2019 (1) TMI 1807 - Tri - Companies Law

Sanction of Scheme of Merger (by absorption) - Sections 230 to 232 of the Companies Act, 2013 - HELD THAT - The Fourth Applicant / Transferee Company is accordingly directed to serve notices along with the documents as mentioned (a) the draft of the proposed terms of the Scheme drawn up and adopted by the Board of Directors; (b) confirmation that a copy of the draft Scheme has been filed with the Registrar; (c) a report adopted by the Directors of the Applicant Companies explaining the effect of the amalgamation on each class of shareholders, key managerial personnel, promoters and non-promoter shareholders laying out in particular the share exchange ratio, specifying any special valuation difficulties; (d) the report of the expert with regard to valuation, if any; (e) a supplementary accounting statement, if any, if the last annual accounts of any of the merging companies relate to a financial year ending more than 6 months before the date of service of notice, upon - (i) concerned Income Tax Authority with in whose jurisdiction the Transferee Company s assessments are made, (ii) the Central Government through the office of Regional Director, Western Region, Mumbai, (iii) Registrar of Companies, Mumbai (iv) BSE Limited (v) National Stock Exchange of India Limited (NSE) with a direction that they may submit their representations, if any, within a period of thirty days from the date of receipt of such notice to the Tribunal with copy of such representations shall simultaneously be served upon the Applicant Company, failing which, it shall be presumed that the authorities have no representations to make on the proposals. The Applicant Companies to file affidavit of service in the Registry proving dispatch of notices to the shareholders and Creditors, publication of notices in newspapers and service of notice to the regulatory authorities as stated above and do report to this Tribunal that the directions regarding the issue of notices have been duly complied with.

Issues Involved:
1. Scheme of Merger (by absorption) of wholly owned subsidiaries with the holding company.
2. Rationale for the Scheme of Merger.
3. Separate application by Transferor Company 4 in NCLT, Ahmedabad.
4. Convening meetings of Equity Shareholders of Applicant Companies.
5. Issuance of notices and advertisement for meetings.
6. Appointment of Chairpersons and Scrutinizers for meetings.
7. Quorum and voting by proxy.
8. Reporting compliance to the Tribunal.
9. Service of notice to regulatory authorities and creditors.
10. No issuance of shares or change in equity share capital post-merger.
11. No requirement for meetings of shareholders and creditors of the Transferee Company.

Issue-wise Detailed Analysis:

1. Scheme of Merger (by absorption) of wholly owned subsidiaries with the holding company:
The judgment addresses the Scheme of Merger (by absorption) involving Dolvi Minerals & Metals Private Limited, Dolvi Coke Projects Limited, JSW Steel Processing Centres Limited, and JSW Steel (Salav) Limited with JSW Steel Limited under Sections 230 to 232 of the Companies Act, 2013. The Counsel for the Applicants stated that the Transferor Companies are wholly owned subsidiaries of the Transferee Company.

2. Rationale for the Scheme of Merger:
The rationale for the merger includes operational synergies, a streamlined group structure, reduced legal and regulatory compliances, elimination of duplicative communication efforts, rationalization of costs, and reduced time for financial consolidation at the group level.

3. Separate application by Transferor Company 4 in NCLT, Ahmedabad:
The registered office of Transferor Company 4, JSW Steel (Salav) Limited, is in Ahmedabad, Gujarat, and has filed a separate Company Application before NCLT, Ahmedabad Bench for sanction of the Scheme of Merger.

4. Convening meetings of Equity Shareholders of Applicant Companies:
The Tribunal ordered the convening of meetings of the Equity Shareholders of the First, Second, and Third Applicant Companies on 15th February 2019 at specified times and locations for the purpose of considering and approving the proposed Scheme of Merger.

5. Issuance of notices and advertisement for meetings:
Notices convening the meetings, along with a copy of the Scheme and required disclosures, should be sent to each Equity Shareholder at least one month before the meeting. Additionally, notices should be published in two local newspapers, "Free Press Journal" in English and "Navshakti" in Marathi, circulated in Mumbai.

6. Appointment of Chairpersons and Scrutinizers for meetings:
The Tribunal appointed specific individuals as Chairpersons and Mr. Sunil Agarwal as the Scrutinizer for the meetings of the First, Second, and Third Applicant Companies.

7. Quorum and voting by proxy:
The quorum for the meetings shall be as prescribed under Section 103 of the Companies Act, 2013. Voting by proxy or authorized representative is permitted, provided the proxy form is filed 48 hours before the meeting.

8. Reporting compliance to the Tribunal:
The Chairpersons are required to file an affidavit at least seven days before the meetings, reporting compliance with the issuance of notices and advertisements. They must also report the results of the meetings to the Tribunal within thirty days of the meetings' conclusion.

9. Service of notice to regulatory authorities and creditors:
The Applicant Companies are directed to serve notices along with the Scheme to the Official Liquidator, concerned Income Tax Authority, Central Government, and Registrar of Companies. If no response is received within thirty days, it will be presumed that there are no objections. Individual notices must also be sent to all creditors with amounts due as of specified dates.

10. No issuance of shares or change in equity share capital post-merger:
As the merger involves wholly owned subsidiaries, no shares will be issued or allotted as consideration. Hence, there will be no change in the equity share capital of the Transferee Company, and the rights of the members and creditors will not be affected.

11. No requirement for meetings of shareholders and creditors of the Transferee Company:
The Counsel for the Transferee Company argued that no meetings of shareholders or creditors are required for the Transferee Company, as there is no reconstruction or arrangement with its shareholders or creditors. The Tribunal accepted this argument based on precedents and directed the Transferee Company to serve notices to regulatory authorities.

Conclusion:
The Tribunal directed the Applicant Companies to comply with the procedural requirements for the Scheme of Merger, including convening meetings, issuing notices, and reporting compliance. The merger aims to streamline operations and reduce costs without affecting the rights of shareholders or creditors.

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