2016 (2) TMI 551 - HC - Companies Law

Scheme of Amalgamation - Held that - Considering the totality of the above facts and circumstances and taking into account the contentions raised in the affidavits and reply affidavits and the submissions advanced during the course of hearing, this Court is of the view that the observations made by the Regional Director, Ministry of Corporate Affairs, have been answered. It appears from the record that the present Scheme of Arrangement will be in the interest of the shareholders and creditors of all the companies as well as the public interest and the same deserves to be sanctioned. It is hereby sanctioned.

Issues:
1. Sanction of Scheme of Amalgamation under Sections 391 to 394 of the Companies Act, 1956.
2. Compliance with SEBI circulars and approvals from stock exchanges.
3. Observations by Regional Director, Ministry of Corporate Affairs.
4. Preserving books of accounts, papers, and records.
5. Compliance with FEMA and RBI guidelines.
6. Accounting treatment and Capital Reserve Account.
7. Income Tax Department objections and compliance.
8. Registrar of Companies complaints and public interest.
9. Sanction and disposal of the petition.

Issue 1: Sanction of Scheme of Amalgamation
The petition sought the High Court's sanction for the Scheme of Amalgamation between the Transferor Company and the Transferee Company under Sections 391 to 394 of the Companies Act, 1956. The purpose was to consolidate activities in the pharmaceutical sector for synergic benefits, including management focus, resource transfer, and legal compliance reduction.

Issue 2: Compliance with SEBI Circulars and Approvals
The Transferee Company, a listed entity, had obtained necessary approvals from stock exchanges in compliance with Clause 24(f) of the listing agreement. The petition clarified that since the Transferor Company was a wholly owned subsidiary, no new shares were to be issued, thus exempting the need for approval from public shareholders via postal ballot and 'e' voting.

Issue 3: Observations by Regional Director
The Regional Director raised several observations, including SEBI approval, shareholding details, accounting treatment, Income Tax Department objections, and public interest concerns. The Court addressed each observation, confirming compliance with applicable laws and regulations, and concluded that the Scheme was in the interest of shareholders, creditors, and public interest.

Issue 4: Preserving Books of Accounts
The Official Liquidator recommended preserving the Transferor Company's books of accounts, papers, and records post-amalgamation, with a directive to seek prior permission from the Central Government before disposal. The Court directed the Transferee Company to comply with this requirement and statutory liabilities post-sanction.

Issue 5: Compliance with FEMA and RBI Guidelines
The Scheme's compliance with FEMA and RBI guidelines was highlighted, emphasizing the Transferee Company's commitment to adhere to relevant rules and regulations, including FEMA provisions, without requiring further directions from the Court.

Issue 6: Accounting Treatment and Capital Reserve Account
The Court addressed the Regional Director's observation regarding the accounting treatment under the Scheme, confirming that the excess of assets over liabilities would be reflected in the Capital Reserve Account as per the Scheme's Clause 11.2. It was clarified that reserves created would not be available for dividend distribution.

Issue 7: Income Tax Department Objections and Compliance
The Income Tax Department's objections were addressed, noting the absence of objections within the statutory period and the petitioner's commitment to comply with Income Tax Act provisions and rules post-sanction, eliminating the need for further directions.

Issue 8: Registrar of Companies Complaints and Public Interest
No complaints were received from the Registrar of Companies, and the Regional Director confirmed that the Scheme was not prejudicial to shareholders or public interest, leading the Court to sanction the Scheme as it was deemed beneficial to all stakeholders.

Issue 9: Sanction and Disposal of the Petition
After thorough consideration of all facts, submissions, and observations, the Court granted the prayers in the Company Petition, sanctioned the Scheme of Amalgamation, and disposed of the petition. Costs to be paid to the Central Government standing Counsel and Official Liquidator were quantified, with directives for lodging necessary documents and filings within stipulated timelines.

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