2016 (11) TMI 1073 - HC - Companies Law

Scheme of Amalgamation - Held that - The reports confirm that the affairs of the Transferor Companies are not conducted in a manner prejudicial to the interest of their members or to the public interest. Besides, the Official Liquidator has requested this Court to direct the petitioner Transferor Companies to preserve their books of accounts, papers and records and not to dispose of the records without the prior permission of Central Government under Section 396A of the Companies Act, 1956. The Official Liquidator has also sought directions for making due compliance of the statutory liabilities. Scheme is hereby sanctioned. It is, however, directed that the petitioner Transferor Companies shall preserve their books of accounts, papers and record and shall not dispose of the records without the prior permission of the Central Government under Section 396A of the Companies Act, 1956. It is further observed that the sanction of this Scheme shall not absolve the Transferor Companies from any statutory liability, if any.

Issues:
1. Sanction of Scheme of Amalgamation under Sections 391 to 394 of the Companies Act, 1956.
2. Dispensation of meetings of Equity Shareholders for Transferor and Transferee Companies.
3. Response to observations made by Regional Director regarding compliance with the Income Tax Act and Rules.
4. Reports from the Official Liquidator regarding the affairs of Transferor Companies.

Analysis:
1. The petitions sought the High Court's sanction for the Scheme of Amalgamation involving multiple Transferor Companies with a Transferee Company under Sections 391 to 394 of the Companies Act, 1956. The Court admitted the petitions and directed notices to be issued to the Regional Director and Official Liquidator for further proceedings.

2. Various Transferor Companies filed applications seeking dispensation of Equity Shareholders' meetings as there were no Secured or Unsecured Creditors reported. The Court ordered dispensation of these meetings for all Transferor Companies based on individual applications.

3. In response to observations by the Regional Director, the Transferee Company provided explanations through affidavits addressing concerns related to share exchange ratios, transactions with a bank, and compliance with the Income Tax Act and Rules. The Court found the explanations satisfactory and deemed the observations unsustainable.

4. The Official Liquidator submitted reports confirming that the affairs of the Transferor Companies were not prejudicial to stakeholders' interests. The Court directed the Transferor Companies to preserve their records and comply with statutory liabilities without absolution post-sanction of the Amalgamation Scheme.

5. After considering arguments from advocates representing parties involved, reports from the Official Liquidator and Regional Director, and relevant documents, the High Court granted sanction to the Scheme of Amalgamation. The Court emphasized the preservation of records by Transferor Companies and the continuation of statutory liabilities post-sanction.

6. The Court determined costs for the petitions and directed the Transferor Companies to lodge necessary documents for stamp duty adjudication within a specified timeframe. Additionally, the petitioners were instructed to file copies of the order and Scheme with relevant authorities for compliance purposes.

7. The Court dispensed with the filing and issuance of a drawn-up order, allowing authorities to act on authenticated copies promptly. Finally, the petitions were disposed of accordingly, concluding the legal proceedings related to the Scheme of Amalgamation.

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