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TMI Blog2015 (6) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... be responsible for any liability of the Transferor Company, whether reflected in its books or not. Thus in the event of any demand raised by the Income Tax Department, the deponent undertakes that the Transferee Company shall duly discharge the same, in accordance with law. The learned counsel, Mrs. Munisha Gandhi, contended that even though the Transferor company may be having a small capital base but it also has other assets which would definitely be used in a more fruitful manner once they merged with the Transferee company which is having a greater capital base and greater resources. She further submits that the companies are part of the same group of companies and economies of scale would be achieved by merging the two entities. She submits that the current balance sheet and assets submitted to this Hon’ble Court and the Scheme clearly prescribes the entire assets of the Transferor Company which stands transferred to the Transferee Company. Moreover, the phrase “whether reflected in the books of accounts or not” in normal business parlance refers to the swapping of new assets with the existing assets or the future income during the course of ongoing business transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am and Sh. Aman Sharma, Advocates had been appointed as Chairman and Co-chairman, respectively, for conducting the meetings of the equity shareholders and secured creditors of the Transferee Company. Sh. Animesh Sharma and Sh. Keshav Gupta, Advocates, had been appointed as Chairman and Co chairman, respectively, for conducting the meeting of the unsecured creditors of the Transferee Company. 4 Accordingly meetings were held and the respective Chairmen filed their reports which were taken on record on 4.2.2014. As per the reports the Scheme was unanimously approved by 100% of the shareholders, present and voting, and also 100% by the secured creditors, present and voting. The Scheme was approved by 100% of the unsecured creditors, present and voting. 5 The first motion petition was allowed vide order dated 4.2.2014 and the petitioner Companies were granted liberty to file a second motion petition in accordance with law. 6 Upon filing of the present petition, notice was issued to the Regional Director, Ministry of Corporate Affairs, Noida and the Official Liquidator. It was also directed that a notice of the hearing of the petition be published in the newspapers namely: T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t respectfully submits that the amalgamation is not prejudicial to the interest of its Members or to public interest. 9. In response to the objections raised by the Regional Director, Northern Region, Ministry of Corporate Affairs, Sh. Sat Paul Nijhawan, the Authorised Signatory of the Transferor Company, filed an affidavit dated 25.3.2014 stating as under: 3. That with reference to the observations made by the Ld. Regional Director in Para 4 of his affidavit, regarding giving an undertaking by the transferor company for complying with all compliances required by the Reserve Bank of India, the deponent on behalf of the transferor company submits as under: a. The Transferor Company is a non deposit taking Non-Banking Finance Company (NBFC) and does not accept any funds from the public. The transferor company does not have any creditors and the same has already been placed on record of the first motion petition (CP 166 of 2013) vide Annexure P- 13 and P-14 thereto, and has also been recorded as such by this Hon ble Court while passing order dated 4.12.2013. b. That the Transferor Company had vide its letter dated 21.10.2013, intimated the Reserve Bank of India (RBI) regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the Transferor Company as on date. This has been duly certified by the Chartered Accountant appointed by the Official Liquidator. c. That clause 4.2 of the Scheme reads as follows: All assets and liabilities along with debts, obligations and duties of the Transferor Company as on the Appointed Date, whether or not included in the books of the Transferor Company, shall be deemed to be and shall become the assets, liabilities, debts, obligations and duties of the Transferee Company and all assets and properties which are acquired by the Transferor Company on or after the Appointed Date but prior to the Effective Date shall be deemed to be and shall become the assets and properties of the Transferee Company and shall under the provisions of Sections 391 to 394 and all other applicable provisions if any of the Act, without any further act, instrument or deed, be and stand transferred to and vested in and be deemed to have been transferred to and vested in the Transferee Company upon coming into effect of this Scheme pursuant to the provisions of the Act. d. In view of the said clause 4.2 of the Scheme it is incumbent upon the Transferee Company to take over and be respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment and earning interest income whereas the Transferee Company is a multi-unit industrial profit making company. Therefore the benefits of the amalgamated business would be automatically available after the merger to the shareholders of Transferor Company. The learned counsel, Mrs. Munisha Gandhi, contended that even though the Transferor company may be having a small capital base but it also has other assets which would definitely be used in a more fruitful manner once they merged with the Transferee company which is having a greater capital base and greater resources. She further submits that the companies are part of the same group of companies and economies of scale would be achieved by merging the two entities. 12. The next observation made by the Income Tax Department is that in Para 4.2 (Para D) of the scheme of amalgamation it has been pointed out that all assets and liabilities along with debt/obligations and duties of the Transferor company, whether or not included in the books of the Transferor company shall be deemed to be and shall become the assets, liabilities etc. It appears that there may be some assets, which may not have been included in the books of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion was obtained by the Petitioner companies from a firm of Chartered Accountants, who having considered all the relevant aspects, suggested the aforesaid exchange ratio keeping in view the valuation of shares of respective companies.The shareholders of both the companies have approved the scheme, which necessarily includes the share exchange ratio. It is not in the purview of the Income Tax Department to sit in judgment over the share exchange ratio or on the other modalities and procedures contemplated in the scheme. The shareholders are the sole authority to decide regarding the exchange ratio of merger and once the shareholders have approved and accepted the same it would not lie with the Income Tax Department to sit in judgment on the wisdom and decision of the shareholders. She further submits that the Official Liquidator has in Para 5 of his report submitted that the amalgamation is not prejudicial to the interest of its Members or to public interest. Thus the objection / observation made by the Income Tax Department is unsustainable and irrelevant. 16. The Learned counsel has referred to the decision of the Gujarat High Court in Kamala Sugar Mills Limited (55 Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. xxxxx In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the Company Court has clearly got earmarked. The following broad contours of such jurisdiction have emerged: 1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391(1)(a) have been held. 2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391Sub-Section (2). 3. That the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. 4. That all necessary material indicated by Section 393 (1)(a) is place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merged companies will be ultimately benefitted or of expenses is a matter for the shareholders to consider c. Vijran Hotel Estates P. Ltd. (2008)146 Comp. Cases 386 (Mad) the Hon ble Madras High Court has held that objections by authorities like the Regional Director in opposing the exchange ratio which is accepted the shareholders cannot be sustained and it has reiterated the position that the court will not sit on judgment on the exchange ratio. Similar is the view taken by our own High Court in the case of Max Estates Ltd. [(2008) 141 Comp. Cases 341 (P H)] and by the Hon ble Apex Court in G. L. Sultania Vs. Securities Exchange Board of India [2007] 137 Comp. Cases 658 (S.C)] 19. Having gone through the Scheme of Amalgamation and taking into consideration the views of the Regional Director and the Official Liquidator, the resolutions passed by the Board of Directors, the consents given by the shareholders of the Transferor Company, and the unanimous approval of the Scheme by the shareholders, secured creditors and unsecured creditors of the Transferee Company and the submissions made by the learned counsel for the petitioner companies, I find no reason to decline the pra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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