2020 (9) TMI 14 - Tri - Companies Law

Sanction of amalgamation scheme - sections 230 to 232 of the Companies Act, 2013 - non-submission of chairman's report, admitted copy of the petition, and the minutes of order for admission of the petition - Change of name of the transferee company and change of registered office of the transferee company consequent upon sanction of the scheme of amalgamation - compliance with section 13 of the Companies Act, 2013 - HELD THAT - This is a scheme involving multiple jurisdictions such as the National Company Law Tribunals Benches at Chennai, Hyderabad, Bengaluru and Mumbai. Each Bench looks at the scheme as an integrated whole, rather that segregate it into parts with which the particular Bench is concerned. Therefore, the arguments of learned counsel for the petitioner/transferor company No. 2 that the accounting treatment prescribed in the scheme is a matter that the National Company Law Tribunal Bengaluru alone should be concerned with, is untenable. The scheme cannot be contrary to any law in force, and the accounting standards issued by the Institute of Chartered Accountants of India (ICAI) have the effect of law under section 133 of the Companies Act, 2013. We are also acutely conscious of the fact that ultimately, upon the scheme being sanctioned, it is the transferee-company alone that will be concerned with the accounting entries to be made, which is not within our jurisdiction. The transferee-company being within the jurisdiction of the National Company Law Tribunal, Bengaluru Bench, we do not wish to express any opinion in the matter. Change of name of the transferee company and change of registered office of the transferee company consequent upon sanction of the scheme of amalgamation - compliance with section 13 of the Companies Act, 2013 - HELD THAT - It is now settled law that the provisions to schemes of arrangement area complete code in themselves, and the separate procedures prescribed for change of name, change of registered office, reduction of capital, etc., under other provisions of the Companies Act are not required to be followed if they are effected as part of the scheme itself. It is also settled law that approval by the members to the scheme should be treated as approval also under other provisions of the Companies Act. Of course, there may be procedures required to be followed consistent with the requirements of the MCA-21 programme, so as to ensure that the changes are effected in the registry maintained by the Registrar of Companies. The petitioner/transferor company No. 2 has undertaken to abide by all procedural compliances required in this regard. This undertaking is recorded. From the materials on record, the scheme of amalgamation appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, application is made absolute in terms of prayer of the petition mentioned therein. The petitioner/transferor company No. 2 shall be dissolved without winding up, upon the scheme being finally sanctioned by the jurisdictional benches of the National Company Law Tribunal. The scheme is hereby sanctioned, and the appointed date of the scheme is fixed as April 1, 2017 - petitioner/transferor company No. 2 is directed to file a copy of this order along with a copy of the scheme with the concerned Registrar of Companies, electronically in e-Form INC-28, within 30 days from the date of receipt of order duly certified by the Deputy/Assistant Registrar, of this Tribunal.

Issues Involved:
1. Sanction of the Scheme of Amalgamation under Sections 230 to 232 of the Companies Act, 2013.
2. Compliance with statutory requirements and objections raised by the Regional Director.
3. Adherence to Accounting Standards (AS-14).
4. Compliance with Section 13 of the Companies Act, 2013 for changes in the registered office and name of the transferee company.
5. Tax liabilities and pending appeals.
6. Procedural compliances and filings with regulatory authorities.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The Tribunal was convened through video conferencing and heard the counsel for the petitioner-company and the representative of the Regional Director. The petition sought the Tribunal's sanction under Sections 230 to 232 of the Companies Act, 2013, for a scheme of amalgamation involving several Shriram Chits companies. The rationale for the scheme was to enable consolidation, efficient utilization of capital, better cash flow, and streamlined operations. The board of directors and equity shareholders of the petitioner/transferor company No. 2 approved the scheme unanimously.

2. Compliance with Statutory Requirements and Objections Raised by the Regional Director:
The Regional Director's report raised several objections, including the need for serving notices to concerned authorities, submission of documents, and compliance with accounting standards. The petitioner responded with clarifications and undertakings to comply with these requirements. The Tribunal noted that the petitioner had addressed the objections, including obtaining a No Objection Certificate (NOC) from the Registrar of Chits, Maharashtra.

3. Adherence to Accounting Standards (AS-14):
The Regional Director objected to the proposed accounting treatment of adjusting differences between assets and liabilities in the general reserve instead of the capital reserve. The petitioner argued that the treatment was in consonance with Ind AS-14 and cited judgments supporting deviations in accounting treatment. However, the Tribunal emphasized that post-amendment to AS-14 (March 30, 2016), the treatment prescribed in the scheme cannot override the provisions of AS-14. The Tribunal refrained from expressing an opinion on this matter, as it falls within the jurisdiction of the National Company Law Tribunal, Bengaluru Bench.

4. Compliance with Section 13 of the Companies Act, 2013:
The Regional Director raised concerns about compliance with Section 13 for changes in the registered office and name of the transferee company. The Tribunal acknowledged that schemes of arrangement are a complete code in themselves, and separate procedures under other provisions of the Companies Act are not required if they are part of the scheme. The petitioner undertook to comply with procedural requirements, which the Tribunal recorded.

5. Tax Liabilities and Pending Appeals:
The Income-tax authority demanded ?2.81 crores from the petitioner. The petitioner filed an appeal against this demand, which is pending. The scheme provides that all liabilities of the transferor companies will transfer to the transferee company, which will handle all legal proceedings, including the tax appeal. The Tribunal noted that the transferee company would have sufficient net worth to cover the tax liability.

6. Procedural Compliances and Filings with Regulatory Authorities:
The petitioner undertook to comply with all statutory requirements under the Companies Act, 2013, and file necessary forms for increasing the authorized share capital. The Tribunal accepted this undertaking and directed the petitioner to file copies of the order and the scheme with the concerned Registrar of Companies and the Superintendent of Stamps within specified timeframes.

Conclusion:
The Tribunal found the scheme of amalgamation to be fair, reasonable, and not violative of any law or public policy. The scheme was sanctioned with an appointed date of April 1, 2017. The petitioner/transferor company No. 2 was directed to comply with procedural requirements and file necessary documents with regulatory authorities. The petitioner/transferor company No. 2 shall be dissolved without winding up upon the scheme's final sanction by the jurisdictional benches of the National Company Law Tribunal.

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