Eurokids International Private Limited And Ors. Vs

,,

1. The sanction of the Tribunal is sought under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 (the Act) to the",,

Scheme of Arrangement and Amalgamation (the Scheme) between EuroKids International Private Limited, EuroSchool Properties & Infrastructure",,

Private Limited, Kangaroo Kids Education Limited and EuroSchool International Private Limited and their respective Shareholders.",,

2. We have heard the Learned Counsel for the Petitioner Companies and the representative of the Regional Director. No objector has come before,,

this Tribunal to oppose the Scheme and nor has any party controverted any averments made in the Petition.,,

3. The Board of Directors of the Petitioner Companies have approved the Scheme in their respective meetings held on 19th June, 2020. The",,

Appointed Date for the purposes of merger in the Scheme is 5th September 2019.,,

4. The Transferor Company 1 is engaged in the business of providing education by setting up owned schools across India and outside India and,,

through franchisees. The Transferor Company 2 is engaged in the business of providing assets on lease rentals. The Transferor Company 3 is,,

authorized to engage in the business of providing education to children by setting up owned schools across India and outside India and through,,

franchisees. The Transferee Company is engaged in the business of purchase and sale of school related welcome kits, support services in relation to",,

admissions and examination process and providing education to children by setting up K-12 Schools through franchisee across India.,,

5. Learned Counsel for the Petitioner Companies submits that the rationale for the Scheme is as follows:,,

“With the ultimate objective of acquiring the ongoing business carried on by the Transferor Companies, the Transferee Company has, on",,

5 September 2019 acquired 83.206% of outstanding equity shares in Transferor Company 1 from the erstwhile shareholders of Transferor,,

Company 1. Transferor Company 3 and Transferor Company 2 are directly and indirectly held by Transferee Company.,,

Pursuant to the above referred acquisition of shares in Transferor Company 1, the Transferor Companies and Transferee Company now",,

form part of the same management. Thus, with a view to achieve the main objective of consolidation of business carried on by Transferor",,

Companies and Transferee Company, it is desirable to merge the Transferor Companies into Transferee Company in this Scheme.",,

Further, Merger of the Transferor Companies into the Transferee Company would inter alia have the following benefits:",,

a) The arrangement shall provide an opportunity to leverage combined assets and build a stronger sustainable business. Specifically, the",,

arrangement will enable optimal utilization of existing resources and provide an opportunity to fully leverage assets, capacities, experience",,

and infrastructure of all the Transferor Companies and Transferee Company.,,

b) Reducing managerial overlaps involved in operating multiple entities, enable cost savings and effective utilization of valuable resources",,

which will enhance the management focus thereby leading to increase in operational and management efficiency; integrate business,,

functions; eliminate duplication and rationalization of administrative expenses.,,

c) Greater efficiency in cash management of the Transferee Company and unfettered access to cash flows generated by the combined,,

businesses which can be deployed more efficiently to fund organic and inorganic growth opportunities to maximize shareholder value.,,

d) Synchronization of efforts to achieve uniform corporate policy, greater integration and greater financial strength and flexibility for the",,

Transferee Company.,,

e) Better value creation for the shareholders of the company and improved competitive position of the combined entity in the market.,,

f) Consolidation of businesses of the Transferor Companies and the Transferee Company under a single entity and achieve simplified,,

corporate structure;,,

g) Upon completion of the Merger, the Transferor Companies will be dissolved. Consequently, there would be lesser regulatory and legal",,

compliance obligations including accounting, reporting requirements, statutory and internal audit compliance requirements, tax filings,",,

company law compliances, etc. and therefore reduction in administrative costs.",,

h) The intended Scheme is not prejudicial to the interest of the creditors or the employees of the Transferor Companies and the Transferee,,

Company.,,

The Transferee Company has certain outstanding Class A Equity Shares, Class B Equity Shares, and Class C Equity Shares. These Class A",,

Equity Shares, Class B Equity Shares, and Class C Equity Shares shall no more be required after the Effective Date due to simplification of",,

group structure. Therefore, and with the objective of providing exit to the holders of these shares, it is proposed to undertake reduction of",,

capital of these Class A Equity Shares, Class B Equity Shares and Class C Equity Shares at fair value, as an integral part of this Scheme.",,

The Merger of the Transferor Companies into the Transferee Company pursuant to and in accordance with this Scheme shall take place,,

with effect from the Appointed Date and shall be in accordance with Section 2(1B) of the Income-tax Act, 1961.â€​",,

6. The Company Petition is filed in consonance with sections 230 to 232 of the Act and the Order dated 21st August 2020 passed in C.A. (CAA),,

1043/MB-I/2020 by this Tribunal.,,

7. The Petitioner Companies have complied with all the requirements as per directions of this Tribunal and they have filed necessary affidavits of,,

compliance with the Tribunal. Moreover, the Petitioner Companies through their Learned Counsel undertake to comply with all the statutory",,

requirements, if any, as required under the Act and the Rules made thereunder. The undertaking given by the Petitioner Companies is accepted.",,

8. The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai, has filed a Report dated 26th November 2020, inter alia stating",,

therein its observations on the Scheme as stated in para IV (a) to (e) of the Report. In response to the observations made by the Regional Director,",,

the Petitioner Companies have also given necessary clarifications and undertakings. The observations made by the Regional Director and the,,

clarifications and undertakings given by the Petitioner Companies are summarized in the table below:,,

Sr.

No.

Para

(IV)","RD Report / Observation dated 26th

November, 2020",Response of the Petitioner Companies

(a),"In compliance of AS-14 (IND AS-

103) the Petitioner Companies

shall pass such accounting entries

which are necessary in connection

with the Scheme to comply with

other applicable Accounting

Standards such as AS-5 (IND AS-

8) etc;","In so far as the observations made in

paragraph IV(a) of the Report of

Regional Director is concerned, the

Petitioner Companies shall pass such

accounting entries as may be necessary

in connection with the Scheme to

comply with the accounting standard

AS-14 (IND AS 103) and any other

applicable accounting standards such as

AS-5 (IND AS 8) to the extent

applicable.

(b),"As per Definition of the Scheme:

“Appointed Dateâ€​ means 5th

September 2019 for the purposes

of Merger of Transferor

Companies with Transferee

Company under this Scheme.

“Effective Dateâ€​ means the

date or last of the dates on which

the certified copy of the order of

the NCLT sanctioning this Scheme

is filed with the Registrar of

Companies, Mumbai by the

Transferor Companies and the

Transferee Company.

Further, the Petitioners may be

asked to comply with the

requirements as to Appointed Date

and clarified vide

circular no. F. No. 7/12/2019/CL-1

dated 21.08.2019 issued by the

Ministry of Corporate Affairs.","In so far as the observations made in

paragraph IV(b) of the Report of

Regional Director is concerned, the

Petitioner Companies submit that the

Appointed Date i.e. 5th September

2019 for the purposes of Merger of

Transferor Companies with Transferee

Company under the Scheme has been

clearly indicated in the Scheme in

accordance with provision of Section

232(6) of the Companies Act, 2013 and

the merger as per scheme shall become

effective from the Appointed Date. The

Petitioner Companies further submit

that they have already complied with

the requirements and clarification of

circular no. F. No. 7/12/2019/CL-I

dated 21.08.2019 issued by the Ministry

of Corporate Affairs by clearly

specifying the Appointed Date in the

Scheme and hence the question of

undertaking for compliance to the

requirements of the said circular does

not arise.

(c),"Petitioner Company have to

undertake to comply with section

232(3)(i) of Companies Act, 2013,

where the transferor company is

dissolved, the fee, if any, paid by

the transferor company on its

authorised capital shall be set-off

against any fees payable by the

transferee company on its

authorized capital subsequent to

the amalgamation and therefore,

petitioners to affirm that they

comply the provisions of the

section.","In so far as the observations made in

paragraph IV(c) of the Report of

Regional Director is concerned, the

Petitioner Companies through their

Counsel submit that the Petitioner

Company undertakes that the fee

payable by the Transferee Company

shall be in compliance with the

provisions of Section 232(3)(i) of the

Companies Act, 2013, and where the

transferor companies is dissolved, the

fee, if any, paid by the transferor

companies on its authorised capital shall

be set-off against any fees payable by

the transferee company on its

authorized capital subsequent to the

amalgamation and therefore, petitioners

to affirm that they comply the

provisions of the section.

(d),"As per clause 4.12 of the Scheme,

Petitioner Companies have

proposed that Upon the Scheme

becoming effective in accordance

with the terms set out herein,

without any further act or deed,

the name of the Transferee

Company shall stand changed to

“EuroKids International Private

Limitedâ€​ (name of the Transferor

Company â€" 1) or such other

name as decided by the Board of

Directors of the Transferee

Company and approved by the

concerned jurisdictional Registrar

of Companies by simply filing the

requisite forms and subject to

payment of fees with the

appropriate Government authority.

That adoption of new name of

Transferor Company by the

Transferee Company shall create

confusion in the minds of general

public and other stakeholders.

Besides it will also create

confusion with the regulators like

Income Tax, GST, MCA, etc which

give impression that Transferor

Company is still in existence

however it is not in existence.

In this regards, as per clause 8(2)

(8) of the Companies

(Incorporation) Rules, 2014,

“The names released on change

of name by any company shall

remain in data base and shall not

be allowed to be taken by any

other company including the group

company of the company who has

changed the name for a period of

three years from the date of

change subject to specific

direction from the competent

authority in the course of

compromise, arrangement and

amalgamation.

Hence, the Transferee Company

i.e. Euroschool International

Private Limited may not be allowed

to change its name by the name of

Transferor Company 1 i.e.

Eurokids International Private

Limited and Petitioner Company

have to amend the scheme

accordingly.","In so far as the observations made in

paragraph IV(d) of the Report of

Regional Director is concerned, the

Petitioner Companies through their

Counsel submits that the Transferee

Company will change the name to any

other name as mentioned in clause

4.12.4 of the scheme subject to

availability of the name by the Registrar

of Companies at the time of such

application.

(e),"ROC, Mumbai Report dated

17.11.2020 has inter alia

mentioned that there are no

prosecution, no

technical scrutiny, no inquiry, no

inspection, no complaint are

pending against Petitioner

Companies.

Further mentioned following

observations:-

1. Reduction of equity share

capital of the Transferee Company

2. Interest of the creditors should

be protected.

3. On reduction of the paid up

equity share capital, the transferee

company shall pay consideration

to the respective shareholders. The

companies have filed their

financialstatements and Annual

Returns for the year 2019.

Petitioner Companies have to

undertake to clarify the same.","In so far as the observations made in

paragraph IV(e) of the Report of

Regional Director is concerned with

regard to the ROC Mumbai Report, the

Petitioner Companies through their

Counsel submit that the Petitioner

Companies confirm that there are no

prosecution, no technical scrutiny, no

inquiry, no inspection, no complaint

pending against the Petitioner

Companies. Further, the Petitioner

Companies submit that notices have

been served upon all creditors and no

creditor has come forward to oppose

scheme. Further the interest of all the

creditors shall be protected on reduction

of equity share capital of the

Transferee Company and the

Transferee Company shall pay

consideration to the respective

shareholders on reduction of paid up

equity share capital and all the creditors

will be paid off in the ordinary course of

business. Further, the companies have

filed their financial statements and

Annual Returns for the year 2019.