2016 (2) TMI 1255 - HC - Companies Law

Scheme of arrangement - no proceedings under Sections 235 to 251 of the Companies Act, 1956 are pending against the transferor and transferee companies - HELD THAT - Considering the approval accorded by the equity shareholders and creditors of the petitioner companies to the proposed Scheme of Amalgamation; the affidavit filed by the Official Liquidator not raising any objection to the amended Scheme of Amalgamation; and there being no surviving objection to the same by the Regional Director, Northern Region, there appears to be no impediment to the grant of sanction to the amended Scheme of Amalgamation. Consequently, sanction is hereby granted to the amended Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956. Upon the sanction becoming effective from the appointed date of Amalgamation, i.e. 1st April, 2013, the transferor companies no. 1 to 15 shall stand dissolved without undergoing the process of winding up. Petition allowed.

Summary

Issues Involved:
1. Sanction of the amended Scheme of Amalgamation under Sections 391 & 394 of the Companies Act, 1956.
2. Compliance with statutory requirements and approvals from shareholders and creditors.
3. Objections raised by the Regional Director and the Official Liquidator.
4. Tax liabilities and objections from the Income Tax Department.
5. Costs associated with the examination of extensive records.

Issue-wise Detailed Analysis:

1. Sanction of the amended Scheme of Amalgamation under Sections 391 & 394 of the Companies Act, 1956:
The petitioners sought the court's sanction for the amalgamation of multiple transferor companies with a transferee company. The court noted that the registered offices of all companies involved are situated in New Delhi, within its jurisdiction. The proposed amalgamation aimed to achieve size, scale, integration, greater financial strength, flexibility, and maximization of shareholders' value. The pooling of financial, managerial, and technical resources was expected to increase competitive strength, reduce costs, and improve efficiencies.

2. Compliance with statutory requirements and approvals from shareholders and creditors:
The Board of Directors of the transferor and transferee companies unanimously approved the Scheme in their meetings held on 11th and 12th March 2014, respectively. The court had previously dispensed with the requirement of convening meetings of equity shareholders and unsecured creditors, as there were no secured creditors. The amended Scheme was taken on record following the withdrawal of one transferor company from the Scheme. Notices were issued to the Regional Director and the Official Liquidator, and citations were published in newspapers.

3. Objections raised by the Regional Director and the Official Liquidator:
The Official Liquidator reported no complaints against the Scheme and stated that the affairs of the transferor companies were not conducted prejudicially to the interests of their members, creditors, or public interest. The Regional Director highlighted that employees of the transferor companies would become employees of the transferee company without any break in service and that the transferee company would follow the Accounting Standards and Principles issued by the Institute of Chartered Accountants of India. The Scheme also provided for the dissolution of transferor companies without winding up.

4. Tax liabilities and objections from the Income Tax Department:
The Income Tax Department requested that its recourse for recovery of existing or future tax liabilities be retained and explicitly protected in the court's final order. The transferee company undertook to pay any legally assessed tax liabilities of the transferor companies and assured that the Scheme would not prejudice income tax dues. This undertaking satisfied the Regional Director's objections.

5. Costs associated with the examination of extensive records:
The Official Liquidator requested costs of Rs. 1,00,000, which the petitioner's counsel accepted. The court directed the petitioner to deposit this amount with the Common Pool Fund of the Official Liquidator.

Conclusion:
The court granted sanction to the amended Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956. The petitioner companies were directed to comply with statutory requirements and file a certified copy of the order with the Registrar of Companies within 30 days. The order clarified that it did not grant exemption from stamp duty. The transferor companies would stand dissolved without winding up upon the Scheme's effective date, 1st April 2013. The petition was allowed, and costs were ordered to be deposited as directed.