2016 (4) TMI 616 - HC - Companies Law

Scheme of Amalgamation - Held that - The observations made by the Regional Director, Ministry of Corporate Affairs, have been redressed satisfactorily. It can, therefore, be concluded that the present Scheme of Arrangement is in the interest of the shareholders and creditors of all the companies as well as in the public interest and the same deserves to be sanctioned. The Scheme is, therefore, sanctioned. The prayers in terms of paragraph16( a) of the Company Petition No.55 of 2016 and paragraph15( a) of the Company Petition No.56 of 2016 are hereby granted. The Petitioner companies are directed to file a copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, electronically, along with INC28 in addition to physical copy as per relevant provisions of the Act.

Issues:
1. Sanction of a Scheme of Arrangement for Amalgamation under Sections 391 to 394 of the Companies Act, 1956.
2. Compliance with FEMA and RBI guidelines for equity shares held by foreign body corporate.
3. Working sheet for calculation of share exchange ratio not submitted.
4. Response from the Income Tax Department regarding objections to the proposed Scheme.
5. Complaints received against the petitioner companies in the office of the Registrar of Companies.
6. Sanctioning of the Scheme and related orders.

Analysis:

Issue 1: Sanction of Scheme of Arrangement
The petitions were filed for the sanction of a Scheme of Arrangement, proposing the amalgamation of two companies belonging to the same group of management. The purpose was to achieve synergic benefits due to the consolidation of entities. Meetings of shareholders and creditors were dispensed with as written consents were obtained. Substantive petitions were filed, advertised, and no objections were raised. The Official Liquidator observed no prejudicial conduct and requested preservation of books and records. The Scheme was sanctioned, and necessary directions were issued.

Issue 2: Compliance with FEMA and RBI Guidelines
The Regional Director raised concerns about compliance with FEMA and RBI guidelines for equity shares held by foreign body corporates. The petitioners asserted that no prior approval was required under the Acts for the proposed Scheme and undertook to comply with relevant provisions when necessary. The Scheme already included provisions for such compliance.

Issue 3: Working Sheet for Share Exchange Ratio
The Regional Director noted the absence of a working sheet for the share exchange ratio calculation. The petitioners explained that as both companies belonged to the same group with shares held by the same parent company, providing the working sheets was deemed unnecessary.

Issue 4: Response from Income Tax Department
The Income Tax Department was invited to raise objections to the Scheme, but no response was received within the statutory period. It was presumed that the department had no objections. The petitioners agreed to comply with applicable provisions of the Income Tax Act and rules.

Issue 5: Complaints and Objections
No complaints were received against the petitioner companies in the office of the Registrar of Companies. The Regional Director confirmed the absence of objections to the Scheme.

Issue 6: Sanctioning of the Scheme and Related Orders
After considering all facts, contentions, and submissions, the Court concluded that the Scheme was in the interest of shareholders, creditors, and the public. The Scheme was sanctioned, and related prayers were granted. Costs to be paid to the Central Government Standing Counsel and the Official Liquidator were quantified. Directions were given for stamp duty adjudication, filing with concerned authorities, and issuance of authenticated copies of the order.

This detailed analysis covers the key issues involved in the legal judgment, providing a comprehensive understanding of the judgment's content and implications.

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