2022 (4) TMI 889 - Tri - Companies Law

Sanction of Scheme of Demerger - Sections 230-232 of the Companies Act, 2013 - HELD THAT - The objections/observations to the Scheme received from RoC RD have been adequately replied by the Petitioner Companies and hence, there is no impediment in approval of the Scheme. The scheme is approved - application allowed.

Issues Involved:
1. Sanction of the Scheme of Demerger under Sections 230-232 of the Companies Act, 2013.
2. Dispensation of meetings of shareholders and creditors.
3. Compliance with statutory requirements and objections raised by statutory authorities.
4. Impact on tax outflow and related party transactions.
5. Transfer of assets, liabilities, and employees to the resulting companies.
6. Approval from the Competition Commission of India.
7. Outstanding demands from the Income Tax Department.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Demerger:
The joint Second Motion Petition filed by the Petitioner Companies sought the sanction of the Scheme of Demerger amongst the Demerged Company and the two Resulting Companies under Sections 230-232 of the Companies Act, 2013. The Tribunal found the petition maintainable and in compliance with the relevant rules.

2. Dispensation of Meetings of Shareholders and Creditors:
The Petitioner Companies filed a First Motion Application to dispense with the meetings of the Equity Shareholders, Secured, and Unsecured Creditors. The Tribunal issued necessary directions and dispensed with the meetings based on the consents obtained from the creditors and shareholders, and the publication of notices in newspapers.

3. Compliance with Statutory Requirements and Objections:
The Petitioner Companies complied with the Tribunal's directions to issue notices to statutory authorities and publish notices in newspapers. The Registrar of Companies and the Regional Director filed reports with observations regarding the segregation of assets, tax outflow, unsecured creditors, related party transactions, and bank charges. The Petitioner Companies provided detailed responses to these observations, addressing each point raised.

4. Impact on Tax Outflow and Related Party Transactions:
The Regional Director raised concerns about the impact of the demerger on tax outflow and related party transactions. The Petitioner Companies explained that the demerger would streamline operations, increase turnover, and improve asset turnover ratio and return on capital employed. They also addressed the concerns about unsecured creditors and bank charges.

5. Transfer of Assets, Liabilities, and Employees:
The Tribunal ordered that all property, rights, powers, liabilities, and duties of the liquid paints division and powder coatings division of the Demerged Company be transferred to the Resulting Companies without further act or deed. The employees of these divisions would also become employees of the Resulting Companies on terms no less favorable than their current terms.

6. Approval from the Competition Commission of India:
The Competition Commission of India stated that the matter had not been filed with the Commission under the provisions of the Competition Act, 2002. The Petitioner Companies undertook that no approval from the Commission was required for the sanction of the Scheme of Demerger.

7. Outstanding Demands from the Income Tax Department:
The Income Tax Department reported outstanding demands against the Demerged Company. The Petitioner Companies committed to addressing these demands and clarified that the liabilities of the Demerged Undertakings would devolve on the respective Resulting Companies, ensuring no loss to the Revenue/Income Tax Department.

Conclusion:
The Tribunal concluded that the objections and observations from the statutory authorities had been adequately addressed by the Petitioner Companies. The Scheme of Demerger was approved and declared binding on all shareholders and creditors of the Petitioner Companies. The order clarified that it did not grant any exemption from payment of stamp duty, taxes, or other charges, and compliance with applicable laws was required. The Petitioner Companies were directed to deposit specified amounts with the Pay & Account Office and the Prime Minister National Relief Fund and to deliver a certified copy of the order to the Registrar of Companies for registration. The case was disposed of accordingly.

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