2014 (9) TMI 1086 - HC - Companies Law

Scheme of Amalgamation - Held that - Upon consideration of the entire material and keeping in view the provisions of Section 391 to 394 of the Companies Act and upon consideration of the reports of the Regional Director to the Northern Region, Ministry of Corporate Affairs, Noida and the Official Liquidator as also the affidavit that there are no investigation or proceedings pending against the constituent Companies to the Scheme on Amalgamation under Section 235 and 251 of the Companies Act, the Scheme of Amalgamation is hereby sanctioned and as a result thereof the assets and liabilities of the Transferor Companies 1, 2, 3 and 4 shall stand vested in the Transferee Company no.2 and the Transferor Companies shall be dissolved without being wound up. The Scheme shall be binding on the participants Companies and therefore, respective shareholders, creditors and all concerned. Let a formal order of sanction of the Scheme of Amalgamation be drawn up in accordance with law and a certified copy be filed with the Registrar of Companies within 30 days of the same. The report of the Regional Director regarding the effective date as per Section 391(3) to be the date when certified copy filed with Registrar of Companies is accepted.

Summary

Issues Involved:

1. Approval of the Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956.
2. Compliance with statutory procedures and requirements.
3. Financial and statutory dues, including pending Income Tax liabilities.
4. Valuation of properties and calculation of purchase consideration.
5. Objections raised by the Official Liquidator.
6. Role and jurisdiction of the Company Court in sanctioning the Scheme of Amalgamation.

Issue-wise Detailed Analysis:

1. Approval of the Scheme of Amalgamation:
This petition seeks approval and sanction of the Scheme of Amalgamation involving multiple companies. The transferor companies include Sukh Realters Private Limited, Ma-Ganga Builders & Constructions Private Limited, Belisma Buildcon Private Limited, and North Star Apartments Private Limited. The transferee company is S.S. Group Private Limited. The registered offices of all companies are located in Gurgaon, Haryana.

2. Compliance with Statutory Procedures and Requirements:
The Board of Directors of the petitioner companies approved the Scheme of Amalgamation in their respective meetings held on 14.8.2013. The resolutions passed by the Boards are on record. The Court directed the convening of a meeting of the unsecured creditors of Petitioner Company no.4 on 7.12.2013 to consider the proposed Scheme. The meeting was conducted lawfully, and the Chairman's report is on record.

3. Financial and Statutory Dues:
The Official Liquidator raised objections based on the Chartered Accountant's report, highlighting that the transferor companies had not deposited statutory dues of Income Tax liability for more than three years, amounting to Rs. 80.30 crores. The management assured that these liabilities would be taken over by the transferee company as per the Scheme of Amalgamation. The Official Liquidator found this assurance baseless and unsatisfactory due to the transferee company's limited financial capacity.

4. Valuation of Properties and Purchase Consideration:
The Official Liquidator noted discrepancies in the valuation of properties and the calculation of purchase consideration. The Scheme proposed issuing equity and preference shares worth Rs. 1949.10 crores based on property valuations. However, the valuations were not prepared by an independent approved valuer but by management, raising concerns about the genuineness of the share exchange ratio. The Official Liquidator recommended obtaining an independent valuation report to ensure fairness.

5. Objections Raised by the Official Liquidator:
The Official Liquidator's objections included the following:
- Non-payment of statutory dues of Rs. 80.30 crores.
- Inconsistent criteria for calculating purchase consideration in the first and second amalgamations.
- Overvaluation of properties worth Rs. 1014.66 crores.
- Writing off an advance amount of Rs. 87 lakhs to reduce net profit and income tax liability.
- The Official Liquidator concluded that the affairs of the transferor companies were conducted prejudicially to the interests of revenue, members, and the public.

6. Role and Jurisdiction of the Company Court:
The Court referred to the Supreme Court's decision in Miheer H Mafatlal vs. Mafatlal Industries Ltd., outlining the jurisdiction of the Company Court. The Court's role is to ensure procedural compliance and that the Scheme is backed by the requisite majority vote. The Court should not substitute its opinion for the commercial wisdom of the majority. The Court found that all procedural requirements were met, and the objections of the Official Liquidator were not sufficient to reject the Scheme.

Conclusion:
The Court sanctioned the Scheme of Amalgamation, stating that the assets and liabilities of the transferor companies would vest in the transferee company, and the transferor companies would be dissolved without being wound up. The Scheme is binding on all participants, shareholders, creditors, and concerned parties. The Court directed the publication of the order and allowed any interested person to apply for appropriate directions if needed. The petition was disposed of accordingly.