Gujarat High Court
Talent Anywhere Services Private ... vs Respondent(S) on 27 November, 2014
Author: N.V.Anjaria
Bench: N.V.Anjaria
O/COMP/209/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY PETITION NO. 209 of 2014
In COMPANY APPLICATION NO. 155 of 2014
With
COMPANY PETITION NO. 210 of 2014
In
COMPANY APPLICATION NO. 156 of 2014
TO
COMPANY PETITION NO. 212 of 2014
In
COMPANY APPLICATION NO. 158 of 2014
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TALENT ANYWHERE SERVICES PRIVATE LIMITED....Petitioner(s)
Versus
.....Respondent(s)
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Appearance:
MS GARGI VYAS FOR M/S WADIAGHANDY & CO, ADVOCATE for the
Petitioner(s) No. 1
MR DEVANG VYAS, LD. ASG for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE N.V.ANJARIA
Date : 27/11/2014
ORAL ORDER
A Scheme of Arrangement in the nature of Amalgamation between Quickstart Resource Management India Private Limited, QSG Resource Management Private Limited, Quickstart Global private Limited and Talent Anywhere Services Private Limited, under Sections 391 and 394 of the Companies Act, 1956, has been mooted. The captioned petitions by four companies are filed to obtain a sanction of this court to the said Scheme.
Page 1 of 15O/COMP/209/2014 ORDER 1.1 The petitioner of Company Petition No. 209 of 2014-Talent Anywhere Services Private Limited is a transferee company, whereas the petitioners of other three Company Petitions viz. Company Petition No. 210 of 2014 filed by Quickstart Resource management India Private Limited (the Transferor No. 1 Company), Company Petition No. 211 of 2014 filed by QSG Resource management Private Limited (the Transferor No. 2 Company) and Company Petition 212 of 2014 filed by Quickstart Global Private Limited (the Transferor No. 3 Company) are the transferor companies. Hereinafter, they are referred to accordingly.
2. All the four petitions being necessarily interconnected, they were heard together and are considered simultaneously by this common order.
3. The transferee company and all the transferor companies have their registered offices situated at 1st Floor, Vadodara Hyper, Dr. Vikram Sarabhai Marg, Alkapuri, Vadodara - 390 007.
3.1 The respective petitions by four petitioner companies set out the details about their share capital, the objects with which the companies came to be incorporated and other relevant facts. The transferee company is engaged in the business of providing contract staffing and recruitment related services of identifying, searching, prospecting the availability of all categories of personnel in variety of fields. It also provides consultancy and advisory services to companies and individuals for increasing Page 2 of 15 O/COMP/209/2014 ORDER productivity and effectiveness of personnel. It was incorporated on 7th February, 2012.
3.2 The Transferor No. 1 Company is engaged in the activity of software development on a contract basis as per the instructions of the customers. It has its development centre located at Sampatti, Sardar Baug Lane, Alkapuri, Vadodara 390 007, Gujarat, registered as 100% Export Oriented Undertaking with the Software Technology Park of India. It also provides software related services such as to run, alter amend / modify software. It also provides services to operate and run Data Processing Centers / Business Processing Outsourcing (BPO) centers. The Company was incorporated on 12th April, 2006.
3.3 The Transferor No. 2 Company is engaged in the activity of software development on a contract basis as per the instructions of the customers. It has its development center in Pune, Maharashtra, and registered as an undertaking in Special Economic Zone. It also provides software related services such as to run, alter amend/modify software and also provides services to operate and run Data Processing Centers/Business Processing Outsourcing (BPO) centers. The Company was incorporated on 05th December, 2007.
3.4 The Transferor No. 3 Company is engaged in the activity of software development on a contract basis as per the instructions of the customers. It also provides software related services such as to run, alter amend/modify software and also provides services to operate and run Data Processing Centers/ Page 3 of 15 O/COMP/209/2014 ORDER Business Processing Outsourcing (BPO) centers. The Company was incorporated on 11th October, 2011.
4. Heard learned advocate Ms. Gargi Vyas for M/s.Wadia Ghandy & Co., Advocates, for the petitioners in all the four petitions as well as learned Assistant Solicitor General Mr.Devang Vyas for the Central Government who appeared upon service of notice of admission of the petitions being served on the Regional Director.
5. It was pointed out from the record that in case of the transferee company, Company Application No.155 of 2014 was filed for seeking dispensation of the meetings of the Shareholders and the Unsecured Creditors. This Court, by order dated 25th June, 2014 took note of the fact that the Company does not have any Secured Creditors and in view of consent letters received from the Shareholders and the Unsecured Creditors, had dispensed their the meetings.
5.1 With respect to Transferor No. 1 Company i.e. Quickstart Resource Management India Private Limited, Company Application No.156 of 2014 was filed for seeking dispensation of the meeting of secured creditors and shareholders and further, for seeking directions so as to convene meeting of unsecured creditors of the Company. This Court, by order dated 25th June, 2014, dispensed with the convening of meeting of Shareholders and Secured creditors, in view of receipt of consents from them. This Court also directed to convene the meeting of the unsecured Page 4 of 15 O/COMP/209/2014 ORDER creditors. The Company filed a note for Speaking to Minutes in the Order dated 25th June, 2014 for seeking certain corrections in the same. This Court, by order dated 1st July, 2014, granted the corrections so as to change the date and time of convening of the meeting from 21st July, 2014 to 11th August, 2014 and further nominate Mr.Shridhar Vangla as the Chairman of the Meeting, instead of Mr.Kaushal Choksi. The said meeting was duly held as per the directions of the Court under the chairmanship of one Mr.Shridhar Vangla. The reports of the meeting held on 11th August, 2014 was placed on record by the Chairman confirming that eight unsecured creditors were present in the meetings and passed also votes in support of the Scheme. The resolution came to be passed unanimously in the meeting approving the Scheme.
5.2 With respect to Transferor No.2 Company that is QSG Resource Management Private Limited, Company Application No.157 of 2014 was filed for seeking dispensation of the meeting of shareholders and further, for seeking directions so as to convene meeting of unsecured creditors of the Company. This Court, by order dated 25th June, 2014, dispensed with the convening of meeting of Shareholders, in view of receipt of consents from them. This Court also directed to convene the meeting of the unsecured creditors. The Company filed a note for Speaking to Minutes in the order dated 25th June, 2014 for seeking certain corrections in the same. This Court, by order dated 01st July, 2014, granted the corrections so as to change the date of convening of the meeting from 21st Page 5 of 15 O/COMP/209/2014 ORDER July, 2014 to 11th August, 2014 and further nominate Mr.Shridhar Vangla as the Chairman of the Meeting, instead of Mr.Kaushal Choksi. The said meeting was duly held as per the directions of the Court under the chairmanship of one Mr.Shridhar Vangla. The reports of the meeting held on 11th August, 2014 was placed on record by the Chairman confirming that nine unsecured creditors were present in the meetings and passed also votes in support of the Scheme. The resolution came to be passed unanimously in the meeting approving the Scheme. In the said order dated 25th June, 2014, the court recorded that the transferor company did not have any secured creditor.
5.3 With respect to the transferor No.2 and Transferor No.3 Companies, as there was a delay in filing the affidavit for placing on record, the proof of dispatch of notice and copy of the published advertisement, the Companies also filed Company Application No.217 of 2014 and Company Application No.218 of 2014 respectively, for seeking condonation of the delay of nine days which was condoned by this Court under Rule 9 of the Companies (Court) Rules, 1959.
5.4. The Transferor No.3 Company that is Quicksart Global Private Limited, filed Company Application No.158 of 2014 for seeking dispensation of the meeting of shareholders. This Court, by order dated 25th June, 2014, dispensed with the convening of meeting of Shareholders, in view of receipt of consents from them. In the said order dated 25th June, Page 6 of 15 O/COMP/209/2014 ORDER 2014, the court recorded that the transferor company did not have any secured and unsecured creditor.
6. These substantive petitions were thereafter filed, placing the Scheme of Amalgamation for consideration and sanction of this court. The Schemes are produced at Annexure-E. 6.1 These petitions were admitted by order dated 08th September, 2014. The public notices for the same were duly advertised in the newspapers "India Express"
English daily, Ahmedabad Edition, and "Sandesh", Gujarati daily, Ahmedabad Edition dated 26th September, 2014. The publication in the Government Gazette was dispensed with and confirming affidavit dated 08th October, 2014 was filed in that regard. No one has come forward with any objection to the said petitions even after the publication and the same has been further confirmed by additional affidavit.
6.2 Notice of the petitions was served upon the Central Government through Regional Director. Learned Assistant Solicitor General appeared for the Central Government. Common affidavit dated 07th November, 2014 came to be filed by one Mr. Shambhu Kumar Agarwal, the Regional Director. In that common affidavit, the said authority made certain comments and observations.
6.3 In response to the aforesaid common affidavit, one Mr.Shridhar Vangla, authorized signatory of all the companies has filed additional affidavit (pages 115 to 120 of the compilation) and has dealt with the observations and comments of the Page 7 of 15 O/COMP/209/2014 ORDER Regional Director.
7. Proceeding to consider observations and comments of the Regional Director and the response of the petitioner companies in its additional affidavit mentioned above,
7.1 The observations of the Regional Director in paragraphs-2(a) to 2(c) are factual narration and do not require any response. In paragraph-2(d) of the report, the first comment made is that the Petitioner Companies have not provided the working sheets for calculation of the share exchange ratios calculated arrived at in the Valuation report. In response thereto, In this regard, it was submitted that for arriving at the share exchange ratio, the prevailing accounting standards are being adhered to. It was further submitted that the share exchange ratio so worked out has been accepted by the shareholders. It was submitted by learned advocate for the companies that the Central Government is not supposed to sit in appeal over Commercial wisdom of the shareholders.
7.1.1 The submission has merit. When the shareholders were satisfied with the share exchange ratio worked out for the purpose of implementing the Scheme and when they found the same acceptable, the observation in this regard cannot sustain. The function of the Regional Director in assessing a given Scheme is whether it is prejudicial to the public at large in its effect or contrary to the provisions of the Companies Act or the rules. Weighing the scale of Page 8 of 15 O/COMP/209/2014 ORDER commercial wisdom is not a realm of the Regional Director. Therefore, the objection of the director in respect of seeking the working sheets for arriving at the share exchange ratio in the valuation report to which the shareholders have no objection, could not be accepted.
7.2 The next observation in paragraph-2(e) is in respect of the information furnished by the Income Tax Department which states that there is an outstanding demand of Rs.07,40,749/- (Rupees Seven Lacs Forty Thousand Seven Hundred and Forty Nine Only) for Transferor No.1 Company, that is M/s Quickstart Resource Management India Private Limited for the Financial year 2013-14 and Rs.64,891/- (Rupees Sixty Four Thousand Eight hundred and Ninety One Only) for the transferor No.2 Company, that is QSG Resource Management Private Limited for the Financial year 2012-13. The Advocate for the Petitioners has denied such liability and relying on the Affidavit dated 18th November, 2014, filed by the Companies, submitted that with respect to the Transferor No. 1 Company, the Scrutiny Notice under Section 143(1) of the Income-tax Act, 1961 for AY 2013-14 has been recently received by the Company on 03rd September, 2014 and the assessment proceedings have just started. Therefore, there is no outstanding liability whatsoever on the company for the AY 2013-14. Furthermore, with respect to Transferor No. 2 Company, it has been submitted that Scrutiny notice under section 143(1) of the Income-tax Act, 1961 for AY 2012-13 has been received by the company on 19th August, 2013. However, the assessment Page 9 of 15 O/COMP/209/2014 ORDER proceedings are yet not initiated because assessment for AY 2011-12 is still pending. It is asserted that there is no outstanding liability on the company for the AY 2012-13.
7.2.1 Without prejudice to the aforesaid, learned advocate for the Petitioners submits that subject to its rights and contentions under the Income Tax Act, 1961 and other laws, assuming that the aforesaid demand culminates into a liability, the Transferee Company is financially sound and competent to discharge such liabilities, as and when they arise. Reliance was placed on the Balance-Sheet of the Transferee Company and its profit and loss account for the financial year 2013-14 which demonstrates that against the aggregate income tax liability of Rs. 8,05,640 /- (Rupees Eight Lacs Fifty Thousand Six hundred and Forty Only) of the Transferor Companies No. 1 and 2, the Transferee Company has a net assets worth Rs. 71,59,796 (Rupees Seventy One Lacs Fifty Nine Thousand Seven Hundred and Ninety Six Only) and profits of Rs. 1,44,91,228 (Rupees One Crore Forty Four Lacs Ninety One Thousand Two Hundred and Twenty Eight Only). Therefore, the Transferee Company is financially capable of discharging the liabilities of the Transferor Companies No. 1 and 2 and when they arise.
7.2.2 In the communication dated 10th October, 2014
the Income-Tax Officer concerned has stated about
outstanding income-tax demand of the transferor
company No.1-Quickstart Resource Management India
Page 10 of 15
O/COMP/209/2014 ORDER
Private Limited for the Assessment Year 2013-14 and raised in the Assessment Year 2013-14 is stated to be Rs.07,40,749/- (Rupees Seven Lakhs Forty Thousand Seven Hundred Forty Nine Only). Similarly, in respect of other transferor company-QSG Resource Management Private Limited demand made is stated to be of Rs.64,891/- (Rupees Sixty Four Thousand Eight Hundred Ninety One Only) for the Assessment Year 2012-13 and it is mentioned that the said demand is raised in the year 2013-14. As far as demand of Rs.07,40,749/- is concerned, it is beyond comprehension as to how the said demand which is for the Assessment Year 2013-14 is shown to have been raised in the very year, that is 2013-14. Learned Assistant Solicitor General representing the Regional Director, upon reverifying, stated that the Assessment Year 2013-14 is correctly mentioned and it is the demand for the said Assessment Year raised in the same year. Be as it may.
7.2.3 In any view, total demand in respect of both the transferor companies amounting to little more than Rs.08,00,000/- (Rupees Eight Lakhs Only). Having regard to the financial position of the transferee company, the figures of which were available from the statement of Profit and Loss Account for the year ended on 31st March, 2014 (Page No.59) and the Balance- Sheet at 31st March, 2013 (Page No.58), it could be seen that the transferee company would be in a position to meet with the said demand of the Income- Tax Department if ultimately to be enforced. The petitioner-transferee company has undertaken that it will abide by the Income-Tax Act and the Rules. In Page 11 of 15 O/COMP/209/2014 ORDER view of all the above considerations, the observation of the Regional Director with regard to demand of the Income-Tax Department could not be said to be a factor operating to withhold sanction of the Scheme. It is hereby directed that the transferee company shall be liable for and discharge all the income-tax dues arising and enforceable in law.
7.3 The Regional Director has stated that there are no complaints against the petitioner companies. It is stated that the Scheme of Amalgamation proposed between the companies is not prejudicial to the interest of the shareholders of the petitioner companies and the public at large.
8. Notices of the petitions of transferor companies was served upon the official liquidator. The official liquidator filed his report dated 13th November, 2014. The official liquidator has inter alia opined that the affairs of the transferor company have not been conducted in a manner prejudicial to the interest of its members or to the public interest.
8.1 It is pertinent to note and notice that the official liquidator in his report has referred to and has mentioned about share exchange ratio. This was one of the aspects of the Scheme on which the Regional Director commented upon as recorded in paragraphs 7.1 hereinabove. The Chartered Accountant's opinion on the share exchange ratio is reproduced in paragraph-10 of the report. The method and criteria which underwent consideration of the Chartered Accountant in arriving Page 12 of 15 O/COMP/209/2014 ORDER at the ratio is mentioned. After having taken into account all the relevant parameters, the ratio is fixed and it is opined that the share exchange ratio is fair and there is no reason for not accepting this share exchange ratio. This stands to answer the comment of the Regional Director as well.
9. In view of above, all the observations and comments by the Regional Director made in respect of the Scheme in question have been explained and/or met with and/or do not sustain. The necessary report is produced by the official liquidator. Furthermore, from the material on record and perusal of the Scheme, the Scheme appears to be fair and reasonable and is not in violation of any provisions of law and is not contrary to public policy. None of the parties concerned have come forward to oppose the Scheme except as mentioned above. All requisite statutory compliances are fulfilled.
10. This court is accordingly satisfied that the Scheme of Arrangement in the nature of Amalgamation amongst the petitioner companies deserve to be granted. Accordingly, prayer in paragraph-14(a) in the Company Petition No.209 of 2014, in paragraph-29(a) in the Company Petition No.210 of 2014 and Company Petition No.211 of 2014 and in paragraph-22 (a) in the Company Petition No.212 of 2014 are hereby granted.
11. It is ordered that as required under Section 396-A of the Companies Act, 1956, the transferor companies shall not dispose of or destroy its books of Page 13 of 15 O/COMP/209/2014 ORDER accounts and other connected papers without the prior consent of the Central Government and shall preserve the same.
12. The petitioner companies shall pay towards professional charges to learned Assistant Solicitor General Rs.7,500/- each in respect of all four petitions. The official liquidator shall be paid cost of Rs.7,500/- in respect of three petitions by the transferor companies being Company Petition Nos.210 of 2014 to 212 of 2014.
13. The petitioner companies are further directed to lodge a copy of this order, the schedules of immovable assets of the transferor companies as on the date of this order and the Scheme duly authenticated by the Registrar, High Court of Gujarat, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, on the same within 60 days from the date of the order.
13.1 The petitioner companies are directed to file a copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, electronically, along with E-Form INC 28 as per relevant provisions of the Act.
13.2 Filing and issuance of drawn up order is hereby dispensed with. All the authorities to act on a copy of this order along with the Scheme duly authenticated by the Registrar, High Court of Gujarat. The Registrar, High Court of Gujarat shall issue the authenticated copy of this order along-with Scheme as Page 14 of 15 O/COMP/209/2014 ORDER expeditiously as possible.
14. The petitions are allowed and disposed of accordingly.
(N.V.ANJARIA, J.) Anup Page 15 of 15