2020 (11) TMI 516 - Tri - Companies Law

Sanction of Amalgamation Scheme - sections 230 to 232 of the Companies Act, 2013 read with rule 15(1) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT - It has been stated by the Regional Director that, on a consideration of the materials on record, the scheme of amalgamation appears to be fair, reasonable and is not detrimental against the members or creditors or contrary to public policy and the same can be approved. 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 in question will enable consolidation of all companies indirectly and jointly held by the HMK group and RR group, and helps in streamlining operations, reducing overheads, administrative, and other expenditure and achieving operational rationalization, organizational efficiency and optimal utilization of resources in the interest of shareholders, etc. On a consideration of the facts of the case as mentioned in the preceding paragraphs, which are not elaborating 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 both the transferor company and the transferee company, is hereby sanctioned, as prayed. Application allowed.

Issues Involved:
1. Approval of the scheme of amalgamation between the transferor and transferee companies.
2. Compliance with statutory requirements and observations by regulatory authorities.
3. Tax liabilities and related party transactions.
4. Appointment of a whole-time company secretary.
5. Pending litigations and their impact on the amalgamation.
6. Compliance with the Competition Act, 2002.

Detailed Analysis:

1. Approval of the Scheme of Amalgamation
The company petition was filed under sections 230 to 232 of the Companies Act, 2013, seeking sanction for the proposed scheme of amalgamation between the transferor company and the transferee company. The scheme was approved by the boards of directors of both companies on May 7, 2019. The petitioners sought the Tribunal's sanction to make the scheme binding on all relevant parties.

2. Compliance with Statutory Requirements and Observations by Regulatory Authorities
The Tribunal directed the petitioners to issue notices to various regulatory authorities, including the Regional Director, Registrar of Companies, Official Liquidator, and others. The Registrar of Companies pointed out several observations, including the need for the transferee company to comply with section 232(3)(i) of the Companies Act, 2013, and address related party transactions under section 188. The Regional Director reiterated these points and added that the transferee company must explain the non-appointment of a whole-time company secretary for a specific period.

3. Tax Liabilities and Related Party Transactions
The Registrar of Companies noted that the transferee company had certain dues towards Income-tax and sales tax amounting to ?104.99 lakhs. Additionally, related party transactions required compliance under section 188 of the Companies Act, 2013. The official liquidator reported pending tax litigations for various assessment years, which would be taken over by the transferee company as per the scheme.

4. Appointment of a Whole-Time Company Secretary
Both the Registrar of Companies and the Regional Director pointed out that the transferee company had not appointed a whole-time company secretary for a period exceeding one year. The Tribunal directed the transferee company to file a separate application for adjudication of this non-compliance post-approval of the scheme.

5. Pending Litigations and Their Impact on the Amalgamation
The official liquidator's report included pending tax litigations for the transferor company, which would be assumed by the transferee company as part of the amalgamation. The Tribunal noted that the scheme would not affect ongoing proceedings and that all liabilities, including taxes and duties, would be transferred to the transferee company.

6. Compliance with the Competition Act, 2002
The Competition Commission of India (CCI) informed that the scheme of amalgamation had not been filed with them. The petitioner-companies submitted that the amalgamation did not meet the thresholds prescribed under section 5 of the Competition Act, and hence, CCI approval was not required.

Conclusion:
The Tribunal concluded that the scheme of amalgamation was fair, reasonable, and not detrimental to the members, creditors, or public policy. The scheme was sanctioned with the appointed date of January 1, 2019. The Tribunal specified that the sanctioning of the scheme should not be construed as an exemption from payment of stamp duty, taxes, or other charges. The transferor company was directed to hand over the possession of books and documents to the transferee company post-amalgamation. The Tribunal also emphasized compliance with all provisions of the Companies Act, 2013, and directed the petitioner-companies to file statutory returns and submit compliance reports.

The petition was disposed of, and any pending applications were also disposed of. The Tribunal granted liberty to any person to apply for necessary directions in the matter.

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