2016 (12) TMI 628 - HC - Companies Law

Scheme of Amalgamation - Held that - Scheme appears to be fair and reasonable and does not appear to be violative of any provisions of law or contrary to public policy. Since all the requisite statutory compliances have been fulfilled, scheme is hereby allowed.

Summary

Issues:
- Scheme of Amalgamation under Sections 391 to 394 of the Companies Act, 1956
- Compliance with statutory requirements and directions of the Court
- Observations and concerns raised by the Regional Director
- Report of the Official Liquidator
- Fairness and legality of the Scheme

Analysis:
1. Scheme of Amalgamation: The Court heard the counsel for the parties and noted that no objector opposed the Scheme of Amalgamation involving three companies. The Scheme sought the amalgamation of two transferor companies with a transferee company, enabling more efficient business operations, economies of scale, and financial strength. The Board of Directors of the companies approved the Scheme, which was compliant with the Companies Act, 1956.

2. Compliance with Statutory Requirements: The Petitioner Companies confirmed compliance with all directions and filed necessary affidavits of compliance. They undertook to fulfill all statutory requirements under the applicable laws. The Regional Director also expressed satisfaction with the undertakings given by the Petitioners, ensuring adherence to legal provisions.

3. Observations by the Regional Director: The Regional Director raised concerns regarding tax issues, employees of transferor companies, foreign shareholders, and share exchange ratios. The Petitioner Companies clarified these observations, assuring that tax matters would be handled according to the law, the transferor companies had no employees, compliance with RBI Act and FEMA, and shareholder consent was obtained for the share exchange ratio.

4. Report of the Official Liquidator: The Official Liquidator reported that the affairs of the transferor companies were conducted properly, recommending their dissolution without winding up. This report supported the conclusion that the Scheme was fair, reasonable, and in compliance with legal requirements, ensuring the protection of shareholders' rights.

5. Fairness and Legality of the Scheme: After thorough review and finding no violations of the law or public policy, the Court made the Company Scheme Petitions absolute, directing the Petitioner Companies to fulfill certain post-approval obligations. The Petitioners were also directed to pay costs to the Regional Director and the Official Liquidator, with regulatory authorities instructed to act upon the order.

In conclusion, the judgment approved the Scheme of Amalgamation, emphasizing compliance with statutory provisions, addressing concerns raised by regulatory authorities, and ensuring the fairness and legality of the transaction. The detailed analysis covered various aspects of the case, highlighting the Court's satisfaction with the proposed Scheme and the parties' adherence to legal requirements.