IN THE NATIONAL COMPANY LAW TRIBUNAL,

MUMBAI BENCH

COMPANY PETITION NO 2165 OF

2019
IN
COMPANY APPLICATION NO 1521 OF
2018
IN THE MATTER OF THE
COMPANIES ACT, 2013;
AND
IN THE MATTER OF SECTIONS 230
TO 232 READ WITH SECTION 234
AND OTHER APPLICABLE
PROVISIONS OF THE (INDIAN)
COMPANIES ACT, 2013;
AND
IN THE MATTER OF SCHEME OF
MERGER BY ABSORPTION OF
DIAMOND INDIA DMCC WITH
DIAMOND INDIA LIMITED AND
THEIR RESPECTIVE SHAREHOLDERS

Diamond India Limited )

A Company incorporated under )
the Companies Act, 1956 and a private )
company within the meaning of the )
Companies Act 2013 having Company )
Identification Number )
U36911MH2002PLC138275 )
having its registered office at )
2/A Laxmi Towers )
2nd Floor,G Block )
Behind ICICI Bank )
BKC, Bandra East )
Mumbai – 400051 )
… Petitioner Company/Transferee
Company

Date of Hearing : 03.01.2020

Order Delivered on: 21.01.2020
 IN THE NATIONAL COMPANY LAW TRIBUNAL,
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CP NO 2165/MB/NCLT/2019

Coram:

Mr. Chandra Bhan Singh : Hon'ble Member (Technical)

Smt. Suchitra Kanuparthi : Hon'ble Member (Judicial)

Appearances:

For the Petitioner : Mr. Akshay Shah, Practicing Chartered

Accountant
For the Regional Director : Ms. Rupa Sutar, Dy. Director for the
Regional Director

Per: Chandra Bhan Singh, Member (Technical)

ORDER

1. The Authorised Representative for the Petitioner Company states that this is
a scheme of Merger by absorption of Diamond India DMCC with Diamond
India Limited and their respective Shareholders.

2. The sanction of this Hon’ble Tribunal is sought under section 230 to 232 of
the Companies Act, 2013 read with Section 234 of the Companies Act,
2013 and Rule 15(1) of the Companies (Compromise, Arrangements and
Amalgamation) Rules, 2016, and other applicable provisions of the
Companies Act, 2013 to the Scheme of Merger by Absorption of Diamond
India DMCC, (‘the Transferor Company’) with Diamond India Limited,
(‘the Transferee Company/Petitioner Company’) and their respective
Shareholders.

3. The Petitioner Company has approved the said Scheme of Merger by

Absorption by passing the necessary Board Resolution on 12th October
2018 and thereafter they have approached the Hon’ble National Company
Law Tribunal (‘Tribunal’) for sanction of the Scheme.

4. The Authorised Representative for the Petitioner Company states that the
Petitioner Company had pursuant to order dated February 22, 2019 passed
by the Tribunal with reference of CSA No. 1521 of 2018, convened and
held a meeting of the Equity Shareholders of the Transferee Company on
Friday, 26th April, 2019 at 3:30 p.m. for the purpose of considering and

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approving, with or without modifications(s), the proposed scheme of

Merger by Absorption of Diamond India DMCC with Diamond India
Limited. The Equity shareholders of the Petitioner Company have
unanimously approved the scheme without modifications. The report of the
outcome of the Extraordinary General Meeting of the Equity shareholders
has been filed with the Tribunal on 29th April 2019.

5. The Transferor Company is mainly engaged in the business of trading in

rough and polished diamonds, pearls, precious stones and jewellery. The
Transferor Company has approved the said Scheme by passing the
necessary board resolution dated 12th October 2018. The registered office of
the Transferor Company i.e. Diamond India DMCC is situated in Dubai,
United Arab Emirates. Therefore, the Transferor Company will follow the
procedure as per the laws of United Arab Emirates.

6. The Petitioner Company is engaged in manufacturing, cleaving, sawing,

cutting, polishing, processing, assorting, and in buying, selling, importing,
exporting, supplying, distributing, disposing and dealing as wholesalers for
self and as agents and retailers in cut and uncut diamonds, industrial
diamonds, precious and semi-precious stones and pearls and acting as a
recognized Export House and Trading House; and in buying, selling,
importing, exporting, supplying, distributing, disposing and dealing in
bullion, gold, silver, platinum and precious metals and in acquiring and
holding in the course of business bullion, gold silver, diamonds, precious
stones, gems stones, ornaments and jewellery.

7. The Authorised Representative for the Petitioner Company submits that the
Petition had been filed in consonance with the Order dated 22nd February
2019 passed by this Tribunal in Company Application No. 1521 of 2018.

8. The rationale for the Scheme is that the Petitioner Company is holding the
entire share capital of the Transferor Company and as the Transferor
Company and Transferee Company’s business activities are similar and
complement each other, and to achieve inter-alia economies of scale and
efficiency and to reduce multiplicity of costs, the merger of the Companies

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is being undertaken. The key objectives of the merger by absorption are as

under:

(a) Greater integration and greater financial strength and flexibility for
the Transferee Company, which would result in maximising overall
shareholder value, and will improve the competitive position of the
combined entity.

(b) 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 organic
and inorganic growth opportunities, to maximize shareholder value.

(c) Cost savings are expected to flow from more focused operational
efforts, rationalization, standardisation and simplification of
business processes, and the elimination of duplication, and
rationalization of administrative expenses.

(d) Achieving Economies of scale

(e) Greater ability of the Transferee Company to raise financial

resources, either as equity or debt, based on combined financials.

(f) Ensuring a streamlined structure by reducing the number of legal

entities

(g) Reducing the multiplicity of legal and regulatory compliances

required at present especially over different jurisdictions.

(h) Reducing time and efforts for consolidation of financials at the

group level .

9. Upon the Scheme becoming effective and upon Merger by absorption of the
Transferor Company into the Transferee Company in terms of the Scheme,
the entire equity Paid-up share capital of the Transferor Company shall
stand automatically cancelled and there will not be any issue and allotment
of equity shares in the Transferee Company.

10. The Authorised Representative of the Petitioner Company states that the
Petitioner Company has complied with all requirements as per directions of
this Tribunal and have filed Affidavits dated 16th April 2019 and 24th
October 2019 confirming compliance of the Order dated 22 nd February

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2019 and 22nd October 2019 respectively before this Tribunal. Moreover,
the Petitioner Company undertakes to comply with all the statutory
requirements if any, as required under the Companies Act, 2013 and the
Rules made there under as applicable. The said undertaking given by the
Petitioner Company is accepted.

11. The Authorised Representative of the Petitioner Company states that the
shares of the Petitioner Company are not listed on any stock exchange.

12. The Regional Director has filed its Report dated 7th November, 2019
(“Report”), praying that this Tribunal may pass such orders as it thinks fit,
save and except as stated in paragraph IV (a) to (f). In paragraph IV (a) to
(f) of the said Report, the Regional Director has stated that:

(a) In Compliance of AS-14 (IND AS-103),the Petitioner Companies

shall pass such accounting entries which are necessary in
connection with the scheme to comply with other applicable
accounting standards such as AS-5 (IND AS -8) etc

(b) “Appointed Date” means the 1st Day of April 2018 or such other date
as the National Company Law Tribunal may direct;
“Effective Date” means the last of the dates on which the certified or
authenticated copies of the orders of the National Company Law
Tribunal sanctioning the Scheme are filed with the respective
Registrar of Companies by the Transferor Company and by the
Transferee Company. Any references in this scheme to the date of
“coming into effect of this Scheme” or “effectiveness of this Scheme”
or “Scheme taking effect” shall mean the Effective date and the
scheme shall be deemed to be effective from the Appointed Date;
Further, the Petitioners may be asked to comply with the requirements
and clarified vide circular no. F. No 7/12/2019/CL-I dated 21.08.2019
issued by the Ministry of Corporate Affairs.

(c) The Petitioner Transferor Company is registered and situated at

United Arab Emirates, in this regards, deponent prays that, Petitioner
Company has to comply with directions given by RBI vide their

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notification no. FEMA.389/2018-RB dated 20.03.2018 with prior the

approval of the Hon’ ble NCLT.

(d) It is observed that the Petitioner Companies has foreign/non-

resident shareholders. The Transferee Company must observe the
FEMA guidelines for allotment of shares to the shareholder of the
Transferor Company in Transferee Company.

(e) DIAMOND INDIA DMCC Transferor Company is foreign

Company incorporated in Dubai. Further, the Registrar office of
the above mentioned company is situated at Operating office at
Unit No.20-09-22, Plot No. DMCC-PH2-J&GPLexS, Jewellery &
Gemplex 2, Dubai,U.A.E and does not fall within the jurisdiction of
this Hon’ble Tribunal. Accordingly, similar approvals be obtained
by the Transferor Company in accordance with the laws of Dubai
U.A.E

(f) As per ROC, Mumbai report dated 17.10.2019, he has mentioned

the following observation in his report:-

As per provisions of section 234 of the Companies Act, 2013 sub

section(2) “Subject to the provisions of any other law for the time
being in force, a foreign Company, may with the prior approval
of the Reserve Bank of India, merge into a company registered
under this act or vice versa and the terms and conditions of the
scheme of merger may provide, among other things, for the
payment of the consideration to shareholders of the merging
company in cash, or in depository receipt, or partly in cash or
partly in depository receipt, as the case may be, as per the
scheme to be drawn up for the purpose.”

Explanation: For the purpose of sub section (2) the expression –

foreign company means any company or body corporate
incorporated outside whether having place of business in India
or not”

However the procedure with respect to, RBI notification

no.FEMA.389/2018-RB dated 20.03.2018 states at para no.9(1)

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that “any transaction on account of a cross border merger

undertaken in accordance with their regulations shall be deemed
to have prior approval of the reserve bank as required under rule
25A of the Companies (Compromise, Arrangement and
Amalgamation ) Rules, 2016, the company has also mentioned in
this regard at para 11 of the scheme. In this regard, Petitioner
Companies has to clarify the same.

13. In response to the above observations of the Regional Director, the

Authorised Representative for the Petitioner Company states as under

a) As far as the observations made in paragraph IV (a ) of the Report of the

Regional Director is concerned, the Authorised Representative for the
Petitioner Company submits that the Petitioner Company undertakes to
pass such accounting entries which are necessary in connection with the
Scheme to comply with such accounting standards notified under
Section 133 of the Companies Act, 2013 as may be applicable to the
Transferee Company (including, if applicable, Ind AS 103 and Ind AS-8)

b) As far as the observations made in paragraph IV (b ) of the Report of the

Regional Director is concerned, in view of clause 1 (1.4) of the Scheme,
which states that the Scheme shall become effective and operative from
the Appointed Date i.e. 1st April 2018, the Scheme is in compliance with
Section 232(6) of the Companies Act, 2013. The Authorised
Representative of the Petitioner Company further submits that the
Petitioner Company has complied with the requirements of circular no.
F. No 7/12/2019/CL-I dated 21.08.2019 issued by the Ministry of
Corporate Affairs.

c) As far as the observations made in paragraph IV (c ) of the Report of the

Regional Director is concerned, the Authorised Representative for the
Petitioner Company submits that the Petitioner Company has duly
complied with the directions given by RBI vide their notification no.
FEMA.389/2018-RB dated 20.03.2018 titled Foreign Exchange
Management (Cross Border Merger) Regulations, 2018 and a certificate

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in support of the same was filed with this Tribunal on 20 th November

2018.

d) As far as the observations made in paragraph IV (d ) of the Report of the

Regional Director is concerned, the Authorised Representative for the
Petitioner Company submits that this is a merger by Absorption of a
100% owned subsidiary company with its Holding Company and
therefore, there will be no allotment of shares pursuant to the said
scheme. As a result, there are no FEMA guidelines to be complied with
in respect of allotment of shares to foreign/non-resident shareholders.

e) As far as the observations made in paragraph IV (e ) of the Report of

the Regional Director is concerned, the Authorised Representative for
the Petitioner Company submits that the Transferor Company will
follow the necessary procedure as laid down under the laws of United
Arab Emirates.

f) As far as the observations made in paragraph IV (f ) of the Report of the

Regional Director is concerned, the Authorised Representative for the
Petitioner Company submits that Section 234 of the Companies Act,
2013 read with Rule 25A of the Companies (Compromises,
Arrangement and Amalgamations) Rules, 2016 permits the merger of a
foreign company with an Indian Company with the prior approval of the
Reserve Bank of India(“RBI”).To facilitate the aforesaid mergers of
foreign companies, the RBI has issued the Foreign Exchange
Management (Cross Border Merger) Regulations, 2018 (“Cross Border
Regulations”). Regulation 9 of the aforesaid Cross Border Regulations
provides that a cross border merger undertaken in accordance with said
regulations shall be deemed to have prior approval of the RBI as
required under Rule 2A of the Companies (Compromises, Arrangement
and Amalgamations) Rules, 2016. Regulation 9 of the Cross Border
Regulations further provides that the Managing Director/Whole Time
Director and Company Secretary, if available, of the company(ies)
concerned ensuring compliance to these regulations shall furnish along
with the application made to the Tribunal under the Companies

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(Compromises, Arrangement or Amalgamation) Rules, 2016 an affidavit

ensuring due compliance with the said Cross Border Regulations.
Accordingly, the Authorised Representative of the Petitioner Company
submits that the Petitioner Company has filed a certificate dated 16th
November 2018 issued by the Director of the Petitioner Company,
ensuring compliance with the Cross Border Regulations and filed with
this Tribunal on 20th November 2018.

14. No objector has approached, either the Petitioner Company or this Tribunal,
to oppose this Scheme of Merger by absorption.

15. From the material on record, the Scheme annexed as Exhibit F to Company
Scheme Petition No. 2165 of 2019 appears to be fair and reasonable and is
not violative of any provisions of law and is not contrary to public policy.
None of the parties concerned have come forward to oppose the Scheme.

16. Since all the requisite statutory compliances have been fulfilled, the
Scheme annexed as Exhibit F to Company Scheme Petition No. 2165 of
2019 is sanctioned and Company Scheme Petition No. 2165 of 2019 is
made absolute in terms of the prayer in clause 26 (i) (a ) to (b) in the said
Company Scheme Petition.

17. The Petitioner Company is directed to file a copy of this order and the
Scheme duly certified by the Registrar, National Company Law Tribunal,
Mumbai Bench, with the concerned Superintendent of Stamps for the
purpose of adjudication of stamp duty payable, if any, on the same within
60 days from the date of receipt of the order.

18. The Petitioner Company is directed to file a certified copy of this order
along with a copy of the Scheme with the concerned Registrar of
Companies, electronically, along with E-form INC 28, within 30 days from
the date of issuance of the order by the Registry, duly certified by the
Registrar of the National Company Law Tribunal, Mumbai Bench.

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19. The Petitioner Company is to pay cost of Rs. 25,000/- to the Regional
Director, Western Region, Mumbai. The cost is to be paid within four
weeks from the date of the receipt of the duly Certified copy of this Order.

20. Any person and/or concerned authorities interested shall be at liberty to

apply to this Tribunal in the above matter for any direction that may be
necessary.

21. Ordered accordingly.

Sd/- Sd/-
CHANDRA BHAN SINGH SUCHITRA KANUPARTHI
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
Dated: 21.01.2020
SAM

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