2016 (12) TMI 125 - HC - Companies Law

Scheme of Arrangement in the nature of amalgamation - Held that - The observations made by the Regional Director and the Official Liquidator stand substantially addressed and hence, there does not appear to be any impediment to the grant of sanction to the Scheme of Amalgamation, inasmuch as from the material on record and on a perusal of the Scheme, the Scheme appears to be fair and reasonable and is not violative of any provisions of law. Nor is it contrary to public policy. As noticed earlier, none has come forward to oppose the Scheme. All requisite statutory compliances have also been substantially fulfilled. This court is, therefore, satisfied that the Scheme of Arrangement in the nature of Amalgamation amongst the Petitioner companies deserves to be granted. The Scheme of Amalgamation is hereby sanctioned. The same shall be binding upon all the Equity Shareholders, Secured Creditors, Unsecured Creditors of the petitioner Companies and all other agencies, departments and authorities of the Central, State and any other local authorities. It is ordered that as required under section 396A of the Companies Act, 1956, the Transferor Company shall not dispose of, or destroy, their books of accounts and other connected papers without the prior consent of the Central Government and shall preserve the same.

Summary

Issues:
Scheme of Arrangement for amalgamation under Sections 391 and 394 of the Companies Act, 1956.

Analysis:
1. Background and Parties: The petition involves a Scheme of Arrangement for amalgamation between two companies, one being the Transferee Company and the other the Transferor Company. Both companies are engaged in distinct business activities, with the Transferor Company being a 100% subsidiary of the Transferee Company.

2. Meetings and Approvals: The Transferor Company sought dispensation of shareholder meetings due to received consent, while the Transferee Company requested directions for convening equity shareholder meetings. Both requests were granted, and subsequent meetings were conducted and reported.

3. Compliance with Accounting Standards: The Regional Director raised concerns regarding compliance with Accounting Standard 14 in the Scheme. The Court found that the Scheme's Clause 8.4 aligns with the standard, directing the Transferee Company to maintain accounts as per Accounting Standard 14 with necessary disclosures.

4. SEBI Registration: The Regional Director noted the Transferee Company being referred to as an Asset Management Company, potentially requiring SEBI registration. However, clarification from SEBI confirmed no registration was necessary for the proposed amalgamation, addressing the concern.

5. Income Tax Compliance: No response was received from the Income Tax Department within the stipulated period, implying no objection to the Scheme. The Court directed compliance with Income Tax Act and Rules by the Petitioner Companies.

6. Observations and Approvals: The Regional Director found no complaints against the companies and stated the proposed amalgamation was not prejudicial to shareholders or the public. The Official Liquidator emphasized retaining Transferor Company employees under favorable terms, which the Transferee Company agreed to.

7. Sanction of Amalgamation Scheme: After addressing all observations and ensuring compliance, the Court sanctioned the Scheme of Amalgamation, binding all stakeholders and authorities. Directions were issued for preservation of records, payment of charges, and filing of necessary documents with the Registrar of Companies.

8. Final Orders: The Court dispensed with the filing and issuance of the drawn-up order, allowing authorities to act on the authenticated copy of the order. The petitions were allowed, and necessary steps were directed to be taken by the Petitioner Companies for implementation of the sanctioned Scheme.