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2021 (8) TMI 757 - Tri - Companies LawSeeking to sanction the Scheme of Arrangement - Sections 230 to 232 of the Companies Act, 2013 - HELD THAT - It is a settled position of law that any Scheme of Arrangement or Amalgamation/demerger, 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 Petitioner No. 2 would inherit all the responsibilities. 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 Schezne in question, and other consequential actions, after sanction of the Scheme - 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. The scheme is sanctioned - application allowed.
Issues Involved:
1. Sanction of the Scheme of Arrangement between the Demerged Company and the Resulting Company. 2. Compliance with statutory provisions and observations by the Registrar of Companies (ROC) and Regional Director (RD). 3. Financial and operational implications of the Scheme. 4. Statutory dues and liabilities. 5. Shareholder and creditor interests. Issue-wise Detailed Analysis: 1. Sanction of the Scheme of Arrangement: The Demerged Company and the Resulting Company filed a petition under Sections 230 to 232 of the Companies Act, 2013, seeking to sanction a Scheme of Arrangement. The Scheme was approved by the Board of Directors of both companies on 15th January 2021. The Scheme aims to create two industry-leading companies with strategic focus and flexibility to drive client and shareholder value. The Tribunal found the Scheme to be in the larger interest of all stakeholders and compliant with the provisions of the Companies Act, 2013, and the associated Rules. 2. Compliance with Statutory Provisions and Observations by ROC and RD: The Tribunal directed the Petitioner Companies to issue notices to various statutory authorities and cause paper notifications in specified newspapers. The ROC and RD filed reports with several observations, including the incorporation date of the Resulting Company, name change, compliance with Section 232(3)(i) of the Companies Act, 2013, cancellation of shares, CSR spending, compliance with RBI/FEMA Regulations, disputed tax dues, and related party transactions. The Petitioner Companies responded to these observations through affidavits, providing clarifications and undertakings to comply with all statutory requirements. 3. Financial and Operational Implications of the Scheme: The Scheme involves the transfer of the MIS Business operations from the Demerged Company to the Resulting Company. The financial position of both companies is expected to reflect a positive net-worth upon the demerger becoming effective. The Demerged Company confirmed that the unspent CSR amounts were disclosed in the Board's reports for the relevant financial years. The Resulting Company undertook to comply with the provisions of Section 232(3)(i) of the Companies Act, 2013, and pay all requisite fees. 4. Statutory Dues and Liabilities: The Demerged Company undertook to pay statutory dues as and when demanded by the authorities. The Resulting Company also undertook to take care of statutory dues and current liabilities, including amounts due to MSMEs, upon the Scheme becoming effective. The Tribunal emphasized that the sanction of the Scheme would not waive any violation or liability committed by the Companies prior to the sanction of the Scheme. 5. Shareholder and Creditor Interests: The Scheme was put to notice for all stakeholders and broadly consented to by all shareholders and creditors. The Resulting Company confirmed that the issuance of shares to the shareholders of the Demerged Company would fall under the automatic route and would not require RBI approval. The Tribunal found the Scheme to be fair, reasonable, and not detrimental to the interests of members or creditors or contrary to public policy. Conclusion: The Tribunal provisionally sanctioned the Scheme of Arrangement with an effective date of 1st April 2021, subject to compliance with all undertakings and statutory provisions. The Companies were directed to deliver a certified copy of the Order along with the Scheme to the Registrar of Companies within thirty days. The Tribunal also clarified that the sanction of the Scheme would not prevent statutory authorities from initiating appropriate legal action for any violations of the Companies Act. Any aggrieved person(s) were given the liberty to apply to the Tribunal for necessary directions.
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