2019 (8) TMI 1542 - Tri - Companies Law

Sanction of Scheme of Amalgamation - holding and convening of various meetings - HELD THAT - The First Applicant Company undertake to i. Issue Notice convening meeting as per Form No. CAA.2 (Rule 6) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 ii. Issue Explanatory Statement containing all the as per Section 230(3) of the Companies Act, 2013 and Rule 6 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 iii. Issue Form of Proxy (Rule 10 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 ; and iv. Advertise the Notice convening meeting as per Form No. CAA.2 Rule 7 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 . The said undertaking given by the Applicant Companies are accepted. That at least one month before the said Meetings of the Equity Shareholders of the First Applicant Company to be held as aforesaid, a notice convening the said Meeting at the place, day, date and time as aforesaid, together with a copy of the Scheme, a copy of statement disclosing all material facts as required under Section 230(3) of the Companies Act 2013 read with Rule 6 of the Companies (Compromises, Arrangements and Amalgamations) Rule, 2016 notified on 14th day of December, 2016 - The Notice of the meetings shall be published in the state of Maharashtra Business Standard in English Language and Navshakti in Marathi Language, both having wide circulation in the State in which the Registered office of the Company is situated, by the First Applicant Company, not less than 30 days before the date fixed for the meeting. The Applicant Companies are directed to serve notices along with copy of scheme - The Transferor Company (i.e. the First Applicant Company) are also directed to serve notice of the meeting upon Official Liquidator, pursuant to Section 230(5) of the Companies Act, 2013 and as per Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

Issues Involved:
1. Approval of the Scheme of Amalgamation
2. Benefits and rationale of the Scheme
3. Requirements for shareholder and creditor meetings
4. Compliance with regulatory authorities and procedural requirements

Issue-wise Detailed Analysis:

1. Approval of the Scheme of Amalgamation:
The Scheme of Amalgamation involves the merger of CEAT Specialty Tyres Limited (Transferor Company or CSTL) with CEAT Limited (Transferee Company or CEAT). The Board of Directors of both companies approved the Scheme on April 3, 2019, with an appointed date of April 1, 2019. The Scheme aims to integrate the businesses for optimal resource use, achieving synergies, economies of scale, and enhanced profitability.

2. Benefits and Rationale of the Scheme:
The Scheme proposes several advantages:
- Integration of business activities of the wholly owned subsidiary (Transferor Company) with the holding company (Transferee Company) for greater resource utilization.
- Achieving synergies of operations resulting in economies of scale, effective coordination, and reduction of overheads and administrative expenses.
- Enhanced capability of the Transferee Company to face competition through combined resources, profits, assets, and cash flows.
- Pooling of financial resources to deploy funds in growth opportunities and capital expenditure.
- Cost savings from rationalization, standardization of business processes, and elimination of duplication of work/functions.
- The Scheme is in the best interest of shareholders, creditors, employees, and the public at large.

3. Requirements for Shareholder and Creditor Meetings:
The meeting of the Equity Shareholders of the First Applicant Company is scheduled for October 10, 2019, to consider and approve the Scheme. Since the Transferee Company holds 100% stake in the Transferor Company, no shares will be issued or allotted as consideration, and there will be no dilution in shareholding or change in the debt position of the Transferee Company. The net worth of the Transferee Company is positive, and the assets are sufficient to discharge liabilities. Therefore, no compromise or arrangement with members or creditors is required, and the Scheme is not prejudicial to their interests.

The Tribunal directed that no meeting of creditors is required as the Scheme is an arrangement between the Applicant Companies and their shareholders. However, notices must be issued to all Secured and Unsecured Creditors of the First Applicant Company.

4. Compliance with Regulatory Authorities and Procedural Requirements:
The First Applicant Company must issue notices convening the meeting, including an explanatory statement and a form of proxy, and advertise the notice in widely circulated newspapers. The quorum for the meeting is set at two shareholders, with provisions for adjournment if the quorum is not met. Voting by proxy or authorized representative is permitted.

The Tribunal appointed a Scrutinizer for the meeting and directed the Chairman to report the meeting's results within ten days. The Applicant Companies must serve notices along with a copy of the Scheme to various regulatory authorities, including Income Tax Authorities, Central Government, Registrar of Companies, SEBI, BSE, NSE, and any other applicable authority. These authorities have 30 days to submit their representations.

Additionally, the Transferor Company must serve notice to the Official Liquidator, who will scrutinize the books of accounts for the last five years with the assistance of a Chartered Accountant. If no response is received within 30 days, it will be presumed that there are no objections to the Scheme.

The Tribunal's directions ensure compliance with the procedural requirements under the Companies Act, 2013, and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

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