2021 (5) TMI 181 - Tri - Companies Law

Approval of scheme of Amalgamation - section 230 -232 of the Companies Act, 2013 r/w the Companies (Compromises, Arrangements and Amalgamations) Rules 2016 - HELD THAT - There is no apprehension that any of the creditors would lose or be prejudiced if the proposed scheme is sanctioned - The Petitioner Companies have filed Affidavit, stating that the scheme Proposed does not fall within the ambit of sections 4 and 5 of the Competition Act, 2002. The scheme does not require any modification, except to the Appointed Date as mentioned supra, as it appears to be fair and reasonable, not contrary to public policy and also not violative of any provisions of law. All the statutory compliances have been made under section 230-232 of the Companies Act, 2013 r/w the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Scheme of Arrangement between the Demerged Company and the Resulting Company was duly approved by the shareholders of respective companies - the company scheme is sanctioned. Petition allowed.

Issues Involved:
1. Compliance with Section 230-232 of the Companies Act, 2013.
2. Approval of the Scheme of Arrangement.
3. Objection regarding the "Appointed Date."
4. Protection of employees and shareholders.
5. Accounting treatment.
6. Compliance with the Competition Act, 2002.

Detailed Analysis:

1. Compliance with Section 230-232 of the Companies Act, 2013:
The petitions were filed under Section 230-232 of the Companies Act, 2013, read with the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016. The Tribunal ensured that all statutory compliances were made under these sections, which govern the procedures for compromises, arrangements, and amalgamations.

2. Approval of the Scheme of Arrangement:
The Scheme of Arrangement involved the transfer and vesting of the Demerged Business of M/s. Severn Glocon India Private Limited into M/s. Severn Glocon Valves Private Limited. The Tribunal noted that the Board of Directors of both companies approved the scheme, and the rationale was to enable focused management and growth opportunities. The scheme was duly approved by the shareholders of the respective companies.

3. Objection regarding the "Appointed Date":
The Regional Director raised an objection concerning the "Appointed Date" not being a specific calendar date as required under Section 232(6) of the Companies Act, 2013. The Petitioner Companies argued that the "Appointed Date" and "Effective Date" were commercially agreed to be the same, tied to the occurrence of an event. The Tribunal referred to the Ministry of Corporate Affairs circular, which clarified that the "Appointed Date" could be tied to an event. However, the Tribunal fixed the "Appointed Date" as the date on which the Tribunal approved the scheme, i.e., 27.04.2021.

4. Protection of employees and shareholders:
The scheme ensured the protection of employees, stating that all staff and employees of the Demerged Undertaking would become employees of the Resulting Company without any break in service. Additionally, one fully paid-up equity share of the Resulting Company would be issued for every equity share held in the Demerged Company.

5. Accounting treatment:
The Tribunal reviewed the accounting treatment provided in the scheme and found it in conformity with the established Accounting Standards, specifically Indian Accounting Standard (Ind AS) 103 for "Business Combination." The Resulting Company was required to record the assets and liabilities of the Demerged Undertaking at their respective book values using the pooling of interests method.

6. Compliance with the Competition Act, 2002:
The Petitioner Companies filed an affidavit stating that the proposed scheme did not fall within the ambit of Sections 4 and 5 of the Competition Act, 2002, indicating no adverse effect on competition.

Conclusion:
The Tribunal sanctioned the Scheme of Arrangement, subject to the modification of the "Appointed Date" to 27.04.2021. The scheme was deemed fair, reasonable, and not contrary to public policy or any provisions of law. The order clarified that it did not grant exemption from payment of stamp duty, taxes, or any other charges, and any necessary permissions or compliances must still be obtained. The certified copy of the order was to be filed with the Registrar of Companies within 30 days of receipt.

Final Order:
The Scheme of Arrangement was sanctioned, binding on all members, creditors, and shareholders, and the petitions CP/2 & 4[CHE]/CAA/2021 were disposed of accordingly.

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