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2022 (9) TMI 22 - NATIONAL COMPANY LAW TRIBUNAL , NEW DELHI BENCHLaw of Competition

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Issues:
1. Dispensation of meetings of shareholders and creditors
2. Modification in the Scheme
3. Serving notices under Section 230(5) of the Companies Act, 2013

Dispensation of meetings of shareholders and creditors:
The case involved M/s. Ericsson India Private Limited and M/s. Ericsson India Global Services Private Limited seeking to dispense with the requirement of convening separate meetings of shareholders, secured creditors, and unsecured creditors. The Hon'ble NCLAT set aside a previous order and allowed the appeal, leading to the current application for dispensation based on the judgment. The Tribunal, after considering the judgment and submissions, dispensed with the meetings of shareholders and creditors of the Applicant Companies in line with the NCLAT's findings.

Modification in the Scheme:
The Applicant Companies also sought approval for the modification of certain clauses in the Scheme. The Tribunal reviewed the modified Scheme presented by the companies and accepted it, taking it on record. The specific modifications requested were related to Clause 1.4 of Part A of the Scheme and Clause 11.1(viii) of Part B of the Scheme.

Serving notices under Section 230(5) of the Companies Act, 2013:
Regarding the prayer for serving notices under Section 230(5) of the Companies Act, 2013, the Tribunal referred to the relevant provisions of the Act. It was observed that since the meetings were dispensed with and not being convened under Section 230(1) of the Act, the requirement for serving notices under Section 230(3) and 230(5) did not arise. The Tribunal clarified that notices to Sector Regulators and objectors are required at the time of filing the Second Motion application, and thus rejected the prayer for serving notices at the current stage. The application was disposed of based on the directions provided in the judgment.

In conclusion, the Tribunal addressed the issues of dispensing with meetings of shareholders and creditors, approving modifications in the Scheme, and serving notices under Section 230(5) of the Companies Act, 2013. The judgment reflected a thorough consideration of the legal provisions and the specific circumstances of the case, ultimately providing clear directions and decisions on each issue raised by the Applicant Companies.

Tribunal Waives Shareholder Meetings, Approves Scheme Changes for Ericsson Companies.
The Tribunal dispensed with the requirement for convening meetings of shareholders and creditors for M/s. Ericsson India Private Limited and M/s. Ericsson India Global Services Private Limited, aligning with the NCLAT's findings. It approved modifications to the Scheme, specifically to Clause 1.4 of Part A and Clause 11.1(viii) of Part B, as presented by the Applicant Companies. The Tribunal also determined that serving notices under Section 230(5) of the Companies Act, 2013, was unnecessary at this stage since meetings were not convened under Section 230(1). The application was disposed of according to the judgment's directions.

Dispensation of meetings under Section 230 in merger of a wholly owned subsidiary with its holding company - requirement to serve statutory notices under Section 230(5) where meetings are not convened - service of notices to sectoral regulators at the time of filing Second Motion under Rule 16(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016Dispensation of meetings under Section 230 in merger of a wholly owned subsidiary with its holding company - Whether the Tribunal would dispense with convening meetings of shareholders and creditors for the proposed merger between the Transferor and Transferee companies. - HELD THAT: - The Tribunal, having considered the order of the NCLAT which set aside the Tribunal's earlier order and observed that where the merger is of a wholly owned subsidiary into its holding company, no allotment of shares would arise, there is no dilution of shareholding, the net worth of the Transferee is positive and unsecured creditors' liabilities are unaffected, applied that reasoning to the present case. In view of the NCLAT's findings recorded in paragraph 6 of its judgement dated 18.01.2022 and the setting aside of the earlier order, the Tribunal exercised its power to dispense with the meetings of shareholders and creditors of the Applicant Companies. [Paras 7]Meetings of shareholders and creditors dispensed with.Requirement to serve statutory notices under Section 230(5) where meetings are not convened - service of notices to sectoral regulators at the time of filing Second Motion under Rule 16(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Whether notices in terms of Section 230(3) and Section 230(5) of the Companies Act, 2013 must be served where the Tribunal has dispensed with convening meetings, and whether the Applicant Companies' prayer for immediate service should be granted. - HELD THAT: - Section 230(3) and (5) require service of notice to creditors, members and specified authorities in relation to a meeting called pursuant to Section 230(1). Since the Tribunal has dispensed with convening any meetings under Section 230(1) in this matter, the statutory obligation to serve notices under Sections 230(3) and 230(5) does not arise at this stage. Separately, Rule 16(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 contemplates service to sectoral regulators and objectors at the time of filing the Second Motion, when the next hearing is intimated. Applying these provisions, the Tribunal rejected the Applicants' prayer for directions to serve the notices at the present stage and held that service in accordance with Rule 16(2) should be effected at the appropriate stage (Second Motion). [Paras 10, 11]Prayer for immediate service of notices under Section 230(5) rejected; requirement to serve regulators/objectors arises at the Second Motion in accordance with Rule 16(2).Dispensation of meetings under Section 230 in merger of a wholly owned subsidiary with its holding company - Whether the modifications to the Scheme placed on record should be taken on record by the Tribunal. - HELD THAT: - The Applicant Companies placed a modified Scheme on record as part of the application (pages 128-146). The Tribunal examined the modified Scheme and, in exercise of its administrative control over the record, accepted and took the modified Scheme on record as part of the filing. [Paras 8]Modified Scheme taken on record.Final Conclusion: The application is disposed of: meetings of shareholders and creditors are dispensed with in view of the NCLAT judgment; the modified Scheme is taken on record; and the prayer for immediate service of notices under Section 230(5) is declined, with statutory service to regulators and objectors to be effected at the Second Motion in accordance with Rule 16(2).

2022 (4) TMI 889 - NATIONAL COMPANY LAW TRIBUNAL , BENGALURU BENCHLaw of Competition

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Tribunal Clears Company's Demerger Plan, Binds Shareholders & Creditors, Ensures Legal Compliance Without Tax Exemption.
The Tribunal approved the Scheme of Demerger under Sections 230-232 of the Companies Act, 2013, making it binding on all shareholders and creditors of the involved companies. It dispensed with meetings of shareholders and creditors based on obtained consents and public notices. The Tribunal found compliance with statutory requirements and addressed objections from authorities. The demerger involved the transfer of assets, liabilities, and employees to the resulting companies. The Tribunal's order did not exempt the companies from stamp duty, taxes, or other charges, and required compliance with applicable laws. The companies were instructed to make specified deposits and deliver a certified order copy to the Registrar of Companies for registration, concluding the case.

Sanction of Scheme of Demerger under Sections 230-232 of the Companies Act, 2013 - Vesting of assets and liabilities on demerger - Continuation of employees and preservation of employment benefits on demerger - Dispensation of meetings of shareholders and creditors - Compliance with statutory notice and publication requirements - Consideration and disposal of Registrar of Companies/Regional Director observations - Competition law: undertaking as to non-requirement of approval of the Competition Commission of India - Treatment of existing income-tax demands and devolution of tax liabilities under the Scheme - Filing of certified copy and Registrar formalities consequent to sanction - No exemption from stamp duty, taxes or other statutory compliancesSanction of Scheme of Demerger under Sections 230-232 of the Companies Act, 2013 - No exemption from stamp duty, taxes or other statutory compliances - The Scheme of Demerger between the Demerged Company and the two Resulting Companies is sanctioned and declared binding on shareholders and creditors subject to statutory liabilities and compliances. - HELD THAT: - The Tribunal examined the petition, the statutory compliance affidavits, auditor certificates regarding accounting treatment, and responses to statutory authorities. Having found that objections raised had been addressed and that requisite publications, notices and consents (where applicable) were on record, the Tribunal approved the Scheme and declared it binding on all concerned. The sanction is expressly without prejudice to payment of any stamp duty, taxes or other charges and without conferring any exemption from statutory provisions. [Paras 19, 20]Scheme of Demerger sanctioned and declared binding; approval does not exempt parties from stamp duty, taxes or other statutory compliances.Dispensation of meetings of shareholders and creditors - Compliance with statutory notice and publication requirements - Dispensation of convening meetings of equity shareholders and creditors (where applicable) was proper and the required newspaper publications and service on statutory authorities were complied with. - HELD THAT: - The petitioner companies had earlier applied for and obtained dispensation of meetings; compliance affidavits and original newspaper copies were placed on record. The Tribunal noted the First Motion order directing publication and service and accepted the filed proofs (including publications in The Economic Times and Sanjevani and proof of service on statutory authorities) as satisfying those requirements. [Paras 2, 3, 4]Dispensation of meetings sustained and publication/notice requirements held complied with.Consideration and disposal of Registrar of Companies/Regional Director observations - The observations raised by the Registrar of Companies and Regional Director were considered and found to have been adequately addressed by the petitioners. - HELD THAT: - The RD/ROC reports raised queries regarding asset identification, tax impact, unsecured creditors, related party transactions and bank charges/NOCs. The petitioners filed a detailed reply addressing each point, including that asset details are set out in the Scheme, reasons for demerger and anticipated commercial/tax outcomes, consent affidavits of unsecured creditors and bank consent affidavits already on record. The Tribunal found these responses satisfactory and recorded that there was no impediment to approval. [Paras 12, 13, 19]RD/ROC observations disposed of as satisfactorily replied; no impediment to sanction.Competition law: undertaking as to non-requirement of approval of the Competition Commission of India - The petitioners' undertaking that Competition Commission approval is not required for the Scheme was accepted for purposes of sanction. - HELD THAT: - The Competition Commission noted that filings under the Competition Act may be required if thresholds are met. The petitioners submitted a reply and gave an express undertaking that the transaction does not amount to a 'combination' requiring CCI approval. On the basis of that undertaking and the materials before it, the Tribunal proceeded to sanction the Scheme. [Paras 14, 15, 20]Petitioners' undertaking regarding non-requirement of CCI approval accepted for sanction purposes.Treatment of existing income-tax demands and devolution of tax liabilities under the Scheme - Outstanding income-tax demands (if any) shall devolve in accordance with the Scheme and the petitioners shall follow up with tax authorities; sanction is without prejudice to tax authorities' rights. - HELD THAT: - The Income Tax Department informed of outstanding demands against the Demerged Company. Petitioners replied that they would pursue resolution with the tax authorities and pointed out that the Scheme provides for liabilities of the Demerged Undertakings to devolve on the respective Resulting Companies. The Tribunal recorded these submissions and clarified by its sanction-order that approval does not exempt parties from compliance under the Income Tax Act and that tax authorities are at liberty to take appropriate action. [Paras 16, 17, 20]Tax demands to be pursued with authorities; liabilities to devolve under the Scheme; sanction without prejudice to Income Tax Act rights.Vesting of assets and liabilities on demerger - Continuation of employees and preservation of employment benefits on demerger - Filing of certified copy and Registrar formalities consequent to sanction - On the Effective Date, specified division-wise assets, liabilities, pending proceedings and employees shall stand transferred to the respective Resulting Companies; petitioners to file schedule of properties and furnish certified copy to Registrar for record consolidation; certain deposits directed. - HELD THAT: - The Tribunal ordered that all property, rights, liabilities and pending proceedings of the respective divisions shall transfer to and vest in the Resulting Companies without further act or deed and subject to existing charges. Employees of the divisions shall become employees of the Resulting Companies on terms no less favourable and with continuity for benefits. The Tribunal directed filing of Form CAA 7 and affidavit with schedule of freehold and leasehold properties for formal orders, delivery of certified copy to Registrar of Companies to consolidate files, and payment of directed deposits to specified offices/funds within prescribed time. [Paras 20, 21]Assets, liabilities, proceedings and employees to vest/continue in Resulting Companies; Registrar formalities and directed deposits to be completed as ordered.Final Conclusion: The Tribunal sanctioned the Scheme of Demerger between Southfield Paints Limited and the two Resulting Companies, having found statutory publication, service and replies to regulatory observations satisfactory; the vesting of division-wise assets, liabilities, proceedings and employees in the Resulting Companies is ordered, subject to existing charges and without any exemption from stamp duty, taxes or other statutory compliances, and consequential formalities and deposits are directed to be completed within the time stipulated.

2022 (3) TMI 284 - NATIONAL COMPANY LAW TRIBUNAL , AHMEDABAD BENCHLaw of Competition

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Dispensation of amalgamation meetings granted where shareholder and creditor consents were filed and no secured creditors existed.
Meetings of equity shareholders and unsecured creditors in a proposed amalgamation may be dispensed with where all relevant consents are filed and supporting merger documents are produced. The transferor and transferee companies had no secured creditors, so no secured-creditor meetings were required. The application also remained subject to the statutory notice requirements under the Companies Act, 2013 and the Compromise, Arrangement and Amalgamation Rules, 2016, and notice had to be served on the prescribed authorities.

Dispensation of meetings under Sections 230-232 of the Companies Act, 2013 - Convening of creditors' and members' meetings obviated by unanimous consent affidavits - Absence of secured creditors obviating creditor meeting - Service of joint application on regulatory and government authorities under Section 230(5) and Rule 8 of the CAA RulesDispensation of meetings under Sections 230-232 of the Companies Act, 2013 - Convening of creditors' and members' meetings obviated by unanimous consent affidavits - Convening of meetings of equity shareholders and unsecured creditors of the Applicant Transferor Company dispensed with. - HELD THAT: - The Tribunal recorded that all three equity shareholders and the sole unsecured creditor of the transferor company furnished consent affidavits for the proposed scheme of amalgamation. On that basis, and having considered the material on record including board resolutions, valuation report and statutory auditor's certificate, the Tribunal exercised its power under the Companies Act and Rules to dispense with holding the meetings of equity shareholders and unsecured creditors of the transferor company.Dispensation of convening meetings of equity shareholders and unsecured creditors of the transferor company granted in view of consent affidavits.Dispensation of meetings under Sections 230-232 of the Companies Act, 2013 - Convening of creditors' and members' meetings obviated by unanimous consent affidavits - Absence of secured creditors obviating creditor meeting - Convening of meetings of equity shareholders and unsecured creditors of the Applicant Transferee Company dispensed with; meeting of secured creditors obviated as none exist. - HELD THAT: - The Tribunal noted that both equity shareholders of the transferee company submitted consent affidavits and there was a single unsecured creditor who also furnished consent. The record further showed there were no secured creditors. Having regard to these consents and the absence of secured creditors, and after considering the accompanying documents and approvals in principle from stock exchanges, the Tribunal dispensed with the meetings of equity shareholders and unsecured creditors and held that meeting of secured creditors was obviated.Dispensation of convening meetings of equity shareholders and unsecured creditors of the transferee company granted; no meeting of secured creditors required.Service of joint application on regulatory and government authorities under Section 230(5) and Rule 8 of the CAA Rules - Direction issued to serve notice of the joint application on specified governmental and regulatory authorities and to file affidavit of service. - HELD THAT: - In compliance with the statutory scheme, the Tribunal directed each applicant to serve the joint application on the Central Government through the Regional Director, Registrar of Companies, Income Tax authorities with specified particulars, the Official Liquidator and other sectoral regulators as may be applicable, so that those authorities may file their replies in time. The Tribunal required filing of an affidavit of service as proof of compliance with these directions.Applicants directed to serve the joint application on the named authorities and to file an affidavit of service.Final Conclusion: The application under Sections 230-232 of the Companies Act, 2013 is allowed: meetings of equity shareholders and unsecured creditors of both applicant companies are dispensed with (meetings of secured creditors obviated where none exist), and the applicants are directed to serve the joint application on the specified authorities and file proof of service; application C.A.(CAA)/9/2022 disposed of accordingly.

2022 (1) TMI 465 - NATIONAL COMPANY LAW TRIBUNAL , CHANDIGARH BENCHLaw of Competition

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Tribunal Approves Company Amalgamation Scheme with Conditions; Assets and Liabilities Transferred to Transferee Company.
The Tribunal sanctioned the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013, between the petitioner companies, confirming compliance with statutory requirements. The order mandates the transfer of all assets, liabilities, and employees to the Transferee Company, while preserving the rights of tax authorities to recover dues. Approval from CCI was obtained, and no objections were raised by stock exchanges or SEBI. The Tribunal imposed conditions, including the payment of differential fees and a deposit to the Tribunal Bar Association, and ordered the dissolution of the Transferor Company without winding up.

Sanction of scheme of amalgamation - transfer and vesting of assets and liabilities on amalgamation - protection of revenue's right to recover tax dues post-amalgamation - appreciation of appointed date for consequential effect - transfer of employees on amalgamation - set-off of fees paid on authorized capital upon consolidation - filing of certified copy and dissolution without winding up - compliance with Sections 230 to 232 of the Companies Act, 2013 - dispensing with meetings on the basis of consent affidavits and statutory noticesSanction of scheme of amalgamation - compliance with Sections 230 to 232 of the Companies Act, 2013 - Sanction of the Scheme of Amalgamation between the petitioner companies. - HELD THAT: - Having considered the compliance affidavits, statutory notices, reports of the Registrar of Companies/Regional Director, Official Liquidator and Competition Commission of India, and in the absence of any objection, the Tribunal found the proposed Scheme to be prima facie in compliance with the requirements of the Companies Act, 2013 and sanctioned the Scheme appended to the petition. The Tribunal recorded that requisite statutory compliances had been fulfilled and that sanction did not preclude action for any statutory violations discovered later. The sanction was thus granted subject to the directions contained in the order. [Paras 7, 8, 10, 11, 13]Scheme of Amalgamation sanctioned.Transfer and vesting of assets and liabilities on amalgamation - appreciation of appointed date for consequential effect - Legal effect of amalgamation insofar as transfer of property, rights, liabilities and the appointed date are concerned. - HELD THAT: - The Tribunal directed that all property, rights and powers of the Transferor Company shall stand transferred to and vested in the Transferee Company and that all liabilities and duties of the Transferor Company shall become the liabilities and duties of the Transferee Company pursuant to Sections 230 to 232 of the Companies Act, 2013. The Appointed Date for the Scheme was fixed as 05.07.2019 as specified in the Scheme, with the consequence that proceedings pending by or against the Transferor Company shall be continued by or against the Transferee Company from that date. [Paras 13, 16]Assets and liabilities stand transferred to and vested in the Transferee Company with effect from the Appointed Date 05.07.2019.Protection of revenue's right to recover tax dues post-amalgamation - Treatment of outstanding income-tax demands and protection of the revenue's rights after sanction of the Scheme. - HELD THAT: - The Tribunal noted the Income Tax Department's report listing outstanding demands for specified assessment years against both companies. It accepted the Scheme provisions whereby pending litigations and liabilities of the Transferor Company would stand transferred to the Transferee Company and recorded the Transferee Company's undertaking to satisfy such demands as finally determined. The Tribunal emphasised that sanctioning the Scheme does not impede the legitimate rights of tax authorities to recover lawful dues; such rights remain intact and may be enforced against the Transferee Company in accordance with law. The Tribunal relied on precedent and earlier orders to give effect to this protective position for the revenue. [Paras 9]Outstanding tax demands remain enforceable against the Transferee Company as per law; the Scheme does not bar recovery of revenue dues.Transfer of employees on amalgamation - Status of employees of the Transferor Company after amalgamation. - HELD THAT: - The Tribunal recorded the Regional Director's observation that Clause 9 of the Scheme protects employees' interests and ordered that employees of the Transferor Company shall be transferred to the Transferee Company in terms of the Scheme. This ensures continuity of employment in the transferee entity pursuant to the sanctioned Scheme. [Paras 7, 16]Employees of the Transferor Company to be transferred to the Transferee Company as per the Scheme.Set-off of fees paid on authorized capital upon consolidation - filing of revised memorandum and articles and payment of differential fee - Obligation to pay differential fees on consolidation of authorized share capital and set-off of fees already paid by Transferor Company. - HELD THAT: - The Tribunal noted the Regional Director's observation regarding compliance with the requirement to pay differential fees on the consolidated authorized share capital and accepted the petitioners' undertaking to comply with Section 232(3)(i) and pay applicable fees after setting off fees already paid by the Transferor Company. The order directed the Transferee Company to file revised memorandum and articles with the Registrar and make requisite payments of differential fee (if any) after allowing the set-off. [Paras 7, 16]Transferee Company to file revised constitutional documents and pay differential fee, after setting off fees paid by the Transferor Company.Dispensing with meetings on the basis of consent affidavits and statutory notices - filing of certified copy and dissolution without winding up - Procedural compliances relating to dispensation of meetings, service of statutory notices, and post-sanction formalities including dissolution of the Transferor Company. - HELD THAT: - The Tribunal recorded that meetings of equity shareholders and secured creditors were dispensed with based on consent affidavits and that notices to unsecured creditors and statutory authorities had been issued with newspaper publications. It directed that within 30 days of receipt of the certified copy of the order the petitioners shall deliver the certified copy to the Registrar of Companies for registration and, upon registration, the Transferor Company shall be dissolved without undergoing winding up; the Registrar was also directed to consolidate company files. Additional procedural directions included deposit by the Transferee Company towards the Tribunal Bar Association and that Form CAA-7 formal orders be issued upon filing of schedules of properties. [Paras 3, 5, 11, 16, 17]Dispensation of meetings upheld; certified copy to be filed with Registrar and Transferor Company to be dissolved without winding up after registration.Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation between Comstar Automotive Technologies Pvt. Ltd. and Sona BLW Precision Forgings Ltd., directed transfer and vesting of assets, rights, liabilities and employees to the Transferee Company with effect from the Appointed Date 05.07.2019, preserved the revenue's rights to recover outstanding tax dues against the transferee as per law, required compliance with fee set-off and filing formalities, and ordered post-sanction procedural steps including filing of certified copy for registration and dissolution of the Transferor Company.

2022 (1) TMI 69 - NATIONAL COMPANY LAW TRIBUNAL , JAIPUR BENCHLaw of Competition

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Merger Approved: All Assets, Liabilities, and Employees Transferred Without Issuing New Shares; Legal Compliance Ensured.
The Tribunal sanctioned the Scheme of Amalgamation, ensuring compliance with legal and procedural mandates. It ordered the transfer of all assets, liabilities, and ongoing legal proceedings from the Transferor Company to the Transferee Company. Employees of the Transferor Company will continue under the Transferee Company with unchanged terms. As the Transferor Company is wholly owned by the Transferee Company, no new shares will be issued, and existing shares will be canceled. The Transferor Company will be dissolved without winding-up, and the Transferee Company must fulfill statutory filing and payment obligations, including contributions to the Prime Minister's National Relief Fund and the Ministry of Corporate Affairs.

Scheme of Amalgamation - sanction - Vesting of assets and liabilities by operation of law - Dissolution without winding up on amalgamation - Continuity of employment on amalgamation - Cancellation of shares of wholly owned subsidiary - Treatment of taxes, refunds and claims on amalgamation - Procedural compliance for convening meetings and service of notices on statutory authorities - Compliance with FEMA and RBI requirements - Filing of certified copy of order with Registrar of Companies - Direction to deposit amounts to statutory/relief funds and registry feesScheme of Amalgamation - sanction - Vesting of assets and liabilities by operation of law - Dissolution without winding up on amalgamation - Cancellation of shares of wholly owned subsidiary - Continuity of employment on amalgamation - Treatment of taxes, refunds and claims on amalgamation - Sanction of the Scheme of Amalgamation and the legal consequences on assets, liabilities, shares, employees and tax entitlements. - HELD THAT: - Having considered the documents on record, the approvals by members and creditors, the affidavits of no objection filed by statutory authorities and the certificate placed under the proviso to sub section (7) of Section 230, the Tribunal found no impediment to sanctioning the Scheme. The Scheme is declared binding on shareholders and creditors. Pursuant to the Scheme and with effect from the Appointed Date, all assets, rights, titles and interests of the Transferor Company stand transferred and vested in the Transferee Company by operation of law; all debts, liabilities, duties and obligations stand transferred to the Transferee Company; pending proceedings shall continue in the name of the Transferee Company; employees in service on the Effective Date shall become employees of the Transferee Company on the same terms without interruption; equity shares of the Transferor Company held by the Transferee Company shall stand cancelled without further act; and taxes, cess and duties paid or payable, and refunds or claims, shall be treated as those of the Transferee Company. The Tribunal clarified that its sanction does not imply any exemption from payment of stamp duty, taxes or other charges, or from obtaining permissions required under any law. [Paras 13, 14]Scheme sanctioned; assets and liabilities vested in Transferee Company; Transferor Company to be dissolved without winding up upon filing; employees, shares and tax consequences governed as per Scheme.Procedural compliance for convening meetings and service of notices on statutory authorities - Compliance with FEMA and RBI requirements - Filing of certified copy of order with Registrar of Companies - Direction to deposit amounts to statutory/relief funds and registry fees - Satisfaction of procedural requirements and directions for post sanction compliance. - HELD THAT: - The Tribunal recorded compliance with the directions issued earlier regarding notice publication and service on statutory authorities, and took note of the Regional Director's report and the Petitioner Company's response, including its undertaking regarding FEMA/RBI compliances and the absence of objections from Income Tax and SEBI. The Petitioner Company was directed to: file the Schedule of Property in Form CAA 7 by affidavit; within 30 days of receipt of the certified copy deliver the certified copy to the Registrars of Companies of Maharashtra and Rajasthan for registration, upon which the Transferor Company shall be dissolved without winding up; and deposit the specified amounts to the Prime Minister's National Relief Fund and the Online Miscellaneous Fee account of the Ministry of Corporate Affairs within the time stipulated. The Petitioner remains bound to comply with statutory requirements noted by the Regional Director. [Paras 3, 5, 6, 11, 15]Procedural compliances accepted as satisfied; petitioner directed to file Form CAA 7 schedule of property, file certified copy of order with ROCs, make specified deposits and to comply with FEMA/RBI and other statutory requirements.Final Conclusion: The Tribunal granted sanction to the Scheme of Amalgamation between ISAGRO (Asia) Agrochemicals Private Limited and PI Industries Limited, declaring the Scheme binding and giving effect to the transfer and vesting of assets, liabilities, employees and tax entitlements in the Transferee Company, directing dissolution of the Transferor Company without winding up upon filing of the certified order with the Registrars of Companies, and imposing specified post sanction procedural steps and deposits while requiring compliance with FEMA/RBI and other statutory obligations.

2021 (8) TMI 1059 - NATIONAL COMPANY LAW TRIBUNAL , BENGALURU BENCHLaw of Competition

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Tribunal Approves Company Merger Scheme, Effective April 2020, with Conditions for Compliance and Fairness.
The Tribunal provisionally sanctioned the Scheme of Amalgamation between the Transferor Company and the Transferee Company, effective April 1, 2020, contingent upon compliance with all stipulated conditions, undertakings, and statutory requirements. The Scheme was deemed comprehensive, fair, and not detrimental to members, creditors, or public policy. The Transferee Company will assume all liabilities and responsibilities of the Transferor Company. The companies must deliver a certified copy of the order and Scheme to the Registrar of Companies within thirty days, and any aggrieved party may seek directions from the Tribunal.

Scheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - power of Tribunal to sanction scheme subject to conditions - auditor's certificate confirming compliance with applicable accounting standards - transfer of assets and liabilities on amalgamation - no waiver of statutory liabilities or bar on initiation of proceedings - compliance with observations of Registrar of Companies and Regional Director - registration of Tribunal order with Registrar of Companies - dispensation of convening meetings of shareholders and creditorsScheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - power of Tribunal to sanction scheme subject to conditions - Sanction of the Scheme of Amalgamation between Edreams Edusoft Private Limited (Transferor) and Indiavidual Learning Limited (Transferee). - HELD THAT: - The Tribunal examined the petition filed under Sections 230-232 and the accompanying material including the auditor's certificate, reports of ROC and RD, the Official Liquidator's scrutiny report and statutory authorities' communications. Finding that the Scheme is comprehensive, prima facie fair and reasonable, not detrimental to members, creditors or public policy, and that requisite pre-conditions under the Companies Act and Rules have been complied with, the Tribunal was satisfied that it could grant sanction. The sanction is, however, granted subject to compliance with the various undertakings and observations recorded by statutory authorities and other conditions set out in the Order. [Paras 9, 10, 12]The Scheme is provisionally sanctioned, subject to compliance with the undertakings and statutory observations recorded by the Tribunal.Effective date of amalgamation - transfer of assets and liabilities on amalgamation - Effective date of the amalgamation and vesting of assets and liabilities in the Transferee Company. - HELD THAT: - The Tribunal accepted the date proposed in the Scheme as the effective date and ordered that upon the Scheme becoming effective the investment of the Transferee Company in the Transferor Company shall stand cancelled and that assets, liabilities and obligations of the Transferor Company shall stand transferred and vested in the Transferee Company in accordance with the Scheme. The sanction was made operative from the effective date stated in the Scheme, while preserving the Scheme's provisions regarding vesting. [Paras 7, 12, 13]The Scheme is sanctioned with the effective date as 1st April, 2020 and assets and liabilities shall vest in the Transferee Company accordingly.No waiver of statutory liabilities or bar on initiation of proceedings - power of Tribunal to sanction scheme subject to conditions - Whether sanction of the Scheme extinguishes or waives statutory liabilities or prevents initiation of enforcement or regulatory proceedings. - HELD THAT: - The Tribunal reiterated the settled legal position that sanctioning an arrangement does not operate to waive past violations or statutory liabilities and does not prevent statutory authorities from initiating proceedings for alleged contraventions. The Transferee Company will inherit liabilities of the Transferor Company, and statutory authorities remain free to take action and to approach the Tribunal for directions by filing appropriate applications. [Paras 11, 13]Sanction does not waive any pre-existing violations or liabilities; statutory authorities retain the right to initiate proceedings and seek directions.Compliance with observations of Registrar of Companies and Regional Director - auditor's certificate confirming compliance with applicable accounting standards - Obligations to comply with observations made by ROC/RD and to abide by auditor's certificate regarding accounting treatment. - HELD THAT: - The Tribunal noted the observations made by the ROC and RD concerning matters such as authorized capital clubbing, shareholding/CCPS records, related party compliances and convening of meetings (as applicable). It recorded the petitioners' explanations and documents, and directed that the Scheme is to be sanctioned subject to compliance with the undertakings and observations of statutory authorities. The Tribunal relied upon the auditors' certificate confirming that the accounting treatment in the Scheme conforms to applicable accounting standards as a material compliance requirement. [Paras 4, 5, 10, 12]Petitioners must comply with the observations of ROC/RD and adhere to the accounting treatment certified by auditors; sanction is subject to such compliance.Registration of Tribunal order with Registrar of Companies - direction to Registrar for filing/registration - Requirement to file a certified copy of the Tribunal's order and the Scheme with the Registrar of Companies. - HELD THAT: - In terms of the Companies (Compromises, Arrangements and Amalgamations) Rules, the Tribunal directed the companies to deliver a certified copy of the Order along with the Scheme to the Registrar of Companies for registration within the time prescribed by the Rules. This is a statutory compliance step consequent to sanctioning the Scheme. [Paras 13]The company must, within thirty days of receipt of this Order, deliver a certified copy of the Order and the Scheme to the Registrar of Companies for registration.Final Conclusion: C.P.(CAA) No. 48/BB/2020 disposed of by provisionally sanctioning the Scheme of Amalgamation of Edreams Edusoft Private Limited with Indiavidual Learning Limited with effect from 1 April 2020, subject to compliance with auditors' certification, observations of statutory authorities and other conditions; sanction does not extinguish any statutory liabilities and the order is to be filed with the Registrar of Companies within thirty days.

2021 (8) TMI 757 - NATIONAL COMPANY LAW TRIBUNAL , BENGALURU BENCHLaw of Competition

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Tribunal Approves Company Split Scheme, Awaits Compliance with Legal Commitments by April 2021.
The Tribunal provisionally sanctioned the Scheme of Arrangement between the Demerged Company and the Resulting Company with an effective date of 1st April 2021, contingent upon compliance with all undertakings and statutory provisions. The Companies are required to deliver a certified copy of the Order and Scheme to the Registrar of Companies within thirty days. The Tribunal emphasized that the sanction does not preclude statutory authorities from initiating legal action for any prior violations of the Companies Act. Aggrieved parties retain the right to seek directions from the Tribunal.

Scheme of Arrangement - sanction under Sections 230 to 232 of the Companies Act, 2013 - compliance with Accounting Standards prescribed under Section 133 - no waiver of statutory liabilities by sanction of scheme - statutory authorities' right to initiate proceedings notwithstanding sanction - undertakings and compliance with observations of Registrar/Regional Director - shareholder and creditor approval for schemeScheme of Arrangement - sanction under Sections 230 to 232 of the Companies Act, 2013 - shareholder and creditor approval for scheme - compliance with Accounting Standards prescribed under Section 133 - Provisionally sanctioning the Scheme of Arrangement between the Demerged Company and the Resulting Company. - HELD THAT: - The Tribunal examined whether the scheme, after having been approved by the requisite meetings of shareholders and creditors and accompanied by auditors' certificates confirming conformity of the accounting treatment with the applicable Accounting Standards, satisfies the requirements of Sections 230-232 and the Rules thereunder. The Tribunal found that the scheme is comprehensive, deals with continuation of contracts and liabilities, and prima facie complies with statutory requirements. It noted there are no pending investigations under Section 210 and that requisite notices and filings were effected. Consequently the Tribunal was inclined to sanction the scheme subject to compliance with the undertakings and observations recorded by statutory authorities. [Paras 11, 13, 14]The Scheme of Arrangement is provisionally sanctioned with effect from 1st April 2021, subject to fulfillment of the specified undertakings and compliance with statutory provisions.No waiver of statutory liabilities by sanction of scheme - statutory authorities' right to initiate proceedings notwithstanding sanction - undertakings and compliance with observations of Registrar/Regional Director - Whether sanction of the scheme extinguishes liabilities or bars statutory authorities from initiating proceedings against the companies. - HELD THAT: - The Tribunal reiterated the settled principle that sanctioning a scheme of arrangement does not operate to waive or extinguish any statutory liability or prevent initiation of actions for alleged violations of law. In light of the Registrar's and Regional Director's observations, the Tribunal emphasised that statutory authorities remain free to take appropriate action in accordance with law and may approach the Tribunal by filing applications for necessary directions. The Tribunal therefore imposed conditions that the petitioners comply with the undertakings and observations made by the statutory authorities and file requisite undertakings where indicated. [Paras 12, 14]Sanction will not waive any prior violation or liability; statutory authorities retain the right to initiate proceedings and seek directions from the Tribunal.Final Conclusion: The Tribunal provisionally sanctioned the Scheme of Arrangement between the Demerged Company and the Resulting Company effective 1st April 2021, subject to compliance with auditors' certifications, statutory undertakings and the observations of Registrar/Regional Director; and clarified that sanction does not absolve either company of prior liabilities nor bar statutory authorities from initiating appropriate proceedings.

2021 (7) TMI 498 - NATIONAL COMPANY LAW TRIBUNAL , CHENNAI BENCHLaw of Competition

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Corporate Restructuring Approved: Demerger Moves Forward Without Shareholder Meetings, Ensuring Transparency and Compliance.
The National Company Law Tribunal, Chennai Bench, approved the Scheme of Arrangement (Demerger) between the Demerged Company and the Resulting Company, dispensing with the need for meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors based on the consent obtained. The Tribunal directed the issuance of notices to statutory authorities and required publication in newspapers and on company websites. The Tribunal disposed of the Company Application, setting a deadline for presenting the Petition(s) related to the Scheme, ensuring compliance with legal requirements and transparency in the corporate restructuring process.

Scheme of Arrangement (Demerger) - Dispensing with meetings under clause (9) of Section 230 of the Companies Act, 2013 - Notices to statutory authorities under Section 230(5) and Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Requirement of convening meetings of equity shareholders, secured creditors and unsecured creditors - Publication and service of notices for sanction process - Affidavit of exemption under the Competition Act, 2002 and notice to CCIDispensing with meetings under clause (9) of Section 230 of the Companies Act, 2013 - Requirement of convening meetings of equity shareholders, secured creditors and unsecured creditors - Dispensing with convening, holding and conducting of meetings of equity shareholders, secured creditors and unsecured creditors in respect of the Demerged Company and the Resulting Company. - HELD THAT: - The Tribunal recorded that the Demerged Company has 13 equity shareholders whose consent affidavits are on record, one secured creditor who has given consent by affidavit, and 49 unsecured creditors of whom affidavits from consenting unsecured creditors represent 92.42% in value. The Resulting Company has two equity shareholders who have filed consent affidavits, no secured creditors and one unsecured creditor who has filed a consent affidavit. On these facts and documents placed on record, the Tribunal dispensed with convening and holding the respective meetings under clause (9) of Section 230 of the Companies Act, 2013, treating the filed consents and the absence of secured creditors (where applicable) as sufficient to obviate the need for meetings. [Paras 7]Meetings of equity shareholders, secured creditors and unsecured creditors of the Demerged Company and the Resulting Company are dispensed with under clause (9) of Section 230 on the basis of recorded consents and the stated creditor composition.Notices to statutory authorities under Section 230(5) and Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Affidavit of exemption under the Competition Act, 2002 and notice to CCI - Requirement to serve notices on statutory authorities and the scope of such service for the Scheme of Arrangement. - HELD THAT: - The Tribunal directed that the respective companies shall send notices to the Regional Director, Ministry of Corporate Affairs, Registrar of Companies, Income Tax authorities and other sectoral regulators as necessary, in terms of Clause (5) of Section 230 and Sub section (3) of the Act, and Rule 8. It further directed that if the scheme is exempt under the Competition Act, 2002, an affidavit of exemption be filed; otherwise notice to the Competition Commission of India is to be issued. Given the Demerged Company is an unlisted public company and the Resulting Company is a private company, notices to SEBI and stock exchanges were held unnecessary. Authorities were given 30 days from receipt of notice to file objections or representations, failing which it would be deemed they have no objections. [Paras 8]Companies to serve statutory notices as directed; affidavit regarding Competition Act exemption or service to CCI to be furnished; SEBI and stock exchange notices not required in the facts of this case; authorities to respond within 30 days.Publication and service of notices for sanction process - Requirement of convening meetings of equity shareholders, secured creditors and unsecured creditors - Directions as to public and private service of notices, website/display publication, filing proof, and timeline for presentation of the petition. - HELD THAT: - The Tribunal directed the Demerged Company and the Resulting Company to publish notices in one English (Business Standard, All India) and one vernacular (Dinamani) newspaper with wide circulation in Tamil Nadu on or before the specified date, place the notice on the companies' websites and on the registered office notice boards, send private notices to authorities by speed post and file proofs by affidavit at the time of filing the petition. The Registry of the Tribunal was directed to display the notice on its notice board. The Petition(s) were ordered to be presented on or before the date fixed by the Tribunal. [Paras 9, 11]Publication, website/display and private service of notices to be carried out and proof filed by affidavit; registry to display the notice; petitions to be presented by the fixed date.Final Conclusion: The Company Application is disposed of with directions dispensing the convening of meetings for shareholders and creditors of the Demerged and Resulting Companies on the recorded consents and creditor composition; statutory and newspaper notices, including Competition Act compliance or notice to CCI, are to be issued and proof filed; and the petition(s) are to be presented by the date fixed by the Tribunal.

2021 (7) TMI 356 - NATIONAL COMPANY LAW TRIBUNAL , AHMEDABAD BENCHLaw of Competition

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Issues:
Dispensation/convening of meetings for Scheme of Arrangement under Companies Act, 2013.

Analysis:
The application was filed by two companies seeking dispensation/convening of meetings for the Scheme of Arrangement involving amalgamation. The companies are empowered by their Memorandum of Association to enter into such arrangements. The advantages of amalgamation were outlined, including streamlining organization structure, achieving operational efficiency, and enhancing net worth. Both companies' Boards of Directors approved the proposed Scheme, and necessary financial documents were submitted. No investigations or proceedings were pending against the companies under relevant sections of the Companies Act, 2013. The Competition Act, 2002 was deemed inapplicable to the case.

The details of shareholders and creditors were provided, with all equity shareholders and secured creditors consenting to the proposed scheme. Meetings of Equity Shareholders and Secured Creditors were dispensed with due to unanimous consent. However, due to several unsecured creditors, meetings were ordered to be convened for both companies. The meetings were to be conducted physically and through video conferencing or other permitted means. Advertisements and notices were required to be published and sent to creditors as per legal provisions.

Independent Practicing Chartered Accountants were appointed as Chairman and Scrutinizer for the meetings. The Chairman was granted powers under the respective Articles of Association for conducting the meetings. Voting through Proxy was not permitted in case of video conference meetings, but through Authorized Representative. The quorum and procedures for the meetings were specified, and compliance with rules and regulations was emphasized.

The Chairman was directed to report to the Tribunal on the meeting results and file necessary affidavits. Notices were to be sent to relevant authorities, and representations were to be made within the specified period. The companies were instructed to file an affidavit confirming compliance with notice issuance directions. The Tribunal disposed of the Company Application with the provided directions.

Tribunal Waives Meetings for Equity Holders, Mandates Hybrid Meetings for Unsecured Creditors in Merger Plan.
The Tribunal approved the dispensation of meetings for equity shareholders and secured creditors due to unanimous consent regarding the Scheme of Arrangement for amalgamation under the Companies Act, 2013. However, meetings for unsecured creditors were mandated, to be held both physically and via video conferencing. An Independent Practicing Chartered Accountant was appointed as Chairman and Scrutinizer for these meetings, with specific powers and procedures outlined. The Tribunal required compliance with notice and advertisement provisions, and the Chairman was tasked with reporting the meeting outcomes to the Tribunal. The application was disposed of with these directives, ensuring adherence to legal requirements.

Dispensation of meetings of equity shareholders and secured creditors - Convening meetings of unsecured creditors - Compliance with Sections 230-232 of the Companies Act, 2013 and Companies (CAA) Rules, 2016 - Conduct of meetings through video conferencing and other audiovisual means in accordance with MCA circulars - Notice to statutory authorities under subsection (5) of Section 230 and Rule 8 - Voting by ballot/polling paper and prohibition of proxy voting in virtual meetings - Appointment of Chairman and Scrutinizer for creditor meetingsDispensation of meetings of equity shareholders and secured creditors - Compliance with Sections 230-232 of the Companies Act, 2013 and Companies (CAA) Rules, 2016 - Whether meetings of equity shareholders and secured creditors of the applicant companies could be dispensed with - HELD THAT: - The Tribunal found that all equity shareholders and all secured creditors of the respective applicant companies had filed consent affidavits in support of the proposed scheme of amalgamation. The application was considered to have complied with the requirements of Sections 230-232 of the Companies Act, 2013 and the Companies (CAA) Rules, 2016. In view of unanimous consent recorded by shareholders and secured creditors and compliance with statutory filing and certification requirements, the Tribunal exercised its power to dispense with convening meetings of equity shareholders and secured creditors.Meetings of the equity shareholders and secured creditors of both applicant companies are dispensed with.Convening meetings of unsecured creditors - Conduct of meetings through video conferencing and other audiovisual means in accordance with MCA circulars - Voting by ballot/polling paper and prohibition of proxy voting in virtual meetings - Appointment of Chairman and Scrutinizer for creditor meetings - Whether and on what terms meetings of unsecured creditors of the applicant companies should be convened - HELD THAT: - The Tribunal recorded that both applicant companies have several unsecured creditors and therefore it is expedient to convene meetings of unsecured creditors. The Tribunal directed that separate meetings of unsecured creditors for the Transferor and Transferee companies be convened on the specified dates and times, to be conducted physically and also through video conferencing or other audiovisual means as permitted by recent Ministry of Corporate Affairs circulars. Voting at the meetings shall be by ballot/polling paper at the venue; proxy voting is not permitted for virtual meetings in terms of the cited MCA circulars, though Authorized Representatives are permitted. The Tribunal appointed named independent professionals as Chairman (with an alternate) and as Scrutinizer (with an alternate), conferred on the Chairman powers to decide procedural questions and determine disputed entries in company records for valuation purposes, fixed quorum rules, and required the Chairman to publish advertisements and issue notices and to file an affidavit and the meeting result in FORM No. CAA-4 within the time prescribed by the Companies (CAA) Rules, 2016.Meetings of unsecured creditors of each applicant company shall be convened on the directed dates and conducted in accordance with the Tribunal's directions, including use of VC/AV means, voting by ballot/polling paper, appointment of Chairman and Scrutinizer, publication and service of notices, quorum and reporting requirements.Notice to statutory authorities under subsection (5) of Section 230 and Rule 8 - Compliance with Sections 230-232 of the Companies Act, 2013 and Companies (CAA) Rules, 2016 - What statutory communications and filings are required prior to and after the creditor meetings - HELD THAT: - The Tribunal directed that, in compliance with subsection (5) of Section 230 and Rule 8 of the Companies (CAA) Rules, 2016, the applicant companies must forthwith send notices in Form No. CAA.3 (with the required disclosures) to the Central Government through the Regional Director, the Registrar of Companies, Gujarat, the concerned Income Tax authorities and the Official Liquidator, informing them that representations, if any, must be made within 30 days of receipt of such notice. The Tribunal required the applicants to file an affidavit confirming compliance with issuance of notices under subsection (5) of Section 230 and further required the Chairman to file an affidavit before the meeting and to report results in FORM No. CAA-4 within the time prescribed by Rule 14.Applicants must serve statutory notices to the prescribed authorities and file affidavits reporting compliance and the results of the meetings in the specified forms and timeframes.Final Conclusion: The Company Application is allowed to the extent indicated: meetings of equity shareholders and secured creditors are dispensed with on account of consent affidavits; meetings of unsecured creditors of each applicant company are ordered to be convened and conducted in accordance with the Tribunal's directions (including use of VC/AV means, voting method, appointment of Chairman and Scrutinizer, publication and personal service of notices, quorum and valuation rules); statutory notices to authorities and filing of affidavits and FORM No. CAA-4 are mandated. The application is disposed of subject to these directions.

2021 (7) TMI 267 - NATIONAL COMPANY LAW TRIBUNAL , KOLKATA BENCHLaw of Competition

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Approval for Company Split: Tribunal Greenlights Demerger Plan, Enhances Efficiency & Investment Appeal.
The Tribunal approved the Scheme of Arrangement between the Demerged Company and the Resulting Company, facilitating the demerger effective from April 1, 2021. It dispensed with the need for meetings of the Resulting Company's shareholders and creditors due to unanimous consent and absence of creditors, respectively. The Scheme aimed to enhance operational efficiency and attract investors by separating business undertakings. The Tribunal mandated virtual meetings for the Demerged Company's shareholders and creditors, ensuring compliance with statutory requirements, and allowed subsequent procedural steps for formalizing the arrangement.

Scheme of Arrangement - Demerger - Dispensation of meeting - Shareholders' and creditors' meetings - Virtual meeting under MCA Circulars - Service of notice and advertisement under Section 230(5) of the Companies Act, 2013 - Voting threshold of three-fourths in value - Cut-off date for determining voting rights - Appointment of Chairperson and Scrutiniser - Filing of report in Form CAA-4Dispensation of meeting - Shareholders' and creditors' meetings - Dispensation of the convening of meetings of the Resulting Company. - HELD THAT: - The Tribunal accepted the applicants' evidence that the shareholders of the Resulting Company had given consent to the proposed Scheme by affidavit and that the Resulting Company had no creditors, secured or unsecured. On that basis, the Tribunal dispensed with (a) the meeting of the shareholders of the Resulting Company and (b) any meeting of creditors of the Resulting Company, since there were no creditors to be convened. The order records reliance on the consent affidavits and the certified list of creditors as the factual foundation for dispensation. [Paras 17]Meeting of shareholders of the Resulting Company dispensed with on the basis of shareholders' consent affidavits; meeting of creditors dispensed with as there are no creditors.Virtual meeting under MCA Circulars - Service of notice and advertisement under Section 230(5) of the Companies Act, 2013 - Cut-off date for determining voting rights - Voting threshold of three-fourths in value - Appointment of Chairperson and Scrutiniser - Filing of report in Form CAA-4 - Directions for convening and conduct of meetings of equity shareholders, secured creditors and unsecured creditors of the Demerged Company by virtual mode and related procedural requirements. - HELD THAT: - The Tribunal directed that separate virtual meetings of the equity shareholders, secured creditors and unsecured creditors of the Demerged Company be convened on the specified date and times and held in accordance with the MCA General Circulars permitting virtual meetings. It mandated publication of an advertisement and service of notice with copies of the Scheme and the statement required under Section 230 within prescribed timeframes, and required notices to be sent to specified authorities (Regional Director, Registrar of Companies, Competition Commission of India, Income Tax Authorities and stock exchanges) with opportunity for representations within 30 days. The Tribunal specified the cut-off date for voting eligibility, adoption of e-voting (including remote e-voting for shareholders), procedure for quorum to be determined under the Companies Act with virtual attendance counted, and that the resolution shall be deemed passed if approved by a majority in number representing three-fourths in value of votes cast. It appointed a named Chairperson and Scrutiniser for the meetings, directed consolidation and scrutiny of votes and filing of the Chairperson's report in Form CAA-4 verified by affidavit within four weeks of the meetings, and required an affidavit proving service and publication to be filed at least a week before the meetings. The order further permitted filing of the second motion petition within two weeks of filing the Chairperson's report. [Paras 17]Meetings of the Demerged Company shall be convened and conducted virtually in accordance with the MCA Circulars with specified notice, voting, quorum, appointment of Chairperson and Scrutiniser, cut-off date, scrutiny and filing of report in Form CAA-4; applicants to file affidavit proving compliance and may file second motion thereafter.Final Conclusion: The Tribunal allowed the application: meetings of the Resulting Company were dispensed with for want of need (shareholders' consent and no creditors), and detailed directions were issued for virtual convening, notice, voting, quorum, scrutiny, reporting and compliance in respect of the meetings of the Demerged Company; applicants to prove compliance and may proceed to second motion after filing the Chairperson's report.

2021 (6) TMI 728 - NATIONAL COMPANY LAW TRIBUNAL , CHENNAI BENCHLaw of Competition

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Tribunal Approves Shareholder and Creditor Meeting Waivers with Unanimous Consents for Company Transfer.
The Tribunal approved the applications CA/807/CAA/2020 and CA/858/CAA/2020, allowing the dispensation of meetings for the Transferor Company's Equity Shareholders and Unsecured Creditors due to unanimous consent affidavits. Meetings for the Transferee Company's Equity Shareholders and Unsecured Creditors were scheduled with specified quorum requirements. The necessity for meetings of the Transferee Company's Secured Creditors was waived based on consent affidavits. The Tribunal mandated specific procedures for notices and advertisements, compliance with statutory requirements, and appointed officials to oversee the process, ensuring adherence to legal protocols.

Scheme of Amalgamation - Dispensing with convening, holding and conducting meetings of shareholders and creditors - Reduction of share capital consequent to amalgamation - Appointment of Chairperson and conduct of meetings under the Scheme - Notice and publication requirements under Section 230(5) for approval of scheme - Objections/representations by statutory authorities and Official Liquidator reportDispensing with convening, holding and conducting meetings of shareholders and creditors - Whether meetings of the equity shareholders and creditors of the Transferor Company and certain creditors of the Transferee Company could be dispensed with. - HELD THAT: - The Tribunal accepted the applicants' evidence that the Transferor Company had five equity shareholders who had given affidavits consenting to dispense with the meeting, that there were no secured creditors and that the sole unsecured creditor had filed consent. On that foundation the Tribunal dispensed with convening meetings of the Transferor Company's equity shareholders, secured creditors and unsecured creditors. For the Transferee Company the Tribunal recorded that the two secured creditors had furnished their affidavits of consent and accordingly dispensed with convening a meeting of secured creditors of the Transferee Company, while directing that meetings be convened for the Transferee Company's equity shareholders and its unsecured creditors. [Paras 3, 8]Meetings dispensed with for the Transferor Company's equity shareholders, secured creditors and unsecured creditor; meetings of Transferee Company's secured creditors dispensed with, but meetings of Transferee Company's equity shareholders and unsecured creditors ordered to be convened.Appointment of Chairperson and conduct of meetings under the Scheme - The procedure for conduct of the meetings to consider the Scheme and appointment of Chairperson(s). - HELD THAT: - The Tribunal fixed the date, time and venue for the Transferee Company's meetings (equity shareholders and unsecured creditors) and prescribed quorum rules. It appointed a named director as Chairperson (with an alternate) to preside over the meetings, directed the Chairperson to file reports of the meetings within specified time, empowered the Chairperson to issue notices, decide procedural questions and report results of voting, and provided for adjournment rules and treatment of valid proxies consistent with the Companies Act and the Rules. [Paras 9, 10, 11, 12, 15]Meetings to be held as directed; Chairperson appointed with specified powers and obligations; quorum, adjournment and proxy rules prescribed; report and voting requirements fixed.Notice and publication requirements under Section 230(5) - The form and timing of notices, service, and publication to be issued in relation to the meetings and the Scheme. - HELD THAT: - The Tribunal directed that individual notices be sent to entitled members and unsecured creditors at least 30 days in advance together with specified documents including the Scheme and explanatory statement, and that advertisement be published in specified newspapers at least 30 clear days before the meetings. The authorised representatives were directed to file affidavits of service and compliance at least one week before the meetings, and the Registry was directed to display the notice on the NCLT Chennai notice board. [Paras 13, 14, 19, 20]Notices and publications to be issued in the manner and within the timeframes directed; affidavits of compliance to be filed prior to the meetings.Objections/representations by statutory authorities and Official Liquidator report - Whether statutory authorities should be served and afforded an opportunity to object and whether the Official Liquidator should report in respect of the Transferor Company. - HELD THAT: - In terms of the statutory scheme the Tribunal directed notices to the Regional Director, Ministry of Corporate Affairs, ROC, Official Liquidator, Income Tax Authorities and other sectoral regulators as necessary, with a 30 day period for objections or representations. The Tribunal observed that if the scheme is not exempt under the Competition Act an affidavit to that effect should be filed or notice to the Competition Commission issued. The Registry was directed to issue notice to the Official Liquidator in relation to the Transferor Company and the Official Liquidator was asked to appoint chartered accountants and submit a report within four weeks. [Paras 16, 17]Statutory authorities to be served and given 30 days to object; Official Liquidator to submit report on the Transferor Company within four weeks.Compliance with Companies Act and Rules and subsequent presentation of petition - The conditions for compliance with statutory forms, filing of meeting reports and presentation of the petition for sanction. - HELD THAT: - The Tribunal required strict compliance with the Companies Act, 2013 and the Companies (Compromises, Arrangements, Amalgamations) Rules, 2016 including applicable forms and formats. It directed that the Chairperson(s) file report(s) of the meetings within specified periods and permitted presentation of the petition(s) after two weeks from the date of filing those reports. [Paras 6, 15, 20, 21]Applicants must comply with statutory requirements; petition(s) may be presented after the Chairperson(s) file meeting reports and after the lapse of the stipulated two week period.Final Conclusion: The Company Applications CA/807/CAA/2020 and CA/858/CAA/2020 were allowed on the terms directed: meetings of certain classes were dispensed with where consent was on record, meetings of the Transferee Company's equity shareholders and unsecured creditors were ordered to be convened with prescribed procedures, notices and publications were directed to be issued, statutory authorities and the Official Liquidator were to be served and permitted time to respond, and compliance with the Companies Act and Rules was mandated before presentation of the petitions.

2021 (6) TMI 603 - NATIONAL COMPANY LAW TRIBUNAL , CHENNAI BENCHLaw of Competition

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Tribunal Approves Company Merger, Waives Shareholder Meetings, Sets Deadline for Final Steps in Amalgamation Process.
The Tribunal approved the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013, between the Transferor and Transferee Companies. It dispensed with the requirement to hold meetings of Equity Shareholders and Unsecured Creditors, as unanimously approved by the Boards of both companies. The Tribunal directed the issuance of notices to relevant authorities, including the Regional Director and Income Tax Authorities, and required compliance with statutory timelines for objections. The Official Liquidator was notified to report on the Transferor Company. The Tribunal's directions facilitated the procedural steps necessary for the amalgamation, with a deadline set for presenting the final Petitions.

Scheme of Amalgamation - Dispensing with convening, holding and conducting of meetings of equity shareholders and unsecured creditors - Dispensing of meetings under clause (9) of Section 230 of the Companies Act, 2013 - Issuance of statutory notices to regulators and authorities under Clause (5) of Section 230 and sub section (3) of the Companies Act, 2013 - Requirement of affidavit regarding Competition Act exemption or notice to Competition Commission - Appointment of Official Liquidator to report on the Transferor Company - Publication, website posting and service of statutory notices prior to presentation of petitionDispensing with convening, holding and conducting of meetings of equity shareholders and unsecured creditors - Dispensing of meetings under clause (9) of Section 230 of the Companies Act, 2013 - Whether the convening and holding of meetings of equity shareholders and unsecured creditors of the Transferor and Transferee companies should be dispensed with. - HELD THAT: - The Tribunal accepted the companies' representation and documentary proof that each company has only two equity shareholders and that their consents by affidavit have been placed on record, and further that there are no secured creditors in either company. For unsecured creditors, the Transferor Company produced affidavits from consenting creditors whose consent by value amounted to 97.21% of the total unsecured claims, and the Transferee Company produced affidavits from consenting unsecured creditors whose consent by value amounted to 93.91% of the total unsecured claims. On that basis the Tribunal dispensed with convening meetings of equity shareholders and unsecured creditors and allowed dispensation under clause (9) of Section 230, recording that the necessity of convening such meetings does not arise in the facts of the present case. [Paras 7]Meetings of equity shareholders and unsecured creditors of both Transferor and Transferee companies are dispensed with; convening of secured creditor meetings was unnecessary as there are no secured creditors.Issuance of statutory notices to regulators and authorities - Requirement of affidavit regarding Competition Act exemption or notice to Competition Commission - Whether notices should be issued to statutory authorities and sectoral regulators and whether an affidavit regarding Competition Act exemption is required. - HELD THAT: - In exercise of powers under Clause (5) of Section 230 and sub section (3) of the Companies Act, 2013 the Tribunal directed issuance of notices to the Regional Director, Ministry of Corporate Affairs, Registrar of Companies, Income Tax Authorities, The Rubber Board of India and such other sectoral regulators or authorities as may be necessary. The Tribunal observed that if the scheme is exempted under the Competition Act, 2002 an affidavit to that effect should be filed; otherwise notice to the Competition Commission of India should be issued. As the applicants are private limited companies, notice to SEBI and stock exchanges was not required. Authorities were directed to file objections within 30 days of receipt of notice, failing which it would be deemed there were no objections. [Paras 8]Notices are to be issued to the specified statutory and sectoral authorities; affidavit regarding Competition Act exemption must be filed or notice to CCI issued; SEBI and stock exchange notices not required for private companies.Appointment of Official Liquidator report - Whether a report from the Official Liquidator in respect of the Transferor Company should be obtained. - HELD THAT: - The Tribunal directed the Registry to issue notice to the Official Liquidator in respect of the Transferor Company and permitted the Official Liquidator to appoint chartered accountants to assist, directing the Official Liquidator to submit a report regarding the Transferor Company within four weeks from receipt of the order. [Paras 9]Registry to issue notice to the Official Liquidator; Official Liquidator to file a report within four weeks and may appoint chartered accountants for assistance.Publication, website posting and service of statutory notices prior to presentation of petition - What are the requirements for publication, website posting and service of notices and the timeline for presentation of the petition. - HELD THAT: - The Tribunal directed the Transferor and Transferee Companies to publish separate notices in one English (The Indian Express) and one vernacular (Dina Mani) newspaper having wide circulation in Tamil Nadu not less than 30 days before the next hearing; to place the notice on their website and on the registered office notice board; and to send private notices to the authorities by speed post and file proofs by affidavit at the time of filing the petitions. The Registry was directed to display the notice on the NCLT Chennai notice board. The Tribunal disposed of the company applications subject to compliance and fixed the last date for presentation of the petition(s). [Paras 10, 11, 12]Companies to effect and file proof of newspaper publication, website posting and service of notices as directed; petitions to be presented on or before the date fixed by the Tribunal.Final Conclusion: The Tribunal dispensed with convening meetings of equity shareholders and unsecured creditors of both applicant companies on the basis of recorded consents and absence of secured creditors; directed issuance of statutory notices (including to specified authorities and, if applicable, to the Competition Commission), required an Official Liquidator's report on the Transferor Company, ordered publication, website posting and service of notices with proof, disposed of the company applications and fixed the last date for presentation of the petition(s).

2021 (6) TMI 319 - NATIONAL COMPANY LAW TRIBUNAL , CHENNAI BENCHLaw of Competition

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ISSUES PRESENTED AND CONSIDERED

1. Whether the Composite Scheme of Arrangement and Amalgamation (comprising capital reduction, amalgamation and demerger) complies with Sections 230-232 and other applicable provisions of the Companies Act, 2013 and may be sanctioned.

2. Whether the proposed reduction of paid-up share capital of the transferor (Transferor-2) and its adjustment against accumulated losses may be sanctioned under the "Explanation" to Section 230 of the Act without separate application under Section 66.

3. Legitimacy of ante-dated appointed dates (1 April 2017 for reduction and amalgamation; 23 May 2019 for demerger) and need for specific disclosures arising therefrom.

4. Appropriate accounting treatment and applicable accounting standards for (a) amalgamation of entities under common control and (b) demerger - whether Ind AS 103 (Appendix C) is to be applied and whether the scheme's accounting treatment is acceptable.

5. Whether part-merging/combining of authorized capital in relation to a demerged undertaking with the resulting company is permissible under the statutory scheme (i.e., compatibility with Sections 61 and 232).

6. Effect of statutory authorities' reports (Regional Director, Official Liquidator, Income-Tax Department, RBI and others) on sanction - sufficiency of statutory responses and remedial undertakings.

7. Transfer of assets, liabilities, employees and ongoing proceedings consequent to amalgamation/demerger and the extent of continuity of rights and obligations.

8. Ancillary matters: conformity with valuation, auditors' certifications and compliance with stamp duty/tax liabilities; remuneration of auditor engaged by the Official Liquidator.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sanctionability of the Composite Scheme under Sections 230-232

Legal framework: Sections 230-232 and Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 govern court sanction of schemes involving compromise, amalgamation, demerger and capital reduction.

Precedent treatment: The Court applied established principles that sanction will not be withheld where statutory compliances are satisfied and no substantive objections are raised by stakeholders or statutory authorities.

Interpretation and reasoning: Tribunal examined Scheme parts (reduction, amalgamation, demerger), statutory filings, statutory authority reports and auditors' certificates. No pending prosecution/inspection/investigation was found; statutory notices produced either positive responses or no objections. The Tribunal found prima facie compliance with the Act and Rules and no material prejudice to shareholders/creditors.

Ratio vs. Obiter: Ratio - A composite scheme that satisfies statutory requirements, is supported by auditors' certification and unopposed by statutory authorities, is fit for sanction under Sections 230-232. Obiter - Expressions that sanction does not exempt parties from future enforcement of other laws (tax, stamp duty, etc.).

Conclusions: Scheme sanctioned subject to the conditions and directions set out in the order.

Issue 2: Reduction of capital under the "Explanation" to Section 230 and its effect

Legal framework: Reduction of capital contemplated under Section 66 (and Explanation to Section 230 permitting reduction as part of arrangement) and Sections 230-232 procedures for court-sanctioned arrangements.

Precedent treatment: Tribunal relied on statutory provision permitting reduction within arranged scheme; must ensure adjustment against accumulated losses and appropriate disclosures.

Interpretation and reasoning: Transferor-2's paid-up capital reduction (specified quantum) is to be adjusted fully against accumulated losses. The Tribunal directed the reduction to operate in accordance with Section 230 without any separate application, and treated its sanction as sufficient for the reduction to have effect.

Ratio vs. Obiter: Ratio - Capital reduction effected pursuant to a court-sanctioned scheme under Section 230 (Explanation) is effective without separate Section 66 proceedings, provided statutory formalities and disclosures are observed. Obiter - The Tribunal's clarification that the sanction shall not exempt liability under other enactments.

Conclusions: Reduction sanctioned as part of the Scheme; the order deemed to satisfy Section 66(3) requirements for confirming reduction insofar as adjustment against accumulated losses is concerned.

Issue 3: Ante-dated appointed dates and required disclosures

Legal framework: Companies Act and MCA guidance (General Circulars) require justification when appointed dates are significantly ante-dated; full disclosure in financial statements is necessary to avoid misleading comparatives.

Precedent treatment: Tribunal required undertaking and disclosure where appointed date pre-dates proposal by more than a year.

Interpretation and reasoning: Regional Director observed appointed dates were ante-dated. Petitioners furnished affidavit of undertaking explaining commercial rationale (warranty continuity, global support, uniform financial presentation) and undertook to make necessary disclosures in first financial statements after scheme effect. Tribunal accepted the justification and the undertaking.

Ratio vs. Obiter: Ratio - Ante-dated appointed dates are permissible if justified and accompanied by specific disclosures in financial statements, and if not against public interest. Obiter - Commercial reasons (warranty continuity, pricing, dealer assurance) can constitute valid justification but must be clearly disclosed.

Conclusions: Ante-dating accepted on record subject to the specified disclosure obligation in post-scheme financial statements.

Issue 4: Accounting treatment - adoption of Ind AS 103 (Appendix C) for common-control combinations and demerger

Legal framework: Section 133 requires accounting in accordance with notified Indian Accounting Standards; Ind AS 103 (and Appendix C concerning common-control business combinations) governs treatment for combinations under common control.

Precedent treatment: Tribunal required explicit statement of which accounting standard will be followed; RD sought clarification whether AS or Ind AS 103 would apply.

Interpretation and reasoning: Petitioners expressly undertook to apply Appendix C to Ind AS 103 for both amalgamation (common control business combination) and demerger, with specified entries (carrying amounts, adjustments to capital reserve, equity adjustments) and flexibility for Board to make suitable adjustments to comply with applicable standards. Statutory auditors certified compliance. RD's concerns on accounting treatment were thereby addressed.

Ratio vs. Obiter: Ratio - Where Ind AS applies, Appendix C to Ind AS 103 is an acceptable basis for accounting for common-control amalgamations and demergers; explicit undertaking and auditors' certification satisfy Tribunal's requirements. Obiter - Tribunal noted companies may alter accounting treatment if necessary to ensure uniform policies or compliance, subject to Board determination.

Conclusions: Accounting treatment accepted as part of scheme; declarations incorporated into order.

Issue 5: Merging part of authorized capital in a demerger - statutory permissibility

Legal framework: Section 232(3)(i) permits merging of authorized capital of transferor with authorized capital of transferee in merger/amalgamation; Section 61 and other provisions regulate alteration of share capital.

Precedent treatment: RD observed that statute does not expressly provide for division/merging of authorized capital under demerger; petitioners argued by analogy that portion representing demerged undertaking may merge with resulting company's authorized capital, with subsequent filings and payment of differential fees.

Interpretation and reasoning: Tribunal recorded RD's observation and petitioners' undertaking to file amended MOA/AOA and comply with fee payments and Section 232(3)(i) formalities. Tribunal accepted the undertaking and directed requisite filings and fee adjustments, while noting the legal point for consideration in order text.

Ratio vs. Obiter: Obiter - The Tribunal did not conclusively resolve the legal question whether Section 232(3)(i) applies to demergers; instead accepted practical compliance by parties (MOA/AOA filings and fee payments) and incorporated directions. The restraint reflects administrative remedy orientation rather than a binding precedent on statutory interpretation.

Conclusions: Practical compliance ordered (filings, fee payment) and parties directed to take steps; RD's statutory concern noted but not treated as bar to sanction once undertakings were given.

Issue 6: Effect of statutory authorities' reports (RD, Official Liquidator, Income-Tax, RBI) and remedial undertakings

Legal framework: Notices to and reports from statutory/regulatory authorities are material; Tribunal must consider RD and OL reports and any objections/observations; absence of response from departments is treated as no objection unless record shows otherwise.

Precedent treatment: Tribunal considered RD's observations in detail and allowed petitioners' affidavit of undertaking to address them; OL's independent audit report was taken on record and remedial directions issued; absence of response from Income-Tax/RBI treated as no objection.

Interpretation and reasoning: RD raised specific accounting, disclosure and procedural concerns; petitioners' undertakings and accounting clarifications satisfied RD. OL's investigative report led to a direction that transferor companies jointly pay auditor's fees to OL. No response from tax and RBI led Tribunal to presume no objection, subject to the right of revenue to pursue statutory remedies.

Ratio vs. Obiter: Ratio - Tribunal may sanction scheme where statutory authorities either raise only clarificatory observations that are duly addressed or do not object; OL's recommendations may attract cost directions. Obiter - Non-appearance of a statutory authority is presumed to amount to no objection but does not preclude future action by that authority.

Conclusions: RD's observations addressed by undertakings; OL's report accepted and parties directed to pay auditor's fee; absence of Income-Tax/RBI response treated as no objection but revenue's statutory rights preserved.

Issue 7: Transfer/vesting of assets, liabilities, employees and pending proceedings

Legal framework: Section 232(3) provides for transfer and vesting of assets, liabilities and proceedings in amalgamation; employment continuity principles apply on demerger/amalgamation.

Precedent treatment: Tribunal applied statutory vesting provisions to effect automatic transfer without further act or deed, and safeguarded employee continuity.

Interpretation and reasoning: Tribunal directed that all properties, liabilities, obligations and proceedings of transferor companies vest in transferee; employees in service immediately before effective date become employees of transferee without break; similar directions for demerged undertaking to resulting company. The order specified continuation of pending proceedings by/against successor entities.

Ratio vs. Obiter: Ratio - Court sanction under Section 232(3) effects automatic transfer/vesting of assets, liabilities, employees' services and pending proceedings to the successor company; continuity of employment is to be ensured. Obiter - None beyond statutory application.

Conclusions: Vesting and continuity directions issued and embodied in sanction order.

Issue 8: Ancillary matters - valuation, auditors' certificates, tax/stamp liability and OL remuneration

Legal framework: Valuation and auditors' certification support fairness and compliance; sanction does not absolve parties from external tax, stamp or statutory dues; Tribunal may direct payment of fees for statutory investigations.

Precedent treatment: Tribunal examined valuation reports and auditors' certifications and accepted them; reiterated that sanction is without prejudice to actions under other enactments.

Interpretation and reasoning: Valuation yielded exchange ratios for amalgamation and demerger; statutory auditors certified compliance with accounting requirements. Tribunal accepted certifications and valuation, sanctioned allotments accordingly. Tribunal clarified order is not exemption from stamp duty/taxes and directed Transferor Companies to jointly pay Rs. 60,000 to Official Liquidator for auditor remuneration.

Ratio vs. Obiter: Ratio - Valid valuation and auditors' certification are material for sanction; sanction does not preclude subsequent recovery or proceedings for statutory dues. Obiter - The quantum of costs/remuneration is a fact-specific direction.

Conclusions: Valuation and auditor certifications accepted; allotment directions issued per ratios; parties admonished that sanction does not exempt tax/stamp liabilities; payment to OL directed.

Business Merger and Real Estate Demerger Approved; Capital Reduction Ordered, Employees Protected, Shares Allotted.
The Tribunal sanctioned the Composite Scheme of Arrangement and Amalgamation, which involved the capital reduction of Transferor Company-2, the amalgamation of Transferor Companies 1, 2, and 3 into the Transferee Company, and the demerger of the Real Estate Business into the Resulting Company. The scheme was deemed compliant with the Companies Act, 2013, with no objections from shareholders or statutory authorities. The Tribunal ordered the reduction of share capital, transfer of properties and liabilities, continuation of pending proceedings, and transfer of employees without interruption. Appointed dates were set for April 1, 2017, and May 23, 2019, for the respective processes. The Transferee and Resulting Companies were directed to allot shares accordingly, and the Transferor Companies were to be dissolved. The Company Petitions were allowed on these terms.

Sanction of composite scheme of arrangement and amalgamation - reduction of share capital and adjustment against accumulated losses - vesting of assets and liabilities on amalgamation/demerger - transfer of employees on amalgamation/demerger - appointed date for scheme and disclosure of ante-dated appointed date - accounting treatment under Appendix C to Ind AS 103 for common-control combinations - filing of sanctioned order with Registrar of Companies and consequential dissolution - direction for payment of fees to Official Liquidator for auditors' inquirySanction of composite scheme of arrangement and amalgamation - Sanction of the Composite Scheme of Arrangement and Amalgamation as between the petitioner companies. - HELD THAT: - After examining the Scheme, statutory compliance, reports and undertakings filed by the petitioner companies and the responses of statutory authorities, the Tribunal found the Scheme prima facie to be in compliance with the Companies Act, 2013 and that there were no objections indicating the Scheme would be detrimental to shareholders. The Tribunal therefore sanctioned the Composite Scheme appended as Annexure "A4" to the petitions and made the sanctioning order subject to the observations recorded in the order (including that sanction does not operate as exemption from payment of stamp duty/taxes and does not preclude action in law for any statutory violations). [Paras 10, 12]The Composite Scheme of Arrangement and Amalgamation is sanctioned.Reduction of share capital and adjustment against accumulated losses - Reduction of the paid up share capital of Transferor Company 2 and adjustment of the reduced amount against its accumulated losses. - HELD THAT: - The Tribunal authorised the capital reduction of Transferor Company 2 as set out in the Scheme, and directed that the reduced share capital shall be adjusted against the accumulated losses of the company. The Tribunal recorded that such reduction is brought under arrangement under Section 230 of the Act and shall operate without further application, act or deed by the company or its shareholders. [Paras 7, 11]The reduction of the paid up equity share capital of Transferor Company 2 is sanctioned and the reduced amount shall be adjusted against its accumulated losses.Vesting of assets and liabilities on amalgamation/demerger - transfer of employees on amalgamation/demerger - Vesting of properties, rights, liabilities and continuation of proceedings; and transfer of employees consequent to amalgamation and demerger. - HELD THAT: - Pursuant to the sanction, all properties, rights and interests of Transferor Companies 1, 2 and 3 stand transferred and vested in the Transferee Company without further act or deed, and all their liabilities, obligations and pending proceedings shall continue by or against the Transferee Company. Similarly, the Demerged undertaking's properties, rights and liabilities shall transfer to the Resulting Company. All employees in service in the Transferor Companies and in the Demerged undertaking immediately prior to the effective date shall become employees of the Transferee Company or Resulting Company respectively on the same terms, without interruption. [Paras 11]Assets, liabilities, proceedings and employees of the Transferor Companies and the Demerged undertaking are transferred to and shall be continued by the Transferee Company and Resulting Company as specified in the Scheme.Appointed date for scheme and disclosure of ante-dated appointed date - Fixing of the appointed dates for parts of the Scheme and requirement of disclosure in respect of ante dated appointed date. - HELD THAT: - The Tribunal fixed the appointed dates as specified in the Scheme: 1 April 2017 for Part B (capital reduction) and Part C (amalgamation), and 23 May 2019 for Part D (demerger). The Regional Director's observation regarding the ante dating of the appointed date was addressed by the petitioners' affidavit of undertaking explaining the commercial reasons and by the Transferee Company's undertaking to disclose in the first financial statements after giving effect to the Scheme that prior year figures for 2017 18 and 2018 19 are not comparable due to the Scheme being given effect from 1 April 2017. [Paras 7, 11]Appointed dates are fixed as 1 April 2017 (for Part B and C) and 23 May 2019 (for Part D); petitioners to make the disclosures as undertaken concerning the ante dated appointed date.Accounting treatment under Appendix C to Ind AS 103 for common-control combinations - Adoption of the accounting treatment for the amalgamation and demerger in accordance with Appendix C to Ind AS 103 and related undertakings. - HELD THAT: - The Tribunal recorded the petitioners' undertaking that the accounting treatment for the amalgamation of Transferor Companies into the Transferee Company and for the demerger into the Resulting Company shall follow Appendix C on 'Business Combination of entities under common control' to Ind AS 103 as prescribed under Section 133 of the Companies Act, 2013, with specified adjustments to capital reserve and book values. The Regional Director's query regarding whether AS or Ind AS would be followed was satisfied by the affidavit of undertaking, and the Tribunal treated the stated accounting treatment as forming part of the Scheme. [Paras 7, 9]The accounting treatment set out by the petitioners, premised on Appendix C to Ind AS 103 for common control combinations, is accepted and forms part of the Scheme.Direction for payment of fees to Official Liquidator for auditors' inquiry - Direction to Transferor Companies to pay the Official Liquidator for fees of the auditor who investigated the affairs of the Transferor Companies. - HELD THAT: - Having taken on record the report obtained by the Official Liquidator via a panel Chartered Accountant and the observations therein, the Tribunal directed Transferor Companies 1, 2 and 3 to jointly pay the sum specified to the Official Liquidator toward the remuneration of the auditor who investigated their affairs. [Paras 7]Transferor Companies 1, 2 and 3 are directed to jointly pay the fees to the Official Liquidator for the auditor's investigation.Filing of sanctioned order with Registrar of Companies and consequential dissolution - Requirement to file certified copy of the sanction order with the Registrar of Companies and effect of such filing on dissolution and consolidation of records. - HELD THAT: - The Tribunal ordered that within thirty days of receipt of the order, certified copies shall be delivered to the Registrar of Companies for registration; upon such filing, the Transferor Companies shall be dissolved and the RoC shall consolidate files and documents as directed. The order also required the Transferee and Resulting Companies to file revised Memorandum and Articles and make requisite payments for enhanced authorised capital after setting off fees paid by transferor entities. [Paras 11]Petitioners to file certified copy of the order with the RoC, effect necessary filings for MOA/AOA and fee payments; on filing, Transferor Companies shall be dissolved and RoC records consolidated.Final Conclusion: The National Company Law Tribunal, Chennai bench, after considering the Scheme, statutory reports and petitioners' undertakings, sanctioned the Composite Scheme of Arrangement and Amalgamation subject to stated undertakings and observations; authorised the specified reduction of capital of Transferor Company 2 and its adjustment against accumulated losses; directed vesting of assets, liabilities and employees as per the Scheme; fixed the appointed dates; accepted the accounting treatment under Appendix C to Ind AS 103 as part of the Scheme; directed payment to the Official Liquidator for the auditors' fees; and ordered filing of certified copy of the order with the Registrar of Companies with consequential dissolution of the Transferor Companies.

2021 (6) TMI 599 - NATIONAL COMPANY LAW TRIBUNAL , PRINCIPAL BENCH, NEW DELHILaw of Competition

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Shareholders' Meetings Mandatory Under Companies Act: NCLT Cannot Exceed Two-Member Bench Limit.
The bench determined that shareholders' meetings cannot be dispensed with under Section 230(1) of the Companies Act, 2013, emphasizing the statutory requirement for such meetings to ensure shareholder participation and transparency. The tribunal highlighted that it must adhere strictly to the legislative intent and statutory provisions, rejecting the judicial member's reliance on precedents that allowed dispensation based on shareholder consent. Additionally, the bench clarified that the NCLT cannot constitute benches with more than two members, as this exceeds its statutory authority. The decision mandates the applicant company to seek directions for holding shareholders' meetings, reaffirming the tribunal's limited jurisdiction and the necessity of consistency with statutory mandates.

Dispensation of shareholders' meetings under Section 230(1) - distinct power to dispense creditors' meetings under Section 230(9) - interpretation of 'may' as discretion limited to ordering meetings - mandatory notice, disclosure and voting procedure under Section 230 - limits on NCLT constituting larger benches and binding effect of coordinate/larger Bench decisionsDispensation of shareholders' meetings under Section 230(1) - distinct power to dispense creditors' meetings under Section 230(9) - interpretation of 'may' as discretion limited to ordering meetings - mandatory notice, disclosure and voting procedure under Section 230 - Shareholders' meetings under Section 230 must not be dispensed with at the first motion; the statutory power to dispense with meetings is confined to creditors under Section 230(9) and does not extend to shareholders under Section 230(1). - HELD THAT: - The Tribunal examined the language and scheme of Section 230 and held that sub section (1) empowers the Tribunal to order that meetings of members or creditors be called, held and conducted, and that the auxiliary verb 'may' confers discretion only to order or not to order meetings, not to dispense with calling members' meetings. Sub section (9) specifically provides for dispensation of creditors' meetings upon 90% affidavit consent and is a standalone carve out; that provision cannot be read down to include shareholders. Allowing dispensation of shareholders' meetings would render mandatory notice, disclosure and related subsections (including requirements for sending statements, valuation reports and notices to regulators) redundant and would frustrate the statute's purpose of transparency and stakeholder participation. The Tribunal emphasised that the first motion is intended to secure procedural safeguards-individual notices, disclosures, opportunity to object and informed voting-so the applicant cannot seek, nor can the Tribunal grant, dispensation of shareholders' meetings at the first motion. [Paras 16, 20, 23, 24, 30]The request to dispense with shareholders' meetings under Section 230(1) is impermissible; meetings of shareholders must be convened in accordance with Section 230.Limits on NCLT constituting larger benches and binding effect of coordinate/larger Bench decisions - application of ratio decidendi doctrine where statutory mandate is clear - NCLT is not to constitute benches beyond the statutory two member composition or treat coordinate Bench orders as binding where the statute provides clear mandatory procedure; ratio decidendi of other benches has persuasive effect only and cannot be used to contravene clear statutory mandate. - HELD THAT: - The Tribunal observed that NCLT is a fact finding statutory body constituted with one judicial and one technical member and lacks power to expand bench composition arbitrarily into three member benches. Where the statutory text is plain and prescriptive (as in Section 230), the common law doctrine of ratio decidendi is of limited application; one Bench of NCLT need not follow another bench's order where doing so would contradict the statute's clear mandate. Coordinate Bench decisions may have persuasive value but cannot be invoked to read into Section 230 a power to dispense with shareholders' meetings which the statute does not confer. [Paras 26, 27, 28, 29, 30]NCLT cannot rely on or create a binding three member bench precedent to override the clear statutory procedure; coordinate or larger Bench rulings are not binding where they conflict with the statute's mandate.Final Conclusion: The Tribunal concurs with the Technical Member: dispensation of shareholders' meetings at the first motion is not permissible under Section 230(1), the power to dispense extends only to creditors under Section 230(9), and NCLT benches may not expand or treat coordinate/larger bench rulings as overriding an explicit statutory procedure; liberty was granted to the applicant to seek directions for convening meetings in accordance with the Act.

2021 (5) TMI 580 - NATIONAL COMPANY LAW TRIBUNAL , BENGALURU BENCHLaw of Competition

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Merger Approved with Conditions: Companies to Comply with Laws and File Required Documents for Amalgamation.
The Tribunal sanctioned the Scheme of Amalgamation with an appointed date of 01st April 2020, subject to compliance with statutory provisions and the filing of necessary documents with the Registrar of Companies. The companies must file all due statutory returns and submit compliance reports. The order does not prevent any authority from taking action for violations committed before or during the scheme's approval. The petition and all pending applications were disposed of.

Scheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - Appointed Date - vesting of undertakings by operation of law - transfer of liabilities including taxes and pending proceedings - no immunity from stamp duty, taxes or other statutory charges - compliance with FEMA/RBI and Foreign Direct Investment requirements - compounding application under Section 441 for default in appointment of Company Secretary - statutory returns, filings and post-sanction compliance reportsScheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - Sanction of the Scheme of Amalgamation between the transferor companies and the transferee company. - HELD THAT: - The Tribunal examined the petition, the reports of the Regional Director and ROC, objections/inputs from statutory authorities including Income Tax and CCI, the Official Liquidator's report and the material filed by the petitioners. Noting that schemes proposed for commercial expediency are ordinarily not interfered with, the Tribunal found the Scheme to be fair and reasonable and not detrimental to members, creditors or public policy. The Tribunal was satisfied that the procedural requirements under sub sections (1) and (2) of section 232 have been complied with and, accordingly, sanctioned the Scheme as prayed. [Paras 12, 13]The Scheme of Amalgamation is sanctioned.Appointed Date - Fixation of the Appointed Date for the Scheme of Amalgamation. - HELD THAT: - Although the petition and certain filings referred to other dates, the Tribunal expressly fixed the Appointed Date for the Scheme when sanctioning it. The appointed date as declared in the order governs the operative effect of the Scheme. [Paras 13]The Appointed Date for the Scheme shall be 01st April, 2020.Vesting of undertakings by operation of law - transfer of liabilities including taxes and pending proceedings - Effect of sanction on transfer and vesting of assets, liabilities and pending proceedings. - HELD THAT: - Pursuant to section 232, the Tribunal ordered that the undertakings, assets and liabilities of the transferor companies shall, without further act or deed, vest in the transferee company and that all liabilities including taxes, levies, duties and any pending proceedings by or against the transferor companies shall continue by or against the transferee company. The order emphasises that such vesting is subject to existing charges and does not preclude enforcement of liabilities by competent authorities. [Paras 13]All assets, liabilities and pending proceedings of the transferor companies shall stand transferred to and vest in the transferee company.No immunity from stamp duty, taxes or other statutory charges - Whether the sanction operates as exemption from payment of stamp duty, taxes or other statutory charges. - HELD THAT: - The Tribunal clarified that sanction of the Scheme is not an order granting exemption from payment of stamp duty, taxes or other charges and that such matters shall be dealt with by the respective authorities under the applicable laws and rules. This preserves the power of statutory authorities to claim dues notwithstanding the sanction. [Paras 13]Sanctioning the Scheme does not exempt the companies from payment of stamp duty, taxes or other statutory charges.Compliance with FEMA/RBI and Foreign Direct Investment requirements - Obligations regarding foreign investment and foreign exchange regulatory compliance arising from the issue of CCDs pursuant to the Scheme. - HELD THAT: - Given that substantial Compulsorily Convertible Debentures are to be issued and that foreign entities are involved, the Tribunal directed strict compliance with FEMA and RBI regulations and required the transferee/transferor companies to make all relevant filings under Foreign Direct Investment policy and other regulations upon completion of the merger. The Tribunal recorded the undertaking of the transferee company to comply with applicable provisions. [Paras 13]The companies shall comply with FEMA/RBI and file all requisite FDI/foreign exchange filings as applicable.Compounding application under Section 441 for default in appointment of Company Secretary - Remedial direction for defaults in statutory compliance relating to appointment of Company Secretary. - HELD THAT: - The ROC/RD had observed defaults in appointment of company secretaries by certain parties. The Tribunal directed Transferor Company No. 2 and the Transferee Company to file compounding applications under Section 441 of the Companies Act, 2013 to compound the offence in relation to the default in appointment of Company Secretary within thirty days of receipt of the order. [Paras 13]Transferor Company No. 2 and the Transferee Company to file compounding applications under Section 441 within 30 days.Statutory returns, filings and post-sanction compliance reports - Post sanction compliance obligations including filings and periodic compliance reports. - HELD THAT: - The Tribunal required the petitioner companies to lodge a certified copy of the order and Scheme with the Registrar of Companies for registration within thirty days, to file all due statutory returns immediately if any are outstanding, and to submit quarterly/annual status affidavits by the Managing Director/Director with CA/ICWA/CS certificates until compliance is ensured. The Court also directed handing over books and records of transferor companies to the transferee company after amalgamation. [Paras 13]Petitioner companies to register the order with ROC, file outstanding statutory returns and submit periodic compliance affidavits until compliance is achieved; books to be handed over to transferee.Preservation of action by statutory authorities - Whether sanction bars initiation or continuation of action by statutory authorities for prior violations. - HELD THAT: - The Tribunal explicitly recorded that sanction of the Scheme does not preclude the Registrar of Companies or any other authority from taking appropriate action in accordance with law for violations or offences committed prior to or during the approval process. It reiterated that sanction does not imply waiver of liabilities or bar statutory action. [Paras 12, 13]Sanction does not prevent statutory authorities from initiating or continuing proceedings for past or ongoing violations.Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation as fair and in compliance with the procedural requirements, fixed the Appointed Date as 01.04.2020, ordered vesting of assets and transfer of liabilities to the transferee company, preserved the rights of statutory authorities to claim taxes or take action for violations, directed compliance with FEMA/RBI and FDI filings, mandated filing of compounding applications for defaults in appointment of company secretary, and required registration, statutory filings and ongoing compliance reporting by the petitioner companies.

2021 (5) TMI 648 - NATIONAL COMPANY LAW TRIBUNAL , BENGALURU BENCHLaw of Competition

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Company Division Split Approved; Assets, Liabilities Transferred; Taxes and Duties Still Apply.
The Tribunal sanctioned the Scheme of Arrangement under Sections 230 to 232 of the Companies Act, 2013, effective from April 1, 2020, involving the demerger of divisions from the Demerged Company to the Resulting Company. All assets, liabilities, and pending proceedings of the Demerged Company are transferred to the Resulting Company, subject to existing charges. The sanction does not exempt the payment of Stamp Duty, taxes, or other charges, which remain subject to the final decision of the Income Tax Authorities. Compliance with the Companies Act, 2013, is mandated, and the Tribunal reserves the right for any authority to take action for violations. The Scheme is deemed fair, reasonable, and not contrary to public policy.

Sanction of Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013 - Compliance with procedural requirements of section 232 - Appointed Date for scheme implementation - Transfer and vesting of assets and liabilities upon demerger - Continuance of pending proceedings against the resulting company - Tax and stamp duty liabilities subject to concerned revenue authorities - Statutory compliance and post-sanction filing obligationsSanction of Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013 - Compliance with procedural requirements of section 232 - The Tribunal sanctioned the Scheme of Arrangement and held that the procedure specified in sub-sections (1) and (2) of section 232 has been complied with. - HELD THAT: - On consideration of the petition, the reports of the Regional Director and Registrar of Companies and the material on record, the Tribunal found the Scheme to be fair and reasonable, not detrimental to members or creditors and not contrary to public policy. The Tribunal specifically recorded satisfaction that the procedural requirements under section 232(1) and (2) had been followed and therefore granted sanction to the Scheme as approved by the boards of the Demerged Company and the Resulting Company. [Paras 11]Scheme of Arrangement sanctioned.Appointed Date for scheme implementation - The Appointed Date for the Scheme was fixed as 1st April, 2020. - HELD THAT: - In the operative order the Tribunal declared the Appointed Date for the Scheme to be 1st April, 2020, thereby specifying the date from which the demerger will take effect for all purposes under the sanctioned Scheme.Appointed Date fixed as 1st April, 2020.Transfer and vesting of assets and liabilities upon demerger - Continuance of pending proceedings against the resulting company - Assets, shares and liabilities of the Demerged Company are to be transferred and to vest in the Resulting Company, and proceedings pending by or against the Demerged Company shall continue by or against the Resulting Company. - HELD THAT: - The Tribunal ordered that, pursuant to section 232, the undertaking (assets and the interest of the Demerged Company) shall be transferred to and vest in the Resulting Company subject to existing charges. All liabilities, taxes and duties of the Demerged Company are to be transferred and become those of the Resulting Company. Further, any proceedings pending by or against the Demerged Company are to be continued by or against the Resulting Company.Assets, liabilities and pending proceedings to be transferred to the Resulting Company.Tax and stamp duty liabilities subject to concerned revenue authorities - Sanction of the Scheme does not exempt the companies from payment of stamp duty or taxes; tax implications arising from the Scheme are subject to final decision of the concerned Income Tax Authorities. - HELD THAT: - The Tribunal clarified that its sanction is not an order granting exemption from stamp duty, taxes or other charges and that such dues shall be dealt with by the appropriate authorities in accordance with law. Any tax implications arising from the Scheme are reserved for final determination by the concerned tax authorities and their decision will be binding on the Resulting Company.No exemption from stamp duty/taxes; tax implications left to competent authorities.Statutory compliance and post-sanction filing obligations - The Petitioner Companies were directed to comply with specified post-sanction obligations including filing a certified copy of the Order and Scheme with the Registrar of Companies, filing due statutory returns, periodic compliance affidavits and handing over books of account. - HELD THAT: - As part of the sanction, the Tribunal directed the Petitioner Companies to, within thirty days, deliver a certified copy of the Order and Scheme to the Registrar of Companies for registration. The companies were required to file any due statutory returns immediately, to submit quarterly/annual affidavits by the Managing Director/Director with CA/ICWA/CS certification until compliance is ensured, and, after completion of the arrangement, to hand over books of accounts and relevant documents of the Demerged Company to the Resulting Company. The Tribunal also observed that the sanction does not bar the Registrar of Companies or other authorities from taking appropriate action for any violations.Petitioners directed to comply with post-sanction filing and compliance obligations.Final Conclusion: The Tribunal granted sanction to the Scheme of Arrangement between Prime Progression Icom (India) Private Limited and Prime Progression Global Commerce Private Limited, fixed the Appointed Date as 1st April, 2020, directed transfer and vesting of assets and liabilities to the Resulting Company, left tax and stamp duty consequences to the concerned authorities, and imposed post-sanction filing and compliance obligations on the Petitioner Companies.

2021 (7) TMI 33 - NATIONAL COMPANY LAW TRIBUNAL , BENGALURU BENCHLaw of Competition

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Tribunal Approves Company Merger; Tax Obligations and Compliance Measures Highlighted for Effective Transition.
The Tribunal sanctioned the Scheme of Amalgamation involving multiple companies with Abal Infrapower & Multitrading Private Limited, effective from 01.04.2018, under Sections 230 to 232 of the Companies Act, 2013. The Petitioner addressed regulatory observations, including compliance with statutory requirements and clarification on the issuance of compulsory convertible debentures. The transfer of liabilities, including tax implications, was acknowledged, with the Tribunal emphasizing that the Scheme does not exempt payment of taxes or charges. The Petitioner was directed to file statutory returns and deliver necessary documents to the Registrar of Companies within thirty days. The Scheme was deemed fair and reasonable, leading to the disposal of the Petition and all pending applications.

Scheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - Appointed Date - vesting of assets and liabilities - continuation of pending proceedings - no immunity from stamp duty or taxes - filing and registration with Registrar of Companies - official liquidator scrutiny and report - statutory compliance and compounding of defaultsScheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - Appointed Date - Sanction of the Scheme of Amalgamation and the Appointed Date from which it shall be effective. - HELD THAT: - Having considered the petition, reports of the Regional Director and ROC, the Official Liquidator's scrutiny and other material on record, the Tribunal found the scheme to be fair and reasonable and not prejudicial to members, creditors or public policy. The Tribunal was satisfied that the procedure specified in subsections (1) and (2) of section 232 had been complied with and accordingly sanctioned the Scheme of Amalgamation. The Appointed Date for the Scheme was declared as 01st April, 2018. [Paras 12]Scheme of Amalgamation sanctioned; Appointed Date fixed as 01st April, 2018.Vesting of assets and liabilities - continuation of pending proceedings - Effect of sanction as to transfer and vesting of the transferor companies' assets, liabilities and pending proceedings in the transferee company. - HELD THAT: - The Tribunal ordered that upon sanction the transferor company shall be transferred to and vest in the transferee company for all its estate and interest, subject to existing charges. All liabilities, taxes, levies, charges and duties of the transferor companies shall be transferred to and become liabilities and duties of the transferee company. Proceedings pending by or against the transferor company shall continue by or against the transferee company.Assets, liabilities and pending proceedings of the transferor companies shall vest in and continue against the transferee company.No immunity from stamp duty or taxes - tax implications subject to tax authorities - Whether sanction of the Scheme exempts the companies from payment of stamp duty, taxes or other statutory charges and the treatment of tax implications arising from the Scheme. - HELD THAT: - The Tribunal clarified that sanctioning the Scheme does not grant exemption from payment of stamp duty, taxes or other charges; such matters shall be dealt with by the respective authorities under applicable laws. Further, any tax implications arising out of the Scheme are subject to the final decision of the concerned Income Tax Authorities, whose determinations shall be binding on the transferee company.Sanction does not exempt payment of stamp duty or taxes; tax implications to be finally determined by the concerned tax authorities.Filing and registration with Registrar of Companies - statutory compliance and compounding of defaults - Obligations of the petitioner post-sanction as to filing, compliance and adjudication/compounding of defaults, if any. - HELD THAT: - The Tribunal directed the petitioner to furnish a certified copy of the Order and the Scheme to the Registrar of Companies for registration within thirty days. The petitioner was required to file all due statutory returns immediately, ensure compliance with provisions of the Companies Act, 2013 and submit periodic affidavits and professional certificates until compliance is ensured. The petitioner companies were directed to present themselves before the Registrar of Companies for adjudication or compounding of defaults/violations/non-compliances, particularly with reference to the MCA's earlier investigation report, if any.Petitioner to file certified copy of the Order with ROC, complete statutory returns and comply with directions for adjudication/compounding of defaults.Official liquidator scrutiny and report - Weight to be accorded to the Official Liquidator's examination of the transferor company's affairs. - HELD THAT: - The Official Liquidator engaged auditors to scrutinize the transferor company's books and records and reported that records were maintained and affairs were not conducted in a manner prejudicial to members or public interest. The Tribunal took these remarks into account in concluding that the Scheme could be sanctioned on merits. [Paras 9]Official Liquidator's report accepted as supporting sanction; no objection requiring denial of the Scheme was found.Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation with Appointed Date 01st April, 2018, directed vesting of assets and liabilities and continuation of proceedings in the transferee company, clarified that sanction does not absolve payment of stamp duty or taxes (which are subject to other authorities), and imposed post-sanction filing and compliance obligations including submission to ROC and adjudication/compounding of any defaults.

2021 (1) TMI 986 - NATIONAL COMPANY LAW TRIBUNAL AHMEDABAD BENCHLaw of Competition

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Scheme of amalgamation meetings dispensed with where shareholder and creditor consents satisfied statutory requirements
Consent affidavits from all equity shareholders and relevant creditors, together with auditors' certificates supporting the scheme's accounting treatment, satisfied the statutory requirements for sanction proceedings under sections 230 to 232 of the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. As the notice requirements to statutory authorities remained part of the scheme process and the proposed meetings would serve no useful purpose, the Tribunal dispensed with the meetings of the equity shareholders of all applicant companies.

Scheme of Amalgamation - Dispensation of meetings of equity shareholders and creditors - Consent affidavits waiving right to convene meetings - Compliance with Accounting Standards under Section 133 - Statutory notice to authorities under subsection (5) of section 230 - Approval of scheme by TribunalDispensation of meetings of equity shareholders and creditors - Consent affidavits waiving right to convene meetings - Dispensation of meetings of equity shareholders of all Applicant Companies and dispensation/acceptance of creditor consents as a basis for not convening meetings - HELD THAT: - The Tribunal considered the individual consent affidavits filed by all equity shareholders of each applicant company and the affidavits of unsecured and secured creditors where applicable. On the produced consents and attendant certificates, the Tribunal accepted that the equity shareholders of each Applicant Company had given written consent approving the Scheme and waived their right to convene and hold meetings. Where unsecured and secured creditors had provided affidavits consenting to the Scheme, those consents were treated as valid for dispensing with creditor meetings. In view of these consents and the accompanying certifications, the Tribunal dispensed with convening the meetings of equity shareholders of all four Applicant Companies and treated the creditor consents as satisfying the statutory requirement to consider the Scheme without holding separate meetings. [Paras 14, 15, 16, 18, 19]Meetings of equity shareholders of all Applicant Companies are dispensed with and creditor consents accepted in lieu of convening meetings.Statutory notice to authorities under subsection (5) of section 230 - Requirement to send notices to specified statutory authorities and time for representations - HELD THAT: - The Tribunal directed compliance with subsection (5) of section 230 and Rule 8 of the Companies (CAA) Rules, 2016 by sending Form CAA.3 along with the Scheme, explanatory statement and requisite disclosures to the Regional Director (North Western Region), Registrar of Companies, concerned Income Tax Authorities and the Official Liquidator (where applicable). The Tribunal specified that these authorities shall have 30 days from receipt of such notice to make representations to the Tribunal, failing which it shall be presumed they have no objection. [Paras 17]Applicants to send statutory notices to the specified authorities and any representations must be filed within 30 days of receipt of notice.Compliance with Accounting Standards under Section 133 - Accounting treatment in the Scheme found to be in conformity with prescribed Accounting Standards - HELD THAT: - The Tribunal noted production of certificates dated 30.10.2020 for the Transferor Companies and 04.11.2020 for the Transferee Company, issued under Section 133 by the auditors certifying that the accounting treatment specified in the Scheme conforms with the Accounting Standards prescribed by the Central Government. On the basis of these certificates, the Tribunal accepted that the specified accounting treatment conforms with the applicable standards. [Paras 9]Accounting treatment in the Scheme is in conformity with the prescribed Accounting Standards as certified by the auditors.Approval of scheme by Tribunal - Final disposal of the company application allowing the Scheme of Amalgamation - HELD THAT: - Having considered the Scheme, the consent affidavits of equity shareholders and creditors where applicable, the auditors' certificates and the absence of pending investigations or winding up petitions against the Applicant Companies as stated in the application, the Tribunal found the prerequisites for sanctioning the Scheme to be met. The Tribunal recorded that consents and certificates were in order and, accordingly, allowed the company application. [Paras 10, 11, 18, 19]Company Application is allowed and disposed of; the Scheme of Amalgamation is sanctioned in accordance with the order.Final Conclusion: The Tribunal, having accepted auditors' certificates and the written consents of equity shareholders and applicable creditors, dispensed with convening the meetings and directed statutory notices to specified authorities; the company application sanctioning the Scheme of Amalgamation is allowed and the matter is disposed of.

2021 (1) TMI 1139 - NATIONAL COMPANY LAW TRIBUNAL, KOCHILaw of Competition

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Insolvency Plan Gets Green Light: Debtor Revived, Creditors Paid, and Resolution Professional Discharged.
The Tribunal approved the Resolution Plan submitted by the Resolution Applicant, finding it compliant with the Insolvency and Bankruptcy Code (IBC) and CIRP Regulations. The plan aimed to revive the Corporate Debtor by ensuring payments to both financial and operational creditors, thereby addressing the interests of all stakeholders. The Resolution Professional was discharged from duties, and the moratorium order ceased, marking the completion of the Corporate Insolvency Resolution Process for the debtor company. The Resolution Applicant was given one year to obtain necessary approvals for the plan's implementation.

Approval of resolution plan under Section 30 and 31 of IBC - Compliance with Regulation 38 and 39 of CIRP Regulations - Priority of operational creditors in payment under a resolution plan - Binding effect of an approved resolution plan - Irrevocability of resolution plan post-approval (no modification by applicant) - Discharge of the resolution professional and transmission of records to the Board - Cessation of moratorium on approval of resolution planApproval of resolution plan under Section 30 and 31 of IBC - Compliance with Regulation 38 and 39 of CIRP Regulations - The Adjudicating Authority is satisfied that the Resolution Plan approved by the CoC meets the requirements of Section 30(2) and Section 31 and complies with Regulations 38 and 39 of the CIRP Regulations and is fit for approval. - HELD THAT: - The Tribunal examined the Resolution Plan placed before it after the Committee of Creditors approved the plan with the requisite majority. The Bench found that the Resolution Professional certified compliance with the conditions of Section 30(2) (including provisions for payment of insolvency resolution process costs, treatment of operational creditors, management and implementation supervision, and conformity with law). The Tribunal also considered Regulation 38 (mandatory contents and demonstration of feasibility, addressing cause of default, implementation supervision and stakeholder interests) and Regulation 39 (procedural requirements for submission and the RP's obligations) and concluded that those regulatory requirements were fulfilled. Having regard to the CoC approval, the RP's certification and the plan's contents showing feasibility and an implementation schedule, the Bench was satisfied to approve the plan under Section 31(1). [Paras 22, 23, 24, 25, 33]Resolution Plan approved by the Adjudicating Authority as meeting statutory and regulatory requirements.Priority of operational creditors in payment under a resolution plan - The Resolution Plan appropriately deals with the interests of operational creditors and provides for their payment in priority in accordance with the Code and Regulations. - HELD THAT: - The Tribunal reviewed the mandatory contents of the Resolution Plan and the compliance table which demonstrated that the plan gives priority to operational creditors in payment and includes a statement addressing interests of all stakeholders. The Bench noted that operational creditors' claims were to be settled (without separate interest) and that the plan provided for settlement of such dues before payments to financial creditors as required by the statute and Regulations. [Paras 16, 20, 23, 24]Plan found to satisfy the priority and stakeholder interest requirements in favour of operational creditors.Binding effect of an approved resolution plan - Obligations to obtain statutory approvals post-approval - The approved Resolution Plan is binding on the corporate debtor and all stakeholders, and the Resolution Applicant must obtain necessary approvals required under any law within the statutory period specified in Section 31. - HELD THAT: - The Bench recorded that once approved under Section 31(1) the Resolution Plan becomes binding on the corporate debtor, its employees, members, creditors, guarantors and other stakeholders. The Tribunal also recorded the statutory obligation of the Resolution Applicant to secure any approvals required under other laws within one year from the date of this order (or within such period as may be applicable under the particular law), as contemplated by Section 31(4). The plan's implementation provisions and the requirement to comply with applicable laws were noted as conditions of approval. [Paras 26, 29, 32]Approved plan is binding; Resolution Applicant to obtain required statutory approvals within the prescribed period.Irrevocability of resolution plan post-approval (no modification by applicant) - Reliefs sought in the plan that would permit the Resolution Applicant to modify, alter or seek subsequent amendments to the Resolution Plan after approval are not allowable and are rejected. - HELD THAT: - The Tribunal considered reliefs in the submitted plan which purported to reserve rights for the Resolution Applicant to seek modification or cure defects in the plan after approval. The Bench held that once the Resolution Plan is approved it cannot be altered or modified by the Resolution Applicant before the Adjudicating Authority, and therefore the reliefs seeking such post-approval modification were not permissible and cannot be granted. The Tribunal also rejected reliefs seeking unspecified or contingent future liabilities that were not specifically identified in the plan. [Paras 30, 34]Reliefs permitting post-approval modification and unspecified contingent reliefs rejected.Discharge of the resolution professional and transmission of records to the Board - Cessation of moratorium on approval of resolution plan - On approval of the Resolution Plan the Resolution Professional is discharged and directed to forward all CIRP records and the Resolution Plan to the Insolvency and Bankruptcy Board of India; the moratorium ceases to have effect from the date of this order. - HELD THAT: - The Tribunal discharged the Resolution Professional from his duties consequent to approval of the plan and directed him to submit all records maintained during the CIRP along with the approved Resolution Plan to the IBBI for recording on its database, in accordance with the Code and Regulations. The Bench also ordered that the moratorium previously in force shall cease to have effect from the date of this order. These consequential directions were recorded as part of the approval order and linked to the statutory scheme governing conclusion of CIRP after plan approval. [Paras 31, 35, 36]RP discharged; records to be forwarded to IBBI; moratorium terminated from date of order.Final Conclusion: The Adjudicating Authority approved the Resolution Plan as meeting the statutory and regulatory requirements (Sections 30 and 31 and Regulations 38-39), held the plan binding on all stakeholders, rejected reliefs permitting post approval modification and unspecified contingent reliefs, discharged the Resolution Professional who must forward CIRP records to the IBBI, and directed that the moratorium cease with effect from this order.

2020 (12) TMI 1257 - NATIONAL COMPANY LAW TRIBUNAL AHMEDABAD BENCHLaw of Competition

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Amalgamation meeting dispensation and convening directions issued for stakeholder approval under company law procedure.
In a proposed amalgamation under sections 230 to 232 of the Companies Act, 2013, meetings may be dispensed with where the transferor companies have no secured or unsecured creditors and the required shareholder consents are on record; those meetings were accordingly waived. For the transferee company, consent supported dispensation of the secured creditors' meeting, while meetings of equity shareholders and unsecured creditors were directed to be convened with the usual procedural safeguards, including notices, publication, quorum, proxy voting, appointment of a chairperson and scrutinizer, and filing of reports under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The application was allowed in part and the procedural directions were issued for consideration of the scheme.

Scheme of Amalgamation - Sections 230-232 of the Companies Act, 2013 - Dispensation of meeting - Consent affidavit - Convening of meeting - Notice and publication requirements for meetings - Voting including e voting and proxy - Appointment of Chairman and Scrutinizer - Quorum for meetings - Filing of affidavit of compliance - Form No. CAA.3 and Form No. CAA.4 - Indemnity by transferor shareholdersDispensation of meeting - Consent affidavit - Dispensation of convening meetings of Equity Shareholders and of Secured and Unsecured Creditors of the Transferor Companies - HELD THAT: - The Tribunal, upon perusal of the application and the original consent affidavits filed, held that meetings of the Equity Shareholders of both Applicant Transferor Companies are dispensed with in view of the filed consents. As there are no secured or unsecured creditors of the Transferor Companies (as certified by the Chartered Accountant and supported by the record), convening meetings of such creditors does not arise. [Paras 12]Meetings of Equity Shareholders of the Transferor Companies are dispensed with; no meetings of secured or unsecured creditors of the Transferor Companies are required.Dispensation of meeting - Consent affidavit - Dispensation of the meeting of Secured Creditors of the Transferee Company - HELD THAT: - The Tribunal noted that the Applicant Transferee Company filed an original consent affidavit of a secured creditor representing the requisite majority of the outstanding secured debt. On that basis the Tribunal dispensed with the meeting of the Secured Creditors of the Transferee Company. [Paras 10, 12]Meeting of the Secured Creditors of the Transferee Company is dispensed with in view of the consent affidavit.Convening of meeting - Notice and publication requirements for meetings - Scheme of Amalgamation - Directions to convene meetings of Equity Shareholders and Unsecured Creditors of the Transferee Company and requirements for service and publication of notice and scheme - HELD THAT: - The Tribunal directed that the meeting of Equity Shareholders of the Applicant Transferee Company (as on the record date of 30th November 2020) shall be convened on the appointed date specified in the order, and that the meeting of Unsecured Creditors shall likewise be convened. The Tribunal mandated publication in specified newspapers and service of notices with a copy of the Scheme and the statement required under Section 102 read with Sections 230-232 and the Companies (CAA) Rules, 2016, at least one month prior to the meetings. Notices are to be sent to persons appearing on the company records as on 30th November 2020 by permitted modes (including email), and the company's statement and proxy form are to be made available free of charge at the registered office in accordance with the Rules. [Paras 12]Meetings of Equity Shareholders and Unsecured Creditors of the Transferee Company are to be convened with specified publication and notice requirements and provision of scheme and statement as directed.Voting including e voting and proxy - Quorum for meetings - Voting procedure (including e voting and proxy), determination of creditor value for meeting purposes, and quorum - HELD THAT: - The Tribunal observed that the Transferee Company, being listed, must provide e voting facilities in accordance with the applicable SEBI circular. Voting by proxy/authorised representative is permitted provided the proxy/authorization in prescribed form is filed not later than 48 hours before the meeting, as per Rule 10 and Section 105. The quorum for the meetings of Equity Shareholders and Unsecured Creditors is fixed at 30, subject to the provision that if the quorum is not present within half an hour the members present shall form the quorum. For purposes of the meeting the value of unsecured creditors shall be as per the company's records as on 30th November 2020, and where entries are disputed the Chairman shall determine number or value for the meeting. [Paras 12]E voting facility to be provided; proxies allowed subject to time limit; quorum fixed at 30 with chairman's power to determine disputed creditor entries.Appointment of Chairman and Scrutinizer - Filing of affidavit of compliance - Form No. CAA.3 and Form No. CAA.4 - Appointment of Chairman and Scrutinizer, their powers and duties, and requirement to file statutory affidavits and send statutory notices to authorities - HELD THAT: - The Tribunal appointed named persons (with alternates) as Chairman of the meetings and appointed a Scrutinizer (with alternate). The Chairman is empowered to conduct the meetings, decide procedural questions, ascertain results (including by polling paper/ballot) and to issue the publication and notices (and may engage agencies to assist). The Chairman is directed to file an affidavit at least seven days before the meeting confirming compliance with issuance of notices and advertisement as per Rule 12, and to file the meeting result in Form No. CAA.4 within seven days from the meeting as per Rule 14. Separately, the Applicant Companies are directed to send Form No. CAA.3 with disclosures under Rule 6 to specified authorities, inviting any representations within 30 days, in compliance with sub section (5) of Section 230 and Rule 8 of the Companies (CAA) Rules, 2016. [Paras 12, 13]Chairman and Scrutinizer appointed with delineated powers; affidavit of compliance and filing of Form No. CAA.4 required; Form No. CAA.3 to be sent to specified authorities for representations.Final Conclusion: The Company Application under Sections 230-232 is disposed of with meetings of Transferor Companies' members and creditors dispensed with where appropriate, the meeting of Secured Creditors of the Transferee dispensed with on consent, and meetings of the Transferee Company's Equity Shareholders and Unsecured Creditors ordered to be convened with detailed directions on notice, publication, voting, chairmanship, scrutiny and filing of statutory affidavits and forms.

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2021 (8) TMI 757 - Tri - Law of Competition

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Tribunal Approves Company Split Scheme, Awaits Compliance with Legal Commitments by April 2021.

The Tribunal provisionally sanctioned the Scheme of Arrangement between the Demerged Company and the Resulting Company with an effective date of 1st April 2021, contingent upon compliance with all undertakings and statutory provisions. The Companies are required to deliver a certified copy of the Order and Scheme to the Registrar of Companies within thirty days. The Tribunal emphasized that the sanction does not preclude statutory authorities from initiating legal action for any prior violations of the Companies Act. Aggrieved parties retain the right to seek directions from the Tribunal.

Issues Involved:
1. Sanction of the Scheme of Arrangement between the Demerged Company and the Resulting Company.
2. Compliance with statutory provisions and observations by the Registrar of Companies (ROC) and Regional Director (RD).
3. Financial and operational implications of the Scheme.
4. Statutory dues and liabilities.
5. Shareholder and creditor interests.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Arrangement:
The Demerged Company and the Resulting Company filed a petition under Sections 230 to 232 of the Companies Act, 2013, seeking to sanction a Scheme of Arrangement. The Scheme was approved by the Board of Directors of both companies on 15th January 2021. The Scheme aims to create two industry-leading companies with strategic focus and flexibility to drive client and shareholder value. The Tribunal found the Scheme to be in the larger interest of all stakeholders and compliant with the provisions of the Companies Act, 2013, and the associated Rules.

2. Compliance with Statutory Provisions and Observations by ROC and RD:
The Tribunal directed the Petitioner Companies to issue notices to various statutory authorities and cause paper notifications in specified newspapers. The ROC and RD filed reports with several observations, including the incorporation date of the Resulting Company, name change, compliance with Section 232(3)(i) of the Companies Act, 2013, cancellation of shares, CSR spending, compliance with RBI/FEMA Regulations, disputed tax dues, and related party transactions. The Petitioner Companies responded to these observations through affidavits, providing clarifications and undertakings to comply with all statutory requirements.

3. Financial and Operational Implications of the Scheme:
The Scheme involves the transfer of the MIS Business operations from the Demerged Company to the Resulting Company. The financial position of both companies is expected to reflect a positive net-worth upon the demerger becoming effective. The Demerged Company confirmed that the unspent CSR amounts were disclosed in the Board's reports for the relevant financial years. The Resulting Company undertook to comply with the provisions of Section 232(3)(i) of the Companies Act, 2013, and pay all requisite fees.

4. Statutory Dues and Liabilities:
The Demerged Company undertook to pay statutory dues as and when demanded by the authorities. The Resulting Company also undertook to take care of statutory dues and current liabilities, including amounts due to MSMEs, upon the Scheme becoming effective. The Tribunal emphasized that the sanction of the Scheme would not waive any violation or liability committed by the Companies prior to the sanction of the Scheme.

5. Shareholder and Creditor Interests:
The Scheme was put to notice for all stakeholders and broadly consented to by all shareholders and creditors. The Resulting Company confirmed that the issuance of shares to the shareholders of the Demerged Company would fall under the automatic route and would not require RBI approval. The Tribunal found the Scheme to be fair, reasonable, and not detrimental to the interests of members or creditors or contrary to public policy.

Conclusion:
The Tribunal provisionally sanctioned the Scheme of Arrangement with an effective date of 1st April 2021, subject to compliance with all undertakings and statutory provisions. The Companies were directed to deliver a certified copy of the Order along with the Scheme to the Registrar of Companies within thirty days. The Tribunal also clarified that the sanction of the Scheme would not prevent statutory authorities from initiating appropriate legal action for any violations of the Companies Act. Any aggrieved person(s) were given the liberty to apply to the Tribunal for necessary directions.

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Tribunal Approves Company Split Scheme, Awaits Compliance with Legal Commitments by April 2021.

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