2016 (7) TMI 977 - HC - Companies Law

Scheme of Arrangement in the nature of Amalgamation is in the interest of the Shareholders and Creditors of all the three companies as well as in the public interest, therefore, the same deserves to be sanctioned and the same is hereby sanctioned. The Reduction of Issued, Subscribed and Paid up share capital of the Transferee Company viz. Kalthia Engineering and Construction Limited as envisaged under Clause 15 of the Scheme is specifically granted. Prayers in terms of Paragraph No. 15(a) of the Company Petition Nos. 145 and 146 of 2016 for the Transferor Companies viz. Kalthia Investment Private Limited and R. L. Kalthia Engineering and Automobiles Private Limited and prayers made in terms of Paragraph Nos. 17(a) and 17(b) as well as the Minutes under Section 103(1) of the Companies Act, 1956 in terms of Paragraph 14 of the Company Petition No. 147 of 2016 for the Transferee Company viz. Kalthia Engineering and Construction Limited are hereby granted. The petitions are disposed off accordingly.

Summary

Issues Involved:
1. Scheme of Arrangement and Amalgamation
2. Dispensation of Meetings for Shareholders and Creditors
3. Restructure of Equity Share Capital
4. Observations by Official Liquidator
5. Observations by Regional Director, Ministry of Corporate Affairs
6. Compliance with Income Tax Department
7. Sanction of Scheme and Reduction of Share Capital
8. Costs and Directions for Filing and Compliance

Detailed Analysis:

1. Scheme of Arrangement and Amalgamation:
The petitions filed by three companies sought court sanction for a Scheme of Arrangement in the nature of Amalgamation between Kalthia Investment Private Limited and R. L. Kalthia Engineering And Automobiles Private Limited (Transferor Companies) and Kalthia Engineering And Construction Limited (Transferee Company) under Sections 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956. The objective was to achieve synergic advantages, streamline the group corporate structure, and realize operational synergies.

2. Dispensation of Meetings for Shareholders and Creditors:
The court dispensed with the meetings of Equity Shareholders and creditors for the Transferor and Transferee Companies based on written consent letters and Chartered Accountant confirmations. Specifically, orders dated 11th April 2016 in Company Applications No. 141, 146, and 147 of 2016 facilitated this dispensation.

3. Restructure of Equity Share Capital:
Clause 15 of the Scheme proposed the restructure of Equity Share Capital of the Transferee Company, consequential to the cancellation of shares held by the Transferor Companies and vice versa. The reduction of Equity Share Capital did not involve diminution of liability or payment to shareholders, and the approval by Equity Shareholders was treated as a Special Resolution under Section 100 of the Companies Act, 1956.

4. Observations by Official Liquidator:
The Official Liquidator's report noted the Scheme should apply to "all employees" instead of "all permanent employees." The court accepted the Transferor Companies' counsel's explanation that non-permanent employees are covered under contractual obligations, and such contracts would bind the Transferee Company. The Official Liquidator confirmed that the affairs of the Transferor Companies were not conducted prejudicially, allowing their dissolution without winding up. The Transferee Company was directed to preserve books and records as per Section 396(A) of the Companies Act, 1956.

5. Observations by Regional Director, Ministry of Corporate Affairs:
The Regional Director's affidavit dated 7th July 2016 included factual observations and highlighted the need for Income Tax Department comments. The court noted the absence of complaints against the petitioner companies or the Scheme of Amalgamation.

6. Compliance with Income Tax Department:
The Income Tax Department identified a recoverable amount of ?9,67,661 from the Second Transferor Company. The petitioner companies responded that this demand was under rectification. The Transferee Company agreed to assume any statutory dues, including Income Tax liabilities, as per Clause 7 of the Scheme.

7. Sanction of Scheme and Reduction of Share Capital:
The court concluded that the Scheme of Arrangement in the nature of Amalgamation was in the interest of shareholders, creditors, and public interest, thus deserving sanction. The Reduction of Issued, Subscribed, and Paid-up share capital of the Transferee Company was specifically granted.

8. Costs and Directions for Filing and Compliance:
Costs were quantified at ?7,500 for each Transferor and Transferee Company, payable to the Central Government Standing Counsel and the Office of the Official Liquidator. The petitioner companies were directed to lodge a copy of the order and the Scheme with the concerned Superintendent of Stamps within 60 days and file copies with the Registrar of Companies electronically and physically.

The petitions were disposed of accordingly, with all concerned authorities directed to act on the authenticated copy of the order and Scheme issued by the Registrar, High Court of Gujarat.