2020 (9) TMI 470 - Tri - Companies Law

Approval of the Composite Scheme of Arrangement - Section 230 to 232 of Companies Act - HELD THAT - The Independent Statutory Auditors of the Transferor Companies and the Transferee Company have filed the Certificate in relation to compliance with the Accounting Standards, and certified that the proposed scheme is in conformity with the accounting standards specified under Section 133 of the Act, read with relevant rules as applicable. Thus, the Petitioner Company has complied with proviso to Section 230 (7) / Section 232 (3) of the Companies Act, 2013. The Petitioner companies have submitted that no investigation proceedings are pending against them under the provisions of the Companies Act, 1956 or the Companies Act, 2013 and no proceedings are pending against the petitioner companies under Section 235 to 251 of the Companies Act, 2013 or under relevant provision of the Companies Act, 1956 - In view of absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal, sanctions the Composite Scheme of Arrangement, annexed as Annexure 9 with the Company Petition as well as the prayer made therein. The scheme is approved.

Issues involved:
1. Approval of the Composite Scheme of Arrangement.
2. Observations and compliance requirements by the Regional Director.
3. Observations by the Official Liquidator and Chartered Accountant.
4. Objections by the Income Tax Department.
5. Compliance with statutory requirements and accounting standards.
6. Final orders and directions by the Tribunal.

Issue-wise Detailed Analysis:

1. Approval of the Composite Scheme of Arrangement:
The Joint Company Petition was filed by four companies: Transferor Company - 1, Transferor Company - 2, Demerged Company (Transferee Company), and Resulting Company, seeking approval for a Composite Scheme of Arrangement under Sections 230 to 232 of the Companies Act, 2013. The Scheme involved four steps:
(a) Amalgamation of Transferor Company - 1 and Transferor Company - 2 with the Transferee Company.
(b) Demerger of certain divisions of the Demerged Company and transferring them to the Resulting Company.
(c) Renaming of the Transferee Company to M/s. MSE Financial Services Limited.
(d) Renaming of the Resulting Company to M/s. Madras Enterprises Private Limited.

2. Observations and Compliance Requirements by the Regional Director:
The Regional Director (RD), Chennai, made two observations:
(a) The authorized capital of the 1st and 2nd applicant companies will be merged with the authorized capital of the 3rd applicant company. The 3rd applicant company must file the amended MOA and AOA with RoC, Chennai, and pay the differential fees for the enhanced authorized capital.
(b) The main objects clauses of the 1st and 2nd applicant companies will be included in the main objects clauses of the 3rd applicant company to enable it to continue their business activities. The 3rd applicant company must file the necessary e-forms with RoC, Chennai, for the change of objects.

3. Observations by the Official Liquidator and Chartered Accountant:
The Official Liquidator reported that the affairs of the Transferor Companies were not conducted in a manner prejudicial to the interest of its members, creditors, or the public. The Chartered Accountant appointed by the Official Liquidator made several observations, including:
(a) Disputed service tax demand pending appeal before CESTAT.
(b) Contingent liabilities reported in audited financial statements.
(c) Internet fraud incident and recovery status.
The Tribunal directed the Transferor Companies to pay a sum of ?50,000/- to the Official Liquidator for the payment of fees to the Auditor.

4. Objections by the Income Tax Department:
The Income Tax Department objected to the Scheme, citing tax arrears of ?24,86,454/- by Transferor Company - 2. The Transferor Company - 2 filed objections and provided details of the outstanding demand and the status of appeals for each assessment year. The Tribunal referred to judgments by the Hon'ble NCLAT and the Supreme Court, which allowed tax authorities to proceed against the Transferee Company for recovery of any tax dues.

5. Compliance with Statutory Requirements and Accounting Standards:
The Independent Statutory Auditors of the Transferor Companies and the Transferee Company certified that the proposed scheme is in conformity with the accounting standards specified under Section 133 of the Act. The Petitioner companies confirmed that no investigation proceedings were pending against them under the Companies Act, 1956 or 2013.

6. Final Orders and Directions by the Tribunal:
The Tribunal sanctioned the Composite Scheme of Arrangement and issued several orders, including:
(a) Transfer of all properties, rights, and interests of the Amalgamating Companies to the Transferee Company.
(b) Transfer of all liabilities, powers, engagements, obligations, and duties of the Transferor Companies to the Transferee Company.
(c) Continuation of all pending proceedings by or against the Transferor Companies against the Transferee Company.
(d) Transfer of employees of the Transferor Companies to the Transferee Company without any break or interruption in service.
(e) Allotment of shares to members of the Transferor Companies and Demerged Company as per the Scheme.
(f) Transfer of properties, rights, and powers of the Demerged Undertaking to the Resulting Company.
(g) Change of names of the Transferee and Resulting Companies and filing of requisite forms with the Registrar of Companies.
(h) Filing of revised Memorandum and Articles of Association with the Registrar of Companies and payment of differential fees for the enhanced authorized capital.
(i) Filing of necessary e-forms for change of object clause with RoC, Chennai.

The Tribunal clarified that the order does not grant exemption from payment of stamp duty, taxes, or other charges, and any deficiency or violation of statutory rules or regulations will not prevent action against the concerned persons, directors, and officials of the petitioners. The Company Petition was allowed on these terms.

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