2016 (3) TMI 930 - HC - Companies Law

Scheme of Amalgamation - Held that - The queries of the Regional Director and of the Official Liquidator have been met with the petitioners. It is, therefore, ordered that, the Scheme, at Exhibit A to the petition, is sanctioned and the prayers as prayed at 15(a) in the Company Petition are granted. The petitioner is directed to pay the fees amounting to ₹ 7,500/to Mr. Devang Vyas, learned Assistant Solicitor General of India and ₹ 7,500/to the Office of the Official Liquidator. The petitioner Company is further directed to lodge a copy of this order, the Schedule of Assets of the Transferor Company as on the date of this order, if any, and the Scheme duly authenticated by the Registrar, High Court of Gujarat, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, on the same within 60 days from the date of the order.

Issues involved:
- Sanctioning of Scheme of Amalgamation by the High Court
- Compliance with SEBI circulars and guidelines
- Compliance with FEMA and RBI guidelines
- Compliance with Accounting Standard 14
- Outstanding Income Tax Liability
- Maintenance of accounts, records, and registers

Analysis:

1. Sanctioning of Scheme of Amalgamation:
The High Court considered a Company Petition filed by the Transferor Company seeking the sanctioning of the Scheme of Amalgamation with the Transferee Company. The Court had previously allowed directions for dispensation of meetings of Equity Shareholders and Unsecured Creditors. The petition was admitted, and notices were issued to the Regional Director and Official Liquidator. The Court ordered publication of the notice in newspapers and Government Gazette. After compliance with orders, the Official Liquidator submitted a report stating no prejudicial conduct by the Petitioner Company. The Regional Director also filed observations, and after responses from the Petitioner, the Court sanctioned the Scheme of Amalgamation.

2. Compliance with SEBI circulars and guidelines:
The Regional Director highlighted the need for compliance with SEBI circulars, including obtaining NOC for approval of any Scheme of Amalgamation. The Petitioner responded, stating that the Transferee Company had obtained Inprinciple Approval from stock exchanges and issued a 'No Objection' Certificate from SEBI. The Court was satisfied with the compliance and directed adherence to SEBI circulars and guidelines.

3. Compliance with FEMA and RBI guidelines:
The Regional Director raised concerns about compliance with FEMA and RBI guidelines, especially regarding Foreign Body Corporates and Foreign Institutions Investors holding Equity Shares. The Petitioner assured compliance with guidelines and stated that as a wholly-owned subsidiary merging with the Transferee Company, there would be no violation of guidelines. The Court directed future compliance with FEMA and RBI guidelines.

4. Compliance with Accounting Standard 14:
The Regional Director emphasized adherence to Accounting Standard 14, particularly regarding reserves and dividend distribution post-amalgamation. The Petitioner detailed compliance with AS 14, preserving the identity of reserves and following uniform accounting policies. The Court accepted the explanations provided by the Petitioner and directed strict adherence to Accounting Standard 14.

5. Outstanding Income Tax Liability:
The Regional Director pointed out outstanding Income Tax Liability, especially for the Transferee Company under scrutiny for assessment years. The Petitioner assured that liabilities would be discharged as the Transferee Company continued as a going concern. The Court directed compliance with the Income Tax Act and Rules.

6. Maintenance of accounts, records, and registers:
The Official Liquidator recommended the preservation of books of accounts, papers, and records by the Petitioner Company. The Petitioner and Transferee Company undertook to comply with the requirements. The Court ordered compliance with maintaining accounts, records, and registers.

In conclusion, the High Court of Gujarat sanctioned the Scheme of Amalgamation after addressing all compliance issues raised by the Regional Director and Official Liquidator. The Petitioner and Transferee Company were directed to pay fees, lodge necessary documents, and ensure compliance with all legal standards and guidelines. The Court disposed of the petition, emphasizing strict adherence to regulatory requirements and accounting standards.

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