Rejection of Scheme of Merger - Objections from Income Tax Authorities

Indiabulls Real Estate Limited ("Petitioner Company /Transferee Company/IBREL) filed scheme of amalgamation of companies belonging to Embassy groupNAM Estates Private Limited ("NonPetitioner Company/ Transferor Company 1") and Embassy One Commercial Property Developments Private Limited ("Non-Petitioner Company/ Transferor Company 2") before the Hon'ble National Company Law Tribunal (NCLT) Chandigarh & Bengaluru Bench.

- Surendra Rahalkar

IBREL's equity shares are listed on nationwide bourses while the other two entities are private entities pertaining to Bengaluru based Embassy Group. The transaction was peculiarly aiming to consolidate Embassy group with listed. IBREL. Application was filled by the respective companies in Bengaluru & Chandigarh bench. The Scheme has been approved by the Bengaluru Bench by order dated 22.04.2022 however been rejected by Hon'ble Chandigarh bench by order dated 09.05.2023.

Objections raised by A Shareholder of Indiabulls:-

There were few objections raised by a particular shareholder however Hon'ble NCLT dismissed the Objection citing the objector do not have 10% shareholding as required under the section 230[4] of the Companies Act 2013.

Income Tax objections:

i. Extract of letter found during search and seizure: - Embassy Group has acquired controlling stake in the listed company, M/S IBREL, to the extent of 42%. To the extent of 13% by way of purchase of equity directly from promoters of IBREL- Mr. Sameer Gehlaut and the balance 29% is supposed to be acquired by way of amalgamation of M/s NAM Estates Pvt Ltd and Embassy One Commercial Development Pvt Ltd [companies owned by the Embassy group) with IBREL.

ii. Incriminating material was seized, indicating the overvaluation of the assets of the Embassy group while transferring the same to the M/s. NAM Estates Private Limited and the same over-valued assets formed the basis for the valuation of the shares of NAM Estates Private Limited, which formed the basis for the shares swapping for amalgamation with IBREL.

iii. Extensive changes/restructuring of the amalgamating companies during the merger and post-merger preceded the scheme of amalgamation between M/s Nam Estate Private Limited (NEPL), Embassy 1 commercial property development Private Limited and M/s. India Bulls Real Estate Ltd (IBREL).