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2019 (9) TMI 1433 - Tri - Companies LawApproval of the scheme of arrangement - Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT - The Petitioner Companies, it is seen from the records, have filed an affidavit dated 11.02.2019 in relation to the compliance of the order dated 18.01.2019 passed by this Tribunal and a perusal of the same discloses that the petitioners have effected the paper publication as directed by this Tribunal in 'Business Standard' in English edition and in 'Business Standard' in Hindi edition on 06.02.2019. Further, it has also been stated by the Learned Counsel for the Petitioner Companies that notices have been issued to the Regional Director on 29.01.2019 by hand, to the Registrar of Companies on 29.01.2019 by hand, to the Income Tax Department on 29.01.2019 by hand, to the Official Liquidator on 29.01.2019 by hand, to the Department of Non-Banking Supervision Reserve Bank of India and proof of the same acknowledgements made by the respective offices have also been enclosed. In the rejoinder filed by the petitioners, it is stated that Share Valuation has been carried out in accordance with the available share valuation method. Further provisions of Rule 11UA prescribe the method for valuation of unquoted equity shares for purpose of Section 50 CA and Section 56(2)(x) and cannot be applied in other sections/other places - the observations of Income Tax Department stands adequately explained. In addition, it is clarified that there shall be no limitation on the power of the Income tax Department for recovery of pending Income Tax dues, including imposition of penalties etc. as provided in law. The Petitioner Companies have complied with proviso to Section 230 (7)/Section 232(3) by filing the certificates issued by the Statutory Auditors of the Transferor Company and Transferee Company on the accounting treatment as proposed in the Scheme - In view of absence of any other objections having been placed on record before this Tribunal from any other party and all the requisite statutory compliances having been fulfilled, this Tribunal sanctions the scheme of amalgamation annexed as Annexure - 1 with the Company Petition along with the prayers made therein. Application disposed off.
Issues Involved:
1. Approval of the scheme of arrangement (amalgamation) between Shree Krishna Finbiz Private Limited and Gupta Jewellers Private Limited. 2. Compliance with statutory requirements and regulatory approvals. 3. Valuation of shares and objections raised by the Income Tax Department. 4. Objections raised by the Regional Director and other authorities. 5. Final sanction of the scheme and conditions imposed by the Tribunal. Detailed Analysis: 1. Approval of the Scheme of Arrangement: The petition was filed for the approval of the scheme of arrangement under Sections 230 to 232 of the Companies Act, 2013, involving the amalgamation of Shree Krishna Finbiz Private Limited (Transferor Company) and Gupta Jewellers Private Limited (Transferee Company). The Transferor Company was incorporated on 25th January 1994, and the Transferee Company on 14th March 1997. The scheme aimed to amalgamate the assets, liabilities, and operations of the Transferor Company into the Transferee Company. 2. Compliance with Statutory Requirements and Regulatory Approvals: The Tribunal dispensed with the requirement of convening meetings of equity shareholders, secured creditors, and unsecured creditors of both companies, as their consents were obtained. Notices were issued to the Central Government, Registrar of Companies, Regional Director (Northern Region) MCA, Income Tax Authorities, Official Liquidator, and Reserve Bank of India. The companies complied with the Tribunal's order by publishing notices in "Business Standard" (English and Hindi editions) and serving notices to the relevant authorities. 3. Valuation of Shares and Objections Raised by the Income Tax Department: The Income Tax Department noted discrepancies in the share valuation between the companies. The average value per share of Shree Krishna Finbiz was calculated at ?20.83, and Gupta Jewellers at ?85.97. However, as per Rule 11UA, the NAV of shares was ?30.72 and ?118.39, respectively. The petitioners clarified that the share valuation was conducted according to the available method and referenced the Supreme Court's decision in Miheer H. Mafatlal vs. Mafatlal Industries Ltd., which held that the share exchange ratio is a commercial decision of the shareholders. The Tribunal found the explanation satisfactory and clarified that the Income Tax Department retains the power to recover pending dues. 4. Objections Raised by the Regional Director and Other Authorities: The Regional Director's affidavit noted that the Transferor Company, a Non-Banking Finance Company, had applied to surrender its NBFC registration. The Registrar of Companies confirmed that statutory returns were filed up to 31.03.2018, with no pending prosecutions or investigations. The Reserve Bank of India approved the proposed merger. The Official Liquidator reported no complaints against the scheme. 5. Final Sanction of the Scheme and Conditions Imposed by the Tribunal: The Tribunal sanctioned the scheme of amalgamation, noting the absence of objections and compliance with statutory requirements. The order included several conditions: - The Transferor Company shall be dissolved without winding up. - All assets, rights, liabilities, and obligations of the Transferor Company shall be transferred to the Transferee Company. - Licenses, benefits, entitlements, and contracts of the Transferor Company shall vest in the Transferee Company. - Employees of the Transferor Company shall become employees of the Transferee Company without interruption of service. - The Transferee Company shall follow the "pooling of interest method" for accounting. - Inter-company loans and advances shall be canceled. - Pending proceedings by or against the Transferor Company shall continue against the Transferee Company. - Equity shares shall be issued to the Transferor Company's members in a specified ratio. - The Transferor Company shall deliver a certified copy of the order to the Registrar of Companies for registration. The Tribunal clarified that the order does not exempt the companies from paying stamp duty, taxes, or complying with other legal requirements. Any deficiencies or violations found would be subject to legal action.
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