2018 (5) TMI 2002 - AT - Companies Law

Sanction of Amalgamation Scheme - unlisted/private limited companies - issue of shares at a premium - HELD THAT - The Tribunal has recorded disinclination to sanction the Scheme of Amalgamation as has been proposed on the ground that both the companies are unlisted/private limited companies, therefore, in the absence of explicit provision available in the Companies Act, 2013 to issue shares at a premium, the NCLT Bench is of the considered view that the scheme is not in compliance with Section 232 of the Companies Act, 2013, therefore, the Bench is not inclined to sanction the scheme of amalgamation as proposed. Section 232(3)(i) of Companies Act is applicable to all the companies and does not make a distinction whether the company is a private or public company or whether it is listed company or non-listed company. The company where issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of premium received on those shares shall be transferred to a securities premium account . Thus there is no bar that the issues of shares at a premium or otherwise than cash also be resorted to by the company. It is the prerogative of the company to issue shares at a premium or otherwise depending upon the facts and circumstances of the situation. In the present case the shares are being issued by the transferee company to the transferor company for acquiring the assets of the company. If the fair value of the assets being acquired by the transferee company is more than the face value of the shares issued for the same, the company has no other alternative but to allot the shares at premium and the difference being carried to a securities premium account - in the present case, the compliance of Section 232(3)(i) has been made. The Tribunal s observations for not sanctioning the scheme cannot be agreed upon - appeal allowed.

Summary

Issues Involved:
1. Whether the Tribunal erred in not sanctioning the Scheme of Amalgamation between the appellant companies.
2. Whether private limited companies can issue shares at a premium under the Companies Act, 2013.
3. Compliance with statutory provisions and accounting standards for the Scheme of Amalgamation.

Issue-wise Detailed Analysis:

1. Tribunal's Refusal to Sanction the Scheme of Amalgamation:
The appellants filed a joint petition for the sanction of the Scheme of Amalgamation between Ritemed Pharma Retail Private Limited and Optival Health Solutions Private Limited. The Tribunal, however, disinclined to sanction the scheme on the grounds that both companies are unlisted/private limited companies and there is no explicit provision in the Companies Act, 2013 allowing the issuance of shares at a premium for such companies. The Tribunal's decision was based on the absence of explicit provisions in the Companies Act, 2013, and the reliance on a previous High Court order that involved listed companies, which the Tribunal deemed not applicable to the present case.

2. Issuance of Shares at a Premium by Private Limited Companies:
The appellants argued that there is no legal prohibition against issuing shares at a premium for private companies under the Companies Act, 2013. Section 52 of the Companies Act, 2013 specifically provides for the issuance of shares at a premium, whether for cash or otherwise. The appellants cited several judgments where courts permitted the issuance of shares at a premium as part of a Scheme of Amalgamation, arguing that the Act does not differentiate between listed and private companies in this regard.

3. Compliance with Statutory Provisions and Accounting Standards:
The appellants contended that they had complied with all statutory requirements for the Scheme of Amalgamation, including obtaining approvals from relevant stakeholders such as the Board of Directors and creditors. They also submitted a certificate from their auditor confirming that the accounting treatment proposed in the scheme conformed to applicable accounting standards, as required under Section 232(3)(i) of the Companies Act, 2013. The appellants argued that the Tribunal should not have rejected the scheme based on an unfounded belief regarding the issuance of shares at a premium.

Appellate Tribunal's Findings:
The Appellate Tribunal observed that Section 232(3)(i) of the Companies Act, 2013 is applicable to all companies, regardless of whether they are private or public, listed or unlisted. The Tribunal emphasized that the issuance of shares at a premium is permissible under Section 52 of the Companies Act, 2013, and that the companies had complied with all necessary legal and accounting requirements. The Tribunal also referred to the Supreme Court's judgment in Miheer H. Mafatlal Vs Mafatlal Industries Ltd, which outlined the scope and ambit of the jurisdiction of the Company Court in approving schemes of amalgamation.

Conclusion:
The Appellate Tribunal concluded that the Tribunal's refusal to sanction the Scheme of Amalgamation was not justified. The Tribunal directed the National Company Law Tribunal, Hyderabad Bench, to sanction the scheme and issue further consequential directions/orders to ensure legal compliance. The appeal was allowed, and no order as to costs was made.