NCLT Chandigarh Approves Amalgamation of Seven DLF Group Companies into DLF Southern Towns

Chandigarh, India – The National Company Law Tribunal (NCLT), Chandigarh Bench, presided over by Hon’ble Sh. Harnam Singh Thakur (Member Judicial) and Hon’ble Sh. Umesh Kumar Shukla (Member Technical), has sanctioned the Scheme of Amalgamation involving seven transferor companies merging into DLF Southern Towns Private Limited. The order, delivered on January 17, 2025, under Sections 230-232 of the Companies Act, 2013, also approved a modification of the Appointed Date for the amalgamation from April 1, 2021, to April 1, 2024.

Background of the Amalgamation Scheme

A joint company petition (C.P.(CAA) - 20/2023) was filed by eight petitioner companies seeking approval for the amalgamation. The seven transferor companies are:

1. Amon Estates Private Limited

2. Calista Real Estates Private Limited

3. Chevalier Builders & Constructions Private Limited

4. Erasma Builders & Developers Private Limited

5. Hestia Realtors Private Limited

6. Laraine Builders & Constructions Private Limited

7. Snigdha Builders & Constructions Private Limited

These companies are set to amalgamate with DLF Southern Towns Private Limited (the Transferee Company). All petitioner companies are wholly-owned subsidiaries of DLF Home Developers Limited, which in turn is a wholly-owned subsidiary of DLF Limited, indicating a group restructuring. The primary objective cited for the amalgamation was to simplify the group structure and consolidate business operations.

Procedural Journey and Regulatory Scrutiny

The amalgamation process involved a First Motion application (CA(CAA)/31/Chd/Hry/2022), disposed of on March 2, 2023, which dispensed with meetings for most classes of shareholders and creditors, except for the unsecured creditors of the Transferee Company. This meeting, held on April 22, 2023, saw unanimous approval for the scheme.

In the Second Motion proceedings, notices were issued to various statutory authorities, including the Regional Director (Northern Region, MCA), Registrar of Companies (RoC), Official Liquidator (OL), Income Tax Department (ITD), and the Real Estate Regulatory Authority (RERA).

Key Observations and Responses

Several statutory authorities submitted reports with observations, which the petitioner companies addressed:

Regional Director (RD) / Registrar of Companies (RoC):

Appointed Date: The RD initially questioned the Appointed Date of April 1, 2021, being significantly ante-dated from the filing date of June 2, 2022, citing MCA Circular no. 9/2019. The petitioner companies initially justified this based on the latest available audited financials at the time of conceptualizing the scheme. However, they later submitted that the original Appointed Date had become impracticable and proposed a modification to April 1, 2024, which the Board of Directors of all petitioner companies approved. The Tribunal accepted this modification.

Dormant Status & Expenses: Queries were raised about some transferor companies having nil revenue, potentially appearing dormant under Section 455 of the Companies Act, 2013, and "Business Support Expenses" despite no operational revenue. The companies clarified that only two had nil revenue but held land parcels, were active in filings, and expenses were for day-to-day affairs.

Subsidiary Status & Financials: Clarifications were provided regarding the transferor companies becoming wholly-owned subsidiaries of DLF Home Developers Limited w.e.f. June 11, 2021 (post the March 31, 2021 financials initially referenced), and on interest income from Fixed Deposits that had matured within the financial year.

Transferee Company Issues: Concerns about pending statutory dues and homebuyer complaints against the Transferee Company were addressed with undertakings that the Transferee Company would continue to exist and deal with all proceedings.

The RD, after considering the petitioners' responses and the change in the Appointed Date, ultimately conveyed no objection to the scheme.

Official Liquidator (OL): The OL's report provided general information and noted no pending cases or investigations against the petitioner companies. While noting nil income for Transferor Company Nos. 1 and 6, the OL ultimately had no objection to the scheme.

Income Tax Department (ITD): The ITD filed reports for the Transferor Companies. The judgment mentions a table for ITD observations (Para 10(i)) which is empty in the provided text. However, it notes the ITD counsel mentioned that losses in Transferor Company Nos. 1 and 7 would be considered under Sections 72A and 79 of the Income Tax Act. The Petitioner Companies stated that the ITD had 'No Objection' and the Transferee Company undertook to discharge all tax liabilities of the Transferor Companies and confirmed it would not claim benefits of past losses or unabsorbed depreciation of Transferor companies contrary to tax laws. No report was filed for the Transferee Company despite notice, and the Tribunal proceeded based on the Transferee Company's undertakings.

Real Estate Regulatory Authority (RERA): Despite notices to RERA, Tamil Nadu (as some lands are in Tamil Nadu and Kerala), no report was filed. The Tribunal noted the service of notice and proceeded, directing the Transferee Company to comply with all RERA requirements.

Tribunal's Considerations

The Tribunal noted the compliance affidavits filed by the petitioner companies regarding notices, publications, and shareholder/creditor approvals. It also considered the arguments regarding Section 230(4) of the Companies Act, 2013, and Rule 16(2) of the CAA Rules, clarifying that special notice by the Tribunal is only for objectors who have made representations at meetings and desired to be heard.

The accounting treatment proposed in the Scheme was certified by statutory auditors to be in conformity with prescribed Accounting Standards.

The Verdict: Scheme Sanctioned with Conditions

After hearing all parties and perusing the records, the NCLT sanctioned the Scheme of Amalgamation with the Appointed Date as April 1, 2024. Key directions include:

Dissolution: Upon the sanction becoming effective, the Transferor Companies shall stand dissolved without undergoing winding up.

Transfer of Assets and Liabilities: All properties, rights, powers, liabilities, and duties of the Transferor Companies shall transfer to the Transferee Company.

Share Capital: The authorized share capital of the Transferee Company will be adjusted, with fees paid by Transferor Companies on their authorized capital being set off. The Transferee Company must file a revised MOA & AOA and pay any differential fees.

Share Allotment: The Transferee Company shall allot shares to the members of the Transferor Companies as per the scheme. (Notably, since Transferor companies are WOS of DLF Home Developers Ltd., shares will be issued to DLF Home Developers Ltd.)

Legal Proceedings: Pending legal proceedings by or against the Transferor Companies will continue by or against the Transferee Company.

Employees: Employees of Transferor Companies will become employees of the Transferee Company on terms no less favorable.

Tax Liabilities: All tax liabilities and pending proceedings of Transferor Companies are transferred to the Transferee Company, which undertakes to discharge them and comply with the Income Tax Act, 1961.

RERA Compliance: The Transferee Company must comply with all requirements of RERA, Tamil Nadu, and other applicable RERAs.

Statutory Dues: The Transferee Company will clear all pending statutory dues of all involved companies after exhausting appellate remedies.

The Tribunal clarified that the order does not grant exemption from any other statutory payments (like stamp duty, taxes) or permissions required under any other law.

Implications

This amalgamation is a significant step for the DLF group, aiming to streamline its corporate structure and enhance operational efficiencies. The sanction from NCLT, after due regulatory scrutiny and modifications, paves the way for the consolidation of these real estate entities. The Transferee Company, DLF Southern Towns Private Limited, will now absorb the assets, liabilities, and operations of the seven amalgamating companies, effective from April 1, 2024.