Auditor's certificate requirement blocks sanction of a scheme of arrangement until accounting compliance is proved.

A scheme of arrangement involving multiple demergers and related accounting treatment must be supported by the company auditor's certificate confirming conformity with prescribed accounting standards under the Companies Act, 2013. Where that certificate is not filed, the Tribunal treats compliance as mandatory and will not grant immediate sanction of the scheme. The petitioners were given two weeks to cure the defect by filing the required certificate, failing which the petition would stand rejected. Final approval of the scheme was therefore deferred until statutory auditor-certification compliance was achieved.

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Issues: Whether the scheme could be sanctioned in the absence of the company auditor's certificate confirming compliance of the accounting treatment with the prescribed accounting standards, and what consequence should follow if such certificate was not produced.

Analysis: The scheme involved multiple demergers and a detailed accounting treatment affecting assets, liabilities, share capital, capital reserve and goodwill. In such a case, the statutory requirement under the Companies Act, 2013 is that the petition must be accompanied by the certificate of the company's auditor that the accounting treatment in the scheme is in conformity with the accounting standards prescribed under section 133 or generally accepted accounting principles. The absence of that certificate prevents immediate sanction of the scheme. The Tribunal therefore treated compliance with the auditor-certificate requirement as mandatory and granted a limited period for curing the defect.

Conclusion: The scheme was not sanctioned at this stage. The petitioners were granted two weeks to file the required auditor's certificate, failing which the petition would stand rejected.

Final Conclusion: The proceeding remained conditional upon compliance with the statutory auditor-certification requirement, and the Tribunal deferred final approval of the scheme until such compliance was made.

Ratio Decidendi: A scheme of arrangement involving accounting treatment must be supported by the company auditor's certificate under the Companies Act, 2013, and in its absence the Tribunal cannot grant sanction.

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