2021 (4) TMI 45 - Tri - Companies Law

Sanction the Scheme of Amalgamation - Section 230 to 232 of the Companies Act, 2013, r/w Companies (CAA) Rules, 2016 - HELD THAT - In terms of sub-section (3) of Section 232 of Companies, the Tribunal is empowered to sanction the scheme of amalgamation, if it is satisfied that sub-section (1) and (2) of the above section, however, subject to filing a Certificate by the Company's Auditor with Tribunal to the effect that the accounting treatment, if any, proposed in the Scheme of Amalgamation is in conformity with the Accounting Standards prescribed under Section 133, etc. It is a settled position of law that any Scheme of Amalgamation or Arrangement, under the extant provisions of Companies Act, would not contemplate to waive any liability or legal action for any violation of provisions of Companies Act, so as to prevent Statutory Authorities from initiating any action against violation of provisions of Companies Act, in respect of the Companies involved, in accordance with law. In the instant case also, the Transferee Company would inherit all the liabilities/Responsibilities of Transferor Company and it is not being exempted from complying with all statutory requirement by virtue of this order. The Tribunal, in the instant proceedings, cannot examine every alleged violation committed by the Petitioner Companies, since the issue here is only to sanction of the Scheme, subject to compliance of extant provisions of Companies Act and to make them to comply all terms and conditions as mentioned in the proposed Scheme in question, and other consequential actions, after sanction of the Scheme - It is settled principles of law that Court/Tribunal cannot interfere in commercial wisdom of Companies involved to frame scheme of merger/amalgamation, unless scheme is ex facie illegal and it is made with an intention to dupe stake holders of Companies involved. The Scheme in question is comprehensive one complying with the provisions of Sections 230 to 232 of the Companies Act, 2013 and the Rules made thereunder and the Petition/Application is filed in accordance with law. It covers all the issues relating to legal proceedings, continuation of contracts, deeds, therefore, the Scheme in question and thus prima facie eligible to be sanctioned, however, subject to compliance of various undertakings as mentioned in the Scheme and to follow/comply various observations made by the Statutory Authorities. It is also appears to be fair, reasonable and it is not detrimental against the Members or Creditors or contrary to public policy. The Scheme of Amalgamation is provisionally sanctioned with effective date i.e. from 1st April, 2020 prayed for, however subject to complying all undertakings, extant statutory provisions - Petition disposed off.

Summary

Issues Involved:
1. Sanction of the Scheme of Amalgamation under Sections 230 to 232 of the Companies Act, 2013.
2. Compliance with statutory provisions and accounting standards.
3. Observations and objections from statutory authorities.
4. Financial and operational benefits of the amalgamation.
5. Legal and procedural requirements for the amalgamation.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The Tribunal considered the joint petition filed by the Petitioner Companies seeking to sanction the Scheme of Amalgamation between M/s. Krackin Technologies Private Limited (Transferor Company) and M/s. I-Nurture Education Solutions Private Limited (Transferee Company) with effect from 1st April 2020. The scheme was approved by the Board of Directors of both companies on 10th September 2020 and was subject to the requisite approval of shareholders, creditors, and confirmation by the NCLT.

2. Compliance with Statutory Provisions and Accounting Standards:
The statutory auditors of both companies confirmed that the proposed accounting treatment in the scheme complies with the Accounting Standards prescribed under Section 133 of the Companies Act, 2013. The Tribunal emphasized that the scheme must comply with all statutory requirements and that the Transferee Company would inherit all liabilities and responsibilities of the Transferor Company.

3. Observations and Objections from Statutory Authorities:
The Registrar of Companies (ROC) and the Regional Director made several observations:
- The authorized share capital of the Transferee Company should comply with Section 232(3)(i) of the Companies Act, 2013, and pay the difference fee.
- There were no common directors and shareholders in the Transferor and Transferee Companies.
- The Transferee Company had outstanding statutory dues and had defaulted in loan repayments.
- The Transferee Company had not appointed a Company Secretary since 2nd April 2019.
The Tribunal directed the Petitioner Companies to comply with these observations and statutory requirements post-sanctioning the scheme.

4. Financial and Operational Benefits of the Amalgamation:
The amalgamation aimed to achieve several benefits, including pooling development facilities, reducing administration and operational costs, achieving operational synergy, and better utilization of financial resources, managerial, and technical expertise. The scheme proposed the issuance and allotment of shares by the Transferee Company to the shareholders of the Transferor Company and the combination of the authorized share capital of both companies.

5. Legal and Procedural Requirements for the Amalgamation:
The Tribunal directed the Petitioner Companies to issue notices to relevant statutory authorities and cause paper notifications. The Tribunal noted that no objections were received from any party regarding the acceptance of the scheme. The Official Liquidator's report confirmed that the Transferor Company maintained proper books of accounts and statutory registers, except for certain discrepancies in financial records. The Tribunal emphasized that the scheme must comply with all statutory provisions, and any violation or liability prior to the sanction of the scheme would not be waived.

Conclusion:
The Tribunal provisionally sanctioned the Scheme of Amalgamation with an effective date of 1st April 2020, subject to compliance with all statutory provisions and undertakings. The sanction does not waive any prior violations or liabilities, and statutory authorities are entitled to initiate appropriate actions. The Petitioner Companies were directed to deliver a certified copy of the order and the scheme to the Registrar of Companies within thirty days for registration. Any aggrieved person may apply to the Tribunal for necessary directions.