2022 (3) TMI 1526 - Tri - Companies Law

Sanction of Scheme of Arrangement - Sections 230 to 232 of the Companies Act, 2013 and other relevant provisions of the Companies Act, 2013 - HELD THAT - From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, Company Scheme Petition is made absolute in terms of the prayer clauses of the said Company Scheme Petition. The Petitioner Company No 1 be dissolved without winding up - The Appointed Date is 1st April, 2021.

Summary

Issues Involved:
1. Compliance with statutory requirements.
2. Rationale and benefits of the Scheme of Arrangement.
3. Observations and conditions by the Regional Director.
4. Protection of creditors' interests.
5. Official Liquidator's report.
6. Share exchange ratio and issuance of shares.
7. Dissolution of the Transferor Company.
8. Filing and administrative requirements post-approval.

Detailed Analysis:

1. Compliance with Statutory Requirements:
The Tribunal noted that the sanction is sought under Sections 230 to 232 of the Companies Act, 2013, and other relevant provisions. The Board of Directors of both petitioner companies approved the Scheme on September 30, 2021. The Learned Advocate confirmed that the Petition has been filed in consonance with the Tribunal's previous order and that all compliance requirements have been met, including filing necessary affidavits on February 15, 2022.

2. Rationale and Benefits of the Scheme of Arrangement:
The rationale for the Scheme includes:
- Tata Motors Limited holds 100% of the equity share capital of both petitioner companies.
- The Scheme aims to amalgamate Petitioner Company No. 1 (Transferor) into Petitioner Company No. 2 (Transferee) to streamline the Group structure, reduce legal entities, and enhance operational synergies.
- The amalgamation will lead to significant operational efficiencies, cost savings, and a stronger sustainable business.
- The Scheme is not prejudicial to the interests of shareholders and creditors.
- The Petitioner Company No. 2 will undertake necessary financial adjustments, including a reduction of share capital and adjustments against retained earnings.

3. Observations and Conditions by the Regional Director:
The Regional Director's report dated February 14, 2022, included several observations:
- Compliance with AS-14 (IND AS103) and other applicable Accounting Standards.
- Notices to concerned authorities under Section 230(5) of the Companies Act, 2013.
- Confirmation that the Scheme enclosed in the Company Application and Petition are identical.
- Compliance with the Ministry of Corporate Affairs' circular dated August 21, 2019.
- Compliance with Section 232(3)(i) of the Companies Act, 2013.
- Adherence to Indian Accounting Standards and specific accounting treatments as outlined in the Scheme.
- Filing form MGT 14 for alteration of Object Clause.
- Protection of unsecured creditors' interests.
- Transfer of open charges from the Transferor to the Transferee Company.

The Petitioner Companies provided undertakings to comply with all these observations, which were found satisfactory by the Regional Director in his supplementary report dated March 3, 2022.

4. Protection of Creditors' Interests:
The Tribunal directed that the interests of creditors be protected. The Transferee Company will assume all assets and liabilities of the Transferor Company, ensuring that creditors' rights are unaffected.

5. Official Liquidator's Report:
The Official Liquidator's report dated February 28, 2022, stated that the affairs of the Transferor Company have been conducted properly and are not prejudicial to the interests of members or the public. The report recommended the dissolution of the Transferor Company.

6. Share Exchange Ratio and Issuance of Shares:
Upon the Scheme's effect, the Transferee Company will issue and allot 521 equity shares of Rs. 10/- each for every 100 equity shares of Rs. 10/- each held by the equity shareholders of the Transferor Company.

7. Dissolution of the Transferor Company:
The Tribunal ordered that Petitioner Company No. 1 be dissolved without winding up.

8. Filing and Administrative Requirements Post-Approval:
The Petitioner Companies are directed to:
- File a certified copy of the Order along with the Scheme with the Registrar of Companies electronically within 30 days.
- Lodge a copy of the Order and the Scheme with the Superintendent of Stamps for stamp duty adjudication within 60 days.
- Ensure all authorities act on the authenticated copy of the Order and Scheme.

The Appointed Date for the Scheme is April 1, 2021. The Tribunal concluded that the Scheme is fair, reasonable, and not contrary to public policy, and ordered accordingly.