2017 (7) TMI 221 - Tri - Companies Law

Approval of the scheme of arrangement by way of amalgamation - Held that - Since the provisions relating to compromises, arrangements and amalgamation as contemplated under Sections 230-232 had been notified w.e.f. 15.12.2016 wherein the power to consider such schemes have now been vested with the National Company Law Tribunal, the Company Petitions herein have also been transferred from Hon ble High Court of Delhi due to Notification of the provisions of Sections 230 to 232 of the Companies Act, 2013 on and from 15.12.2016, we grant two weeks time from the date of this order for the Petitioners to comply in terms of proviso to sub-section (7) of Section 230/ proviso to sub-section (3) of Section 232 failing which the Petition shall stand rejected.

Issues Involved:
1. Approval of the scheme of arrangement and amalgamation.
2. Compliance with statutory formalities and orders.
3. Disputed tax liabilities.
4. Observations by the Regional Director regarding compliance with the Companies Act and Accounting Standards.

Detailed Analysis:

1. Approval of the scheme of arrangement and amalgamation:
The petition sought approval for the amalgamation of Transferor Company I and II with the Transferee Company, and the transfer of the Demerged Undertaking of Transferor Company III into the Transferee Company. The Hon'ble High Court of Delhi had dispensed with the meetings of equity shareholders and secured creditors, and directed meetings for unsecured creditors. The scheme was approved by the shareholders and creditors, with an amendment to the Appointed Date.

2. Compliance with statutory formalities and orders:
The petitioners filed joint petitions for sanction of the Scheme of Amalgamation under the erstwhile provisions. The Hon'ble High Court of Delhi transferred the records to the National Company Law Tribunal (NCLT) for consideration. The petitioners complied with the High Court's orders regarding publication in newspapers and notices to relevant authorities. An affidavit confirmed no objections from third parties or the public.

3. Disputed tax liabilities:
The Official Liquidator reported no complaints against the proposed scheme but mentioned disputed tax liabilities of the Transferee Company. The petitioners clarified that they had paid part of the demand and filed appeals for the remaining disputed liability. The Transferee Company had sufficient reserves to cover the liability, so the objections were not seriously considered.

4. Observations by the Regional Director regarding compliance with the Companies Act and Accounting Standards:
The Regional Director made three observations:
- Non-compliance with the appointment of a Chief Financial Officer (CFO) in the Demerged Company. The petitioners argued that Section 203 was not applicable as the Demerged Company was a private limited company, and this observation was dismissed.
- Non-filing of annual returns and balance sheets for the financial year 2015-16. The petitioners provided evidence of compliance, and the observation was closed, although statutory authorities could initiate prosecution for delays.
- Non-compliance with Accounting Standards (AS)-13 for 'Accounting for Investments.' The Demerged Company had not recognized a decline in the value of its investment in BBM Heavy Machinery Private Limited. The petitioners explained that the investment was not part of the Demerged Undertaking and would remain with the Demerged Company. They undertook to comply with applicable provisions. However, the Tribunal emphasized the need for a certificate from the Company's Auditor confirming compliance with Accounting Standards, as mandated by the Companies Act, 2013.

Conclusion:
The Tribunal granted two weeks for the petitioners to provide the required auditor's certificate, failing which the petition would be rejected. The judgment underscores the importance of compliance with statutory requirements and the role of the Company's Auditor in certifying adherence to Accounting Standards.

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