2021 (1) TMI 573 - Tri - Companies Law

Seeking sanction of the proposed scheme of amalgamation - section 232 read with section 230 of the Companies Act 2013 read with the Companies (Compromises Arrangements and Amalgamations) Rules 2016 - HELD THAT - On perusal of the scheme the documents produced on record and the undertakings given by the petitioner-companies by way of affidavits the scheme of amalgamation appears to be fair and reasonable and is not contrary to public policy and not violative of any provisions of law. All the statutory compliances have been made under sections 230 to 232 of the Companies Act 2013. The scheme of amalgamation with appointed date as April 1 2019 is hereby sanctioned. The same shall be binding on the petitioners and their respective shareholders secured creditors unsecured creditors/trade creditors employees and all concerned - Petition allowed.

Summary

Issues Involved:

1. Jurisdiction of the Tribunal.
2. Dispensation of meetings of shareholders and creditors.
3. Objections by the Income-tax Department.
4. Compliance with statutory provisions and objections by the Official Liquidator.
5. Compliance with statutory provisions and objections by the Regional Director.
6. Approval and sanction of the scheme of amalgamation.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Tribunal:
The registered offices of the applicant-companies are situated in the State of Andhra Pradesh, placing them within the jurisdiction of the National Company Law Tribunal, Amaravati Bench.

2. Dispensation of Meetings of Shareholders and Creditors:
The petitioner-companies had previously filed an application seeking dispensation of convening meetings of equity shareholders, secured creditors, and unsecured creditors. The Tribunal, in its order dated December 23, 2019, granted this dispensation.

3. Objections by the Income-tax Department:
The Income-tax Department objected to the scheme, arguing that the benefits would primarily accrue to a foreign shareholder, M/s. Nord Anglia Ed. Ltd., and that the scheme lacked commercial substance. They contended that the scheme was designed to avoid capital gains taxation and invoked the General Anti Avoidance Rule (GAAR). In response, the petitioners argued that the amalgamation was tax-neutral under the Income-tax Act and aimed at streamlining business operations. They cited various legal precedents to support their position and provided assurances that the rights of the Income-tax Department would be protected.

4. Compliance with Statutory Provisions and Objections by the Official Liquidator:
The Official Liquidator raised several concerns, including the need for amendments to specific clauses of the scheme, protection of employees, and details of related party transactions. The petitioners provided detailed responses, including affidavits and modifications to the scheme, to address these concerns. They assured that there would be no retrenchment of employees and provided explanations for related party transactions and exceptional items in financial statements.

5. Compliance with Statutory Provisions and Objections by the Regional Director:
The Regional Director raised issues regarding compliance with statutory laws, CSR provisions, related party transactions, and potential revenue loss to the government. The petitioners responded with affidavits and supporting documents, confirming compliance with FEMA/RBI regulations, CSR provisions, and related party transactions. They also undertook to transfer any unspent CSR amounts to the transferee company and provided assurances regarding statutory liabilities.

6. Approval and Sanction of the Scheme of Amalgamation:
After considering the scheme, documents on record, and undertakings by the petitioner-companies, the Tribunal found the scheme to be fair, reasonable, and compliant with sections 230 to 232 of the Companies Act, 2013. The scheme was sanctioned with an appointed date of April 1, 2019, and binding on all concerned parties. The order clarified that it did not grant exemptions from stamp duty, taxes, or other charges. The petitioner-companies were directed to submit the scheme to the Registrar of Companies within 30 days, issue newspaper publications regarding the approval, and comply with all statutory requirements.

Order:
- The scheme of amalgamation is sanctioned with an appointed date of April 1, 2019.
- The order does not exempt payment of stamp duty, taxes, or other charges.
- All concerned parties must act on the order and the scheme authenticated by the Registrar of the Tribunal.
- The petitioner-company must submit the scheme to the Registrar of Companies within 30 days.
- Newspaper publications regarding the scheme's approval must be issued.
- The petitioner-company must comply with all statutory steps and submit necessary compliance and undertakings.
- Transferor company No. 1 must transfer unspent CSR amounts to the transferee company within 90 days.