2016 (1) TMI 994 - HC - Companies Law

Scheme of Amalgamation appears to be fair and reasonable and is not violative of any provisions of law. Nor is it contrary to public policy. As noticed earlier, none has come forward to oppose the Scheme. All requisite statutory compliances have also been substantially fulfilled.

Summary

Issues:
1. Scheme of Arrangement for amalgamation under Sections 391 and 394 of the Companies Act, 1956.
2. Compliance with Accounting Standard 14.
3. Outstanding tax liability of the Transferor Company.
4. Observations by the Regional Director and Official Liquidator.
5. Sanction of the Scheme of Amalgamation.

Analysis:
1. The judgment concerns a Scheme of Arrangement for amalgamation between two companies, Jainco (India) Exports Private Limited and Gallops Motors Private Limited, along with their shareholders and creditors under Sections 391 and 394 of the Companies Act, 1956. The petitions for both companies were heard together and disposed of by a common judgment.

2. The Regional Director raised an issue regarding compliance with Accounting Standard 14, specifically relating to the treatment of assets and liabilities in the amalgamation process. The Regional Director sought direction for the companies to strictly adhere to the requirements of Accounting Standard 14. The companies argued that the clause in question was in conformity with the standard and explained the accounting treatment under the pooling of interests method.

3. Another issue highlighted was an outstanding tax demand against the Transferor Company. The Transferor Company had challenged this demand through a rectification application under the Income Tax Act, 1961. The Scheme proposed that any tax liability would become the responsibility of the Transferee Company from the appointed date, and thus, the Scheme was requested to be sanctioned in its current form.

4. The judgment addressed observations made by the Regional Director and Official Liquidator, confirming that there were no complaints against the petitioner companies. The Scheme of Amalgamation was found not to be prejudicial to the interests of shareholders or the public. The Official Liquidator stated that the companies' affairs were not conducted in a manner prejudicial to their members.

5. Ultimately, the Court found that the Scheme of Amalgamation was fair, reasonable, compliant with the law, and not contrary to public policy. No objections were raised, and statutory compliances were met. Therefore, the Court granted sanction to the Scheme, making it binding on all stakeholders and authorities. Directions were issued regarding the preservation of books of accounts, payment of charges, filing of necessary documents, and issuance of the order.

This detailed analysis provides a comprehensive overview of the judgment, addressing each issue involved in the legal matter.