2021 (1) TMI 272 - Tri - Companies Law

Approval for Composite Scheme of Arrangement and Amalgamation - Sections 230-232 of the Companies Act, 2013 - HELD THAT - This Tribunal is of the considered view that the scheme as contemplated amongst the petitioner companies seems to be prima facie beneficial to the Company and will not be in any way detrimental to the interest of the shareholders of the Company. 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 Scheme of Arrangement appended as Annexure A1 with the Company Petition as well as the prayer made therein. The Learned Senior Counsel for the Petitioner companies submitted that no investigation proceedings are pending against the Transferor or Transferee Companies under the provisions of the Companies Act, 1956 or the Companies Act, 2013 and no proceedings against the petitioner companies for oppression or mismanagement have been filed before this Hon'ble Tribunal or erstwhile Company Law Board - Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the petitioners. It is clarified that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any, payment is due or required in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law - Petition allowed.

Issues Involved:
1. Approval of the Composite Scheme of Arrangement and Amalgamation.
2. Directions for convening meetings and compliance with statutory requirements.
3. Rationale and benefits of the Scheme.
4. Compliance with directions for notices and publications.
5. Observations and responses from statutory authorities.
6. Valuation report and accounting treatment.
7. Final observations and approval by the Tribunal.

Detailed Analysis:

1. Approval of the Composite Scheme of Arrangement and Amalgamation:
The Tribunal examined the approval granted by the Board of Directors of the Transferor Companies (Aztec Auto Limited, Freins Metal Limited, Freins Engineering Limited, Task Pressing Limited, Wichitra Auto Limited, and Modular Auto Limited) and the Transferee Company (Transenergy Limited) for the Composite Scheme of Arrangement and Amalgamation. The Scheme involved the cancellation and reduction of 9,260 equity shares of the Transferee Company and the amalgamation of the Transferor Companies with the Transferee Company.

2. Directions for Convening Meetings and Compliance with Statutory Requirements:
The Transferor and Transferee Companies jointly filed the First Motion Application seeking directions for convening meetings of Equity Shareholders and Unsecured Creditors, and for dispensing with the requirement of convening meetings of Secured Creditors. The Tribunal issued directions based on Sections 230-232 of the Companies Act, 2013. Subsequent meetings were held, and reports were filed before the Tribunal.

3. Rationale and Benefits of the Scheme:
The Scheme aimed to pool resources, reduce production costs, increase operational efficiency, strengthen the balance sheet, reduce compliance requirements, and provide better supervision. The integration of synergies and provision of liquidity to shareholders were highlighted as key benefits.

4. Compliance with Directions for Notices and Publications:
The Tribunal directed the Petitioner Companies to issue notices to statutory/regulatory authorities and publish notices in specified newspapers. The Companies complied with these directions and filed an affidavit of service, confirming the issuance of notices and publications.

5. Observations and Responses from Statutory Authorities:
- Regional Director (RD): The RD filed a report stating that the interests of employees were protected, and there were no pending prosecutions or investigations. The RD sought directions for the Transferee Company to file amended MoA and AoA and comply with Section 232(2)(i) of the Companies Act, 2013.
- Official Liquidator (OL): The OL appointed Chartered Accountants to verify the affairs of the Transferor Companies. The report confirmed compliance with statutory requirements and no pending appeals or public deposits.
- Income Tax Department: The DCIT and ACIT raised concerns about outstanding tax demands. The Petitioner Companies provided affidavits and supporting documents to address these concerns, and the Tribunal ensured that the rights of the Tax authorities to recover lawful dues remained intact.
- Other Statutory Authorities: No objections were raised by other statutory authorities, including the Reserve Bank of India.

6. Valuation Report and Accounting Treatment:
The Tribunal reviewed the Valuation Report by an Independent Valuer, recommending the issuance of Optionally Convertible Redeemable Preference Shares by the Transferee Company to the shareholders of the Transferor Companies. The Statutory Auditors certified that the Accounting Treatment in the Scheme complied with applicable Indian Accounting Standards.

7. Final Observations and Approval by the Tribunal:
The Tribunal concluded that the Scheme was beneficial to the Company and not detrimental to shareholders' interests. The Tribunal sanctioned the Scheme, subject to compliance with statutory provisions and payment of applicable fees and taxes. Specific orders were issued regarding the reduction of equity share capital, transfer of properties and liabilities, continuation of pending proceedings, and allotment of shares. The Tribunal also directed the filing of revised MoA and AoA and the dissolution of the Transferor Companies upon registration of the order with the Registrar of Companies.

Conclusion:
The Company Petition was allowed, and the Composite Scheme of Arrangement and Amalgamation was sanctioned on the aforementioned terms. The Tribunal ensured compliance with statutory requirements and protected the interests of shareholders, employees, and tax authorities.

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