2019 (9) TMI 533 - Tri - Companies Law

Requirement to hold shareholders' meeting and creditors' meeting for approval of the proposed Scheme of merger - Scheme of Merger by absorption of Amanora Future Towers Private Limited with City Corporation Limited and their respective shareholders under Sections 230 to 232 of the Companies Act, 2013 - applicant/Transferee Company submits that since no reconstruction or arrangement is happening with its shareholders or creditors, there is no requirement to hold shareholders' meeting and creditors' meeting for approval of the proposed Scheme. HELD THAT - The Applicant Company 1 is directed to serve notices along with copy of scheme upon - (i) concerned Income Tax Authority with in whose jurisdiction the Applicant Company 1's assessments are made (PAN No.-AAKCA3074H Assistant Commissioner of Income Tax Circle 1(1) Income Tax Office, Pmt Building. Shankarseth Road, Pune- 411 037, (ii) the Central Government through the office of Regional Director, Western region, Mumbai, (iii) Registrar of Companies with a direction that they may submit their representations, if any, within a period of thirty days from the date of receipt of such notice to the Tribunal with copy of such representations shall simultaneously be served upon the Applicant Company 1, failing which, it shall be presumed that the authorities have no representations to make on the proposals. The Applicant Company 1 is also directed to serve notice upon Official Liquidator, pursuant to section 230(5) of the Companies Act, 2013 and as per Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Tribunal is appointing M/s. Gondalia Mandviwala, Chartered Accountant, to assist the Official Liquidator to scrutinize the books of accounts of the said Transferor Company for the last 5 years and submit its representation / report to the Tribunal. The aforesaid Company to pay fees of ₹ 1,50,000/- plus applicable taxes, if any for this purpose. Application disposed off.

Issues involved:
1. Scheme of Merger by absorption of two companies under Sections 230 to 232 of the Companies Act, 2013.
2. Necessity and justification of the merger.
3. Dispensing with the meeting of Equity Shareholders.
4. Approval and compliance with legal procedures for the merger.
5. Impact on shareholders and creditors of the companies involved.
6. Service of notices to regulatory authorities and compliance with legal requirements.

Analysis:

1. Scheme of Merger by absorption: The judgment discusses the proposed Scheme of Merger by absorption of a subsidiary company with its holding company under Sections 230 to 232 of the Companies Act, 2013. It highlights the approval process by the Board of Directors of both companies and the appointed date for the merger.

2. Necessity and justification of the merger: The judgment outlines the reasons necessitating the merger, including maintaining a simple corporate structure, optimizing resource utilization, reducing overheads, achieving economies of scale, and enhancing business operations. It emphasizes the benefits of the merger in terms of efficiency, cost reduction, and legal compliance.

3. Dispensing with the meeting of Equity Shareholders: The judgment allows for the dispensation of the meeting of Equity Shareholders of one of the companies based on the written consent affidavits procured from all shareholders, constituting 100% of the shareholding. This decision is supported by the compliance with legal requirements and the absence of objections from shareholders.

4. Approval and compliance with legal procedures: The judgment details the approval process by the Board of Directors of both companies, submission of necessary documents, and compliance with the Companies Act, 2013. It ensures that the proposed Scheme of Merger meets the legal requirements and is not prejudicial to the interests of shareholders or creditors.

5. Impact on shareholders and creditors: The judgment addresses the impact of the merger on the rights of shareholders and creditors of the companies involved. It emphasizes that the merger will not affect the rights of shareholders or creditors, as there is no dilution in shareholding or compromise with creditors' claims. The net worth of the companies post-merger remains positive.

6. Service of notices to regulatory authorities: The judgment directs the companies to serve notices to relevant regulatory authorities, including Income Tax Authorities, Central Government offices, Registrar of Companies, and Real Estate Regulatory Authority. It emphasizes the importance of compliance with legal procedures and submission of representations by the authorities within a specified timeframe.

Overall, the judgment ensures that the proposed Scheme of Merger complies with legal requirements, safeguards the interests of shareholders and creditors, and involves proper communication with regulatory authorities to facilitate a smooth merger process.

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