Delta Infosolutions Private Limited Vs

Charanjeet Singh Gulati, Member (Technical)

1. Heard the Ld. Professional for Petitioner Companies.

2. The sanction of this Tribunal is sought under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 and the Rules framed thereunder for sanction of the Scheme of Amalgamation of DELTA INFOSOLUTIONS PRIVATE LIMITED (‘Transferor Company’ or ‘First Petitioner Company’) with and into DATAMATICS GLOBAL SERVICES LIMITED, (‘Transferee Company’ or ‘Second Petitioner Company’) and their respective shareholders and creditors (‘Scheme’).

3. Prayers of the Petitioner Companies:

a. THAT the notice of the hearing of the Company Scheme Petition be published in the newspapers i.e., 'Business Standard' in English and 'Navshakti' in Vernacular or such other newspapers, as the Tribunal may deem fit;

b. THAT the said Scheme of Amalgamation (annexed at Exhibit "6”) or modified scheme, if any from time to time, be sanctioned by this Tribunal with or without modification and declare the same to be binding on the Petitioner Companies and also their respective Shareholders, Creditors, Employees or any other regulatory authorities and/or any other stakeholders;

c. THAT the Petitioner Companies do file the copy of the order sanctioning the Scheme of Amalgamation with the concerned Registrar of Companies;

d. THAT liberty be reserved to the Petitioner Companies and all other persons interested in this Petition to apply to this Tribunal herein as and when occasion may arise for any direction that may be necessary.”

4. Nature of Business:

4.1. First Petitioner Company is incorporated with following objects:

a) To carry on the business of processing both manual as well as with use of Data Processing Equipment and Computers, of Financial Instruments like shares, debentures, bonds issued by Private and Public Sectors Companies, Financial Institutions, Commercial Banks, Government and Semi-Government Bodies, Local Authorities and such other Bodies and to act and carry on the business of Registrar and Transfer Agents, and to perform all such services associated with such business.

b) To carry on the business of manufacturing, development and marketing of information technology products and services, software and hardware systems and to design, develop, create, produce, compile, convert, alter, operate, write, test, record, print and document and to buy, sell, import export, exchange, let on hire, lease, license or otherwise deal in, whether as principals or as agents, software systems, packages, programs and information technology products, electronic products and services required for or by different organisations, industries, businesses or individuals.

4.2. The Second Petitioner Company is a technology company that builds intelligent solutions enabling data-driven businesses to digitally transform themselves through Robotics, Artificial Intelligence, Cloud, Mobility and Advanced Analytics. With its wide array of solutions, the Second Petitioner Company has developed several proprietary products and innovative solutions through which it caters to over 450 customers across the globe, some of which are Fortune 500 companies. Headquartered in Mumbai, the Second Petitioner Company has a strong presence across the America, Australia, Asia, Europe, and the Middle East.

5. The registered offices of the Petitioner Companies are situated in Mumbai, Maharashtra and hence the subject matter of the Petition is within the jurisdiction of this Bench.

6. The Petitioner Companies are part of same group. The First Petitioner Company is a wholly owned subsidiary of Second Petitioner Company. The Rationale for the Scheme is as under:

The amalgamation of the First Petitioner Company with Second Petitioner Company would inter-alia have the following benefits:

a) Greater integration and financial strength for the amalgamated entity, which would result in maximising overall shareholder value, and will enhance the financial position of the amalgamated entity.

b) The amalgamation would provide synergistic linkages besides economies in costs and other benefits resulting from the economies of scale, by combining the business and operations of the Transferor Company and the Transferee Company and thus contribute to the profitability of the amalgamated entity by rationalisation of management and administrative structure.

c) Cost savings are expected to flow form more focused operational efforts, rationalisation, usage of common resource pools like human resource, administration, finance, accounting, legal, technology and other related functions, leading to elimination of duplication and rationalisation and administrative expenses.

d) Greater efficiency in cash management of the Transferee Company and unfettered access to cash flow generated by the combined business which can be deployed more efficiently to fund growth opportunities, to maximise shareholder value.

e) The amalgamation would lead to greater and efficient use of infrastructure facilities and optimum utilisation of the financial resources, managerial, technical and marketing expertise of the Transferor Company and the Transferee Company.

f) Simplification of group structure by eliminating companies having similar objectives and similar businesses.

7. The Boards of Directors of the Petitioner Companies have approved the said Scheme of Amalgamation by passing their Board resolutions in their respective Board meetings held on 04.03.2022 which are annexed to the Company Scheme Petition.

8. The Appointed Date is 1^st April 2021.

9. The Scheme Application was filed on 18.02.2023 and the appointed date fixed was 01.04.2021, which was ante-dated beyond a year from the date of filing. Petitioner Companies submitted a justification as under:-

a. the Second Petitioner Company is an entity listed on BSE Limited (‘BSE’) and National Stock Exchange of India Limited (‘NSE’) hence, before filing a Company Scheme Application before this Tribunal it was required to seek approval from the stock exchange where its shares are listed and Securities and Exchange Board of India (‘SEBI’), in terms of master circular SEBI/HO/CFD/POD-2/P/CIR/2023/93 dated 20.06.2023 and other applicable SEBI Circulars. In compliance with the aforesaid requirement, the Second Petitioner Company submitted documents to BSE and NSE on 24.03.2022, and 25.03.2022. Proof of submission of the documents to BSE and email confirmation on submission of documents with NSE are attached to the Additional Affidavit. The Second Petitioner Company received an observation letter from BSE and NSE on 26.08.2022.

b. Further, as required under Regulation 37(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the validity of this Observation Letter shall be six (6) months from the date of issue, within which the scheme shall be submitted to the NCLT. The Scheme was filed on 18.02.2023 within the timeframe prescribed by Regulation 37(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

c. In view of the above-stated facts, the Petitioner Companies stated and submitted that it had filed the Scheme before the relevant first regulatory authority, whose observation letters were pre-requisite for filing of the Scheme Application before this Tribunal within a period of one year from the Appointed Date in terms of applicable MCA circular. The Petitioner Companies are in compliance with the requirements as clarified in circular no. F. No. 7/12/2019/CL-I dated 21.08.2019, issued by the Ministry of Corporate Affairs.

10. The Second Petitioner Company submitted documents to BSE and NSE on 24.03.2022 and 25.03.2022 and received an Observation letter from BSE and NSE on 26.08.2022. The validity of the letter was for six (6) months from the date of the letter i.e. till 26.02.2023. The Petitioner Companies filed Company Scheme Application on 18.02.2023, which is therefore, filed within time. In view of aforesaid facts and justification given for the appointed date fixed as 01.04.2021 is found to be acceptable.

11. The Professional for Petitioner Companies submits that the Company Scheme Petition No. C.P. (CAA) No. 239/MB-III/2023 has been filed in consonance with the Order of the Tribunal dated 22.06.2023 passed in the Company Scheme Application No. C.A. (CAA) No. 50/MB-III/2023.

12. This Tribunal vide its order dated 22.06.2023 has directed following with respect to meeting of equity shareholders and creditors of the Petitioner Companies.

13. The Learned Professional for the Petitioner Companies states that the Petitioner Companies have complied with all requirements as per directions of the Hon’ble Tribunal and they have filed necessary affidavits of compliance with Hon’ble Tribunal. Moreover, Petitioner Companies have undertaken to comply with all statutory requirements, if any, as required under the Companies Act, 2013 and the relevant Rules & Regulations made there under.

14. The ROC Mumbai in his report dated 13.10.2023 inter alia has stated that, No Inquiry, Inspection, Investigations, Prosecutions, Technical Scrutiny under Companies Act, 2013 have been pending against the Petitioner Companies.

15. The Regional Director has filed Report dated 18.10.2023. Petitioner Companies have filed Affidavit in reply dated 19.10.2023. In response to the observations of the Regional Director, the Petitioner Companies have submitted that:

i. The Second Applicant Company has received observation letter from BSE and NSE vide their letter dated August 26, 2022 which has been annexed to the Company Scheme Petition.

ROC has observed that there are Four open charges in respect of the Transferee Company.

ii. Regarding the above observation, it was submitted that, the Second Applicant Company is a Transferee Company i.e., surviving entity and the charges shall continue with the Transferee Company.

iii. the Petitioner Companies vide their affidavit dated October 13, 2023 has filed consents received from unsecured creditors in accordance with directions of this Tribunal.

iv. the Petitioner Companies have undertaken to comply with the provisions of section 232(3)(i) of the Companies Act, 2013 regarding set-off of fees paid by the Transferor Company i.e., First Petitioner Company against any fees and stamp duty payable by the Second Petitioner Company i.e., Transferee Company on its authorized capital subsequent to the Scheme. The aggregate authorised share capital of the Second Petitioner Company shall automatically stand increased to that effect by simply filing the requisite e-form INC-28 with the relevant Registrar of Companies without any further act, instrument or deed on the part of Second Petitioner Company. Further, in the event of any increase in the authorised share capital of First Petitioner Company before the Effective Date, such increase shall be given effect to while aggregating the authorised share capital of the Second Petitioner Company.

v. The Petitioner Companies have undertaken that the interest of the creditors shall be duly protected under scheme. It is further clarified that the Scheme does not envisage any compromise or arrangement with any creditors of any of the Petitioner Companies.

vi. Petitioner Companies have undertaken to comply with the provisions of section 232(3)(i) of the Companies Act, 2013 regarding set-off of fees paid by the Transferor Company i.e., First Petitioner Company against any fees and stamp duty payable by the Second Petitioner Company i.e., Transferee Company on its authorized capital subsequent to the Scheme. The aggregate Authorised share capital of the Second Petitioner Company shall automatically stand increased to that effect by simply filing the requisite e-form INC-28 with the relevant Registrar of Companies without any further act, instrument or deed on the part of Second Petitioner Company. Further, in the event of any increase in the Authorised share capital of First Petitioner Company before the Effective Date, such increase shall be given effect to while aggregating the Authorised share capital of the Second Petitioner Company.

vii. in addition to compliance with IND AS-103 (AS-14 is not applicable), in connection with the scheme, the Petitioner Companies shall pass such accounting entries which are necessary to comply with all other applicable Accounting Standards such as IND AS-8, etc. to the extent applicable.

viii. the Petitioner Companies by way of this affidavit that Scheme enclosed to Company Scheme Petition and Company Application are one and same and there is no discrepancy, or no change is made.

ix. the Petitioner Companies had served notices to concerned authorities which are likely to be affected by the Amalgamation. Further, Petitioner Companies have undertaken the approval of the Scheme by the Tribunal would not deter such authorities to deal with any of the issues arising after giving effect to the Scheme. The decision of such authorities shall be binding on the Petitioner/Transferor Company and Transferee Company concerned.

x. the Appointed Date i.e., 1st April 2021 and the Scheme was approved by the Board of directors of the Second Applicant Company on March 4, 2022. The Second Petitioner Company is an entity listed on the Stock Exchanges and before filing of Company Scheme Application with Tribunal, the Second Petitioner Company need to file for obtaining observations from the stock exchange(s) and SEBI, where shares of the Company are listed, in accordance with SEBI Regulations and Stock Exchange Circulars, issued from time to time. The Second Petitioner Company had submitted documents with BSE and NSE on March 24, 2022 and March 25, 2022 for seeking their observations on the Scheme. Hence, the Scheme was filed well within a period of one year with the Stock Exchanges and SEBI in accordance with timelines prescribed by the MCA Circular. Hence, the Petitioner Companies have stated and submitted that it is in compliance with requirements as clarified vide circular no. F. No. 7/12/2019/CL-I dated 21.08.2019 issued by the Ministry of Corporate Affairs. Further to the best of the knowledge and belief, the Appointed Date under the Scheme shall be beneficial to the stakeholders concerned of the Petitioner Companies. The Board of Directors, Stock Exchanges and SEBI, Shareholders of the Petitioner Companies (including public shareholders) in accordance with directions of this Tribunal have approved the Scheme.

xi. Petitioner Companies have undertaken to comply with the directions of the Income Tax Department & GST Department, if any. To the best of the knowledge & belief of the Petitioner Companies, they have not received any directions from the Income-tax Department & GST Department till date in response to notices served u/s 230(5) of the Companies Act, 2013.

xii. Petitioner Companies have undertaken to comply with the directions of the concerned sectoral Regulatory, if any. The Transferee Company is engaged in the business of IT Services related business and other incidental activities and hence, to their best of the knowledge & belief, the Petitioner Companies are not governed by any Sectoral Regulators.

Further, the Regional Director has observed that:

Petitioner Transferee Company is Listed Company hence Petitioner Transferee Company shall undertake to comply with observations pointed out by BSE & NSE vide their letter dated 26.08.2022 also comply with SEBI (LODR) Regulations, 2015

The Response submitted by the Petitioner Companies for above observation is as under:

Petitioner Companies have complied with the observations pointed out by BSE & NSE vide their letter dated 26.08.2022 and also comply with SEBI (LODR) Regulations, 2015. Further the Transferee Company have undertaken to comply with directions of BSE & NSE and SEBI in relation to the Scheme and shall remain in compliance with letter dated 26.08.2022 and also comply with SEBI (LODR) Regulations, 2015.

16. Mr. Tushar Wagh, representing the Regional Director’s Office, submitted that the explanations and undertakings given by the Petitioner Companies are found satisfactory and that the Regional Director has no further objections post Rejoinder. However, it is made clear that mere sanctioning of this Scheme will not prevent the Registrar of Companies from taking any action against the Transferee Company, in accordance with applicable law.

17. The observation of the Official Liquidator of their Report dated 17.10.2023 is as under:

From the Assets and Revenue of Delta Infosolutions Private Limited (“Transferor Company”) as at 31st March 2022, it appears to be a deemed NBFC. There may be applicability of provisions of Section 45-IA of the Reserve Bank of India Act, Tribunal may require the Company to clarify:

Response submitted by the Petitioner Companies is as under:

Apropos the observation of the Official Liquidator, as stated in paragraph 9 of his Report is concerned, it is submitted that The Transferor Company has made investments of INR 16.50 Cr in its Group Companies and may be categorized as a Core Investment Company ("CIC"). This classification is due to the fact that it has allocated more than 90% of its net assets in the form of investment in equity shares of the group companies.

It is important to note, however, that pursuant to Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016 regulations, Core Investment Companies with total assets totalling less than 100 Crores are exempted from mandatory registration and regulation by the Reserve Bank of India and therefore not bound by the regulations from the RBI. Attached herewith is the relevant extract for Exemption from the registration and regulation by RBI under Core Investment Companies Regulations at Exhibit ‘A’ of OL Report. Therefore, considering the Transferor Company's asset size as of March 31, 2022, which falls below the threshold of 100 crores, which can be evidenced from the Financial Statements of the Transferor Company as on March 31, 2022 at Exhibit ‘B’ of OL Report, the Transferor Company is indeed exempted from the registration and regulation requirements imposed by the Reserve Bank of India and may not be categorized as Non-Banking Financial Company. Further, the Transferor Company is not carrying out any non-banking financial activities.

18. Further, the Official Liquidator in his report dated 17.10.2023 has stated that the affairs of the Companies have been conducted in proper manner.

19. No objections have been received by the Tribunal opposing the Company Scheme Petition and nor has any party controverted any averments made in the Company Scheme Petition.

20. The Professional for Petitioner Companies submits that the Second Petitioner Company undertakes that all the duties, direct and indirect taxes (including any advance taxes) liabilities, GST liabilities, liabilities under the erstwhile provisions of the VAT Act, Sales Tax Act, Customs duty, excise duty and any other tax obligations or litigations thereunder for any tax laws for the First Petitioner Company shall be transferred to Second Petitioner Company, as a result of the Scheme. Further, upon effectiveness of the Scheme, the Second Petitioner Company (Transferee Company) undertakes to have all legal or other proceedings initiated by or against the First Petitioner Company, transferred into its name and to have the same continued, prosecuted and enforced by or against the Second Petitioner Company to the exclusion of the First Petitioner Company.

21. The Income Tax Department will be at liberty to examine the aspect of any tax payable because of this scheme and it shall be open to the income tax authorities to take necessary action as permissible under the Income Tax Law.

22. Further, effectiveness of this Scheme shall not deter any regulatory authorities to initiate action, proceedings, prosecution, investigation or any regulatory action against the First Petitioner Company and Second Petitioner Company has undertaken that all such proceedings shall continue in its own name.

23. The Statutory Auditors of the Transferee Company have examined the Scheme in terms of provisions of Sections 230-232 and certified that the accounting treatment specified in the Scheme is in compliance with all applicable accounting standards specified under section 133 of the Companies Act, 2013.

24. The shareholders and Creditors of the Petitioner Companies are the best judges of their interest. Their decision should not be ordinarily interfered with by the Tribunal as per the decision of Hon’ble Supreme Court in Miheer H. Mafatlal vs. Mafatlal Industries Ltd [JT 1996 (8) 205] wherein it was held as follows:

“It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the usefulness and propriety of the scheme by supporting it by the requisite majority vote.”

25. From the material on record, the Scheme pursuant to the Company Scheme Petition appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. Upon effectiveness of the Scheme all the assets and properties comprised in the First Petitioner Company of whatsoever nature and wheresoever situated, shall, under the provisions of Sections 230 to 232 and all other applicable provisions, if any, of the Act, without any further act or deed, be and stand transferred to and vested in the Second Petitioner Company or be deemed to be transferred to and vested in Second Petitioner Company as a going concern so as to become the assets and properties of Second Petitioner Company.

26. As consideration under the Scheme, upon coming into effect of the Scheme and in consideration for amalgamation of the Transferor Company with and into the Transferee Company, the Transferee Company shall, without any further application or deed and without any further payment, issue and allot to all the equity shareholders of the Transferor Company (whose names appear in the register of members as on the Record Date) an equal number of equity shares, held by them in the Transferee Company in the following manner:

‘3,20,98,742 fully paid equity shares of INR 5/- each of Second Petitioner Company to be issued and allotted to the Equity Shareholders of First Petitioner Company, in proportion to their holdings in First Petitioner Company in the event of amalgamation of First Petitioner Company into Second Petitioner Company.’

27. In view of the foregoing, upon considering the approval accorded by the members and creditors of the Petitioner Companies to the proposed Scheme, the affidavit filed by the Regional Director, the rejoinder and undertakings of the Petitioner Companies, the report of the Official Liquidator, there appears to be no impediment in sanctioning the present Scheme.

28. Since all the requisite statutory compliances have been fulfilled, C.P.(CAA)/50/MB/2023 is made absolute in terms of the prayer clauses of the said Company Scheme Petition.

29. Consequently, sanction is hereby granted to the Scheme under Sections 230 to 232 of the Companies Act, 2013 with the following directions:

a) The Transferor Company be dissolved without winding up.

b) While approving the Scheme, we clarify that this Order should not, in any way, be construed as an Order granting exemption from payment of stamp duty, taxes or other charges, if any, and payment in accordance with law or in respect of any permission or compliance with other requirements which may be specifically required under any law.

c) All the employees of the Transferor Company in service, on the date immediately preceding the date on which the Scheme takes effect i.e. the Effective Date, shall become the employees of the Transferee Company on such date, without any break or interruption in service and upon terms and conditions not less favourable than those subsisting in the concerned Transferor Company on the said date.

d) Any legal proceedings now pending by or against the Transferor Company be continued by or against the Transferee Company. The legal proceedings whether civil or criminal, if any of whatsoever nature shall not abate as a result of the present Scheme of Amalgamation and shall be taken over by the Transferee Company.

e) All the properties, rights, liabilities, duties and powers of the Transferor Company, be transferred without further act or deed, to the Transferee Company and accordingly the same shall, pursuant to Section 232 of the Companies Act, 2013, be transferred to and vest in the Transferee Company.

f) The Registrar of Companies is entitled to proceed against the Transferee Company for violation/offences committed by Transferor Company, if any.

g) The Petitioner Companies are directed to file a copy of this Order along with a copy of the Scheme of Amalgamation with the concerned Registrar of Companies, electronically, along with E-Form INC-28, in addition to physical copy, within 30 days from the date of receipt of the Certified copy of the Order from the Registry.

h) Certified copy of this Order be also submitted to all the concerned statutory authorities.

i) The Petitioner Companies to lodge a copy of this Order and the Scheme duly authenticated by the Deputy Registrar or Assistant Registrar, National Company Law Tribunal, Mumbai Bench, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable, if any, within 60 days from the date of receipt of the Certified copy of the Order from the Registry.

j) All authorities concerned to act on a copy of this Order along with Scheme duly authenticated by the Deputy Director or Assistant Registrar, National Company Law Tribunal, Mumbai.

k) Any person interested shall be at liberty to apply to this Tribunal in the above matter for any directions that may be necessary.

l) Any concerned authorities are at liberty to approach this Tribunal for any further clarification as may be necessary.

30. Ordered Accordingly and the Company Scheme Petition with C.P. (CAA) /239/ MB/C-III/2023 in CA (CAA)/ 50/MB/C-III/2023 stands disposed of.