2022 (5) TMI 762 - Tri - Companies Law

Seeking approval of the Scheme of Merger - section 230-232 of the Companies Act 2013 r/w Companies (Compromises Arrangements And Amalgamations) Rules 2016 - HELD THAT - The meeting of the Equity shareholders optionally convertible redeemable non-cumulative Preference shareholder non-convertible redeemable non-cumulative preference shareholder Secured and Unsecured Creditors of the Applicant Company are dispensed with - Application allowed.

Issues Involved:
1. Approval of the Scheme of Merger by Absorption.
2. Dispensation or convening of meetings of shareholders, secured and unsecured creditors.
3. Compliance with statutory requirements and submission of necessary documents.
4. Rationale and benefits of the proposed merger.
5. Valuation and accounting treatment conformity.
6. Employee transition post-merger.

Issue-wise Detailed Analysis:

1. Approval of the Scheme of Merger by Absorption:
The Applicant/Transferee Company, M/s. Biocon Biologies Limited, filed an application under sections 230-232 of the Companies Act, 2013, seeking approval for the Scheme of Merger by Absorption with the Non-Applicant/Transferor Company, M/s. Covidshield Technologies Private Limited. The scheme is detailed in Annexure A of the application.

2. Dispensation or Convening of Meetings:
The Applicant sought dispensation of the meetings of shareholders, secured, and unsecured creditors, or alternatively, directions for convening such meetings and issuing notices through 'The Hindu' and 'Udayavani'. The Tribunal noted that the Applicant had secured the necessary consents from the majority of shareholders and creditors. Specifically, 99.97% of equity shareholders, 100% of optionally convertible redeemable non-cumulative preference shareholders, 100% of non-convertible redeemable non-cumulative preference shareholders, 100% of secured creditors, and 91.03% of unsecured creditors by value had given their consent to the scheme.

3. Compliance with Statutory Requirements and Submission of Documents:
The Tribunal reviewed the compliance with statutory requirements, including the submission of the Certificate of Incorporation, Articles of Association, Board Resolution approving the scheme, and affidavits confirming no pending investigation proceedings against the Applicant Company. The application also included the valuation report, statutory auditor’s certificate, and audited financial statements.

4. Rationale and Benefits of the Proposed Merger:
The rationale for the merger, as stated in the preamble of the scheme, includes complementing capabilities in vaccines and biologies, consolidation of resources, achieving economies of scale, operational synergies, increased financial strength, and improved management focus. The merger is expected to enable better market positioning and cost efficiencies, benefiting all stakeholders.

5. Valuation and Accounting Treatment Conformity:
A certified valuation report dated 03.01.2022 by Raghuraman Krishna Iyer and a certificate from the statutory auditor, BSR & Co. LLP, confirmed that the accounting treatment specified in the scheme conforms to the Accounting Standards prescribed under Section 133 of the Companies Act, 2013, and other generally accepted accounting principles.

6. Employee Transition Post-Merger:
Clause 8 of the scheme ensures that all employees of the Transferor Company will become employees of the Transferee Company on the effective date without any break or interruption in service and on terms not less favorable than their current terms.

Judgment:
The Tribunal allowed the dispensation of meetings for equity shareholders, optionally convertible redeemable non-cumulative preference shareholders, non-convertible redeemable non-cumulative preference shareholders, secured, and unsecured creditors. The First Motion Application bearing CA (CAA) No. 09/BB/2022 was approved, permitting the Applicant Company to file the Second Motion Petition with directions to notify relevant statutory authorities, including the Central Government, Registrar of Companies, Competition Commission of India, Official Liquidator, and Income Tax Authorities, providing them an opportunity to respond.

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