2010 (11) TMI 1098 - HC - Income Tax

Summary

Issues involved:
The judgment involves a second motion filed by a transferor company under Sections 391, 392, and 394 of the Companies Act, 1956 for demerger and merger, objections raised by the Regional Director regarding coram present in meetings, appointed date contradiction, and merger of authorized share capital.

Demerger and Merger Approval Process:
The transferor company filed a second motion for demerger and merger, following a previous order directing meetings for approval of the scheme by shareholders and creditors. Meetings were held for equity shareholders, preference shareholders, secured and unsecured creditors, and fixed deposit holders. Reports from appointed Chairpersons indicated approval from shareholders and creditors for the scheme.

Objection Regarding Coram in Meetings:
The Regional Director raised concerns about the lack of response from unsecured creditors and fixed deposit holders in the meetings. However, the Court noted that notices were duly sent to all stakeholders, and the scheme was approved by stock exchanges and secured creditors, ensuring no harm to the transferor company.

Appointed Date Contradiction:
An objection was raised regarding the appointed date of 1st April, 2008, conflicting with the incorporation date of the transferee company. The Court clarified that the appointed date was for asset identification and valuation purposes only, not for actual transfer.

Merger of Authorized Share Capital:
Another objection was raised concerning the merger of authorized share capital and resultant increase in the share capital of the transferee company. The Court referenced previous judgments to reject this objection, stating that Sections 391-394 provide a complete code for such arrangements, and compliance with fee payments to authorities is required.

Approval and Order:
No objections opposing the scheme were received from the general public or the Regional Director. The Court approved the scheme of arrangement, clarifying that it does not grant exemption from stamp duty and the transferor company remains liable for fees under the Act and Rules.

Conclusion:
The Court approved the scheme of arrangement, addressing objections raised by the Regional Director and ensuring compliance with legal requirements for demerger and merger processes.