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2016 (12) TMI 254 - HC - Companies LawScheme of Arrangement in the nature of amalgamation - Held that - Petitioners complied with the order of publication and service. The affidavit for publication and service of notices came to be filed. The notices of the petitions came to be served on the Regional Director on 18th August, 2016 and the Official Liquidator on 17th August, 2016. Notices of the petitions came to be published in the English Daily newspaper, Business Standard and the Gujarati Daily newspaper, Jai Hind , both Ahmedabad Editions on 06.08.2016. The affidavit of compliance dated 10.10.2016, came to be filed. Upon service of notice, the Regional Director filed a common affidavit dated 25.10.2016. The Official Liquidator filed separate reports dated 16.11.2016, in the petitions of the Transferor companies. In respect of the compliance of Accounting Standard 14, as observed in the affidavit of Regional Director at paragraph 2(d), the petitioner of Transferee Company has filed an affidavit dated 24.11.2016, undertaking to comply with the Accounting Standard 14 and has submitted that, the excess of assets over liabilities, if any, shall be credited to the Amalgamation Reserve Account being of Capital Reserve nature and the shortfall, if any, shall be debited to the Goodwill Account. It is also undertaken that, the reserve so created, if any, shall not be available for distribution of dividend and the petitioner will comply with the Accounting Standard 14. Further the petitioners also undertake to comply with the Income Tax Act and Rules. Also as in the same affidavit at paragraph 2 clarified that, there are no Secured and Unsecured Creditors in the respective companies and the Petitioners have produced the certificates of the Chartered Accountant with the respective applications and upon considering the averments and submissions, the order came to be passed, dispensing with the meeting of the Equity Shareholders. There is no requirement for convening and holding the meetings of the Creditors, as there are none. There are neither Secured nor Unsecured Creditors in either of the companies and hence, there is no requirement of either obtaining consent letters or convening the meetings. The petitioners also undertake to maintain the books, accounts, registers and shall comply with the law and shall not dispose of the books and accounts without the prior approval of the Central Government. 8. Considering the explanation in the affidavit, there is no requirement for convening and holding of the meetings of the Secured and Unsecured Creditors or obtaining consent letters, as there are no creditors in either of the Companies. It is, however, directed that, the petitioner company shall preserve its books of accounts, papers and records and not dispose of the records without the prior permission of the Central Government, as per the provisions of Section 396(A) of the Companies Act, 1956 and shall not be absolved from any statutory liability. Considering the above, it is ordered that, the Scheme at Exhibit C to the petitions, is hereby sanctioned and the prayers made in the Company Petitions are granted.
Issues:
1. Sanctioning of the Scheme of Arrangement for amalgamation of multiple companies. 2. Dispensation of Equity Shareholders meeting and compliance with statutory provisions. 3. Compliance with Accounting Standard 14 and Income Tax Act. 4. Observations by Regional Director and Official Liquidator. 5. Preservation of books, accounts, and records. 6. Payment of professional charges and fees. Analysis: 1. The petitions involved seeking sanction for the Scheme of Arrangement, specifically the amalgamation of several companies. The Transferor Companies filed Company Petition Nos. 319-321 of 2016, while the Transferee Company filed Company Petition No. 322 of 2016 for this purpose. 2. Dispensation of Equity Shareholders meeting was granted after obtaining consent letters from all shareholders, as required under Section 391(1) of the Companies Act, 1956. The meeting was dispensed with through separate orders dated 21.7.2016, and the petitions sought sanction for the Scheme of Arrangement. 3. Compliance with Accounting Standard 14 and the Income Tax Act was crucial. The Transferee Company undertook to comply with Accounting Standard 14, ensuring any excess assets over liabilities were credited to the Amalgamation Reserve Account and shortfall debited to the Goodwill Account. They also committed to follow the Income Tax Act and Rules. 4. The Regional Director and Official Liquidator raised observations, including compliance with Accounting Standard 14 and providing copies of High Court orders directing the dispensation of meetings for Secured and Unsecured Creditors. The company clarified there were no such creditors, and undertook to maintain books, accounts, and registers as required by law. 5. The petitioners were directed to preserve books of accounts and records, not disposing of them without prior approval of the Central Government. This was in accordance with Section 396(A) of the Companies Act, 1956, to ensure statutory liabilities were not absolved. 6. The Scheme at Exhibit "C" was sanctioned, and the prayers in the Company Petitions were granted. Professional charges were directed to be paid to the Assistant Solicitor General and fees to the Official Liquidator. Filing and issuance of drawn-up orders were dispensed with, with authorities instructed to act on authenticated copies of the order along with the Scheme and schedule of assets. This detailed analysis covers the key issues and outcomes of the judgment delivered by the Gujarat High Court.
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