2016 (9) TMI 1050 - HC - Companies Law

Sanction of the scheme of amalgamation - Held that - The scope of the Company Court sitting over an application for sanctioning of amalgamation on an application under Sections 391 and 304 of the Act of 1956 is supervisory in nature and limited to ensure that in the process there is no violation of any statutory rule or prejudice to public interest. From the affidavit submitted by the Regional Director and the report of the Official Liquidator, on notice being sent to them on second motion under Sections 391 and 394 of the Act of 1956, it is quite apparent that no ground for denying the scheme of amalgamation is made out in the present case. The issue of Income Tax Clearance, to my mind, is a matter which does not directly flow from the language of Section 391 of the Act of 1956. Income Tax liability is a matter distinct from manner of carrying out of business. Income tax liability would hold as per law both for the period prior to the sanction of the scheme and thereafter. Even otherwise under the circular dated 15-1-2014, non response to the Regional Director s letter is required to be considered as a presumption that the Income Tax Department has no objection to the action of the merger/ demerger as the case may be under Sections 391-394 of the act of 1956. Having examined the scheme of amalgamation, this court find nothing prejudicial to the interest of creditors, members of both transferor companies and the transferee company or to public interest. All required procedures had been followed.

Summary

Issues:
Petition filed under Sections 391-394 of the Companies Act, 1956 seeking sanction of the scheme of amalgamation.

Analysis:
The petition was filed by multiple petitioner companies seeking approval for the scheme of amalgamation under Sections 391-394 of the Companies Act, 1956. The transferor companies, along with the transferee company, were involved in the scheme. Detailed information regarding the authorized share capital, equity shares, and balance sheets of each company was provided in the petition.

The meeting of shareholders and secured creditors of the petitioner companies was dispensed with, allowing the petition to proceed for the second motion seeking approval of the amalgamation scheme. Notice was duly issued to relevant authorities, including the Regional Director and the Official Liquidator, with no objections raised during the process. The Regional Director's affidavit and the Official Liquidator's report both concluded that the scheme did not prejudice the interests of stakeholders.

The Court's role in sanctioning amalgamation schemes under Sections 391 and 394 of the Act is supervisory, ensuring compliance with statutory rules and safeguarding public interest. The absence of objections from concerned parties, coupled with the compliance of transferor companies with Income Tax Act provisions, further supported the approval of the scheme. The Court found no prejudice to the interests of creditors, members, or public interest in the proposed amalgamation.

Consequently, the Court allowed the company petition, sanctioning the amalgamation scheme and declaring it binding on all relevant parties. The parties involved were given liberty to seek further directions if needed, and the Registrar was directed to issue the order as per the Companies (Court) Rules, 1959. The transferor companies were instructed to file a certified copy of the order with the Registrar of Companies within fourteen days, and the Official Liquidator was entitled to miscellaneous expenses from the transferor companies.

In conclusion, the Court approved the scheme of amalgamation, ensuring compliance with legal procedures and protecting the interests of stakeholders involved in the process.