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2019 (5) TMI 1891 - Tri - Companies LawSanction of Scheme of Amalgamation - Sections 230 to 232 and Section 66 of the Companies Act, 2013 - HELD THAT - The present position of law, while dealing with the provisions of Sections 230-232 and 66 of the Act is that if none of the shareholders are objecting for the proposed reduction, then after considering the merits of the case as also connected facts and circumstances such petition generally deserves to be admitted. It is also observed that while reducing the share capital, company can decide to extinguish some of its shares without dealing in the same manner as with all other shares of the same class. The company limited by shares is permitted to reduce the share capital in any manner, thereby a selective reduction is permissible within the framework of law. On the question of valuation as well, an observation was that valuation of shares is a technical matter, which requires considerable skill and experience. If the stakeholders are satisfied with the value, can approve the transaction of reduction of share capital which should not deemed to be inequitable or unfair transaction. The Regional Director, Northern Region, Ministry of Corporate Affairs, Registrar of Companies, Official Liquidator and Income Tax Department have not raised any objections to the proposed Scheme of Amalgamation. The learned counsel for the petitioner-companies has referred to clause 7.1 of the Scheme which provides that all legal proceedings pending by or against the Transferor Companies shall be continued by or against the Transferee Company and that clause 9.8 provides that all taxes paid or payable by the Transferor Companies shall be deem to be the corresponding item paid by the Transferee Company. The objections/observations to the Scheme received from RD and IT Department have been adequately replied by the Petitioner Companies and hence, there is no impediment in the sanction of the Scheme - the scheme is approved - application allowed.
Issues Involved:
1. Maintainability of the joint second motion petition under Sections 230 to 232 and Section 66 of the Companies Act, 2013. 2. Compliance with procedural requirements for convening meetings of creditors and shareholders. 3. Approval and compliance with the Scheme of Amalgamation. 4. Reduction of share capital of the Transferee Company. 5. Compliance with statutory and regulatory requirements. 6. Objections and observations from statutory authorities. 7. Impact on employees and stakeholders. Detailed Analysis: 1. Maintainability of the Joint Second Motion Petition: The petition filed under Sections 230 to 232 and Section 66 of the Companies Act, 2013, was deemed maintainable as per Rule 3(2) of the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016. The petition sought the sanction of the Scheme of Amalgamation involving Brooks Instrument India Private Limited (Transferor Company No.1), Bangalore Integrated System Solutions Private Limited (Transferor Company No.2), and ITW India Private Limited (Transferee Company). 2. Compliance with Procedural Requirements: The Petitioner Companies filed a First Motion Application seeking directions to convene meetings of unsecured creditors and equity shareholders, which was disposed of with specific directions. Compliance affidavits and newspaper publications were filed, and notices were sent to relevant statutory authorities. Reports from the Chairperson and Scrutinizer confirmed unanimous approval of the Scheme by the unsecured creditors and equity shareholders. 3. Approval and Compliance with the Scheme of Amalgamation: The Scheme's main objects, incorporation details, authorized and paid-up share capital, interest of employees, and rationale were discussed in the First Motion order. Statutory auditors' certificates confirmed that the accounting treatment proposed in the Scheme complied with Section 133 of the Act and Generally Accepted Accounting Principles in India. The appointed date for the Scheme was set as 01.01.2019, with a share exchange ratio determined by an independent valuation report. 4. Reduction of Share Capital of the Transferee Company: The Scheme involved the reduction of the Transferee Company's share capital, which was detailed in the petition. The reduction was to be carried out by canceling and extinguishing certain equity shares and paying the shareholders a sum determined by independent valuers. Article 54 of the Articles of Association empowered the Transferee Company to reduce its share capital as authorized by law. 5. Compliance with Statutory and Regulatory Requirements: Notices were sent to various authorities, including the Regional Director (Northern Region), Registrar of Companies, Income Tax Department, Official Liquidator, and Reserve Bank of India. Compliance affidavits confirmed that no objections were received from these authorities. The Regional Director's report highlighted the need for compliance with specific sections of the Companies Act, which the Transferee Company undertook to fulfill. 6. Objections and Observations from Statutory Authorities: The Regional Director's report raised observations regarding compliance with Sections 232(3)(8)(i), 233(11), 233(12), and 2(68)(ii) of the Companies Act. The Transferee Company responded with undertakings to comply with these provisions. The Income Tax Department's report mentioned an outstanding demand against Transferor Company No.2, which the company undertook to settle. The Official Liquidator confirmed no pending investigations or proceedings against the petitioner companies. 7. Impact on Employees and Stakeholders: The Scheme provided for the transfer of all employees of the Transferor Companies to the Transferee Company. The shareholding pattern before and after the reduction was detailed, and the Transferee Company confirmed no public deposits or arrears in repayment of deposits. The reduction of capital was distinguished from a buy-back of shares, with reference to relevant case law. Conclusion: The Tribunal concluded that the objections and observations from the Regional Director and Income Tax Department were adequately addressed. The Scheme was approved, binding all shareholders and creditors of the Petitioner Companies. The order clarified that it did not grant exemption from payment of any stamp duty, taxes, or other charges. The Transferor Companies were dissolved without undergoing the process of winding up, and their share capital was canceled and extinguished. Formal orders were to be issued upon the petitioners filing the schedule of properties by affidavit. The appointed date for the Scheme was approved as 01.01.2019.
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