2021 (7) TMI 486 - Tri - Companies Law

Approval of scheme of amalgamation - Sections 230-232 of the Companies Act, 2013 and other relevant provisions of the Act - HELD THAT - From the material on record and after perusing the clarifications and submissions of the Petitioner Company to the Report, Supplementary Report of the RD, the Scheme appears to be fair and reasonable and does not violate any provisions of law and is not contrary to public policy. Since all the requisite statutory compliances have been fulfilled, the Company Scheme Petition is made absolute in terms of prayer clauses V(a) and (b) of the Company Scheme Petition. The Scheme is sanctioned with the Appointed Date fixed as 1st April, 2020. This order is subject to the sanction to the Scheme by the National Company Law Tribunal, Chennai Bench. The scheme is sanctioned - application allowed.

Summary

Issues Involved:
1. Jurisdiction and Compliance with Tribunal Orders
2. Approval and Compliance with the Scheme of Amalgamation
3. Observations and Compliance with the Regional Director's Report

Issue-wise Detailed Analysis:

1. Jurisdiction and Compliance with Tribunal Orders:

The Tribunal convened via videoconference, and the Petitioner Company filed the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013. The Petitioner Company has its registered office in Maharashtra, falling within the Tribunal's jurisdiction. The Transferor Company, with its registered office in Tamil Nadu, has filed its petition before the National Company Law Tribunal, Chennai Bench, which is pending final hearing. The Petitioner Company complied with all Tribunal directions, including filing necessary affidavits of compliance and undertaking to meet all statutory requirements under the Act and associated rules.

2. Approval and Compliance with the Scheme of Amalgamation:

The Scheme of Amalgamation involves the merger of the Transferor Company with the Petitioner Company, leading to the dissolution of the Transferor Company without winding up and cancellation of its equity shares. The Scheme aims to reduce operational entities, lower compliance costs, gain market entry, integrate internal policies, extend branding activities, and optimize resource utilization. The Petitioner Company approved the Scheme via a Board Resolution dated 24th July 2020, and the Transferor Company did so on 22nd July 2020. The Scheme specifies an Appointed Date of 1st April 2020 and an Effective Date as the last date on which all conditions are fulfilled. The Petitioner Company has undertaken to comply with all applicable accounting standards and statutory provisions, including those related to the Income Tax Act, 1961, and FEMA Regulations/RBI guidelines.

3. Observations and Compliance with the Regional Director's Report:

The Regional Director (RD) raised several observations in their Report dated 25th May 2021, which were addressed by the Petitioner Company in its Affidavit in Reply dated 26th May 2021. The RD's Supplementary Report confirmed satisfaction with the Petitioner Company's responses. Key observations and responses include:

- Accounting Standards Compliance: The Petitioner Company undertook to pass necessary accounting entries to comply with AS-14 (IND AS-103) and other applicable standards.
- Appointed and Effective Dates: The Scheme complies with Section 232(6) of the Companies Act, 2013, specifying the Appointed Date as 1st April 2020.
- Approval by Members and Creditors: The Petitioner Company confirmed that meetings of equity shareholders and creditors were either dispensed with or not required, as per Tribunal directions.
- Consistency of Scheme Documents: The Petitioner Company affirmed that the Scheme documents in the Company Application and Petition are identical.
- Notices to Authorities: The Petitioner Company served notices to relevant authorities as directed and undertook that approval of the Scheme would not deter authorities from addressing post-Scheme issues.
- Compliance with Section 232(3)(i): The Petitioner Company undertook to comply with fee set-off provisions for authorized capital.
- Income Tax Act Compliance: The Petitioner Company undertook to ensure compliance with all provisions of the Income Tax Act, 1961.
- Stamp Duty and Fees: The Petitioner Company undertook to comply with applicable laws regarding stamp duty and fees.
- Capital Reserve Treatment: The Petitioner Company undertook to treat the "Capital Reserve arising out of Amalgamation" in accordance with applicable accounting standards and statutory provisions.
- Foreign/Non-resident Shareholders Compliance: The Petitioner Company clarified that no new shares would be issued, thus negating the need for compliance with Section 55 of the Companies Act, 2013, and FEMA Regulations/RBI guidelines, but undertook to comply if applicable.
- Jurisdiction of Chennai Bench: The Transferor Company has sought sanction from the National Company Law Tribunal, Chennai Bench, and the approval of the Scheme by this Tribunal is subject to Chennai Bench's sanction.

The Tribunal found the Scheme fair, reasonable, and compliant with legal provisions and public policy. The Company Scheme Petition was granted in terms of prayer clauses V(a) and (b), with the Appointed Date fixed as 1st April 2020, subject to sanction by the Chennai Bench. The Petitioner Company was directed to lodge a certified copy of the order with the Superintendent of Stamps and file it electronically with the Registrar of Companies within specified timelines. All concerned authorities were directed to act on the certified order and sanctioned Scheme.