2021 (1) TMI 113 - Tri - Companies Law

Approval of the Scheme of Arrangement - Section 230 to 232 and other applicable provisions of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT - The Petitioner Company has filed the certificate of the Independent Statutory Auditor in relation to compliance with the Accounting Standards with respect to the Scheme. Thus, the Petitioner Company has complied with proviso to Section 230 (7)/Section 232 (3) of the Companies Act, 2013 - The Petitioner Company has submitted that no investigation proceedings are pending against them under the provisions of the Companies Act, 1956 or the Companies Act, 2013 and no proceedings are pending against the Petitioner Company under Section 235 to 251 of the Companies Act, 2013 or under relevant provision of the Companies Act, 1956. In view of absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal, sanctions the Scheme of Arrangement, annexed at pages 312 to 348 of the typed set filed along with the Company Petitions as well as the prayer made therein - the scheme is sanctioned - application allowed.

Issues Involved:
1. Approval of the Scheme of Arrangement between the Transferor and Transferee Companies.
2. Reduction of Equity Share Capital of the Transferee Company.
3. Amalgamation of the Transferor Company with the Transferee Company.
4. Change of name of the Transferee Company.
5. Compliance with statutory requirements and objections from authorities.
6. Protection of employees' interests.
7. Financial and accounting compliance.
8. Tax liabilities and objections from the Income Tax Department.
9. Compliance with the Companies Act and other regulations.

Detailed Analysis:

1. Approval of the Scheme of Arrangement:
The Joint Company Petition was filed for the approval of the Scheme of Arrangement between the Transferor Company and the Transferee Company under Sections 230 to 232 of the Companies Act, 2013. The Scheme includes the reduction of equity share capital, amalgamation, and change of name of the Transferee Company.

2. Reduction of Equity Share Capital of the Transferee Company:
Clause 5.1 of the Scheme proposed to reduce the paid-up capital from ?174.40 crores to ?40.40 crores by canceling ?134 crores worth of equity shares. This reduction is to be effected proportionately, and no payment of consideration will be made for the canceled shares. The amount involved will be utilized to write off accumulated losses.

3. Amalgamation of the Transferor Company with the Transferee Company:
The Scheme provides for the transfer of all properties, rights, interests, liabilities, and obligations of the Transferor Company to the Transferee Company without further act or deed, as per Section 232(3) of the Companies Act, 2013. The appointed date for the amalgamation is 1st January 2019.

4. Change of Name of the Transferee Company:
The name of the Transferee Company will be changed from "Takata India Private Limited" to "Joyson Anand Abhishek Safety Systems Private Limited" as per the Scheme. The Transferee Company is required to file the requisite forms with the Registrar of Companies.

5. Compliance with Statutory Requirements and Objections from Authorities:
Notices were served to various statutory/regulatory authorities, and no objections were raised except from the Income Tax Department. The Regional Director and Official Liquidator did not object to the Scheme. The Chartered Accountant appointed by the Official Liquidator confirmed the fairness of the share exchange ratio and compliance with accounting standards.

6. Protection of Employees' Interests:
Clause 6.6 of Part IV of the Scheme ensures the protection of the interests of the staff, workmen, and other employees of the Transferor Company. All employees will become employees of the Transferee Company without any break or interruption in their service.

7. Financial and Accounting Compliance:
The Scheme complies with Indian Generally Accepted Accounting Principles (GAAP) and the Companies Act. The Chartered Accountant's report confirmed that the Transferor Company has not declared any dividends in the preceding three financial years and has no pending complaints or prosecutions.

8. Tax Liabilities and Objections from the Income Tax Department:
The Income Tax Department objected to the Scheme, but the Tribunal referred to the NCLAT judgment in the Joint Commissioner of Income Tax v. Reliance Jio Infocomm Ltd., which allows the Department to recover any tax dues from the transferor or transferee company. The Scheme does not exempt the companies from paying taxes or other statutory dues.

9. Compliance with the Companies Act and Other Regulations:
The Petitioner Companies have complied with all statutory requirements, including filing affidavits of service and statutory returns. No investigations or proceedings are pending against them under the Companies Act.

Conclusion:
The Tribunal sanctioned the Scheme of Arrangement, including the reduction of equity share capital, amalgamation, and change of name, subject to compliance with statutory dues and regulations. The order does not exempt the companies from paying stamp duty, taxes, or other charges. The Transferor Company is directed to pay ?50,000 to the Official Liquidator for the auditor's fees. The Scheme is approved, and the Company Petition stands allowed on the aforementioned terms.

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