2015 (7) TMI 414 - AT - Companies Law

Acquisition of shares/ voting rights - Contravention of Regulation 10 of the SEBI (Takeover Regulations), 1997 - Ground taken by appellant that Management has changed through a Scheme of Arrangement - Held that - The Scheme of Arrangement as approved by the two Hon ble High Courts clearly provides that from the appointed date all debts, liabilities, duties, obligations of every kind, nature and description of the transferor companies shall also be deemed to be transferred to the transferee companies. In fact this is also the spirit of sections 391 to 394 of the Companies Act, 1956. Moreover, as noted in the impugned order, it is an undisputed fact that the appellants have not made any public announcement inspite of having acted in concert and acquiring more than 30 percent of the voting rights of Axon Infotect Limited. Therefore, we hold that mere change of name of a company does not wash away the liabilities despite the change of name of that of the promoters or the directors. - Decided against the appellant.

Summary

Issues:
1. Imposition of monetary penalty on Appellant for contravention of Takeover Regulations, 1997.
2. Challenge to the imposition of monetary penalty based on a change in management.
3. Liability of present company for past actions despite a change in name.
4. Dismissal of appeal challenging the penalty.

Analysis:

1. The Appellant, Octant Industries Ltd., challenged an order imposing a monetary penalty for contravening Takeover Regulations, 1997 by acquiring shares without a public announcement. The investigation revealed the acquisition of shares in Axon InfoTech Ltd. by Octant Industries Ltd. and seven others without compliance. A penalty was imposed on all entities involved.

2. The main ground of challenge by the Appellant was the change in management through a Scheme of Arrangement approved by the High Courts. The Appellant argued that the violations were not committed by the present promoters or directors and they were not given an opportunity to explain before the penalty was imposed. The appeal solely focused on this ground.

3. The Respondent argued that the change in the name of the Appellant did not absolve the present company from liabilities incurred by the previous promoters. The Tribunal noted that as per the Scheme of Arrangement and the Companies Act, liabilities are transferred to the new entity. The Tribunal held that the change in name does not erase past liabilities, and the present company is required to fulfill its obligations.

4. After hearing both parties, the Tribunal dismissed the appeal, stating that the change in name does not relieve the Appellant from liabilities. The Appellant was given two months to deposit the penalty amount failing which the Respondent could recover it with interest. The Tribunal highlighted that the appeal lacked merit, and costs were not awarded.

In conclusion, the Tribunal upheld the imposition of the monetary penalty on the Appellant, emphasizing that the change in name did not exempt the company from past liabilities. The dismissal of the appeal reiterated the importance of compliance with regulations and the continuity of obligations despite changes in management or name.