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TMI Blog2019 (5) TMI 1821X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with law for any violation committed by the Companies involved in Scheme. It is settled position of law that Companies involved in the scheme have right to evolve their suitable schemes in accordance with their business interest and public interest, after duly complying with their respective Memo and Articles of Association, however, subject to overall compliance of extant provisions of Companies Act, 2013 and the Rules made thereunder. At the same time, the Tribunal is under obligation to scrutinize the schemes in question, in the light of law on the issue before it is approved. Apart from framing scheme in question, it is duly approved by the Board of Directors of the respective Companies, and it was duly approved by respective stake holders with requisite majority - After analyzing the issue in detail, the Tribunal is convinced that the scheme in question would broadly confirm to the general principles of law as enunciated under provisions of Sections 230 to 232 of Companies Act, 2013 and the rules made thereunder. Therefore, it is a settled position of law that Tribunal shall exercise only supervisory but no appellate powers shall be applicable to the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Bangalore-560048. The Nominal Capital of the Transferee Company is ₹ 3,00,00,000/- (Rupees Three Crores Only) divided into 30,00,000(Thirty Lakhs)Equity Shares of ₹ 10/- (Rupees Ten Only) each. The Issued, Subscribed and Paid up Share Capital of the Company is ₹ 2,65,10,000/-(Rupees Two Crores Sixty Five Lakhs and Ten Thousand Only) divided into 26,51,000 (Twenty Six Lakhs Fifty One Thousand) fully paid up Equity Shares of ₹ 10/- (Rupees Ten Only) each The main objects of the Company, in brief, are to engage in the business of manufacture of High Tensile Fasteners, Industrial Valves, Industrial Components, equipments, etc. (3) With a view to rationalize and consolidated the business activities, the Board of Directors of the Transferor Company and the Transferee Company have decided to amalgamate the Transferor Company with the Transferee Company in order to ensure better management of the Company as a single entity. They are of the opinion the amalgamation in question will be for the benefits of both the Companies in the following manner: a) By this amalgamation, it is expected that the administrative and operational costs will be considerably re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in CA(CAA) No.52/BB/2018, wherein the applicant Company has sought for dispensation of meeting of equity shareholders secured Creditors and unsecured creditors of the Transferor and Transferee Companies. While dispensing with the meetings of the equity shareholders and secured creditors of both Companies the meetings of the unsecured creditors of the Transferor Company and the Transferee Company respectively were directed to be held. The said order directed that Mr. Krishnamurthy M N should act as Chairman of the said meeting of Unsecured Creditors and should report the result thereof to the Hon'ble Tribunal. It is stated that the Tribunal vide order 27th November 2018, in LA No.384 of 2018, the Chairperson to conduct the proposed meeting on 16.01.2019 instead of 29.11.2018 in accordance with law. The orders directed that Mr. S Manjunath should act as Chairman of the said meeting of Unsecured Creditors and should report the result thereof to the Hon'ble Tribunal. (5) Accordingly, notices were duly issued and also advertised notice of meeting in Financial Express and Udayavani on 13th December, 2018. And meeting duly convened on 16th January 2019 at 733, 1st Main C Blo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Seven Crores Ninety Nine Lakhs Thirteen Thousand One Hundred and Twenty One Only) representing 86.31% of the total value of debts of the Company. The said Scheme of Amalgamation of the Company was read and explained by the said Chairman Sri. S Manjunath, to the meeting and it was Resolved unanimously. 3. The Central Government represented by ROC, Karnataka has filed two Affidavits dated 05.04.2019 and 10.04.2019, by inter alia contending as follows: (1) As per Section 232(6) of the Companies Act, 2013 the Scheme shall clearly indicate an Appointed Date from which it shall be effective and the Scheme shall be deemed to be effective from that date and not at subsequent date. Hence, clause 1.2 of the Scheme is contrary to Section 232(6) of the Companies Act, 2013, and needs modification. (2) As per the Scheme, it is mentioned that the Issued, Subscribed and Paid-up Capital of the Transferor Company is ₹ 14,51,000/-divided into 14,51,000 equity shares of ₹ 10/- each. If the capital amount has to be ₹ 14,51,000/-, then the value of each equity share has to be Re.1/- only and not ₹ 10/-. The Petitioner Company may amend the Petition accordingly to sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tamp duty, if any, paid by the Transferor Company on their authorized share capital, shall be deemed to have been so paid by the Transferee Company on the combined authorised share capital and accordingly, the Transferee Company shall be not be required to pay any additional registration fee/filing fee/stamp duty for its increased authorised share capital. The undertaking has been filed by both the applicant Companies. d. The Transferor Company has entered into several with related parties during the year 2016-17 and 2017-18 during normal course of its business activities in accordance with law and there is nothing illegal in those transactions. And all transactions have been entered into after obtaining necessary approvals and are approved by the Board of Directors in their board meeting. The transactions have been made at market prices existing at the time of the transactions. 5. The Official Liquidator has filed a Report in pursuant order dated 2.5.2019 passed in OLR No.58/2019 dated 02.05.2019 by interalia stating, examining the records that there are no adverse remarks found in the affairs of the Company and concluded in para 12.0 and 12.1 of the report dated 25.04.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition and various pleadings filed subsequently, has further submitted that the Scheme of Amalgamation in question is prepared duly complying with the extant provisions of the Companies Act for the sanction of Scheme. The Transferee Company also undertakes to comply with all the terms and conditions, future compliances as contemplated in the Scheme in question. 9. As stated supra, the Scheme in question is framed in accordance with law and the instant petition is filed by disclosing all material facts which includes latest financial position, Auditor report and the statutory Authorities also reported that the affairs of Company are being conducted in accordance with law. So far as the observations/objections as raised by the Statutory Authorities as mentioned supra, any scheme under Section 230-232 of Companies Act, 2013, is to be prepared first basing on parameters in the interest of business, subject to Compliance of extant statutorily Compliance under Companies Act, 2013. A scheme cannot be in violation of any provisions of Articles of Association of a Company and extant provisions of Companies Act, 2013. Any scheme can be approved subject to complying all the terms and condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt can in appropriate cases pierce the veil of apparent corporate purpose underlying the Scheme - However, jurisdiction of court is supervisory and not appellate in nature - Court cannot, therefore, normally interfere with the commercial wisdom of the parties who have taken an informed decision in the meeting - Company Law - Piercing the Corporate Veil. 12. The Court held that when the parameters set out in the case of Miheer H. Mafatlal are met, the court has no further jurisdiction to sit in appeal over the commercial wisdom of the majority of class of persons who have with their eyes open given approval to the scheme, even if in the view of the court there would be better scheme for the Company. United Western bank Ltd V Khaitan Hostombe Spinels Ltd, (2009) 91 SCL, 221 (AII). Wherein it is held is The Hon'ble HC held that when the scheme was approved by the majority of the shareholders and unsecured creditors at the meeting convened under the orders of Hon'ble Court, the Court can allow the Petition, even though the scheme was in violation of accounting standards and also under section 211 of the Companies Act, 1956, if the petitioner submits an undertakin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs agree to any compromise of arrangement, then, the scheme, if sanctioned by the court will be binding on all creditors and members and also on the company or in case of a company being wound up, on the liquidator and contributories of the company In the case of Telecommunication Holdings Pvt. Ltd. In re., India Securities Ltd. In re LCA 95: (2011) 167 Com Cases 566 : (2012) 111 SCL 795 (Mad), wherein, it is interalia held that the Hon'ble HC held that when the scheme was approved by the majority of the shareholders unsecured creditors at the meeting convened under the orders of Hon'ble Court, the Court can allow the petition, even though the scheme was in violation of accounting standards and also under Section 211 of Companies Act, 1956, if the Petitioner submits an undertaking to the court to disclosure of all the documents as requires under law. In the case of Mile Stone Trade Links Pvt. Ltd. In re., (2013)176 C.C 337 (Guj)., wherein it is interalia held that while sanctioning a scheme of amalgamation, the court retains its power to supervise such scheme and is empowered to give directions either at the time of passing the order or thereafter and has t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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