2010 (7) TMI 271 - HC - Companies Law

Scheme of amalgamation - Held that - The petitioners/transferor-companies have made out a case for sanctioning the scheme of amalgamation - Annexure-A. Hence the following order (i)Petitions are hereby allowed subject to the sanctioning of the scheme by the High Court of Madras in respect of the transferee-company and also, the transferor-companies complying with the observations made by the Registrar of Companies as undertaken by them in the affidavits filed before this Court. (ii)The scheme at Annexure-A is hereby sanctioned and the same is binding on the petitioners/transferor-companies and their shareholders and creditors. (iii)Petitioners/transferor-companies shall serve a copy of this order on the Registrar of companies in the State of Karnataka and Tamil Nadu within 30 days from the date of receipt of copy of this order.

Issues Involved:
1. Sanctioning of the scheme of amalgamation.
2. Compliance with the provisions of FEMA and other regulations.
3. Appointment of Chartered Accountants for scrutiny.
4. Approval from the High Court of Madras.
5. Transfer of employees to the transferee-company.

Issue-wise Detailed Analysis:

1. Sanctioning of the Scheme of Amalgamation:
The petitioners, who are the transferor-companies, sought the court's approval for the amalgamation scheme with M/s. Flextronics Technologies (India) Private Company, the transferee-company. The court noted that the Board of Directors of both the transferor and transferee companies had approved the proposed scheme in their respective meetings held on January 11, 2010. The court also observed that no shareholders, creditors, employees, or other persons opposed the scheme following the advertisements of the hearing.

2. Compliance with the Provisions of FEMA and Other Regulations:
The Registrar of Companies, Bangalore, in an affidavit dated June 19, 2010, highlighted the need for compliance with the provisions of FEMA, particularly since the first transferor-company is a subsidiary of a foreign entity. The court outlined the necessary compliance under the Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India) Regulations, 2000, including the automatic route of Reserve Bank for issue of shares, determination of issue price, and the requirement to file Form FC-GPR within 30 days of the issue of shares.

3. Appointment of Chartered Accountants for Scrutiny:
The Official Liquidator requested permission to appoint Chartered Accountants to scrutinize the books of account and records of the transferor-companies. The court appointed Sri P.S. Ananda Rao, Chartered Accountant, who subsequently submitted reports indicating no adverse findings and opined that the affairs of the transferor-companies were not conducted in a manner prejudicial to the interest of its members or the public.

4. Approval from the High Court of Madras:
The scheme's sanctioning was made subject to the approval of the High Court of Madras, as the transferee-company has its registered office in Tamil Nadu. The court emphasized that the scheme would only be sanctioned if the High Court of Madras also approved it.

5. Transfer of Employees to the Transferee-Company:
The court noted that all employees of the transferor-companies in service on the effective date would become employees of the transferee-company without any break or interruption in service and on terms not less favorable than those with the respective transferor-companies. No employees opposed the scheme of amalgamation.

Conclusion:
The court allowed the petitions, sanctioning the scheme of amalgamation subject to the approval of the High Court of Madras and compliance with the Registrar of Companies' observations. The scheme was declared binding on the petitioners/transferor-companies and their shareholders and creditors. The petitioners were directed to serve a copy of the order on the Registrar of Companies in Karnataka and Tamil Nadu within 30 days from the receipt of the order.

← Previous Next →