2016 (1) TMI 672 - HC - Companies Law

Scheme of Amalgamation - Held that - Compliance of procedural requirements contemplated under the Act and the relevant Rules, on due consideration of the reports of Regional Director, Northern Region, Ministry of Corporate Affairs, and the Official Liquidator, the Scheme of Amalgamation is hereby sanctioned. The assets and liabilities of the Transferor Company shall stand vested in the Transferee Company. The Transferor Company shall be dissolved without being wound up. The Transferee Company shall be required to comply with the procedural requirements with regard to all conditions stipulated under the Income Tax Act, Accounting Standards issued by the Institute of Chartered Accountants of India. The Scheme shall be binding on the Transferor and Transferee Companies, their respective Shareholders, Creditors and all concerned. Let formal order of sanction of the Scheme of Amalgamation be drawn in accordance with law and its certified copy be filed with the Registrar of Companies within 30 days from the date of receipt thereof. A notice of the order be published in the Indian Express (English) and Des Sewak (Punjabi) and in the official Gazette of Government of Punjab. Any person interested shall be at liberty to apply to the Court for any direction(s) as per law. Learned counsel for the petitioner companies states that the petitioner Transferee Company would voluntarily deposit a sum of ₹ 30,000/- in the Common Pool Fund Account of the Official Liquidator within one month.

Summary

Issues:
- Sanctioning of Scheme of Amalgamation
- Compliance with procedural requirements
- Acceptance of deposits from persons other than directors
- Carry forward and set off of losses
- Provision for internal audit system

Sanctioning of Scheme of Amalgamation:
The petition sought approval for the Scheme of Amalgamation between two companies. The Board of Directors of both companies had already approved the scheme. Meetings of equity shareholders and creditors were dispensed with by court order. The report indicated overwhelming support for the scheme from shareholders. The court, after considering all relevant facts, reports, and compliance with procedural requirements, sanctioned the Scheme of Amalgamation. The assets and liabilities of the Transferor Company would vest in the Transferee Company, with the former being dissolved without winding up.

Compliance with Procedural Requirements:
The court ensured that all procedural requirements under the law and relevant rules were met before sanctioning the amalgamation scheme. The Transferee Company was directed to comply with conditions stipulated under the Income Tax Act and Accounting Standards issued by the Institute of Chartered Accountants of India. The Scheme was declared binding on both companies, their shareholders, creditors, and all concerned parties.

Acceptance of Deposits and Carry Forward/Set Off of Losses:
The Official Liquidator raised concerns regarding the acceptance of deposits from individuals other than directors and the carry forward/set off of losses. The Regional Director highlighted non-compliance with Accounting Standard-14. In response, directors of the Transferee Company filed affidavits undertaking compliance with Accounting Standard-14 and the Income Tax Act regarding losses. Additional affidavits were filed to address objections raised by the Official Liquidator regarding deposits, stating compliance with relevant provisions, which led to the objections being resolved.

Provision for Internal Audit System:
The Official Liquidator also raised the issue of the provision for an internal audit system in the company. However, considering the assets, turnover, loans, and deposits of the company were below the prescribed thresholds, the court found that the appointment of an internal auditor was not required. The petition was disposed of, with the Transferee Company agreeing to deposit a sum in the Common Pool Fund Account of the Official Liquidator voluntarily.