MICROFIRM CAPITAL PRIVATE LIMITED VS

Counsel on Record for the Petitioners:

1. Mr. Jishnu Chowdhury, Advocate

2. Ms. Joveria Sabbah, Advocate

3. Ms. Ankita Agrahari,Advocate

4. Mr. Kritin Saraf, Advocate

ORDER

Per: Balraj Joshi, Member (Technical)

1. The instant petition has been filed under Section 230(1) read with to Section 232(1) of the Companies Act, 2013 ("Act") for sanction of the Scheme of Amalgamation between Microfirm Capital Private Limited, being the Petitioner No. 1 above named ("Transferor Company" or "Petitioner No. 1") and Magma Consumer Finance Private Limited being the Petitioner No. 2 above named ("Transferee Company" or "Petitioner No. 2") whereby and where under Microfirm Capital Private Limited is proposed to be merged with Magma Consumer Finance Private Limited from the Appointed Date, viz. close of business hours of March 31, 2022, in the manner and on the terms and conditions stated in the said Scheme of Amalgamation ("Scheme").

2. The Petition has now come up for final hearing. Counsel for the Petitioners submits as follows:-

(a) The Scheme was approved unanimously by the respective Board of Directors of the Petitioners at their respective meetings held on December 14, 2022.

(b) The rationale provided for the scheme of amalgamation is that the Petitioner No.1holding registration as "Core Investment Company" was holding, primarily, shares in Poonawalla Fincorp Limited (erstwhile Magma Fincorp Limited, hereinafter "PFL"). However, consequent upon the investment in PFL by the Poonawalla group, based on a transaction which has duly been approved by the RBI, PFL ceased to be a group company, and therefore, the Petitioner No.1's investment in PFL ceased to qualify as an investment in "company under the same group".

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Hence, Petitioner No.1 ceased to meet the criteria for an NBFC-CIC. Petitioner No.1 has since been deploying the cash flows generated from the transfer of shares of PFL into various capital market activities. The RBI vide email dated 18th September 2022 had asked to make a decision as to whether Petitioner No.1 proposes to get itself converted into an NBFC-ICC or merge with an existing NBFC-ICC.

Petitioner No.1 has since evaluated and understood that there is no formal process of conversion of NBFC-CIC into NBFC-ICC and for that a fresh registration process only has to be followed. Accordingly, considering the circumstances, the Petitioner No.1, evaluated the benefits of amalgamation of the Petitioner No.1 with the transferee company. Since both Petitioner No.1 and Petitioner No.2 are part of the same group and engaged in similar activities, it would be of better interest and benefit for the Group to have one NBFC, from the perspective of ease of doing business as also to align with the future objectives of the group.

The Scheme is intended to merge these companies and consolidate their business in a manner that is expected to enable better realization of their business potential, yield beneficial results and enhanced value creation for the said companies, their respective shareholders and stakeholders. The Amalgamation of the Petitioner No.1 with the Petitioner No.2 would inter alia have the following benefits:

a. It will enable better and more efficient management, control and obtain synergic benefits of the proposed merger. It will result in a significant reduction in the multiplicity of legal and regulatory compliances required at present to be carried out by the Transferor Company and the Transferee Company.

b. The proposed merger will ensure cost reduction, easier and efficient compliances and optimum management combining synergies of the companies.

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c. The proposed merger will provide for pooling of the managerial, technical and financial resources of the Transferor Company and the Transferee Company which will help in increasing the overall competitiveness of the group.

d. Both the Transferor Company and the Transferee Company are engaged in similar activity and therefore, it would be more desirable for the group to have one NBFC in its fold from the perspective of ease of doing business and also a preferable choice in regulator's preference.

e. The same will lead to strengthening of the single brand leading to a stronger market presence.

f. The proposed merger will help to achieve greater integration and greater financial strength and flexibility, to maximize overall shareholder value and improve the competitive position of the combined entity. g. Greater efficiency in cash management of the merged entity, and unfettered access to cash flow generated by the combined business which can be deployed more efficiently to maximize shareholders value. h. The increased asset base of the merged entity would have better financial viability and clearer focus, which would be in the interests of all creditors.

(c) The Statutory Auditor of the Transferee Company by its certificate dated December 12, 2022 has confirmed that the Accounting Treatment proposed in the Scheme is in conformity with the Accounting Standards prescribed under Section 133 of the Companies Act, 2013.

(d) The exchange ratio of shares in consideration of the Amalgamation has been fixed on a fair and reasonable basis based on the valuation report obtained from CA Vidhi Chandak, Registered Valuer [IBBI/RV/06/2019/11186]. Further Sumedha Fiscal Services Limited., a SEBI Registered Category I Merchant Banker, has also confirmed the said ratio is fair and proper by their fairness opinion thereon.

(e) No proceedings are pending under Sections 210 to 227 of the Companies Act, 2013 against the Petitioners.

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(f) The shares of the Petitioners are not listed with any of the Stock Exchanges

(g) By an order dated March23, 2023 in Company Application (CAA) No.1/KB/ 2023, this Tribunal allowed the said Company Application and made the following directions with regard to meetings of shareholders and creditors under Section 230(1)read with Section 232(1) of the Act:-

a. Meetings dispensed: (i) Meetings of the Equity Shareholders of the Petitioner No.1 and meetings of the ordinary Equity Shareholders , Class B Equity Shareholders and Preference Shareholders of the Petitioner No.2 are dispensed with under Section 230(1) read with Section 232(1) of the Act in view of the fact that such shareholders have already given their consent to the Scheme.(ii) It is recorded that there are no Secured Creditors in the Petitioner No.1 and no Secured Creditors and Unsecured Creditors in the Petitioner No.2

b. Meetings directed to be held: Meeting of the Preference Shareholders of the Petitioner No.1 and meeting of the Unsecured Creditors of the Petitioner No.1 for considering the Scheme were directed to be held on May 2, 2023 at 11:00 AM and 12:00 Noon respectively. Such meetings were directed to be held physically at the Registered Office of the Company i.e. Development House, 3^rdFloor, 24, Park Street, Kolkata -

700016.

(h) Pursuant to the said order dated March 23, 2023 in Company Application (CAA) No.1 / KB / 2023, and the applicable provisions of the Companies Act, 2013 and Rules framed thereunder, the Preference Share-holders and the Unsecured Creditors of the Petitioner No.1 were given the option of voting on the Scheme, conducted physically, by polling paper.

(i) The said meetings were duly held on May 2, 2023, as directed. The said meetings duly approved the Scheme by requisite majority.

(j) Consequently, the Petitioners presented the instant petition for sanction of the Scheme. By an order dated June 7, 2023, the instant petition was admitted by this

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Tribunal and fixed for hearing on July 10, 2023 upon issuance of notices to the Statutory/Sectorial Authorities and advertisement of date of hearing. In compliance with the said order dated June 7, 2023, the Petitioners have duly served such notices on the Central Government through the Regional Director, Eastern Region, Ministry of Corporate Affairs, Kolkata; Registrar of Companies, West Bengal, Kolkata; the Official Liquidator, High Court at Calcutta, and the Income Tax Authorities having jurisdiction over the Petitioners Companies and Reserve Bank of India. The Petitioners have also published advertisements one each in the "Financial Express" and "Aajkal" in their respective issues both dated June 16, 2023. An affidavit of compliance in this regard has also been filed by them on June21, 2023.

(k) All statutory formalities requisite for obtaining sanction of the Scheme have been duly complied with by the Petitioners. The Scheme has been made bona fide and is in the interest of all concerned.

3. Pursuant to the said advertisements and notices, the Regional Director (In-charge), Eastern Region, Ministry of Corporate Affairs, at Kolkata, Official Liquidator, High Court at Calcutta and Income Tax Authority has filed their representations before this Tribunal.

4. The Official Liquidator, High Court, Calcutta has filed his report dated July 4, 2023 and concluded as under:-

"8. That the Official Liquidator has not received any complaint against the proposed Scheme of Amalgamation from any person/party interested in the Scheme in any manner till the date of filing of this Report.

10. That the Official Liquidator on the basis of the information submitted by the Petitioner Companies is of the view that the affairs of the aforesaid Transferor Companies do not appear to have been conducted in a manner prejudicial to the interest of its members or to public interest as per the provisions of the Companies Act, 1956/the Companies Act, 2013 whichever is applicable.

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5. The Income Tax Authority has filed their representation through a letter dated June 30, 2023and, in its letter, has inter alia stated as follows:-

"5. However, this is to inform that assessee company's case for the A. Y. 2022-2023 has been selected for scrutiny and the assessment proceeding u/s 143(3) is still pending with a faceless unit and there is also outstanding demand of Rs.580/- + int. u/s 202(2) A.Y. 2019-20 in the case of the company."

The Petitioners have clarified such observations of the Income Tax Authority and have filed an affidavit on July 8, 2023 stating:-

"I say that all the claims of the Income Tax Department were satisfactorily addressed. Further, the proposed Scheme relates to an amalgamation of Petitioner No.1 with Petitioner No.2, the Assessee Company. The Transferee Company shall continue to exist and carry on its business in the normal course even after the sanction of this instant Scheme by the Hon'ble Tribunal and on implementation and giving effect to the terms of the Scheme. Consequentially, the outstanding demand, scrutiny proceedings and/or assessment proceedings against the Assessee Company could be conducted and/or carried on the usual course and the Assessee Company, being the Transferee Company, shall continue to exist and shall not be affected by the approval of the Scheme".

6. The Regional Director (In-charge), Eastern Region, Ministry of Corporate Affairs, at Kolkata has filed his reply affidavit dated June 28, 2023 ("RD Affidavit") which has been dealt with by the Petitioners by their Rejoinderaffidavit dated June 30, 2023 ("Rejoinder")filed by the learned counsel of the Petitioners. The observations of the Regional Director and responses of the Petitioners are summarized as under:-

(a) Observation of the Regional Director contained in Paragraph No.2(a) of RD Affidavit:

"That it is submitted that as per available record, it appears that no complaint and/or representation has been received against the proposed Scheme of Amalgamation. Further, all the petitioner companies are up-dated in filing their Financial Statements and Annual Returns for the financial year 31/03/2022."

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Response of the Petitioners contained in Paragraph 3 of the Rejoinder:

"3. With reference to the statements in paragraph 2 (a) of the said Affidavit, it is stated that it is clear from the averments that there are no complaints or representations received against the Scheme and the Petitioner Companies are updated in filling their financial statements and Annual Returns for the financial year ended March 31, 2022."

(b) Observation of the Regional Director contained in Paragraph No.2(b) of RD Affidavit:

"It is submitted that the Petitioner Transferee Company, M/s Magma Consumer Finance Private Limited having Registration No. N-05.06752 and Transferor Company, Microfirm Capital Private Limited having Registration No. N- 05.07053 are registered with RBI as NBFC Companies. The Reserve Bank of India vide its letter No. KOL.DOS. RSG.No.S30/99-06-002/2023-2024 dated 10.04.2023 addressed to the Board of Directors of M/s Magma Consumer Finance Private Limited (Transferee Company) issued their "No Objection" to the proposed scheme of amalgamation. Further, the RBI has also stated in the said letter that the said approval (No Objection) is valid for six months from the date of issue of that letter (A copy of the said letter of RBI marked as Annexure- I is annexed herewith for kind perusal and ready reference)." Response of the Petitioners contained in Paragraph 4 of the Rejoinder:

"4. With reference to the statements contained in paragraph 2 (b) of the said affidavit, it is stated that the Reserve Bank of India by a letter dated April 10, 2023 has advised that they do not have any objection to the proposed Scheme."

(c) Observation of the Regional Director contained in Paragraph No.2(c) of RD Affidavit:

"The Petitioner Companies should be directed to provide list/details of Assets, if any, to be transferred from the Transferor Companies to the Transferee Company upon sanctioning of the proposed Scheme"

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Response of the Petitioners contained in Paragraph 5 of the Rejoinder:

"5. With reference to the statements contained in paragraph 2(c) of the said Affidavit, the Petitioner Companies state that the details and list of assets, if any, to be transferred from the Transferor Company to the Transferee Company shall be provided in the Schedule of Assets that shall be filed on the Scheme being sanctioned by this Hon'ble Tribunal."

(d) Observation of the Regional Director contained in Paragraph No. 2(d) of RD Affidavit:

"That the Petitioner company should undertake to comply with the provisions of section 232(3)(i) of the Companies Act, 2013 through appropriate affirmation."

Response of the Petitioners contained in Paragraph 6 of the Rejoinder:

"With reference to the statements contained in paragraph 2 (d) of the said Affidavit, the Petitioner Companies undertake to comply with the provisions of 232(3)(i) of the Companies Act, 2013."

(e) Observation of the Regional Director contained in Paragraph No.2(e) of RD Affidavit:

"That the Transferee Company should be directed to pay applicable stamp duty on the transfer of the immovable properties from the Transferor Companies to it.."

Response of the Petitioners contained in Paragraph 7 of the Rejoinder:

"7. With reference to the statements contained in paragraph 2 (e) of the said Affidavit, the Petitioner Company undertakes that there is no immovable property in the Transferee Company. Accordingly, there shall be no stamp duty leviable and chargeable on the transfer of immovable properties from the Transferor Company to it."

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(f) Observation of the Regional Director contained in Paragraph No.2(f) of RD Affidavit:

"The Hon'ble Tribunal may kindly direct the Petitioners to file an affidavit to the extent that the Scheme enclosed to the Company Application and Company Petition are one and same and there is no discrepancy or no change is made.." Response of the Petitioners contained in Paragraph 8 of the Rejoinder:

"With reference to the statements contained in paragraph 2 (f) of the said Affidavit, it is stated that the Scheme enclosed with the Company Application and the Company Petition are one and the same and there is no discrepancy and no change has been made in the Scheme."

(g) Observation of the Regional Director contained in Paragraph No.2(g) of RD Affidavit:

"It is submitted that as per instructions of the Ministry of Corporate Affairs, New Delhi, a copy of the scheme was forwarded to the Income Tax Department on 13/04/2023 for their views/observation in the matter and the said report is still awaited. Hon'ble Tribunal may peruse the same and issue order as deemed fit and proper. "

Response of the Petitioners contained in Paragraph 9 of the Rejoinder:

"With reference to the statements contained in paragraph 2 (g) of the said Affidavit, the Petitioner Companies have served notices on the Income Tax authorities on March 29, 2023 and June 16, 2023. Copy of such notices dated March 29, 2023 and June 16, 2023 are collectively annexed herewith and marked as "Annexure A". The Income Tax authorities had responded through a letter dated April 27, 2023 seeking further time of 30 days to file representation, if any. A copy of the letter dated April 27, 2023 is annexed herewith and marked as

"Annexure B". Such letter has been responded by the Petitioners through a letter dated May 04, 2023, a copy which is annexed herewith and marked as

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"Annexure C". It is stated that the Income Tax authorities having sought additional time of 30 days to file the representation, if any, has not filed any such representation or served a copy of such representation on the Petitioners. It should, therefore, be presumed that the Income Tax Authorities have no objection to the proposed Scheme submitted before this Hon'ble Tribunal."

7. The observations/objections pointed out by the Regional Director (In-Charge), Eastern Region, Ministry of Corporate Affairs, at Kolkata in his Report are all clarified by the Petitioners in their Rejoinder.

8. Heard submissions made by the Ld. Counsel appearing for the Petitioner Companies and Regional Director. Upon perusing the records and documents in the instant proceedings and considering the submissions and on being satisfied with the clarifications provided by the Petitioners, we allow the Petition and make the following orders:-

a. the Scheme of Amalgamation mentioned in paragraph 1 of the Petition, being Annexure "A" hereto, be and is hereby sanctioned by this Tribunal with effect from Appointed Date i.e. closure of business hours of March 31, 2022 and shall be binding on Microfirm Capital Private Limited and Magma Consumer Finance Private Limited, their respective shareholders and creditors and all concerned;

b. all the property, right and powers of Microfirm Capital Private Limited be transferred from the said Appointed Date, without any further act or deed toMagma Consumer Finance Private Limitedand, accordingly, the same shall pursuant to Section 232(4) of the Companies Act, 2013, be transferred to and vest in Magma Consumer Finance Private Limitedfor all the estate and interest of Microfirm Capital Private Limited therein but subject nevertheless to all charges now affecting the same, as provided in the Scheme. c. all the debts, liabilities, duties and obligations of Microfirm Capital Private Limited be transferred from the said Appointed Date without any further act or deed to Magma Consumer Finance Private Limitedand, accordingly, the same

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shall pursuant to Section 232(4) of the Companies Act, 2013, be transferred to and become the debts, liabilities, duties and obligations of Magma Consumer Finance Private Limited, as provided in the Scheme.

d. The employees of Microfirm Capital Private Limited shall be employed by Magma Consumer Finance Private Limited,as provided in the Scheme; e. all proceedings and/or suits and/or appeals now pending by or against Microfirm Capital Private Limited be continued by or against Magma Consumer Finance Private Limited,as provided in the Scheme and the sanction of this scheme shall not come in the way of compliance of any extant law, for the contravention of which, necessary proceedings may be instituted against the Transferee company. f. Magma Consumer Finance Private Limited do without further application issue and allot to the shareholders of the Microfirm Capital Private Limited, the shares in Magma Consumer Finance Private Limited to which they are entitled in terms of the Scheme;

g. Leave is granted to the Petitioner to file the Schedule of Assets of Microfirm Capital Private Limited in the form as prescribed in the Schedule to Form No.CAA7 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 within three weeks from the date of receiving a copy of this order; h. Microfirm Capital Private Limited and Magma Consumer Finance Private Limited shall each within thirty days of the date of the receipt of this order, cause a certified copy thereof to be delivered to the Registrar of Companies, West Bengal for registration and on such certified copies being so delivered, Microfirm Capital Private Limited shall be dissolved with effect from the last of the dates of filing of the certified copies of the order, as aforesaid (Effective Date) and the Registrar of Companies, West Bengal shall place all documents relating to the Microfirm Capital Private Limited and registered with him on the file kept by him in relation to the Magma Consumer Finance Private Limitedand the files relating to the said companies shall be consolidated accordingly.

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9. The Petitioners shall supply legible print out of the Scheme and Schedule of Assets in acceptable form to the Department and the Department will append such printout, upon verification to the certified copy of the order.

10. That any person/authority interested/aggrieved shall be at liberty to apply to this Tribunal in the above matter for any directions that may be necessary.

11. Company Petition (CAA) No.69/KB/2023) connected with CA(CAA) No. 1/KB/2023 is disposed of accordingly.

12. Certified copy of this order, if applied or, be supplied to the parties, subject to compliance with all requisite formalities.

(Balraj Joshi) (RohitKapoor) Member (Technical) Member (Judicial)

This order is signed on 22^ndDay of September, 2023.

BD

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