2015 (11) TMI 1868 - HC - Companies Law

Application for sanctioning of the Scheme of Amalgamation - Clause 7 of Part II of the Scheme - HELD THAT - In reply, the petitioners are agreeable to modify the clause by adding the words subject to compliance of the requirements of the provisions of Sections 13, 14, 61 and 117 of the Companies Act, 2013 at the end of paragraph 7 of Part II of the said scheme as desired by the Central Government. Scrutiny proceedings under Section 143(2) of the Income Tax Act, 1961 were pending in respect of the assessment of the petitioner nos. 5 and 7 - HELD THAT - The Income Tax Department had raised an objection against any scheme of amalgamation of these two companies. Learned Counsel appearing on behalf of the petitioners submits that after the issue of the letter dated 6th February 2015, an assessment order has been passed by the Income Tax Department in respect of both the petitioner nos.5 and 7 on 20th March 2015 and copies of such orders have been annexed to the affidavit in reply filed by the petitioners. In the circumstances, there is no embargo on the scheme being sanctioned. It is observed from the Balance Sheets as at 31st March, 2013 of the transferor companies that the share application money was pending for allotment - HELD THAT - A revised share valuation report was also prepared by the valuer after taking into consideration the allotment of shares made during 2013-14 and such revised valuation report dated 13th April 2015 is also on record. Moreover, it would be evident from the valuation report dated 13th April 2015 that there is no difference in the share exchange ratio. Further paragraph 12.8 of Part III of the scheme takes into consideration and makes provision in respect of the shares allotted by the transferor companies between the appointed date and the effective date. There are, therefore, emergent circumstances and for the benefit of all concerned, it was necessary that the scheme be sanctioned. Application allowed.

Summary

Issues:
1. Sanctioning of the Scheme of Amalgamation
2. Objections raised by the Central Government regarding the Scheme

Analysis:
The High Court of Calcutta dealt with an application for the sanctioning of a Scheme of Amalgamation. The Central Government raised three objections during the proceedings. The first objection pertained to a specific clause in the Scheme, which the petitioners agreed to modify as per the Central Government's suggestion. The second objection raised by the Central Government concerned pending scrutiny proceedings by the Income Tax Department, which had previously objected to the scheme. However, the petitioners clarified that assessment orders had been passed subsequently, removing any impediment to the scheme. The third objection highlighted by the Central Government related to the share application money pending for allotment as per the Balance Sheets of the transferor companies. The petitioners responded by providing evidence of share allotments in the previous years and revised valuation reports to address this concern.

Furthermore, the petitioners had undergone a restructuring process and submitted a proposal for "Merger-cum-Restructuring" before the Consortium of Banks/Financial Institutions, following all prescribed procedures. The Corporate Debt Restructuring Cell of the Reserve Bank of India had granted provisional approval to the restructuring proposal, emphasizing the necessity of sanctioning the scheme without further delay to implement the Corporate Debt Restructuring Package effectively. The Court, after considering the arguments and submissions, ordered in favor of the petitioners, granting sanction to the Scheme of Amalgamation as per the prayers mentioned in the petition. The petitioners were directed to pay costs to the Central Government Advocate, and the case was disposed of, with a provision for the petitioners to supply a computerized printout of the scheme and asset schedule for verification.