2021 (6) TMI 743 - Tri - Companies Law

Sanction of Scheme of Arrangement - Sections 230-232 of the Companies Act, 2013 (for short the 'Act') filed by the Petitioner Companies in terms of Rule 15 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT - There are no objections to the Scheme and hence there is no impediment in the sanction of the Scheme. Therefore, the Scheme (Annexure P-1) is hereby approved. While approving the Scheme, it is clarified that this order should not be construed as an order in any way granting exemption from payment of any stamp duty, taxes, or any other charges, if any, and payment in accordance with law or granting permission in respect of any compliance with any other requirement which may be specifically required under any law. With the sanction of the Scheme, the Demerged Undertaking (as defined in Clause 1.5 of the Scheme) of the Demerged Company shall be transferred to and vested in the Resulting Company. Application disposed off.

Issues Involved:
1. Filing and recording of RD & RoC reports and additional information.
2. Recording of the Demerged Company’s list of appeals and undertaking to pay outstanding demands.
3. Sanction of the Scheme of Arrangement between the Demerged Company and the Resulting Company.
4. Compliance with statutory requirements and directions.
5. No objections to the Scheme from various authorities.
6. Transfer of properties, rights, powers, liabilities, and duties.
7. Continuation of legal proceedings.
8. Transfer of employees.
9. Allotment of shares.
10. Payment of fees and deposits.
11. Delivery of certified copy of the order to the Registrar of Companies.
12. Liberty to apply for further directions.

Issue-wise Detailed Analysis:

1. Filing and Recording of RD & RoC Reports and Additional Information:
The Tribunal addressed the applications CA No. 116/2020 and CA No. 117/2020, which were filed to place on record the RD & RoC reports along with additional information from the Demerged and Resulting Companies. The documents attached with these applications were taken on record, and both applications were disposed of accordingly.

2. Recording of the Demerged Company’s List of Appeals and Undertaking to Pay Outstanding Demands:
CA No. 431/2020 was filed to place on record the list of appeals filed by the Demerged Company regarding demands raised by the Income Tax Department and an undertaking to pay all outstanding demands, if any, found due/payable pursuant to the completion of the proceedings/appeals. The affidavit attached with this application was taken on record, and the application was disposed of.

3. Sanction of the Scheme of Arrangement:
The joint Second Motion Petition under Sections 230-232 of the Companies Act, 2013, was filed for the sanction of the Scheme of Arrangement between the Demerged Company and the Resulting Company. The petition was maintainable under Rule 3(2) of the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016. The Tribunal noted that the main objects, date of incorporation, authorized and paid-up share capital, and the rationale of the Scheme were discussed in detail in the order dated 15.10.2019.

4. Compliance with Statutory Requirements and Directions:
The Petitioner Companies submitted the certificate of statutory auditor certifying that the accounting treatment in the Scheme complied with the Accounting Standards. Audited financial statements and provisional statements were annexed. Directions were issued on 05.12.2019 for advertising the notice of hearing and serving notices to various authorities. Compliance affidavits were filed by the Petitioner Companies, and the Registry reported no objections against the Scheme.

5. No Objections to the Scheme from Various Authorities:
Reports from the Regional Director, Registrar of Companies, Official Liquidator, and Income Tax Department were filed. The Regional Director and Registrar of Companies had no adverse observations. The Official Liquidator reported no pending litigation or long-term contracts that would impact the financial position of the petitioner companies. The Income Tax Department listed outstanding demands for different assessment years, and the Demerged Company provided an affidavit undertaking to pay any outstanding demands found due.

6. Transfer of Properties, Rights, Powers, Liabilities, and Duties:
The Scheme provided that all properties, rights, powers, liabilities, and duties of the Demerged Undertaking would be transferred to the Resulting Company without further act or deed, pursuant to Sections 230 to 232 of the Companies Act, 2013.

7. Continuation of Legal Proceedings:
All legal or other proceedings by or against the Demerged Company related to the Demerged Undertaking would be continued by or against the Resulting Company. If required, the Resulting Company would be added as a party to such proceedings.

8. Transfer of Employees:
Clause 11 of the Scheme stated that all employees engaged exclusively in relation to the Demerged Business Undertaking would become employees of the Resulting Company without any break or interruption of service, with the benefit of continuity of service on terms and conditions not less favorable than those applicable prior to the demerger.

9. Allotment of Shares:
The Share Entitlement Ratio under the Scheme was determined as one equity share of the Resulting Company for every one equity share held in the Demerged Company. This ratio was based on a report issued by Price Waterhouse & Co. LLP.

10. Payment of Fees and Deposits:
The Resulting Company was directed to deposit specified amounts with the Pay and Accounts Office, PM CARES Fund, and the Company Law Tribunal Bar Association, Chandigarh, within four weeks from the receipt of the certified copy of the order.

11. Delivery of Certified Copy of the Order to the Registrar of Companies:
The Petitioner Companies were required to deliver a certified copy of the order to the Registrar of Companies within 30 days. Upon delivery, the Demerged Undertaking would be transferred to the Resulting Company, and the Registrar would consolidate the files accordingly.

12. Liberty to Apply for Further Directions:
The Tribunal granted liberty to any interested person to apply for further directions if necessary.

Conclusion:
The Tribunal approved the Scheme of Arrangement, clarifying that the order did not grant exemption from payment of any stamp duty, taxes, or other charges, or permission for any compliance required under any law. The Demerged Undertaking of the Demerged Company was to be transferred to the Resulting Company, and any deficiencies or violations would not prevent action being taken in accordance with the law. Formal orders were to be issued upon filing the schedule of properties by affidavit.

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