2021 (8) TMI 626 - Tri - Companies Law

Scheme of Arrangement by way of Amalgamation - section 230-232 read with section 66 of Companies Act, 2013, and read with Rule 15 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT - There is no additional requirement for any modification and the Scheme of Amalgamation appears to be fair and reasonable and is not contrary to public policy and not violative of any provisions of law. All the statutory compliances have been made under Sections 230 to 232 of the Companies Act, 2013. The Scheme of Amalgamation annexed as Annexure-1 with the Petitions is hereby sanctioned - Petition allowed.

Issues Involved:
1. Compliance with statutory provisions under Sections 230-232 and Section 66 of the Companies Act, 2013.
2. Rationale and benefits of the Scheme of Amalgamation.
3. Treatment of taxes and legal proceedings post-amalgamation.
4. Observations and objections raised by the Regional Director and RoC.
5. Responses and modifications by the Applicant Companies to address objections.
6. Reports from the Official Liquidator and Income Tax Department.
7. Approval from the Reserve Bank of India.
8. Accounting treatment post-amalgamation.
9. Final approval and conditions of the Scheme of Amalgamation.

Detailed Analysis:

1. Compliance with Statutory Provisions:
The application was filed under Sections 230-232 read with Section 66 of the Companies Act, 2013, and Rule 15 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Tribunal ensured that all statutory compliances were met under these sections, confirming the legality of the Scheme.

2. Rationale and Benefits of the Scheme:
The Scheme aimed at the accumulation of resources, better utilization of resources, reduction of costs, and administrative efficiencies. It was intended to establish a larger resource and capital base, facilitating further business development and benefiting shareholders through the combined resources of the companies involved.

3. Treatment of Taxes and Legal Proceedings:
The Scheme provided that all taxes and duties payable by the Transferor Companies would be treated as those of the Transferee Company from the appointed date. It also allowed the companies to revise and file their tax returns accordingly. Furthermore, all legal proceedings by or against the Transferor Companies would continue against the Transferee Company.

4. Observations and Objections by the Regional Director and RoC:
The Regional Director raised several observations:
- Lack of consideration for preference shareholders.
- Need to treat differences as 'Capital Reserve'.
- Unjustifiable share exchange ratio of 1:1.
- Non-filing of PAS-3.
- Compliance with Section 232(3)(i) regarding fee on revised authorized share capital.
- Lack of valuation report.
- Accumulated losses of Transferor Company No. 2.

5. Responses and Modifications by Applicant Companies:
The Applicant Companies responded with the following:
- Clarified cross-holdings of preference shares.
- Modified the Scheme to address the 'Capital Reserve' issue.
- Justified the share exchange ratio based on family consent and provided a fair exchange ratio report.
- Filed PAS-3 Form and paid requisite fees.
- Addressed RoC's observations regarding authorized share capital and compliance with SH-7 filing.

6. Reports from Official Liquidator and Income Tax Department:
The Official Liquidator reported no complaints against the Scheme, stating that the affairs of the Applicant Companies were not prejudicial to members or public interest. The Income Tax Department had no objections, and the companies undertook to meet any tax liabilities.

7. Approval from the Reserve Bank of India:
The Reserve Bank of India approved the Scheme subject to certain post-merger compliances.

8. Accounting Treatment:
The Scheme stipulated that all assets and liabilities transferred would be recorded at book value in the Transferee Company's books. Any differences would be treated as capital reserves after necessary adjustments.

9. Final Approval and Conditions:
The Tribunal found the Scheme fair, reasonable, and compliant with public policy and legal provisions. The Scheme was sanctioned with the appointed date of 01.04.2019. The order clarified that it did not grant exemptions from stamp duty, taxes, or other charges. The companies were directed to file a certified copy of the order with the RoC within 30 days, and the Transferor Companies would be dissolved without winding up upon filing. The Transferee Company was required to file statements in Form No. CAA.8 until the Scheme's full implementation.

Conclusion:
The Scheme of Amalgamation was sanctioned, binding on all stakeholders, with specific directions for compliance and filing requirements. The application CAA-23/ND/2020 was disposed of accordingly.

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