2016 (11) TMI 1260 - HC - Companies Law

Scheme of Amalgamation - Held that - Taking into account the contentions raised in the affidavits and counter affidavits and the undertakings given vide the additional affidavit dated 20th October, 2016, and the submissions advanced, the observations made by the Regional Director, Ministry of Corporate Affairs, no longer survive. It appears from the material on record that the Scheme of amalgamation would be in the interest of its shareholders and creditors as well as in the public interest, therefore the same deserves to be sanctioned and is hereby, sanctioned.

Summary

Issues involved:
Petition for sanction of Scheme of Amalgamation under Sections 391 to 394 of Companies Act, 1956; Compliance with SEBI regulations for listed company; Dispensation of separate proceedings for Equity Shareholders and Unsecured Creditors; Treatment of reserves and goodwill as per Accounting Standards; Approval from Income Tax Department; No objections from Registrar of Companies; Sanction of Scheme in the interest of shareholders, creditors, and public interest.

Detailed Analysis:

1. Scheme of Amalgamation: The petition was filed for obtaining the Court's sanction for the Scheme of Amalgamation between a Transferor Company and a Transferee Company under Sections 391 to 394 of the Companies Act, 1956. The purpose was to achieve synergic benefits, rapid growth, expansion, and administrative efficiency, resulting in reduced operational costs. The benefits of the proposed Scheme were detailed in the petitions.

2. Compliance with SEBI Regulations: The Transferee Company, being a listed entity, obtained approval from stock exchanges as per Regulation 37 of SEBI (LODR) Regulations, 2015. The company also ensured compliance with SEBI circulars for obtaining necessary approvals through stock exchanges. The Court considered the positive net worth of the Transferee Company and the absence of prejudicial effects on creditors.

3. Dispensation of Separate Proceedings: The separate proceedings for Equity Shareholders and Unsecured Creditors of the Transferor Company were dispensed with due to written consent letters from all parties approving the proposed scheme. The rights and interests of existing shareholders of the Transferee Company were safeguarded as no shares were proposed to be issued for the transfer.

4. Treatment of Reserves and Goodwill: The issue of treatment of reserves and goodwill as per Accounting Standards was addressed, emphasizing the company's entitlement to prescribe specific treatments in the Scheme itself. The company agreed to make necessary disclosures in financial statements if there was any deviation from the standard practice, ensuring transparency.

5. Approval from Income Tax Department: The Income Tax Department was invited to raise objections, if any, but no response was received within the statutory period. The company committed to comply with applicable provisions of the Income Tax Act and Rules, eliminating the need for further directions.

6. No Objections from Registrar of Companies: No complaints were received by the Registrar of Companies, confirming that the Scheme was not prejudicial to the interests of shareholders. The observations made by the Regional Director of the Ministry of Corporate Affairs were addressed, and the Scheme was found to be in the interest of shareholders, creditors, and public interest.

7. Sanction of Scheme: Considering all submissions, undertakings, and compliance with regulatory requirements, the Court sanctioned the Scheme of amalgamation, deeming it beneficial for shareholders, creditors, and public interest. The prayers in the Company Petition were granted, and costs were allocated to the Central Government Standing Counsel and the Office of the Official Liquidator. The company was directed to lodge necessary documents and file copies of the order with relevant authorities within specified timelines.