2018 (4) TMI 1778 - Tri - Companies Law

Approval of scheme of amalgamation - convention of meeting of the shareholders of the Transferor Company-I and the meeting of the shareholders of the Transferor Company-I was convened and scheme was approved by the majority of the shareholders - HELD THAT - It is a fact that the notices have been issued to all the statutory authorities and except the Regional Director, the Income Tax Authorities have not submitted any objections to the Scheme. It is also a fact that the Transferee Company is going to record the cancelled portion of the capital to capital reserve and there is no repayment to the shareholders whose shares are cancelled. It is also on record that the Objector does not possess the requisite qualification to oppose the Scheme as envisaged in the provisions of section 230(4) of the Companies Act, 2013. Taking in consideration of the shareholders whose shares are cancelled this Tribunal directed the Transferee Company to consider to make payment to the shareholders whose shares were cancelled in terms of respective clauses of the scheme and on the intervention of this Tribunal, the Transferee Company accepted to make payment to the objector at the book value as on 01.04.2016, the appointed date, however, without prejudice to the submissions made on the locus standi of the objector - The scheme does not require any modification other than mentioned at para 16 above and the said scheme of Arrangement and Amalgamation appears to be fair and reasonable, not contrary to public policy and also not violative of any provisions of law, all the statutory compliances have been made under the Companies Act, 2013. The scheme of Arrangement and Amalgamation annexed with the petition is hereby sanctioned which shall binding on all the member, creditors and shareholders - Petition allowed.

Issues Involved:
1. Approval of the Scheme of Amalgamation and Arrangement.
2. Objections raised by the Regional Director and an objector.
3. Compliance with statutory requirements and protection of stakeholders' interests.

Issue-wise Detailed Analysis:

1. Approval of the Scheme of Amalgamation and Arrangement:
The petitions pertain to the proposed Scheme of Amalgamation by which seven transferor companies are to be amalgamated with the transferee company, and identified undertakings from two demerged companies are to be transferred to the transferee company. The scheme aims to simplify the group structure, achieve administrative efficiency, and maximize shareholders' value. The Board of Directors of the involved companies approved the scheme on 21.03.2017. Meetings of equity shareholders were conducted as directed, and the scheme was approved by the requisite majority. The Tribunal found that the scheme is fair, reasonable, and not contrary to public policy or any provisions of law. The scheme is sanctioned with modifications regarding the rounding off of fractional shares and buyback of fractional shares.

2. Objections Raised by the Regional Director and an Objector:
The Regional Director raised several objections, including the nature of the transfer of shares, the treatment of minority shareholders, deemed profit, and the cancellation of share capital. The learned senior counsel for the petitioner companies provided detailed responses, clarifying that the scheme complies with the relevant sections of the Companies Act, 2013, and the Income Tax Act, 1961. The Tribunal found that the objections were addressed satisfactorily, noting that the Income Tax Authorities did not submit any objections.

The objector, holding 450 equity shares, raised concerns about the notice for the EGM, the valuation report, the rounding off of fractional shares, and the potential fraud against public shareholders. The Tribunal noted that the objector did not possess the requisite qualification to oppose the scheme under section 230(4) of the Companies Act, 2013. However, the Tribunal directed the transferee company to make payment to the shareholders whose shares were canceled at the book value as on 01.04.2016 and to publish a general notice for other shareholders.

3. Compliance with Statutory Requirements and Protection of Stakeholders' Interests:
The Tribunal ensured that all statutory requirements were met, and notices were sent to the relevant authorities. The Official Liquidator's report confirmed that the transferor companies maintained their statutory books in accordance with accepted accounting principles and that the affairs of the companies were not conducted prejudicially. The scheme safeguards the interests of employees and provides a clear mechanism for the issuance and allotment of shares. The Tribunal directed the transferee company to file the amended MOA and AOA with the ROC, Chennai, and ordered the dissolution of the transferor companies without winding up. The Tribunal also directed the transferor companies to pay fees to the Official Liquidator for the audit conducted.

Conclusion:
The scheme of Arrangement and Amalgamation is sanctioned with modifications to address the rounding off of fractional shares and the buyback of fractional shares. The Tribunal ensures compliance with statutory requirements and protection of stakeholders' interests, providing directions for the implementation of the scheme and the dissolution of the transferor companies.

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