2016 (5) TMI 664 - HC - Companies Law

Sanction of the Scheme of Amalgamation - Held that - On the consideration of all the relevant facts and the procedural requirements contemplated under Sections 391 & 394 of the Act and the relevant Rules and on due consideration of the report of the Regional Director Northern, Ministry of Corporate Affairs, New Delhi and Official Liquidator, the Scheme of Amalgamation is hereby sanctioned and as a result thereof, the assets and liabilities of the Transferor Company shall stand vested in the Transferee Company and the Transferor Company shall be dissolved without being wound up. The Transferee Company shall comply with the procedural requirement as per the Accounting Standard 14 related to the pooling of interests method as prescribed under Section 211(3C) of the Companies Act, 1956 and under Section 133 of the Companies Act, 2013 as stated in Clause 10 of the Scheme of Amalgamation and shall also abide by the result of the pending litigation for the Assessment Year 2010-11 and the transfer pricing matter in case it is decided against the company.

Summary

Issues:
1. Sanction of Scheme of Amalgamation under Sections 391 & 394 of the Companies Act, 1956.
2. Compliance with Accounting Standard 14 and related provisions.
3. Tax assessment proceedings and pending litigations.
4. Dissolution of Transferor Company and vesting of assets in Transferee Company.
5. Binding nature of the Scheme on shareholders, creditors, and concerned parties.

Analysis:
1. The petition sought sanction of the Scheme of Amalgamation under Sections 391 & 394 of the Companies Act, 1956. The Board of Directors of both the Transferor and Transferee Companies had approved the Scheme in their respective meetings. The Court noted compliance with procedural requirements and reports from the Regional Director and Official Liquidator. The Scheme was sanctioned, leading to the dissolution of the Transferor Company and vesting of its assets in the Transferee Company.

2. An objection was raised regarding compliance with Accounting Standard 14. The Regional Director highlighted the need for adherence to the pooling of interests method and submission of a Chartered Accountant certificate. The Director of the Transferor Company clarified that the necessary filings had been made, and compliance with Accounting Standard 14 was undertaken as per the Scheme. The Court directed the Transferee Company to comply with the Accounting Standard and abide by pending litigations.

3. The Official Liquidator's report mentioned ongoing tax assessment proceedings and a transfer pricing matter under litigation. The Scheme outlined the continuation and enforcement of such proceedings by the Transferee Company post the Effective Date. The Court considered these aspects and directed the Transferee Company to abide by the outcome of the pending litigations.

4. The judgment emphasized the dissolution of the Transferor Company without winding up, with its assets and liabilities vesting in the Transferee Company. The Transferee Company was instructed to fulfill procedural requirements and comply with Accounting Standard 14. The Bombay High Court's prior sanction of the Scheme was also noted.

5. The Scheme was deemed binding on the Transferor and Transferee Companies, their shareholders, creditors, and all concerned parties. Formal orders of sanction were to be drawn, filed with the Registrar of Companies, and published in specified newspapers and gazettes. Interested parties were granted liberty to seek directions from the Court. Additionally, the Transferor Company agreed to deposit a sum in the Common Pool Fund Account of the Official Liquidator, which was accepted by the Court.