2016 (2) TMI 279 - HC - Companies Law

Scheme of Amalgamation - Held that - Taking into account the contentions raised in the affidavits and counter affidavits and the judgment cited at the Bar, this Court is satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs no longer survive. This Court is of the view that the present Scheme of Arrangement is in the interest of the shareholders and creditors of all the companies as well as in the public interest therefore, it deserves to be sanctioned. Hence, the following order The prayers in terms of paragraph 16(a) of the Company Petition No. 352 of 2015, and paragraph 15(a) of Company Petition No. 353 of 2015 are hereby granted.

Summary

Issues:
Petitions for obtaining court sanction for amalgamation under sections 391 to 394 of the Companies Act, 1956.

Analysis:
1. Accounting Treatment: The Regional Director raised concerns about the proposed Accounting Treatment in the Scheme. The petitioner argued that the company can prescribe specific treatment for reserves under the Scheme and cited Section 129(5) of the Companies Act, 2013. The court referred to previous decisions and concluded that no direction is needed to restrict dividend distribution out of reserves.

2. Share Exchange Ratio Calculation: The absence of working sheets for the calculation of Share Exchange Ratio was noted. The petitioner explained that both companies are private limited with the same shareholders, and the proposed ratio is equitable. The court referenced a previous judgment to support the fairness of the ratio calculation.

3. Inviting Objections from Income Tax Department: The Regional Director highlighted a letter inviting objections from the Income Tax Department. Since the statutory period lapsed without objections, it was presumed that the department had no issues. The petitioner agreed to comply with Income Tax Act provisions, leading the court to conclude that no further directions were necessary.

4. Sanction of Scheme: After considering all submissions, affidavits, and judgments, the court found the Scheme to be in the interest of shareholders, creditors, and the public. Consequently, the court granted the prayers in the Company Petitions and sanctioned the Scheme of Arrangement.

Conclusion:
The court disposed of the petitions, quantified costs to be paid to the Central Government Standing Counsel and the Office of the Official Liquidator, and directed the petitioner companies to take specific actions within a specified timeframe. The court dispensed with the filling and issuance of the drawn-up order, instructing all concerned authorities to act on the authenticated copy of the order promptly.