2019 (8) TMI 1579 - Tri - Companies Law

Approval of the Scheme of Amalgamation - Sections 230 to 232 of the Companies Act 2013 read with the Companies (Compromises Arrangements and Amalgamations) Rules 2016 and the National Company Law Tribunal Rules 2016 - HELD THAT - The shareholders of the applicant companies are the best Judges of their interest fully conversant with market trends and therefore their decision should not be interfered with by Tribunal for the reason that it is not a part of judicial function to examine entrepreneurial activities and their commercial decisions. It is well settled that the Tribunal evaluating the Scheme of which sanction is sought under Section 230-232 of the Companies Act of 2013 will not ordinarily interfere with the corporate decisions of companies approved by shareholders and creditors. Right to apply for the sanction of the Scheme has been statutorily provided under Section 230-234 of the Companies Act 2013 and therefore it is open to the applicant companies to avail the benefits extended by statutory provisions and the Rules. Thus upon considering the approval accorded by the members and creditors of the Petitioner companies to the proposed Scheme and the affidavits filed by the Regional Director Northern Region Ministry of Corporate Affairs and the report of official liquidator there appears to be no impediment in sanctioning the present Scheme - sanction is hereby granted to the Scheme under Section 230 232 of the Companies Act 2013. Application allowed.

Issues Involved:
1. Approval of the Scheme of Amalgamation under Sections 230 to 232 of the Companies Act, 2013.
2. Dispensation of meetings of shareholders and creditors.
3. Compliance with statutory requirements and observations by regulatory authorities.
4. Issuance and allotment of shares post-amalgamation.
5. Transfer of property, rights, liabilities, and duties of Transferor Companies to the Transferee Company.
6. Continuation of pending proceedings and employment terms post-amalgamation.
7. Compliance with tax obligations and other statutory dues.

Detailed Analysis:

1. Approval of the Scheme of Amalgamation:
The joint petition was filed for the approval of the Scheme of Amalgamation of three Transferor Companies into the Transferee Company under Sections 230 to 232 of the Companies Act, 2013. The Tribunal noted that the Scheme was placed on record, and no objections were raised by the Official Liquidator or any interested party, indicating that the affairs of the Transferor Companies were conducted fairly and not prejudicially to public interest.

2. Dispensation of Meetings:
The Tribunal previously dispensed with the requirement to convene meetings of shareholders and creditors of the petitioner companies via an order dated 21.01.2019, based on a joint application under Sections 230-232 of the Companies Act, 2013.

3. Compliance with Statutory Requirements and Observations by Regulatory Authorities:
The petitioners complied with the publication requirements and served notices to relevant authorities. The Regional Director's report required compliance with Section 232(3)(B)(i) and 233(11) r/w (12) of the Companies Act, 2013. The Income Tax Department had no objections except for pending assessment proceedings under Section 148 of the Income Tax Act, 1961, for one of the Transferor Companies. The Transferee Company undertook to bear any liabilities arising from these proceedings.

4. Issuance and Allotment of Shares:
The Scheme specified the proportion of shares to be issued and allotted by the Transferee Company to the shareholders of the Transferor Companies, ensuring that each shareholder received shares in the Transferee Company in exchange for their shares in the Transferor Companies.

5. Transfer of Property, Rights, Liabilities, and Duties:
The Tribunal ordered that all property, rights, and powers of the Transferor Companies be transferred to the Transferee Company without further act or deed. Similarly, all liabilities and duties of the Transferor Companies were to be transferred to and become the liabilities and duties of the Transferee Company.

6. Continuation of Pending Proceedings and Employment Terms:
All pending proceedings by or against the Transferor Companies were to continue against the Transferee Company. Employees of the Transferor Companies were to become employees of the Transferee Company without any break or interruption in service and on terms not less favorable than those existing prior to the amalgamation.

7. Compliance with Tax Obligations and Other Statutory Dues:
The Tribunal clarified that the sanction of the Scheme did not exempt the petitioner companies from paying stamp duty, taxes, or any other charges. The Transferee Company undertook not to claim benefits under Section 72A of the Income Tax Act, 1961, and to comply with all statutory requirements.

Conclusion:
The Tribunal sanctioned the Scheme of Amalgamation, subject to compliance with statutory requirements and regulatory observations. The Transferor Companies were to be dissolved without winding up, and all their properties, rights, liabilities, and duties were to be transferred to the Transferee Company. The order emphasized that any deficiencies or violations of statutory rules would still be actionable in accordance with the law. The petition was disposed of accordingly.

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