2016 (10) TMI 465 - HC - Companies Law

Scheme of Arrangement in the nature of Amalgamation - Held that - This Court is of the view that the observations made by the Regional Director, Ministry of Corporate Affairs, do not survive. No directions are required to be issued to the Petitioner Companies. This Court is of the view that based on the material on record it can be concluded that the present Scheme of Arrangement in the nature of Amalgamation is in the interest of the Shareholders and Creditors of both the 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. INI Design Studio Private Limited as envisaged under Clauses 5 and 7 of the Scheme is specifically granted. Prayers in terms of Paragraph No. 15(a) of the Company Petition No. 378 of 2016 for the Transferor Company viz. INI Design Services 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. 379 of 2016 for the Transferee Company viz. INI Design Studio Limited are hereby granted.

Issues Involved:
1. Sanction of Scheme of Arrangement in the nature of Amalgamation.
2. Restructure of Capital of the Transferee Company.
3. Compliance with statutory requirements and observations from the Regional Director.
4. Preservation of books and records by the Transferor Company.
5. Compliance with Income Tax regulations.
6. No objections from shareholders, creditors, and public interest.

Detailed Analysis:

1. Sanction of Scheme of Arrangement in the nature of Amalgamation:
The petitions were filed by two companies for the sanction of a Scheme of Arrangement in the nature of Amalgamation between INI Design Services Private Limited (Transferor Company) and INI Design Studio Private Limited (Transferee Company) under Sections 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956. The rationale for the amalgamation was to achieve synergic advantages, streamline the organization structure, and realize commercial synergies, leading to overall improvement in profits and operational efficiencies.

2. Restructure of Capital of the Transferee Company:
The scheme included the restructure of Equity Share Capital of the Transferee Company, consequential to the cancellation of shares held by the Transferor Company. The reduction did not involve diminution of liability or payment to any shareholder. The approval by Equity Shareholders of the Transferee Company was treated as a Special Resolution under Section 100 of the Companies Act, 1956.

3. Compliance with statutory requirements and observations from the Regional Director:
The Regional Director, Ministry of Corporate Affairs, raised several observations:
- Master Data Update: The Transferee Company updated its master data on the MCA website.
- FEMA Approval: The purchase of shares by the Transferor Company from a Foreign Company was under the automatic route, requiring no prior RBI approval, confirmed by ICICI Bank Limited.
- Income Tax Department: No objections were received from the Income Tax Department within the statutory period.
- No Complaints: There were no complaints against the Petitioner Companies or the Scheme of Amalgamation.
- Public Interest: The scheme was not prejudicial to the interest of shareholders or the public.

4. Preservation of books and records by the Transferor Company:
The Official Liquidator requested the Transferor Company to preserve its books of accounts, papers, and records and not to dispose of them without prior permission from the Central Government as per Section 396(a) of the Companies Act, 1956. The Transferor Company assured compliance with all applicable laws and statutory liabilities.

5. Compliance with Income Tax regulations:
A letter was sent to the Chief Commissioner of Income Tax inviting comments on the scheme. Since no objections were received within the statutory period, it was presumed that the Income Tax Department had no objections. The Petitioner Companies agreed to comply with the applicable provisions of the Income Tax Act, 1961, and Income Tax Rules, 1962.

6. No objections from shareholders, creditors, and public interest:
The scheme was advertised in newspapers, and no objections were received. The Official Liquidator and the Regional Director confirmed that the scheme was not prejudicial to the interest of shareholders or the public.

Conclusion:
Considering all facts, affidavits, and submissions, the Court concluded that the Scheme of Arrangement in the nature of Amalgamation was in the interest of shareholders, creditors, and the public. The scheme was sanctioned, including the reduction of share capital as envisaged. Costs were quantified for the Central Government Standing Counsel and the Office of the Official Liquidator. The Petitioner Companies were directed to comply with procedural requirements, including lodging copies of the order and scheme with relevant authorities and filing electronically with the Registrar of Companies.

The petitions were disposed of accordingly, and all concerned authorities were directed to act on the authenticated copy of the order along with the scheme.

← Previous Next →