2020 (10) TMI 395 - Tri - Companies Law

Approval of the Scheme of Arrangement by way of Demerger - Sections 230 to 232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and the National Company Law Tribunal Rules, 2016 - HELD THAT - Upon considering the approval accorded by the members and creditors of the Petitioner companies to the proposed Scheme, and the report filed by the Regional Director, Northern Region, Ministry of Corporate Affairs and the report filed by Income Tax Department and also as no objection from any quarter against the Scheme has been received; there appears to be no impediment in sanctioning the present Scheme - Consequently, sanction is hereby granted to the Scheme under Section 230 to 232 of the Companies Act, 2013. The scheme is sanctioned.

Summary

Issues:
1. Approval of Scheme of Arrangement by way of Demerger under Sections 230 to 232 of the Companies Act, 2013.
2. Compliance with procedural requirements for convening/dispensing meetings of Shareholders and Creditors.
3. Affirmation of compliance with orders for newspaper publication and service of notices.
4. No objection from the Regional Director and Income Tax Department against the sanction of the Scheme.
5. Protection of Revenue interest and clarification on Income Tax Department's powers.
6. Absence of pending proceedings against the Petitioner Companies.
7. Confirmation of Accounting Treatment conformity with Accounting Standards.
8. Judicial review of the Scheme's fairness, justness, and reasonableness.
9. Statutory provisions allowing application for Scheme sanction.
10. Scheme's interest in relation to shareholders, creditors, and employees.
11. Approval based on members' and creditors' accord, reports, and absence of objections.
12. Compliance with statutory requirements and potential consequences for deficiencies or violations.
13. Clarification on exemption from stamp duty, taxes, and other charges.

Analysis:
1. The joint Application filed by the Petitioner Companies sought approval for a Scheme of Arrangement through Demerger under Sections 230 to 232 of the Companies Act, 2013. The Scheme was placed on record for review by the Tribunal.

2. Initially, procedural steps were taken, including dispensing with meetings of Shareholders and Creditors after a motion application. Publication in newspapers and service of notices to relevant authorities were duly carried out as directed by the Tribunal.

3. The Regional Director and Income Tax Department expressed no objections to the Scheme, with the latter highlighting pending transactions but raising no concerns, subject to revenue protection.

4. Emphasis was placed on protecting Revenue interests, ensuring no limitations on the Income Tax Department's powers for recovery of dues, penalties, etc. under the law.

5. The Petitioner Companies affirmed the absence of pending proceedings against them and provided certificates from Statutory auditors confirming conformity of Accounting Treatment with prescribed standards.

6. The Tribunal's role was clarified to focus on the Scheme's fairness, justness, and reasonableness, without interfering with corporate decisions approved by shareholders and creditors.

7. The judgment referenced statutory provisions allowing companies to seek sanction for Schemes under Sections 230-234 of the Companies Act, 2013.

8. The Scheme's interest was highlighted as beneficial for both companies, their stakeholders, and employees, with approval based on members' and creditors' accord, along with positive reports from authorities and the absence of objections.

9. The Tribunal granted sanction to the Scheme under Sections 230 to 232 of the Companies Act, 2013, while reminding the Petitioners to comply with statutory requirements and warning of consequences for deficiencies or violations.

10. The judgment clarified that the order did not exempt the Scheme from stamp duty, taxes, or other charges, emphasizing compliance with legal obligations and any specific requirements under the law.