2016 (5) TMI 595 - HC - Companies Law

Scheme of Amalgamation - Held that - Perusal of the reports of the Official Liquidator and the Regional Director, the replies filed on behalf of the petitioner Transferee company and having considered the Scheme of Amalgamation together with the relevant documents on record, the Court considers it appropriate to grant sanction to the present Scheme of Amalgamation. In view of the above, the Scheme of Amalgamation is sanctioned. It is, however, directed that the Transferor Companies shall preserve their books of accounts, papers and record and shall not dispose of the records without the prior permission of the Central Government under Section 396 A of the Companies Act, 1956. The costs of all three petitions are determined at ₹ 7,500/each, payable to Shri Devang Vyas, Learned Assistant Solicitor General of India. The Transferor Companies are directed to pay an amount of ₹ 7,500/each to the office of the Official Liquidator.

Issues Involved:
1. Sanction of the Scheme of Amalgamation under Sections 391 to 394 of the Companies Act, 1956.
2. Dispensation of meetings of Equity Shareholders and Creditors.
3. Observations and objections raised by the Regional Director.
4. Compliance with Accounting Standards (AS15, AS18, AS22).
5. Preservation of books of accounts, papers, and records.
6. Costs and procedural compliance post-sanction.

Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The petitions were filed under Sections 391 to 394 of the Companies Act, 1956, seeking the sanction of the Scheme of Amalgamation between Amitech Chemicals Private Limited, Fine Hydrochem Private Limited, and Hema Dyechem Private Limited. The court considered the Scheme of Amalgamation and relevant documents on record and found it appropriate to grant sanction to the Scheme.

2. Dispensation of Meetings:
Hema Dyechem Private Limited, the Transferee Company, sought dispensation of the meeting of the Equity Shareholders and Creditors, which was granted by the court. Similarly, Fine Hydrochem Private Limited and Amitech Chemicals Private Limited, the Transferor Companies, sought dispensation of the meetings of Equity Shareholders and Unsecured Creditors, which was also granted by the court.

3. Observations and Objections by the Regional Director:
The Regional Director filed affidavits making several observations regarding typographical errors and other discrepancies. The petitioner companies responded to these observations, clarifying that the errors were either typographical or did not materially impact the financial statements. The court found that the observations made by the Regional Director were beyond the scope and ambit of the powers conferred under Section 394(1) of the Act and did not find any conduct prejudicial to the interest of the members or public interest.

4. Compliance with Accounting Standards:
The petitioner companies addressed the Regional Director's observations related to compliance with various Accounting Standards:
- AS15 (Employee Benefits): The companies clarified that AS15 has no application to Small Medium Companies (SMC) to the extent of recognition and measurement principles, and they have adopted the policy of accounting for gratuity on a "pay as you go" basis.
- AS18 (Related Party Disclosures): Necessary disclosures were made in the financial statements.
- AS22 (Accounting for Taxes on Income): Deferred tax assets were not recognized due to the lack of reasonable certainty of future taxable income.

5. Preservation of Books of Accounts, Papers, and Records:
The Official Liquidator requested that the Transferor Companies preserve their books of accounts, papers, and records and not dispose of them without prior permission from the Central Government under Section 396A of the Companies Act, 1956. The court directed compliance with this request.

6. Costs and Procedural Compliance Post-Sanction:
The court determined the costs of the petitions at ?7,500 each, payable to the Assistant Solicitor General of India and the Official Liquidator. The petitioner companies were directed to lodge a copy of the order, the schedule of immovable assets, and the Scheme with the Superintendent of Stamps within 60 days for the adjudication of stamp duty. Additionally, the petitioners were directed to file a copy of the order along with the Scheme with the Registrar of Companies electronically and physically as per the relevant provisions of the Act.

Conclusion:
The Scheme of Amalgamation was sanctioned by the court, subject to the conditions mentioned, including the preservation of records and compliance with procedural requirements. The petitions were disposed of accordingly.

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