2016 (7) TMI 279 - HC - Companies Law

Scheme of Arrangement in the nature of amalgamation sanctioned - There does not appear to be any impediment to the grant of sanction to the Scheme of Amalgamation, inasmuch as from the material on record and on a perusal of the Scheme, the Scheme appears to be fair and reasonable and is not violative of any provisions of law, nor is it contrary to public policy. As noticed earlier, none has come forward to oppose the Scheme. All requisite statutory compliances have also been substantially fulfilled.

Issues:
1. Scheme of Arrangement for amalgamation under Sections 391 and 394 of the Companies Act, 1956.
2. Compliance with Accounting Standard 14.
3. Change of name of the Transferee Company.
4. Compliance with provisions of the Income Tax Act and Rules.
5. Observations by the Regional Director and Official Liquidator.
6. Sanction of the Scheme of Amalgamation.

Analysis:

Issue 1: Scheme of Arrangement for Amalgamation
The Petitioner Companies presented a Scheme of Arrangement for amalgamation between two companies, with details about their share capital and business activities. Both companies were incorporated under the Companies Act, 1956. Meetings of shareholders and creditors were dispensed with after due consents were received. Substantive petitions were filed for the court's consideration and sanction of the Scheme, which was duly advertised, and no objections were raised by any party. The Regional Director and Official Liquidator did not raise any objections, and the court found the Scheme fair, reasonable, and compliant with statutory requirements. The Scheme was sanctioned, binding on all stakeholders, and the companies were directed to comply with necessary formalities.

Issue 2: Compliance with Accounting Standard 14
The Regional Director raised concerns regarding compliance with Accounting Standard 14 in the Scheme. The court examined the relevant clause and additional affidavit, concluding that the clause was in accordance with the standard. However, it directed the Transferee Company to maintain accounting standards as per Accounting Standard 14, with necessary disclosures in financial statements as per the Companies Act, 2013.

Issue 3: Change of Name of the Transferee Company
The Regional Director noted a provision in the Scheme for changing the name of the Transferee Company post-amalgamation. The court directed compliance with relevant provisions of the Companies Act for name alteration and payment of fees and stamp duty. The Petitioner Companies undertook to fulfill these requirements.

Issue 4: Compliance with Income Tax Act and Rules
No response was received from the Income Tax department within the stipulated time. The court presumed no objection from the department but directed the Petitioner Company to comply with applicable provisions of the Income Tax Act and Rules.

Issue 5: Observations by the Regional Director and Official Liquidator
The Regional Director and Official Liquidator provided observations stating no prejudice to stakeholders' interests and no objection to the Scheme, respectively. The court found these observations addressed and concluded that there were no impediments to granting sanction to the Scheme.

Issue 6: Sanction of the Scheme of Amalgamation
After addressing all observations and ensuring compliance with legal requirements, the court granted sanction to the Scheme of Amalgamation. It declared the Scheme binding on all stakeholders and directed necessary actions for implementation, including preservation of records, payment of charges, and filing of documents with relevant authorities.

This detailed analysis covers the key issues involved in the legal judgment regarding the Scheme of Arrangement for amalgamation under the Companies Act, 1956, and the court's decision to sanction the Scheme after addressing all relevant concerns and ensuring compliance with legal standards.

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