2020 (10) TMI 397 - Tri - Companies Law

Sanction the scheme of amalgamation - sections 230 to 232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT - In his report, the Regional Director, MCA has concluded that the scheme appears to be fair, reasonable and not detrimental against the members or creditors or contrary to public policy and the same can be approved. The scheme appears to have been proposed for better performance management, for greater clarity in roles, responsibilities and performance objectives of the individual specialised divisions at the corporate as well as individual level for key management. On a consideration of the facts of the case as mentioned in the preceding paragraphs, which are not elaborated here again to avoid duplication and repetition, we are satisfied that the procedure specified in sub-sections (1) and (2) of section 232 of the Companies Act, 2013 has been complied with, and hence the scheme of amalgamation, as approved by the boards of the petitioner companies, can be sanctioned. The scheme is sanctioned.

Issues Involved:
1. Sanctioning the scheme of amalgamation under sections 230 to 232 of the Companies Act, 2013.
2. Compliance with statutory requirements and observations from statutory authorities.
3. Financial and accounting treatment of the amalgamation.
4. Compliance with CSR obligations.
5. Pending tax liabilities and legal proceedings.
6. Compliance with FEMA/RBI regulations.
7. Transfer of liabilities, including taxes and charges.
8. Compounding of offences/defaults under the Companies Act, 2013.

Detailed Analysis:

1. Sanctioning the Scheme of Amalgamation:
The petitioners sought the Tribunal's sanction for the scheme of amalgamation of four transferor companies with the transferee company under sections 230 to 232 of the Companies Act, 2013. The Tribunal noted that the scheme was approved by the boards of the petitioner companies and was aimed at achieving greater focus on core businesses, better performance management, and consolidation of similar business operations.

2. Compliance with Statutory Requirements and Observations from Statutory Authorities:
The Tribunal directed the issuance of notices to various statutory authorities, including the Registrar of Companies, Income-tax Authority, and the Reserve Bank of India. The Registrar of Companies and the Regional Director provided observations, which included compliance with FEMA/RBI regulations, non-compliance with section 96 of the Companies Act, 2013, and CSR spending. The petitioner companies responded to these observations, confirming compliance with necessary regulations and addressing issues related to CSR and tax liabilities.

3. Financial and Accounting Treatment of the Amalgamation:
The petitioner companies provided a certificate from S. R. Batliboi and Associates LLP, chartered accountants, confirming that the accounting treatment proposed in the scheme of amalgamation was in conformity with the Accounting Standard under section 133 of the Companies Act, 2013. The scheme also outlined the share exchange ratios for the amalgamation.

4. Compliance with CSR Obligations:
The Registrar of Companies observed that the transferor company No. 3 had unspent CSR amounts for the financial years 2016-17 and 2017-18. The petitioner companies explained that the unspent amounts were carried forward for future projects and undertook to spend the unspent CSR amount post-merger as per section 135 of the Companies Act, 2013.

5. Pending Tax Liabilities and Legal Proceedings:
The Registrar of Companies noted pending tax demands and legal proceedings against the petitioner companies. The petitioner companies undertook to pay all undisputed outstanding tax demands once the matter reached finality. The Tribunal emphasized that the tax implications arising out of the scheme were subject to the final decision of the concerned Income-tax authorities.

6. Compliance with FEMA/RBI Regulations:
The petitioner companies confirmed compliance with FEMA/RBI regulations, stating that 100% foreign direct investment was allowed under the automatic route for the transferee company and transferor company No. 3. They also confirmed that there were no pending proceedings with the RBI.

7. Transfer of Liabilities, Including Taxes and Charges:
The Tribunal ordered that all liabilities, including taxes and charges of the transferor companies, be transferred to the transferee company without further act or deed, pursuant to section 232 of the Companies Act, 2013.

8. Compounding of Offences/Defaults under the Companies Act, 2013:
The Registrar of Companies noted non-compliance with section 96 of the Companies Act, 2013, for the financial year 2016-17 by transferor company No. 3. The petitioner companies confirmed that the offence had been compounded and the penalty paid.

Conclusion:
The Tribunal sanctioned the scheme of amalgamation, effective from April 1, 2019, subject to compliance with all statutory requirements and addressing the observations of the statutory authorities. The Tribunal emphasized that the sanctioning of the scheme should not be construed as an exemption from payment of stamp duty, taxes, or other charges and that compliance with all applicable laws and regulations was mandatory. The petitioner companies were directed to ensure compliance with all provisions of the Companies Act, 2013, and to submit quarterly/annual status of compliances. The petition was disposed of with the Tribunal's order outlining the specific directions and conditions for the amalgamation.

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