2020 (11) TMI 293 - Tri - Companies Law

Approval of Amalgamation Scheme - sections 230 to 232 of the Companies Act, 2013 - HELD THAT - From the material 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, the Company Scheme Petitions are made absolute. The Transferee Company to file a copy of this Order duly certified by the Deputy/Assistant Registrar of this Tribunal along with a copy of the Scheme with the concerned Superintendent of Stamps for the purpose of adjudication of stamp duty, if any, payable on the same, within 60 (sixty) days from the date of receipt of the Order - The Petitioner Companies are directed to file a copy of this Order alongwith a copy of the Scheme of Amalgamation with the concerned Registrar of Companies, electronically in E-Form INC 28 in addition to the physical copy, as per relevant provisions of the Companies Act, 2013. The Scheme is sanctioned and Appointed Date is fixed as 1st April 2018 - Application allowed.

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 observations of the Regional Director.
3. Impact on shareholders and capital structure.
4. Compliance with Accounting Standards.
5. Tax implications and compliance with Income Tax laws.

Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The Tribunal was approached for the sanction of the Scheme of Amalgamation of Rosche Trading Private Limited (Transferor Company) with Fine Tech Corporation Private Limited (Transferee Company) under sections 230 to 232 of the Companies Act, 2013. The Scheme was unanimously approved by the respective Board meetings of both companies on 10th September 2018. The rationale for the amalgamation included reducing administrative costs, avoiding duplication of processes, optimizing profitability, and enhancing shareholder value.

2. Compliance with Statutory Requirements and Observations of the Regional Director:
The Tribunal noted that the Petitioner Companies complied with all directions passed in previous Company Scheme Applications and Petitions. Affidavits of compliance were filed, and the Official Liquidator confirmed that the affairs of the Transferor Company were conducted properly. The Regional Director's observations were addressed in detail, including compliance with Accounting Standards, the appointed date, set-off of fees, serving notices to authorities, and ensuring no discrepancies in the Scheme documents. The Petitioner Companies undertook to comply with all applicable provisions and confirmed that the Scheme was not a device for tax avoidance.

3. Impact on Shareholders and Capital Structure:
The authorized share capital of the Transferor Company and Transferee Company was detailed. Upon amalgamation, the entire issued, subscribed, and paid-up equity and preference share capital of the Transferor Company would stand extinguished and cancelled. The authorized share capital of the Transferee Company would increase to accommodate the combined authorized share capitals of both companies. No new shares would be issued or allotted to the shareholders of the Transferor Company.

4. Compliance with Accounting Standards:
The Regional Director's observation on compliance with AS-14 (IND AS-103) and other applicable Accounting Standards was addressed. The Transferee Company undertook to pass necessary accounting entries to comply with these standards. The appointed date was confirmed to be 1st April 2018, in compliance with the Ministry of Corporate Affairs' circular.

5. Tax Implications and Compliance with Income Tax Laws:
The Income Tax Department's concerns regarding potential tax avoidance through the Scheme were noted. The Petitioner Companies confirmed that the Scheme was not intended for tax avoidance and undertook to comply with all applicable provisions of the Income Tax Act. The Department was assured that it could examine the Scheme's tax implications and take appropriate action if necessary.

Conclusion:
The Tribunal found the Scheme of Amalgamation to be fair, reasonable, and compliant with legal provisions and public policy. All requisite statutory compliances were fulfilled, and the Scheme was sanctioned with the appointed date fixed as 1st April 2018. The Transferee Company was directed to file the Order with the concerned authorities and ensure compliance with stamp duty adjudication and Registrar of Companies' requirements. The Scheme was ordered accordingly, and the file was consigned to the record.

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