2021 (9) TMI 10 - Tri - Companies Law

Sanction of Scheme of Amalgamation - Sections 230 to 232 of the Companies Act, 2013, and other applicable provisions of the companies Act, 2013 r/w Companies (CAA) Rules, 2016 - HELD THAT - 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. 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 is also appears to be fair, reasonable and it is not detrimental against the Members or Creditors or contrary to public policy. Therefore, we are inclined to sanction the scheme, however, subject to complying with various conditions/undertakings, post sanctioning the Scheme. The scheme is approved - application allowed.

Issues Involved:
1. Sanction of the Scheme of Amalgamation under Sections 230 to 232 of the Companies Act, 2013.
2. Compliance with FEMA/RBI regulations.
3. Clubbing of Authorised Share Capital.
4. Overdraft facility without charge creation.
5. Pending investigations or legal proceedings.
6. Compliance with statutory and regulatory requirements.

Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The Petitioner Company filed C.P (CAA) No. 02/BB/2021 seeking to sanction the Scheme of Amalgamation of Equifax Software Systems Private Limited with Equifax Analytics Private Limited under Sections 230 to 232 of the Companies Act, 2013. The Board of Directors of both companies approved the scheme on 21st October 2020. The Tribunal noted that the scheme aims to consolidate business operations, enhance financial strength, and improve operational efficiency. The scheme was broadly consented to by all shareholders and creditors, and no investigations were pending against the companies. The Tribunal found the scheme to be comprehensive, fair, reasonable, and not detrimental to members or creditors. Therefore, the scheme was provisionally sanctioned with an effective date of 1st April 2020, subject to compliance with statutory provisions and undertakings.

2. Compliance with FEMA/RBI Regulations:
The Registrar of Companies (ROC) and the Regional Director (RD) observed that EFX Holding Limited, a foreign company, holds almost 100% shares in both the Transferee and Transferor Companies. Upon merger, the Transferee Company will issue shares to EFX Ltd., necessitating compliance with FEMA/RBI regulations. The Petitioner Company undertook to comply with all applicable FEMA/RBI regulations for the issuance of shares to foreign entities upon the scheme's sanction.

3. Clubbing of Authorised Share Capital:
The scheme provided for the automatic increase of the Transferee Company's authorised share capital without additional fees, which was not in line with Section 232 (3) (i) of the Companies Act, 2013. The Petitioner Company undertook to pay the differential fee, if any, after setting off the fee paid by the Transferor Company on its authorised capital. A separate application for clubbing the authorised capital must be made to the ROC within one month from the order, or interest will be levied as per Section 403 of the Companies Act, 2013.

4. Overdraft Facility Without Charge Creation:
The RD noted that the Transferee Company had an overdraft of ?8,56,67,295 as of 31.3.2020 without creating a charge. The Petitioner Company explained that the overdraft facility was backed by a corporate guarantee, and therefore, no charge was required to be created.

5. Pending Investigations or Legal Proceedings:
The Tribunal confirmed that no prosecutions, complaints, technical scrutiny, or inspections were pending against the Petitioner Companies. The Principal Commissioner of Income Tax, Bengaluru, confirmed that there was no outstanding demand or pending scrutiny against Equifax Analytics Private Limited.

6. Compliance with Statutory and Regulatory Requirements:
The Tribunal emphasized that the sanction of the scheme does not waive any liability or legal action for any violation of the Companies Act. The Transferee Company will inherit all liabilities and responsibilities of the Transferor Company. The Tribunal directed the Petitioner Companies to comply with all statutory requirements and undertakings post-sanctioning the scheme. The companies must deliver a certified copy of the order along with the scheme of amalgamation to the ROC within thirty days for registration.

Conclusion:
The Tribunal provisionally sanctioned the Scheme of Amalgamation of Equifax Software Systems Private Limited with Equifax Analytics Private Limited, subject to compliance with statutory provisions and undertakings. The scheme was found to be in the larger interest of all stakeholders and compliant with Sections 230 to 232 of the Companies Act, 2013. The Tribunal also noted that any person aggrieved by the order could apply to the Tribunal for necessary directions.

← Previous Next →