2012 (12) TMI 772 - HC - Companies Law

Scheme of Amalgamation - Held that - Upon sanction of the Scheme, all the employees of the Transferor entity shall become the employees of the Transferee Company without any break or interruption in their services - all the property, rights and powers & liabilities and duties of the Transferor Company be transferred to and vest in the Transferee Company without any further act or deed. Once the exchange ratio of the shares have been worked out by the Chartered Accountants, who are expert in the field of valuation and if no mistake is pointed out in the said valuation, it is not for the court to substitute is exchange ratio, especially when it has been accepted without demur unanimously by all the shareholders of the two companies, thus objection raised by the Official Liquidator that the valuation report is not on the basis of Book Value of shares is without merit. Thus in view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies; representation filed by the Regional Director, Northern Region and no objection by the Official Liquidator, the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation - The Petitioner Companies will comply with the statutory requirements in accordance with law with filing certified copy of the formal order with the ROC within 30 days - order will not be construed as an order granting exemption from payment of stamp duty or any other charges - Petitioner Companies would voluntarily deposit a sum of Rs. 1 Lac in the Common Pool fund of the Official Liquidator within three weeks from today.

Summary

Issues:
Petition filed under sections 391 & 394 of the Companies Act, 1956 for sanction to the Scheme of Amalgamation of two companies. Compliance with statutory requirements, approval by shareholders and creditors, objections raised by Regional Director and Official Liquidator, valuation report concerns, objections from other parties, and final grant of sanction.

Analysis:
The petition was filed seeking sanction to the Scheme of Amalgamation under sections 391 & 394 of the Companies Act, 1956, involving two companies. The registered offices of the companies were in New Delhi. Details regarding the incorporation dates, capital structure, and resolutions approving the scheme were provided in the petition along with necessary documents like Memorandum, Articles of Association, and audited accounts. No pending proceedings under relevant sections of the Companies Act were reported. Earlier, directions were sought for dispensation of meetings, and after compliance, the present petition was filed for sanction. Notice was issued to the Regional Director and Official Liquidator, and publications were made in newspapers as per court orders, with evidentiary filings.

The Regional Director, in response, submitted an affidavit supporting the scheme, mentioning employee transfers and no objection from the Central Government. However, there was a delay in filing the Balance Sheet, later rectified. The Official Liquidator raised concerns about the valuation report not being based on the Book Value of shares. The petitioner's counsel cited precedents where courts upheld expert valuation without errors, dismissing objections similar to the one raised. Directors of the petitioner companies confirmed no objections received from any party post-publication of citations.

Considering the approval by shareholders and creditors, representation by the Regional Director, and lack of objections, the court granted sanction to the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956. The companies were directed to comply with statutory requirements within the specified timeline. The order mandated the transfer of all property, rights, powers, liabilities, and duties from the Transferor Company to the Transferee Company without additional formalities. The order did not exempt from stamp duty or other charges as per the law. The petitioner companies agreed to deposit a sum in the Official Liquidator's fund. The petition was allowed, and the order was issued for immediate action.