2015 (5) TMI 369 - HC - Companies Law

Application for Scheme of Amalgamation under Sections 391 & 394 of the Companies Act, 1956 - Observations of Official Liquidator and Regional Director duly addressed - Held that - The Regional Director in Para 10 of his report has, however, submitted that as per the Memorandum of Association of the transferee company, the main objects of the transferee company are to carry on and undertake the business of financing, leasing, and hire purchase etc., whereas there is no mention whether the said company is registered with Reserve Bank of India as NBFC, if so, whether it has obtained no objection from the RBI with regard to proposed scheme of amalgamation. He further submitted that in the reply dated 16.02.2015, the petitioner companies have submitted that the transferee company, being non banking finance company, is registered with the Reserve Bank of India and it has served a copy of petition to the RBI on 24.12.2014 mentioning that the applicant companies have moved a petition before the High Court of Delhi for the purpose of approval of the Scheme of Amalgamation and also categorically mentioned that in case the RBI has any observations/comments, the same may be communicated to the Regional Director within 15 days of the submission of the said letter. The Regional Director, however, confirmed that he has not received any observations/comments from the RBI till the date of filing of his report. In view of the above, the observation raised by the Regional Director does not subsist. The Official Liquidator has submitted that in consequence of amalgamation, the share capital of the transferee company will be reduced to the extent of shareholding of transferor companies which is 99.96% shareholding in the transferee company. Accordingly, after the allotment of shares to the shareholders of the transferor companies, the post merger paid up share capital of the transferee company will be ₹ 55,000/- which is less than the minimum statutory requirement of ₹ 1,00,000/-. He, however, submitted that the transferee company has given an undertaking that the transferee company shall increase its paid up share capital so that the post merger share capital of the company be more than the minimum paid up share capital as per the provisions of the Companies Act, 2013. In view of the above, the observation raised by the Official Liquidator does not subsist. No objection has been received to the Scheme of Amalgamation from any other party. The petitioner companies, in the affidavit dated 29th January, 2015 of Ms. Richa Agrawal, Director of the petitioner companies, have submitted that the petitioner companies have not received any objection pursuant to the citations published in the newspapers on 25th December, 2014. 20. Considering the approval accorded by the equity shareholders of the petitioner companies to the proposed Scheme of Amalgamation and the affidavits filed by the Regional Director, Northern Region, and the Official Liquidator not raising any objection to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956. - Application for scheme of amalgamation approved.

Summary

Issues:
1. Scheme of Amalgamation under Sections 391 & 394 of the Companies Act, 1956.
2. Share exchange ratio determination.
3. Approval of the Scheme by the Board of Directors.
4. Requirement of convening meetings of equity shareholders, secured, and unsecured creditors.
5. Publication of notices and responses from the Official Liquidator and Regional Director.
6. Compliance with statutory requirements and grant of sanction to the Scheme of Amalgamation.

Analysis:
1. The joint petition filed under Sections 391 & 394 of the Companies Act, 1956 seeks the sanction of the Scheme of Amalgamation involving three companies - two transferor companies and one transferee company. The Scheme aims at pooling resources, achieving economies of scale, and enhancing business capabilities for future growth.

2. The share exchange ratio is determined in the Scheme where shareholders of the transferor companies will receive one fully paid-up equity share of the transferee company for every four equity shares held in the transferor companies.

3. The approval of the proposed Scheme by the Board of Directors of the transferor and transferee companies is crucial, as it signifies unanimous support for the Amalgamation. Resolutions passed in separate meetings of the Board of Directors confirm their endorsement of the Scheme.

4. The requirement of convening meetings of equity shareholders and creditors was dispensed with by the court after finding no objections from any interested parties. This decision was based on the absence of secured and unsecured creditors and the approval already obtained from the equity shareholders.

5. Notices were issued to the Regional Director and the Official Liquidator, and responses were received confirming compliance with legal provisions. The Official Liquidator's report highlighted the reduction in share capital of the transferee company post-amalgamation, which was addressed by an undertaking to increase the paid-up capital as required by law.

6. After thorough examination and considering the absence of objections, the court granted sanction to the Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956. The petitioner companies were directed to comply with statutory requirements, and the order clarified that it did not exempt them from paying stamp duty. Upon the sanction becoming effective, the transferor companies would stand dissolved without winding up proceedings.