2019 (5) TMI 1821 - Tri - Companies Law

Sanction of the Scheme of Amalgamation - Section 230 to 232 of the Companies Act, 2013 - HELD THAT - The Scheme in question is framed in accordance with law and the instant petition is filed by disclosing all material facts which includes latest financial position, Auditor report and the statutory Authorities also reported that the affairs of Company are being conducted in accordance with law. So far as the observations/objections as raised by the Statutory Authorities as mentioned supra, any scheme under Section 230-232 of Companies Act, 2013, is to be prepared first basing on parameters in the interest of business, subject to Compliance of extant statutorily Compliance under Companies Act, 2013. A scheme cannot be in violation of any provisions of Articles of Association of a Company and extant provisions of Companies Act, 2013. Any scheme can be approved subject to complying all the terms and conditions mentioned in it and it cannot waive/override any statutory stipulation and the Authorities are at liberties to take appropriate action in accordance with law for any violation committed by the Companies involved in Scheme. It is settled position of law that Companies involved in the scheme have right to evolve their suitable schemes in accordance with their business interest and public interest, after duly complying with their respective Memo and Articles of Association, however, subject to overall compliance of extant provisions of Companies Act, 2013 and the Rules made thereunder. At the same time, the Tribunal is under obligation to scrutinize the schemes in question, in the light of law on the issue before it is approved. Apart from framing scheme in question, it is duly approved by the Board of Directors of the respective Companies, and it was duly approved by respective stake holders with requisite majority - After analyzing the issue in detail, the Tribunal is convinced that the scheme in question would broadly confirm to the general principles of law as enunciated under provisions of Sections 230 to 232 of Companies Act, 2013 and the rules made thereunder. Therefore, it is a settled position of law that Tribunal shall exercise only supervisory but no appellate powers shall be applicable to the Tribunal for Schemes framed under Section 230 to 240 of the Companies Act, 2013 - The scheme is sanctioned. Application allowed.

Issues Involved:
1. Sanction of the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013.
2. Compliance with statutory provisions and modifications required in the Scheme.
3. Approval from stakeholders and regulatory authorities.
4. Observations and objections raised by the Central Government and Official Liquidator.
5. Legal precedents and principles governing the approval of amalgamation schemes.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The petition was filed by two companies seeking sanction for their amalgamation. The Tribunal was requested to make the scheme binding on all members, secured creditors, and unsecured creditors, and to dissolve the Transferor Company without winding up.

2. Compliance with Statutory Provisions and Modifications Required:
The Central Government, represented by the Registrar of Companies (ROC), raised several issues:
- The Scheme's appointed date needed modification to comply with Section 232(6) of the Companies Act, 2013.
- The paid-up capital of the Transferor Company was incorrectly stated and required correction.
- Compliance with Section 188 of the Companies Act, 2013, for related party transactions was necessary.
- The Transferee Company needed to comply with Section 232(3)(1) regarding stamp duty and registration fees.

The petitioner companies responded by:
- Clarifying the appointed date as 1st April 2018.
- Correcting the paid-up capital to ?14,51,000 divided into 1,45,100 equity shares of ?10 each.
- Providing an undertaking regarding stamp duty and registration fees.
- Confirming compliance with Section 188 for related party transactions.

3. Approval from Stakeholders and Regulatory Authorities:
Meetings of unsecured creditors were held and the scheme was unanimously approved. The Official Liquidator reported no adverse findings, and the Chartered Accountants confirmed that the accounting treatment in the scheme complied with Section 133 of the Companies Act, 2013.

4. Observations and Objections Raised by the Central Government and Official Liquidator:
The ROC's objections were addressed by the petitioner companies through necessary clarifications and amendments. The Official Liquidator confirmed that the affairs of the Transferor Company were conducted lawfully and without prejudicing members or public interest.

5. Legal Precedents and Principles Governing the Approval of Amalgamation Schemes:
The Tribunal referenced several legal precedents, including:
- Miheer H. Mafatlal v. Mafatlal Industries Ltd., which emphasized that the court's jurisdiction is supervisory, not appellate.
- United Western Bank Ltd. v. Khaitan Hostombe Spinels Ltd., which allowed approval despite accounting standard violations if proper disclosures were made.
- Other cases reaffirming that the court should not interfere with the commercial wisdom of the parties unless the scheme is illegal or against public policy.

The Tribunal concluded that the scheme complied with legal principles and statutory provisions, benefiting all stakeholders and not opposing public interest.

Conclusion:
The Tribunal provisionally sanctioned the Scheme of Amalgamation, subject to compliance with all terms and conditions mentioned in the Scheme and undertakings provided. The Transferor Company was dissolved, and the Transferee Company was directed to comply with statutory requirements and notify stakeholders through public announcements. The Tribunal also allowed any aggrieved person to approach it within six weeks from the date of the order.

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