2016 (2) TMI 204 - HC - Companies Law

Scheme of Amalgamation - As the requirements of the provisions of sections 391 to 394 of the Companies Act, 1956 are satisfied. The Scheme appears to be genuine and bonafide and in the interest of the shareholders and creditors. This Court, therefore, considers it proper to allow Company Petitions and approve the Scheme. The Scheme stands sanctioned and the prayers made in the respective Company Petitions are granted.

Summary

Issues Involved:
1. Sanction of Composite Scheme of Arrangement.
2. Dispensation of meetings of shareholders and creditors.
3. Observations by the Official Liquidator.
4. Observations by the Regional Director regarding cash consideration, share exchange ratio, accounting treatment, regulatory approvals, and Income Tax Department objections.

Detailed Analysis:

1. Sanction of Composite Scheme of Arrangement:
The petitions were filed by two companies seeking the sanction of a Composite Scheme of Arrangement. This included the Slump Sale of Jamnagar Windmill Undertaking of Olympic Laminates Private Limited (Transferor Company) to Sara Suppliers Private Limited, and the Amalgamation of the residue Undertaking of Olympic Laminates Private Limited with Sara Suppliers Private Limited (Transferee Company) under Sections 391 to 394 of the Companies Act, 1956. The proposed Scheme aimed to consolidate operations, resulting in synergic benefits.

2. Dispensation of Meetings of Shareholders and Creditors:
Orders dated 29th October 2015 dispensed with the meetings of Equity Shareholders of both companies due to the consent letters from all shareholders. The Scheme was also approved by the Secured and Unsecured Creditors of the Transferor Company, with no creditors for the Transferee Company. The substantive petitions were admitted on 2nd November 2015, and notices were duly advertised. No objections were received post-publication.

3. Observations by the Official Liquidator:
The Official Liquidator's report dated 16th December 2015, based on a Chartered Accountant's report, stated that the Transferor Company's affairs were conducted within its object clauses and not prejudicial to public or members' interest. The Transferor Company could be dissolved without winding up, but the books of accounts, papers, and records must be preserved and not disposed of without prior Central Government permission as per Section 396(A) of the Companies Act, 1956.

4. Observations by the Regional Director:
- Cash Consideration: The Regional Director raised concerns about the Transferee Company's cash balance for the Slump Sale. It was submitted that financial arrangements would be made upon the Scheme becoming effective. The Court noted that the Scheme was not prejudicial to shareholders or creditors, thus no directions were necessary.
- Share Exchange Ratio: The Regional Director noted the absence of a working sheet for the Share Exchange Ratio. The petitioner argued that since both companies had the same shareholders, the working sheets were unnecessary. This objection was deemed beyond the Regional Director's purview and unnecessary for the Court to direct.
- Accounting Treatment: The Regional Director observed that the Accounting Treatment under clause 7.2 was not in accordance with Accounting Principles. It was clarified that Accounting Standard 14 did not apply to the Slump Sale.
- Regulatory Approvals: The Regional Director noted the need for regulatory approvals for power generation. It was submitted that the Transferee Company would obtain necessary licenses and approvals upon the Scheme becoming effective.
- Income Tax Department Objections: The Regional Director had invited objections from the Income Tax Department, but none were received within the statutory period, implying no objections to the Scheme. The petitioner companies agreed to comply with applicable Income Tax provisions.

Conclusion:
The Court concluded that the Scheme of Arrangement was in the interest of shareholders, creditors, and public interest. The Scheme was sanctioned, and the petitions were disposed of. Costs were quantified for the Central Government Standing Counsel and the Office of the Official Liquidator, payable by the Transferor Company. The petitioner companies were directed to lodge the order with the concerned Superintendent of Stamps for Stamp Duty adjudication and file the order with the Registrar of Companies.

Final Orders:
- The Scheme was sanctioned as per paragraph 16(a) of Company Petition No. 368 of 2015 and paragraph 15(a) of Company Petition No. 369 of 2015.
- Costs of Rs. 7,500 per petition to be paid to the Central Government Standing Counsel and the Office of the Official Liquidator.
- The petitioner companies to lodge a copy of the order with the Superintendent of Stamps within 60 days.
- The petitioner companies to file a copy of the order and Scheme with the Registrar of Companies electronically and physically.
- Filing and issuance of a drawn-up order were dispensed with.
- All concerned authorities to act on the authenticated copy of the order along with the Scheme.