Rajesh Sharma, Member (Technical):— The court is convened through video conference today.
2. The counsel for the Applicant Companies submits that the proposed Scheme inter-alia provides for the transfer and vesting of the Passenger Vehicles Undertaking (as defined in the Scheme) of the Applicant Company 1 to the Applicant Company 2 as a going concern on a slump sale basis, and reduction of Securities Premium Account (as defined in the Scheme) of the Applicant Company 1 and various other matters consequential to or otherwise integrally connected with the above pursuant to Sections 230 to 232 of the Companies Act, 2013 in the manner provided in the Scheme. For commercial reasons, the Applicant Companies have chosen to affect the transfer of the Passenger Vehicles Undertaking by the mechanism of a slump sale {as defined u/s 2(42C) of the Income Tax Act 1961}, through the captioned Scheme of Arrangement.
3. The rationale and purpose of the Scheme is as under:
(a) The Applicant Company 1 is inter-alia: (i) engaged in design, development, manufacturing and sale of commercial vehicles and parts thereof in India and abroad; and (ii) engaged in design, development, manufacturing and sale of passenger vehicles (including electric vehicles) and parts thereof in India and abroad. The securities of the Applicant Company 1 are listed on the BSE Limited and the National Stock Exchange of India Limited. The Applicant Company 2 is a wholly owned subsidiary of TML Business Services Limited. The Applicant Company 1 directly and indirectly, holds100% equity interest in TML Business Services Limited as also the Applicant Company 2.
(b) As part of an overall business reorganization plan and in order to provide for the optimum running, growth and development of the Passenger Vehicles Undertaking (as defined in the Scheme) and interests of the Transferor Company, it is necessary to realign the PV Business (as defined in the Scheme). In the circumstances it is considered desirable and expedient to reconstruct the Applicant Company 1 by transferring the Passenger Vehicles Undertaking as a going concern to the Applicant Company 2 in the manner and on the terms and conditions stated in the Scheme. This shall help in: (i) providing differentiated focus for the said passenger vehicle business and commercial vehicle business and help each of them realise their potential; and (ii) unlocking business value and enhanced management focus and operational flexibility in each of the businesses. The passenger vehicle business (which also includes the passenger electric vehicle business) landscape is seeing rapid transformation in the form of tightening emission norms and safety norms, push towards electrification, enhanced disruptions from autonomous and connected technologies. Additionally, India continues to remain an attractive market for global OEMs while the aspiration levels of the Indian consumer continues to rise requiring stepped up investments in contemporary products in a competitive market. Over the last few years, the PV Business has implemented a strong turnaround and has earned its right to grow by launching a slew of successful products. A fully refreshed BS VI ready product portfolio based on the Impact 2.0 design philosophy, consistently improving Net Promoter Scores (NPS), improved retail market shares and an exciting entry into the electric vehicle space makes the business ready to realise its potential. Further, this restructuring would facilitate mutually beneficial strategic alliances for the PV Business in the future, as stated by the Applicant Companies in the scheme.
(c) The Applicant Company 1 has Accumulated Losses (as defined in the Scheme) amounting to Rs. 11,173.59 Crore and also has balance in the Securities Premium Account (as defined in the Scheme) amounting to Rs. 22,194.89 Crore, as on June 30, 2020. Accordingly, for a better presentation of the financial position of the Applicant Company 1, the Board of the Applicant Company 1 considered it prudent to consider a reduction of its share capital without extinguishing or reducing its liability on any of its shares by writing down a portion of its Securities Premium Account, which is lost or is unrepresented by available assets, with a corresponding adjustment to the Accumulated Losses of the Applicant Company 1.
4. The Counsel for the Applicant Companies submits that the Board of Directors of the Applicant Company 1 and Applicant Company 2 at their respective board meetings both held on July 31, 2020 have approved the Scheme.
Shareholders meetings
5. This Tribunal hereby directs that a meeting of the equity shareholders consisting of Ordinary Shares and ‘A’ Ordinary Shares, collectively referred to as the ‘Equity Shareholders’ of the Applicant Company 1, be convened and held on Monday, February 15, 2021 at 3:30 p.m.for the purpose of considering, and if thought fit, approving the proposed Scheme, through video conferencing and/or other audio visual means, without holding a general meeting requiring the physical presence of shareholders at a common venue, as the same in the current Covid-19 environment mandating social distancing norms shall not be feasible.
6. In view of provisions of Section 230(4) read with Section 108, 110 of the Companies Act, 2013 read with Rule 20, 22 and other applicable provisions of the Companies (Management and Administration) Rules, 2014 and in accordance with Regulation 44(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Applicant Company 1 proposes to provide the facility of remote e-voting and postal ballot to its Equity Shareholders in respect of the resolution to be passed at the aforesaid meeting. The equity shareholders of the Applicant Company 1 are also allowed to avail the facility of e-voting during the aforesaid meeting to be held through video conferencing or other audio-visual means on Monday, February 15, 2021 at 3:30 p.m. The e-voting facility for the Equity Shareholders of the Applicant Company 1 shall be provided in compliance with the conditions specified under the Companies (Management and Administration) Rules, 2014, Regulation 44 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Secretarial Standard on General Meetings (SS2) issued by the Institute of Company Secretaries of India, as applicable.
7. At least 30 (thirty) clear days before the aforesaid meeting of the Equity Shareholders of the Applicant Company 1 be held as aforesaid, a notice convening the said meeting at the day, date and time aforesaid, together with copies of the Scheme and the Explanatory Statement required to be sent under Section 230(3) of the Companies Act, 2013 read with Rule 6 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, shall be sent by e-mail to the Equity Shareholders of the Applicant Company 1 whose email addresses are duly registered with the Applicant Company 1, addressed to each of the shareholders, at their last known e-mail addresses as per the records of the Applicant Company 1. Shareholders whose e-mail address are not available, shall be provided an opportunity by way of notice in the advertisement of notice mentioned in point 8 below to register their e-mail address to receive the notice of the said meeting.
8. At least 30 (thirty) days before the aforesaid meeting of the Equity Shareholders of the Applicant Company 1 to be held as aforesaid, an advertisement of notice convening the said meeting, indicating the day, date and time aforesaid be published once each in ‘Free Press Journal’ in English and ‘Navshakti’ in Marathi, both circulated at Mumbai, and stating that copies of the Scheme and the statement required to be furnished pursuant to Section 230 (3) of the Companies Act, 2013 can be obtained free of charge by emailing the Applicant Company 1 at inv_rel@tatamotors.com.
9. The Applicant Company 1 undertakes to:
(i) issue notice convening meeting of the Equity Shareholders as per Form No. CAA.2 (Rule 6) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016;
(ii) issue statement containing all the particulars as per Section 230 of the Companies Act, 2013; and
(iii) advertise the notice convening meeting as per Form No. CAA.2 (Rule 7) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
The undertaking is accepted.
10. Mr. N. Chandrasekaran, Non-Executive Chairman of Applicant Company 1 and failing him Ms. Vedika Bhandarkar, Independent Director and Chairperson of the Audit Committee of Applicant Company 1, is appointed as the Chairperson for the aforesaid meeting of the Equity Shareholders of the Applicant Company 1.
11. The scrutinizer for the aforesaid meeting of the Applicant Company 1 shall be Mr. PN Parikh (Membership No. FCS 327), failing him Ms. JigyasaVed (Membership No. FCS 6488) and failing her Mr. Mitesh Dhabliwala (Membership No. FCS 8331) of M/s Parikh & Associates, Practicing Company Secretaries.
12. The quorum for the aforesaid meeting of the Equity Shareholders of Applicant Company 1 shall be as prescribed under Section 103 of the Companies Act, 2013 and would include shareholders present through audio visual means. In case the required quorum as stated above is not present at the commencement of the meeting, the meeting shall be adjourned by 30 (thirty) minutes and thereafter the persons present shall be deemed to constitute the quorum.
13. The facility for appointment of proxies by the Equity Shareholders and voting by proxy shall not be permitted as the meeting would be held through video conferencing and/or other audio-visual means. However, attendance and voting in case of body corporate be permitted, provided the authorisation is filed with the Scrutinizer at tml.scrutinizer@gmail.com with a copy marked to evoting@nsdl.co.in as required under Rule 10 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
14. The Chairperson appointed for the aforesaid meeting of the Equity Shareholders of the Applicant Company 1 shall have all powers as per the Articles of Association of the Applicant Company 1 and also under the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, to the extent necessary and applicable, in relation to the conduct of the meeting(s), including for deciding procedural questions that may arise at the meeting or at any adjournment thereof or any other matter including an amendment to the Scheme or resolution, if any, proposed at the aforesaid meeting by any person(s).
15. The value and number of the shares of each Equity Shareholder shall be in accordance with the books/register of members of the Applicant Company 1 or depository records and where the entries in the books/register of members/depository records are disputed, the Chairperson of the Meeting shall determine the value for the purposes of the meeting of Equity Shareholders and his/her decision in that behalf would be final.
16. The Chairperson shall report to this Tribunal, the result of the aforesaid meetings within 30 (thirty) days of the conclusion of the aforesaid meeting, and the said report shall be verified by his Affidavit as per Rule 14 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
17. The Counsel for the Applicant Companies further submits that the Applicant Company 2 is a wholly owned subsidiary of TML Business Services Limited. The Applicant Company 1 directly and indirectly, holds 100% equity interest in TML Business Services Limited as also the Applicant Company 2. Moreover, the Ld. Counsel submits that the Applicant Company 2 has obtained consent affidavits from all its equity shareholders approving the proposed Scheme. The said consent affidavits are filed with this Tribunal along with the Company Scheme Application at Exhibit U. In view of the fact that the Applicant Company 2 has filed consent affidavits, there is no requirement of convening a meeting of the shareholders of the Applicant Company 2, the meeting is therefore dispensed with.
Creditors meetings/dispensation
18. The Counsel for the Applicant Companies submits that the Applicant Company 1 as on September 30, 2020 has 10 secured creditors and the total amount due and payable by the Applicant Company 1 to the aforementioned secured creditors is Rs. 6,746.52 Crore (Rupees Six Thousand Seven Hundred Forty-Six Crore and point Fifty two Lakh only). This Tribunal hereby directs that a meeting of the Secured Creditors of Applicant Company 1 as on September 30, 2020, be convened and held on Monday, February 15, 2021 at 2:30 p.m., for the purpose of considering, and if thought fit, approving the proposed Scheme, through video conferencing and/or other audio visual means, without holding a meeting requiring the physical presence of secured creditors at a common venue, as the same in the current Covid-19 environment mandating social distancing norms shall not be feasible. The Applicant Company 1 shall carry out voting for the meeting of Secured Creditors by e-voting at the time of meeting.
19. The Counsel for the Applicant Companies submits that as an integral part of the Scheme, the loan availed by the Applicant Company 1 from Government of Gujarat is the only secured loan that is being transferred as part of the liabilities of the Passenger Vehicles Undertaking from Applicant Company 1 to Applicant Company 2 subject to receipt of requisite approvals. The Counsel submits that in the documents executed by the Applicant Company 1 in relation to the Government of Gujarat Loan, there is no specific requirement for obtaining prior consent of the Government of Gujarat for transfer of the said loan and encumbrance attached thereto. However, the Applicant Company 1 shall engage in necessary discussions with Government of Gujarat for the transfer of the Government of Gujarat Loan, said encumbrance and Sanand Property. The Counsel further submits that other than the encumbrance created in respect of the Government of Gujarat Loan (which relates to the PV Business), none of the Secured Creditors of Applicant Company 1 hold any security/encumbrance over the assets forming part of the Passenger Vehicles Undertaking.
20. The Learned Counsel submits that the ‘PV Business Liabilities’, ‘Government of Gujarat Loan’ and ‘PV Working Capital Liabilities’ has been defined in the Scheme as follows:
“PV Business Liabilities” means ordinary course liabilities pertaining to the PV Business and continuing as on the Appointed Date such as contingent liabilities, PV Working Capital Liabilities, liabilities arising out of PV Contracts, and, upon receipt of necessary approvals and such other directions as may be applicable, the Government of Gujarat Loan;”
“Government of Gujarat Loan” means loan of amount INR 587.08 Crore, outstanding to the Government of Gujarat pursuant to loan agreement dated March 30, 2013 and all documents and/or government resolutions related thereto;”
The Counsel further submits that while Applicant Company 1 has availed of working capital loan facilities from its lenders, however no working capital loan facilities are being transferred as part of the Scheme from Applicant Company 1 to Applicant Company 2. In this regard the definition of ‘PV Working Capital Liabilities’ (reproduced below) only includes trade payables, employee payments, retention money etc. relating to/concerning the PV Business, which liabilities will stand transferred to the Applicant Company 2.
“PV Working Capital Liabilities” as of any specified date, means any deferred revenue, trade and other payables, trade acceptances, duties, provisions, deposits and retention money, provisions for employee payments, or such other customary current and non-current liabilities relating, or assigned to the Transferor Company, each of which on the Appointed Date, belongs to or can be directly relatable to the PV Business;”
21. At least 30 (thirty) clear days before the aforesaid meeting of the Secured Creditors of the Applicant Company 1 be held as aforesaid, a notice convening the said meeting at the day, date and time aforesaid, together with copies of the Scheme and the Explanatory Statement required to be sent under Section 230(3) of the Companies Act, 2013 read with Rule 6 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, shall be delivered by hand delivery to the Secured Creditors of the Applicant Company 1 at their last known address as per the records of the Applicant Company 1. The acknowledgements be obtained by clearly mentioning the Name, Designation, Phone Number, email Id and Stamp of the concerned dealing officer of secured creditor and be filed with the Tribunal.
22. At least 30 (thirty) days before the aforesaid meeting of the Secured Creditors of the Applicant Company 1 to be held as aforesaid, an advertisement of notice convening the said meeting, indicating the day, date and time aforesaid be published once each in ‘Free Press Journal’ in English and ‘Navshakti’ in Marathi, both circulated at Mumbai, and stating that copies of the Scheme and the statement required to be furnished pursuant to Section 230 (3) of the Companies Act, 2013 can be obtained free of charge by emailing the Applicant Company 1 at inv_rel@tatamotors.com.
23. The Applicant Company 1 undertakes to:
(i) issue notice convening meeting of the Secured Creditors as per Form No. CAA.2 (Rule 6) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016;
(ii) issue statement containing all the particulars as per Section 230 of the Companies Act, 2013; and
(iii) advertise the notice convening meeting as per Form No. CAA.2 (Rule 7) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
The undertaking is accepted.
24. Mr. N. Chandrasekaran, Non-Executive Chairman of Applicant Company 1 and failing him Ms. Vedika Bhandarkar, Independent Director and Chairperson of the Audit Committee of Applicant Company 1, is appointed as the Chairperson for the aforesaid meeting of the Secured Creditors of the Applicant Company 1.
25. The scrutinizer for the aforesaid meeting of Secured Creditors of the Applicant Company 1 shall be Mr. P.N. Parikh (Membership No. FCS 327), failing him Ms. JigyasaVed (Membership No. FCS 6488) and failing her Mr. Mitesh Dhabliwala (Membership No. FCS 8331) of M/s Parikh & Associates, Practicing Company Secretaries.
26. The quorum for the aforesaid meeting of the Secured Creditors of Applicant Company 1 shall be 3 (three) persons present in person or through authorised representative through video conferencing and/or other audio-visual means. In case the required quorum as stated above is not present at the commencement of the meeting, the meeting shall be adjourned by 30 (thirty) minutes and thereafter the persons present shall be deemed to constitute the quorum. In so far as agreements executed by the Applicant Company 1 with its secured creditors, in all such cases where the agreements require the Applicant Company 1 to obtain specific no objection from such secured creditor prior to undertaking any schemes of arrangement/amalgamation/acquisition as the case may be, the Applicant Company 1 will obtain such specific no objection from the concerned secured creditor and submit the same to the Tribunal.
27. The facility for appointment of proxies by the Secured Creditors and voting by proxy shall not be permitted as the meeting would be held through video conferencing and/or other audio-visual means. However, attendance and voting in case of body corporate be permitted, provided the authorisation is filed with the Scrutinizer at tml.scrutinizer@gmail.com with a copy marked to evoting@nsdl.co.in as required under Rule 10 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
28. The Chairperson appointed for the aforesaid meeting of the Secured Creditors of the Applicant Company 1 shall have all powers as per the Articles of Association of the Applicant Company 1 and also under the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, to the extent necessary and applicable, in relation to the conduct of the meeting, including for deciding procedural questions that may arise at the meeting or at any adjournment thereof or any other matter including an amendment to the Scheme or resolution, if any, proposed at the aforesaid meeting by any person(s).
29. The Chairperson shall report to this Tribunal, the result of the aforesaid meeting of Secured Creditors of Applicant Company 1 within 30 (thirty) days of the conclusion of the aforesaid meeting, and the said report shall be verified by his Affidavit as per Rule 14 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
30. The Applicant Company 2 does not have any Secured or Unsecured Creditors. Accordingly, the question of convening a meeting/issuing notices to the Creditors of the Applicant Company 2 does not arise.
31. The Counsel for the Applicant Companies submits that since the Scheme is an arrangement between the Applicant Companies and their respective shareholders as contemplated under Section 230(l)(b) and not in accordance with the provisions of Section 230(l)(a) of the Companies Act, 2013 as there is no compromise and/or arrangement with the creditors and as no sacrifice is called for by the creditors, a meeting of the Equity Shareholders of the Applicant Company 1 is proposed to be held in accordance with the provisions of Section 230(l)(b) of the Companies Act, 2013. Further, the Applicant Company 1's net worth post giving effect to the Scheme remains in the positive. Moreover, the adjustment to the Securities Premium Account as contemplated in the Scheme does not involve any financial outlay but is merely an accounting treatment and therefore, would not affect the ability or liquidity of the Applicant Company 1 to meet its obligations/commitments or have any adverse impact on the creditors. Therefore, the meeting of the Unsecured Creditors of the Applicant Company 1 is not required to be convened. The Applicant Company 1 has 5,777 Unsecured Creditors having in the aggregate an amount of Rs. 27,605.90 Crore as on September 30, 2020. Out of this, the number of Unsecured Creditors relating to Passenger Vehicles Undertaking is 1864 and the amount involved is Rs. 2,757 Crore only. In view of the aforesaid, the meeting of the unsecured creditors of the Applicant Company 1 is dispensed with. Accordingly, the applicant Company 1 shall ensure that consent affidavits from at least 90% value of the total unsecured creditors of the company are obtained and filed with the Tribunal. The Bench hereby directs the Applicant Company 1 to issue individual notice to all those Unsecured Creditors having value of Rs. 10,00,000 (Rupees TenLakh only) and more, as on September 30, 2020 (constituting 99.74% of the outstanding unsecured creditors of Applicant Company 1), by registered post or speed post and through e-mail (to those unsecured creditors whose e-mail addresses are duly registered with the Applicant Company 1), at their last known address as per the records of the Applicant Company 1, as required under Section 230(3) of the Companies Act, 2013, with a direction that they may submit their representations, if any, to the Tribunal within thirty days from the date of receipt of the said notice and copy of such representations shall simultaneously be served upon Applicant Company 1.
Notices to authorities
32. The Applicant Company 1, pursuant to Section 230(5) of the Companies Act, 2013 read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, is directed to serve the notice of the meeting of its Equity Shareholders upon: (i) Regional Director, Western Region, Ministry of Corporate Affairs, Mumbai, Maharashtra, (ii) the Registrar of Companies, Mumbai, (iii) Income Tax Authority within whose jurisdiction the assessments of the Applicant Company 1 is made (mentioning the PAN of Applicant Company 1 - PAN: AAACT2727Q) at the following address: The Assistant Commissioner of Income tax - 3(4), 29 floor, Centre No. 1, World Trade Centre, Cuffe Parade, Mumbai - 400005, (iv) Securities and Exchange Board of India, (v) BSE Limited, and (vi) the National Stock Exchange of India Limited and (vii) Goods and Service Tax Authority (mentioning GST RC No. 27AAACT2727Q1ZW) at the following address (a) Vikrikar Bhavan, Airport Rd, Shastri Nagar, Yerawada, Pune, Maharashtra 411006, (b) 41-A, Sasoon Rd, Central Excise Colony, Sangamvadi, Pune, Maharashtra 411001, with a direction that they may submit their representation, if any, within a period of 30 (thirty) days from the date of receipt of such notice, to the Tribunal and copy of such representations shall simultaneously be served upon the Applicant Company 1, failing which, it will be presumed that the aforesaid authorities have no representations to make on the Scheme.
33. The Applicant Company 2, pursuant to Section 230(5) of the Companies Act, 2013 read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, is directed to serve notice along with a copy of the Scheme upon: (i) Regional Director, Western Region, Ministry of Corporate Affairs, Mumbai, Maharashtra, (ii) the Registrar of Companies, Mumbai, (iii) Income Tax Authority within whose jurisdiction the assessments of the Applicant Company 2 are made (mentioning the PAN of Applicant Company 2 - PAN: AAHCT8301P) at the following address: The Deputy/Assistant Commissioner of Income Tax - Circle 1(3)(1), 5 Floor, Aayakar Bhavan, Maharishi Karve Road, Mumbai 400020, and (iv) Goods and Service Tax Authority (mentioning GST RC No. 27AAHCT8301P1ZT) at the following address: (a) GST Bhavan (Vikrikar Bhavan), Sales Tax Officer, FORT_701, Dockyard Rd, Dockyard, Ekta Nagar, Mazgaon, Mumbai, Maharashtra 400010, (b) GST Bhavan, New Marine Lines, Churchgate, Mumbai, Maharashtra 400020, with a direction that they may submit their representation, if any, within a period of 30 (thirty) days from the date of receipt of such notice, to the Tribunal and copy of such representations shall simultaneously be served upon Applicant Company 2, failing which, it will be presumed that the aforesaid authorities have no representations to make on the Scheme.
34. The Applicant Companies shall obtain consent from State Government of Maharashtra and State Government of Gujarat for transfer of Incentives and Concessions availed by Applicant Company No. 1 till now will also be available to Applicant Company No. 2 post implementation of this Scheme.
35. In view of the averments made in paragraph 31 of the Company Scheme Application, serving of notice along with a copy of the Scheme on the Competition Commission of India, in terms of Section 230(5) of the Companies Act, 2013, is not required.
36. The Applicant Companies shall file proof of compliance electronically to report to this Tribunal that all the directions including issue of notices and publication of advertisement have been duly complied with.
37. Ordered accordingly.