Per: Manoj Kumar Dubey, Member (Technical)

1. This is a joint second motion petition is filed by M/s. Austin Global Ventures Private Limited (for brevity, the "Petitioner Company No. 1/Transferor Company") and M/s. Zerodha Broking Limited (for brevity, the "Petitioner Company No. 2/Transferee Company") under Sections 230 and 232 of the Companies Act, 2013 (for short to be referred hereinafter as the 'Act') and read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (for brevity, 'Rules') by inter alia seeking for the sanction of Scheme of Arrangement (for brevity 'Scheme') between Transferor Company and Transferee Company.

2. The petitioner companies filed First Motion Application bearing CA (CAA) No. 16/BB/2021 before this Tribunal. And based on such application moved under section 230-232 of the Companies Act, 2013 necessary directions were issued vide order dated 06.08.2021. Details of the First Motion order are as under:

3. Pursuant to the First Motion Application, the Tribunal directed to issue paper notification one in English language "Indian Express" and one in Vernacular language "Kannada Prabha" about the dispensation of the meetings. The compliance to the aforesaid order, the applicant companies filed an affidavit dated 5.05.2021 to the petition.

4. When the petition was listed on 20.10.2021, the following directions were issued:

"Admit and Issue Notice. Registry is directed to prepare the notice to the Registrar of Companies, Karnataka The Regional Director (SER) Hyderabad, the Official Liquidator, Karnataka (in respect of Transferor Company), the Securities and Exchange Board of India, Bangalore (in respect of Transferee Company) the Principal Commissioner of Income Tax, Koramangala, the Secretary, Competition Commission of India, New Delhi-and the Counsel for the Petitioner Companies is permitted to collect notice and serve it personally on the aforesaid statutory authorities and to file proof of service in the Registry well before the next date of hearing. The Petitioner is also permitted to cause Per Publication in Bengaluru Edition of "The Indian Express" in English language and in "Kannada Prabha", in vernacular language and to file proof of service in the Registry well before the next date of hearing".

5. In pursuant to the aforesaid notice, the Counsel of the petitioner companies has filed affidavit of service for paper publication vide diary No. 3172 dated 23.11.2021 and copies of proof of service of notice vide diary No. 245 dated 17.01.2022, to the aforesaid authorities i.e., The Regional Director, Ministry of Corporate Affairs, Registrar of Companies, Income Tax Department. The Principal Commissioner of Income Tax, Office of the Official Liquidator. The Secretary Competition Commission of India. On 14.12.2022 vide diary No. 5431, petitioner companies filed an affidavit stating that they have not received any objections and/or opposition to the Scheme till present date, and there are no objectors as such. It is further stated that the Scheme has been approved by the respective Board of Director, along with its members/shareholders and creditors, of the Petitioner Companies to achieve the benefits captured in the Scheme.

6. The main objects, dates of Incorporation, authorized, issued and paid-up share capital, rationale of the scheme and interest of employees have been discussed in detail in first motion order dated 06.08.2021.

7. The Board Resolution of the Petitioner Companies approving the Scheme is annexed as Annexure S & T of the Petition.

8. It is further submitted that the Certificate of Statutory Auditors of the Petitioner Companies, stating that the accounting treatment contained in clause 11, does not contravene the requirement of any accounting standards prescribed under section 133 of the Companies Act, 2013. The aforesaid certificate is attached as Annexure Y & Z of the Petition.

9. The audited financial statement as on 31.03.2020 and un-audited balance sheet as on 30.09.2020 of the Transferor Company are attached as Annexure D & E of the Petition. The audited financial statement as on 31.03.2020 and un-audited balance sheet as on 30.09.2020 of the Transferee Company are attached as Annexure M & N of the Petition. The Petitioner companies have filed financial statements for the year 31.03.2022 & 31.03.2021 along with the reply to Common Roc and RD report vide diary No. 5433 dated 14.12.2022 as Documents 7, 9, 10.

10. As per the Scheme, the "Appointed Date" means 1st April, 2020 or such other date as may be agreed by the board of directors of the Transferor Company and the Transferee Company and approved by the Central Government or as directed or imposed by the Central Government.. The "Effective Date" means the day on which means the last of the dates on which the certified copy of the confirmation order of this Scheme issued by the Central Government, is filed with the Registrar of Companies, Bangalore. References in this scheme to the date of "Coming in to effect of this Scheme" or "upon the Scheme being effective" shall mean the Effective Date.

11. The consideration for Amalgamation of the Transferor Company with the Transferee Company has been determined under Clause 10 of the Scheme.

12. It is stated that, petitioner companies have filed affidavits dated 14.12.2022 stating that petitioner companies does not contemplate or envisage or involve any corporate debt restructuring. It is further stated that there are no pending legal proceedings involving either or both of the Petitioner companies. The aforesaid is supported by an affidavit filed vide diary No. 5430 dated 14.12.2022

13. In pursuant to the notice, the Regional Director (RD) has filed its report along with the ROC vide Diary No. 4934 dated 18.11.2022, by inter alia observing as under, vide para 2:-

(i) The Appointed Date for the purpose of section 232(6) of the Companies Act, 2013 is 01.04.2020. As the appointed date is quite old and as per Company Master Date both the Companies have filed their returns for the year 31.03.2021. Hence, this Tribunal may be pleased to direct the Petitioner Companies to change the appointed date.

(ii) Both the Transferee and Transferor Companies have not filed Notice of scheme inviting objections or suggestions in form CAA-3 in e-form GNL-1. The Petitioner Companies may be advised to comply with the requirements in this regard.

(iii) Transferee and Transferor companies are involved in business of broking and investment related activities. The Transferor Company is venture capitalist and Transferee Company is a share broker company. Hence, both the companies are required to submit approval from SEBI/RBI. Transferee Company in its reply submitted on 10.10.2022 has stated that upon the implementation of the Scheme, the Transferor Company shall cease to exist and hence, it will not be able to undertake any investment activities. Also, the Transferee Company undertakes that it will not be involved in any investment activities upon the merger with the Transferee Company, as a result, there is no question of approval from SEBI/RBI arises.

(iv) Transferor Company has received a notice from RBI on 10th March 2020, in the matters of complying the principal business criteria. The Transferee Company in its reply submitted on 10.10.2022 has stated that as per the notice from RBI on 10th March 2020, the Transferor Company had adopted to dissolve the Company by merging itself with the Transferee Company and stated that the applicant company has not filed for, nor has it obtained any license from RBI. However, RBI in its letter dated 10.03.2022 had directed to submit their comments/explanation for undertaking the business of NCFI without obtaining registration with RBI and directed to adopt anyone of the following three options:

a. Merge with another NBFC or Non-Financial Company (NFC).

b. Wind up the business of NBFI.

c. Apply for certificate of registration as per RBI press release dated June 17, 2016, regarding simplification and rationalization of registration process of new NBFCs.

Hence, petitioner companies may be directed to furnish NOC from Reserve Bank of India (RBI), regarding compliance of the directions issued by RBI and furnish the copy of the same with supporting documents duly certified.

(v) The Transferee company has outward Foreign Exchange to the tune of Rs. 87,24,65,681/- whereas the foreign exchange inflow is Nil. The company may be asked to submit the relevant approvals and compliances made under FEMA/RBI regulations in this regard. Transferee Company in its reply submitted on 10.10.2022 has stated that as per master direction No. 8/2015-16, a prior approval of the Reserve Bank of India is only required if remittances exceeds USD 1,00,00,000 per project for any consultancy services in respect of infrastructure projects and USD 10,00,000 per project, for other consultancy services procured from outside India. Transferee Company has stated that it didn't make any single foreign remittance exceeding USD 1000000 but made payments to various parties post deduction of applicable taxes.

(vi) The main object clauses of Transferee and Transferor Company are different. Transferor Company is investment company whereas the Transferee Company is engaged in the business of broking and dealing in all kinds of shares and other financial instruments. Hence, the Transferee company is required to alter memorandum of association with respect to the objects of the company by complying with the provision of section 13(9) of the Companies Act, 2013 and file necessary E-forms with the Registrar of Companies upon approval of Scheme, in case the Transferee Company intends to do investment and other related business. Transferee Company in its reply submitted on 10.10.2022 has stated that Transferee Company is not to make investments. Further, upon merger the Transferee Company will only hold pre-existing assets/investments of the Transferor Company and the Transferee Company shall not make any further investments. The Transferee Company undertakes that it will not be involved in any investment activities upon the merger with the Transferee Company. It is further humbly submitted that the Memorandum of Association of the Transferee Company in the ancillary objectives allows for the Transferee Company in the ancillary objectives allows for the Transferee Company to hold such assets/investments and accordingly, no change to the objects clause of the Transferee Company is warranted.

(vii) As per the notice of first annual general meeting of the Transferee Company for the year ended March 31st, 2019 the date on which the meeting to be held is written as 23/12/2020, whereas, as per the Master data of the company the meeting was conducted on 23/12/2019, which is in violation of Section 101(2) of the Companies Act, 2013. The Company is required to file adjudication application under section 454 of Companies Act, 2013

(viii) The Transferee and Transferor Companies have to comply with Section 232(2)(e) as far as present financial position is concerned.

(ix) The Transferee and Transferor companies have Related Party Transactions. The companies may be asked to show the compliance of Section 188 of the Companies Act, 2013 and if not complied, may be asked to file compounding application.

(x) The Transferor Company is holding investment in shares worth Rs. 29.91 Crore in the Transferee Company and once the scheme is allowed, the said shares shall be extinguished. No fresh shares shall be allotted directly or indirectly by Transferor Company whatsoever in this regard. The scheme is silent on this matter. Petitioner Companies may be directed to furnish their comments with proper justification and supporting documents before Hon'ble Tribunal.

(xi) As per clause 13.1 of Scheme of merger, it is stated that company has already paid the additional fees and duties on authorized capital increased after amalgamation of the Transferor Company with Transferee Company. The Company may be asked to submit necessary proofs and challans for the above payment of stamp duty and registration fees. Further, Transferee Company needs to make a separate request letter to ROC for clubbing of Authorized capital within one month from the order or else interest will be levied as per the provisions of section 403 of the Companies Act, 2013.

(xii) Official Liquidator, Karnataka in his report filed before Hon'ble NCLT Bengaluru Bench has pointed out certain observations.

14. Subsequently, reply affidavit to the common report of RD and ROC has been filed by the petitioner companies vide diary No. 5433 dated 14.12.2022 inter alia stating as under:-

(a) Reply to point 2(i): it is stated that 01.04.2020 has been prescribed as the 'Appointed Date' from which the Scheme shall be deemed to be effective upon approval by the Tribunal. The Petitioner Companies first approached this Tribunal for approval of the Scheme by way of the C.A. (C.A.A) No. 16/2021 on 11.02.2021. However, the progress in and consideration of the C.A. (C.A.A) No. 16/2021 and the C.P. (C.A.A.) No. 39/2021 has taken longer than usual on account of extraordinary circumstances, including the limitations caused by the global COVID - 19 pandemic. It is further stated that General Circular No. 09/2019 dated 21.08.2019 issued by the Ministry of Corporate Affairs prescribes that explanation is required only if the Appointed Date is significantly antedated beyond a year from the date of filing the application. The Appointed Date determined in the Scheme (i.e., 01.04.2020) is within the same financial year, and therefore, not significantly ante-dated from the date of filing the application (i.e., 11.02.2021). It is stated that considering the Appointed Date of 01.04.2020, the Scheme has been approved in entirety by the concerned Board of Directors, Shareholders, Secured Creditors and Unsecured Creditors of the Petitioner Companies, and it is not prejudicial to the interests of its shareholders, creditors and the public in general. In fact, retaining the same Appointed Date would also facilitate the Petitioner Companies in duly complying with all corporate, statutory and accounting measures required to be taken upon the sanction of the Scheme by this Tribunal.

(b) Reply to point 2(ii): It is stated that the Petitioner No. 1/Transferor Company and Petitioner No. 2/Transferee Company had filed the e-form GNL-1 vide SRN No. F27035807 and F27034768, respectively. True copies of the e-form GNL-1 are produced herewith as Document No. 1 to Document No. 2, respectively.

(c) Reply to point 2(iii): it is submitted that the contents of this paragraph are a matter of record. In the Petitioner Companies 'reply dated 10.10.2022, the Petitioner Companies have highlighted that the Petitioner No. 1/Transferor Company would cease to exist upon the Scheme being approved by this Tribunal and consequent implementation, as well as that the Petitioner No. 2 neither is nor will be involved in investment activities. The same has been accepted by the RoC and RD and reiterated in the said Report.

(d) Reply to point 2(iv): the Petitioner No. 1/Transferor Company has duly responded to the Letter dated 10.03.2020 issued by the Reserve Bank of India ("RBI") vide its Reply dated 07.05.2020. In the said Reply, the Petitioner No. 1/Transferor Company has explained to the RBI that Petitioner No. 1/Transferor Company is not engaged in any non-banking financial/lending activity and the only advances shown in the books of the Petitioner No. 1/Transferor Company were advances to the Petitioner No. 2/Transferee Company which had already been repaid in full by May 2022. It was also expressly clarified and assured that the Petitioner No. 1/Transferor Company did not intend to carry out any non-banking financial/lending activity and had no intention to do so. Thereafter, the RBI has raised no concerns and issued no directions to the Petitioner No. 1/Transferor Company. Moreover, the Petitioner No. 1/Transferor Company would cease to exist upon the Scheme being approved by the Hon'ble Tribunal and consequent implementation. Therefore, there are no directions either issued by RBI or pending compliance by the Petitioner Companies. True copy of the Reply to the RBI dated 07.05.2020 (with Annexures) is produced herewith as Document No. 3. On 25.1.2023, the counsel for ROC/RD submitted that no further observation is required after considering the reply filed by the petitioner companies.

(e) Reply to point 2(v): it is stated that the contents of this paragraph are a matter of record. The Petitioner Companies has not made any single foreign remittance exceeding USD 1,000,000, requiring any regulatory approvals in this regard. On 25.1.2023, the counsel for ROC/RD submitted that no further observation is required after considering the reply filed by the petitioner companies.

(f) Reply to point 2(vi): it is submitted that, the contents of this paragraph are a matter of record.

(g) Reply to point 2(vii): it is further stated that the first annual general meeting of the Petitioner No. 2/Transferee Company for the year ended 31.03.2019 was to be held on 23.12.2019. However, due to an inadvertent, human and typographical error, the Petitioner No. 2/Transferee Company's notice for holding the said meeting mentioned the date of the meeting to be 23.12.2020 instead of 23.12.2019. Therefore, immediately upon realizing the error and out of abundant caution, the Petitioner No. 2/Transferee Company had rectified the same and a fresh notice for the holding the said meeting on the correct date, i.e., 23.12.2019, was issued to the members of the Petitioner No. 2/Transferee Company, and only thereafter, the said meeting was held on 23.12.2019. The Petitioner No. 2/Transferee Company were not required to file any application under Section 454 of the Companies Act and seek any adjudication on this matter. True copy of the Notice dated 16.12.2019 is produced herewith as Document No. 4. On 25.1.2023, the counsel for ROC/RD submitted that no further observation is required after considering the reply filed by the petitioner companies.

(h) Reply to point 2(viii): it is submitted that this tribunal vide Order dated 06.08.2021 in C.A. (C.A.A.) 16/BB/2021, was pleased to dispense with the requirement of convening and holding meetings of all members/shareholders and creditors of the Petitioner Companies. Therefore, there never arose any requirement envisaged under Section 232(2)(e) of the Companies Act.

(i) Reply to point 2(ix): it is stated that the Petitioner Companies have always acted in conformity with the provisions and requirements under the Companies Act 2013, including but not limited to Section 188 of the Companies Act. Furthermore, there are no transactions between the Petitioner Companies which may be governed by Section 188 of the Companies Act 2013. In this regard, reference may be had to the audited financial statements of the Petitioner Companies for the immediately preceding three financial years (i.e., F.Y. 2019-20, F.Y. 2020-21 and F.Y. 2021-22), true copies of which are produced herewith as Document No. 5 to Document No. 10.

(j) Reply to point 2(x): It is further stated that Para 10.1 of the Scheme provides that "pursuant to this scheme, the Transferee Company shall, as soon as possible after the Record Date and in any event no later than 30 (thirty) days from the Effective Date complete allotment of the Transferee Company Shares in favour of the Eligible Members such that 335 (three hundred and thirty five) Transferee Company Shares, shall be issued as fully paid-up, for every 100 (one hundred) Transferor Company Shares, held by each Eligible Member". It is stated that pursuant to Para 10.5 of the Scheme, upon the approval of the Scheme, the shares held by the Petitioner No. 1/Transferor Company in the Petitioner No. 2/Transferee Company shall be cancelled and fresh shares shall be issued by the Petitioner No. 2/Transferee Company to the shareholders of the Petitioner No. 1/Transferor Company in aforementioned ratio the members/shareholders of the Petitioner No. 1/Transferor Company, who are also members/shareholders of the Petitioner No. 2/Transferee Company, have given their unconditional consent to the Scheme and there is no impediment to implement the Scheme in the manner prescribed.

(k) Reply to point 2(xi): it is stated that upon the approval of the Scheme by the this Tribunal, the Petitioner No. 2/Transferee Company shall not be required to increase the authorized capital for the reason that the 29.91% shareholding of the Petitioner No. 1/Transferor Company in the Petitioner No. 2/Transferee Company shall be cancelled, and the fresh shares issued in favour of the eligible members of the Petitioner No. 1/Transferor Company do not exceed the current approved authorised capital of the Petitioner No. 2/Transferee Company. Hence, there does not arise any requirement for additional fees or duties.

(l) Reply to point 2(xii): It is further stated that a plain reading of the Report of the Official Liquidator dated 01.02.2022 would show that they have not raised any adverse observations or reservations or objections to the Scheme under consideration before this Tribunal. In fact, the Official Liquidator has confirmed that the affairs of the Petitioner No. 1/Transferor Company have not been conducted in a manner prejudicial to the interests of its member or public interest.

15. The Official Liquidator (OL) has filed its report vide diary No. 461 dated 7.02.2022 wherein it is observed that the affairs of the Transferor Company has not been conducted in manner prejudicial to the interest of the members of the Company or public interest. SEBI, CCI, RBI have filed its report and the petitioner companies filed reply affidavit.

16. The reports of the RD & ROC, OL, IT, RBI, SEBI and CCI are taken on record. Similarly, reply filed by the petitioner companies to the above mentioned reports are also taken on record.

17. In view of the above discussion, we conclude that the objections/observations to the Scheme received from RD, ROC and OL, SEBI, CCI, RBI have been adequately replied by the petitioner companies and hence there is no impediment in approval of the Scheme.

18. The Scheme in question as annexed at Annexure-V is approved and we hereby declare that the same is to be binding on all the shareholders and creditors of the Transferor as well as Transferee Companies. While approving the Scheme, it is clarified that this order should not be construed as an order in anyway granting exemption from payment of any stamp duty, taxes, or any other charges, if any, and payment in accordance with law or in respect of any permission/compliance with any other requirement which may be specifically required under any law. With the sanction of the Scheme, the Transferor Company, namely M/s. Austin Global Ventures Private Limited shall stand dissolved without undergoing the process of winding up resulting in increase in the authorised share capital of the Transferee Company, namely Zerodha Broking Limited.

AND THIS TRIBUNAL DOES FURTHER ORDER:

(i) That the petitioner companies do, within 30 days after the date of receipt of this Order, cause a certified copy of this Order to be delivered to the Registrar of Companies, Karnataka for registration and on such certified copy being so delivered, the Transferor Company shall be dissolved without undergoing the process of winding up. The concerned Registrar of Companies shall place all documents relating to the Transferor Company registered with him on the file relating to the said Transferee Company and the files relating to Transferor and Transferee Companies shall be consolidated accordingly, as the case may be; and

(ii) That the Transferee Company shall deposit an amount of Rs. 75,000/- with the Pay & Accounts Office, Chennai in respect of the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad and Rs. 25,000/- in favour of The Prime Minister's National Relief Fund, within a period of four weeks from the date of receipt of certified copy of this Order; and

(iii) That any person interested shall be at liberty to apply to this Tribunal in the above matter for any directions that may be necessary.

(iv) The approval/sanctioning of the Scheme shall not be construed as an exemption from any of the provisions under the Income Tax Act, 1961 or the Companies Act, 2013 and that the authorities under both thes, are at liberty to take appropriate action, in accordance with law, if so advised.

19. As per the directions, Form No. CAA-7 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, formal orders be issued on the petitioner companies on filing of the Schedule Property i.e., (i) freehold property of the Transferor Company and (ii) leasehold property of the Transferor Company by way of affidavit of the Transferor Company respectively.

20. Accordingly, CP(CAA) No. 39/BB/2021, is disposed of. Copy of this Order be communicated to the Counsel for the Petitioner Companies.