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TMI Blog2021 (7) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Petitioners, namely, Silversand Distributors Limited, the Transferor Company, with Prarthana Sales Private Limited, the Transferee Company, under section 230-232 of the Companies Act, 2013, read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, for sanctioning the Scheme of Amalgamation proposed between the Transferor Company and the Transferee Company. A copy of the Scheme has been annexed as Annexure-E in the petition. 2. The object of this petition is to obtain the approval of the Hon'ble Tribunal for sanctioning the Scheme of Amalgamation of the Petitioner Companies, namely, Silversand Distributors Limited, the Transferor Company, with Prarthana Sales Private Limited, the Transferee Company, wherein all the assets, properties, rights and claims whatsoever of the Transferor Company and their entire undertaking together with all their rights and obligations relating thereto are proposed to be transferred to and vested in the Transferee Company and on the terms and conditions fully stated in the Scheme of Amalgamation, which has been annexed with the petition. 3. From the records it is seen that the First Motion application seeking direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agement and administration in better and more productive utilization of various resources and the business of the companies can be conveniently and advantageously combined together and in general business of the Companies concerned will be carried on more economically and profitably under the said Scheme of Amalgamation. f) The said Scheme of Amalgamation will enable the establishment of a larger company with larger resources and a larger capital base enabling further development of the business of the Companies concerned. The aforesaid Scheme of Amalgamation will also enable the undertakings and business of the said Petitioner Companies to obtain greater facilities possessed and enjoyed by one large company compared with a number of small companies for raising capital, securing and conducting trade on favorable terms and other benefits; g) The said Scheme of Amalgamation will contribute in furthering and fulfilling the objects of the companies concerned and in the growth and development of these businesses. h) The said Scheme of Amalgamation will strengthen and consolidate the position of the amalgamated Company and will enable the amalgamated Company to increase it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, shall be included in the Capital Reserve account or Goodwill, as applicable, in the books of the Transferee Company. But the scheme appears to be having the ingredients of pooling of interest and in paragraph 9.1 of the scheme it is stated that the Transferee Company shall account for the scheme in accordance with Pooling of interest method. But contrary to Accounting Standard-14, in clause 14(c) of the scheme the differences between net assets transferred from the transferor companies and the value of shares to be issued by the transferee company is envisaged to be adjusted with Capital Reserves, instead of the general reserves. Hence the scheme contains distorted accounting treatment contrary to the Accounting Standard arid hence is defective. d) In continuation of the submission in point No. 2(c) hereinabove it is submitted that whereas in terms of the proviso to sub-section (3) of section 232 of the Companies Act 2013 the Auditor of the company is required to give a certificate before Hon'ble Tribunal to the effect that the accounting treatment proposed in the scheme of compromise or arrangement is in conformity with the accounting standards prescribed in sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Amalgamations' issued by the Institute of Chartered Accountants of India and notified by the Central Government and the applicant companies suitable changes in the clause 12.3 and 12.4 of the scheme and submitted the copy of the same. d) That as per the paragraph 3(iv) of Rejoinder dated 26.12.2019 in respect of 2(d) it is stated that the Transferee Company i.e. Prarthana Sales Private Limited had provided the certificate from the practicing Chartered Accountant firm i.e. Amit Sheth and Associates due to non-availability of the company's statutory auditor in the city and urgency in filing the application before the Hon'ble Tribunal, Kolkata Bench. Subsequent company submitted the certificate from the company's statutory auditor with respect to the accounting treatment. e) That as per the paragraph 3(v) of Rejoinder dated 26.12.2019 in respect of 2(e) it is stated that the disposal of fraction shares which would not, even come to one share and hence the contents of clause 11.2 of the scheme doesn't tantamount to buy back of shares and therefore nothing has been stated in the scheme of amalgamation about the compliance of section 68 of the Companies Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, is not a sum of money, and not just the interest of the shareholder in a company, but also represents a set of rights and liabilities. Therefore, getting paid in cash against the share, be in fraction also, tantamounts to buy back of shares. But the scheme does not narrate that the provisions of section 68 of the Companies Act 2013 shall be complied with and hence this clause is repugnant to the provisions of section 230(10) of the Act. The scheme is therefore flawed. 10. The Petitioners have filed three rejoinders, first rejoinder on 26th December 2019, second rejoinder on 17th January 2020 and third rejoinder on 13th February 2020 to the reply affidavit filed by the Central Government, as on 05th August 2019, 06th January 2020 and 12th February 2020, respectively, as mentioned below: With regard to observations of the Central Government, as stated in the said affidavit dated 05th August 2019, we hereby submit as follows: a) With regard to statements in Paragraph 2(a), we say that the transferee company is not required to pay any fee for the increase in authorized capital by way of clubbing of the authorized capital of the transferor company. Both the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Standards, so as to ensure that the financial statements of the Transferee Company reflect the correct financial position on the basis of consistent accounting policy. d) With regard to the statements in Paragraph 2(d), we say that certainly Agarwal Associates , Chartered Accountants were the statutory auditors of the company for the period 01.04.2014 to 18.03.2019 and from 01.04.2019 Krishna Kumar Company were appointed as the statutory auditor's of the Transferee Company. The Transferee Company i.e., Prarthana Sales Private Limited had provided the certificate from the Practicing Chartered Accountant firm i.e., Amit Sheth and Associates due to non-availability of the company's statutory auditor in the city and urgency in filing the application before the Hon'ble National Company Law Tribunal, Kolkata Bench. However, now we have rectified our mistake and have attached the certificate from the company's statutory auditor with respect to the accounting treatment proposed, that the Scheme of Amalgamation is in conformity with the prescribed Accounting Standards; the same is annexed and marked as Annexure E. e) With regard to the statements in Parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment of shares to the shareholders of Transferor Company in the Transferee Company, if any share would come in fraction, will be settled in cash, same is also mentioned in clause 11.2 of the scheme. Further, we say that, clause 11.2 of the scheme of Amalgamation specifically deals with the disposal of fractional shares which would not even come to one share. We hereby undertake that, post sanctioning of scheme of merger, at the time of allotment of shares to the shareholders of the Transferor Company, if shares would come in fraction, would be settled in cash. Detailed calculation of shares to be issued to Transferor Company, subsequent to sanctioning of scheme of Merger is enumerated herein below for your quick reference: Number of Shares to be allotted to the shareholders of Transferor Company post Merger: With regard to observations of the Central Government as stated in the said affidavit dated 12th February 2020, we hereby submit as follows: a) With regard to the statements in Paragraph 2(b), we undertake that, in case any shareholder's holding in the Transferor Company is such that the shareholder becomes entitled to a fraction of an equity shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany shall be continued by or against Transferee Company. e. The Transferee Company do issue and allot shares to the shareholders of Transferor Company, as envisaged in the said Scheme of Amalgamation and for that, if necessary, to increase the authorised share capital. f. The Transferor Company shall stand dissolved without winding up from the appointed date. g. The schedule of assets in respect to the Transferor Companies be filed within a period of 60 days from the date of this Order. h. In the event any of the Petitioner Companies supplies a computerized printout of the said scheme of Amalgamation in acceptable form in the Registry concerned, is hereby directed to append such computerized printouts upon verification to the certificate copy of this Order, without insisting on a handwritten copy thereof. i. The petitioner Companies, respectively, do, within 30 days after the receipt of the certified copy of this Order, cause a certified copy thereof to be delivered to the Registrar of Companies, West Bengal. 14. The CP No. 426/KB/2019, connected with CA (CAA) No. 914/KB/2018, is disposed off, accordingly. 15. Urgent certified copies of this Order, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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