2015 (3) TMI 654 - HC - Companies Law

Application for Scheme of Arrangement / Amalgamation - Sections 391 to 394 of the Companies Act, 1956 - Regional Director observation regarding undertaking to comply with FEMA and RBI regulations , No objection from RBI with regard to proposed scheme , arrangement is not proposing to write off or reduce the value of any liability - Carry forward of losses - Held that - It is submitted that all the Petitioner Transferor and Transferee Companies are Core Investment Companies (CIC) as defined in the Core Investment Companies (Reserve Bank) Directions, 2011, issued by the Reserve Bank of India, and as per the said Directions, Core Investment Companies are not required registration from the RBI as NBFC. Further, RBI NOC is also not required for amalgamation of Core Investment Companies. The Petitioner Transferee Company has undertaken and confirmed that it will comply with all the compliances of the Reserve Bank of India and will take other necessary steps in this regard, if any. Further submitted that all the Petitioner Transferor and Transferee Companies are profit making companies and do not have any accumulated losses and un-absorbed depreciation except the Transferor Company No. 9 which has a small amount of loss of ₹ 9.68 lac as on 31.3.2013. The aforesaid loss has been fully set off against the income of the Transferor Company No. 9 during the Financial Year ended 31.3.2014 and as on date there is no loss in the Company. In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies, representation/report filed by the Regional Director, Northern Region and Official Liquidator attached with this Court to the proposed scheme, there appears to be no impediment to the grant of Sanction to the Scheme. Consequently, Sanction is hereby granted to the Scheme under Sections 391 and 394 of the Companies Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law. - Scheme of amalgamation approved.

Summary

Issues:
1. Sanction of Scheme of Arrangement under sections 391 to 394 of the Companies Act, 1956 for amalgamation and re-arrangement of multiple companies.
2. Compliance with FEMA and RBI Regulations for foreign shareholding.
3. Impact on income tax assessment, carry forward of losses, and set off in the Transferee Company.
4. Transfer of liabilities, duties, and dissolution of Transferor Companies.
5. Compliance with statutory requirements and deposit in the Common Pool fund of the Official Liquidator.

Analysis:
1. The judgment pertains to a second motion joint petition filed seeking sanction of a Scheme of Arrangement for amalgamation and re-arrangement of multiple companies under sections 391 to 394 of the Companies Act, 1956. The petition includes details of the companies involved, their capital structure, resolutions passed, and confirmation of no pending proceedings against the companies. The Court dispensed with the requirement of convening separate meetings for shareholders and creditors based on previous orders.

2. The Official Liquidator and Regional Director of the Ministry of Corporate Affairs provided reports and observations regarding the scheme. Concerns were raised about compliance with FEMA and RBI Regulations for foreign shareholding, to which the companies responded by confirming compliance and undertaking to adhere to regulations. The Court directed that any violation of RBI provisions would hold the directors liable.

3. The Income Tax Department's observations focused on the impact of amalgamation on tax positions, particularly regarding carry forward of losses and set off. The companies clarified that they were profit-making entities with minimal losses, and they were not eligible for certain tax benefits due to their classification as Core Investment Companies. The scheme ensured that no reduction in income tax liability occurred, and liabilities were transferred to the Transferee Company.

4. The judgment sanctioned the scheme under sections 391 and 394 of the Companies Act, 1956, based on approvals from shareholders and creditors, reports from regulatory authorities, and absence of objections. It directed the transfer of assets, liabilities, and dissolution of Transferor Companies without winding up procedures. Compliance with statutory requirements and filing of the order with the Registrar of Companies within a specified timeline were mandated.

5. Additionally, the judgment clarified that it did not grant exemption from stamp duty, taxes, or other charges. The Petitioner Companies agreed to deposit a sum in the Common Pool fund of the Official Liquidator voluntarily. The petition was allowed in the specified terms, emphasizing adherence to legal provisions and procedures.