2018 (12) TMI 1748 - Tri - Companies Law

Tribunal stresses public interest, orders Petitioner to address concerns, dismisses Petition with option to reapply.

The Tribunal acknowledged the importance of safeguarding public interests and directed the Petitioner to address all concerns raised by the Regional ... Sanction of amalgamation scheme - Section 230 to 232 of the Companies Act, 2013 - entire undertakings, assets, business and liabilities of the Transferor Companies No. 1,2, and 3 are proposed to be amalgamated with and vested in the Petitioner/Transferee Company as a going concern - shifting of the Registered office of the Petitioner/Transferee Company from the State of Karnataka to the State of Tamil Nadu, and a change in the name of the Transferee Company from Shriram Chits (Karnataka) Private Limited to Shriram Chits (India) Private Limited. HELD THAT:- The object and business of the Company involved in the Scheme relates to Chit Funds or Kuries and all similar kinds of schemes which encourage the habit of savings by affording all facilities for the purpose and more especially by opening Chit Savings, Thrift savings, and other deposit schemes in relation to trade or public, commercial and regular needs. Therefore, the ordinary public is involved in the business of the Company and the interest of those ordinary public has to be taken care of while sanctioning the scheme. It is not in dispute that the Tribunal is empowered to sanction the Scheme. However, cases like the present one where the business lies with ordinary public, it is necessary for the Company to take permission/approval from the appropriate authorities - In the instant case, Registrar of Chits is the concerned authority to examine the issue in light of the terms and conditions proposed in the Scheme. In the interest of justice, the Scheme subject to condition that approval can be taken from the Registrar of Chits after the sanction of the Scheme, cannot be sanctioned - Therefore, the instant Petition is disposed off by granting liberty to the Petitioner to comply all observations/objections as raised by the Regional Director and the Registrar of Companies, especially the observation/objection with respect to approval of the Registrar of Chits in the interest of public/chit holders and thereafter file afresh. Issues Involved:1. Sanctioning the Scheme of Amalgamation.2. Shifting of Registered Office.3. Change of Company Name.4. Compliance with Section 232(3)(i) of the Companies Act, 2013.5. Method of Accounting Treatment.6. Share Exchange Ratio.7. Approval from Registrar of Chits.8. Related Party Transactions.9. Details of Trust and its Beneficiaries.Issue-wise Detailed Analysis:1. Sanctioning the Scheme of Amalgamation:The Petitioner/Transferee Company requested the Tribunal to sanction the Scheme of Amalgamation under Sections 230 to 232 of the Companies Act, 2013. The Scheme proposed the amalgamation of Transferor Companies No. 1, 2, and 3 with the Petitioner/Transferee Company, making it binding on all involved entities. The Tribunal acknowledged the necessity of ensuring that the interests of the public, specifically chit holders, were adequately protected before sanctioning the Scheme.2. Shifting of Registered Office:The Scheme included a proposal to shift the Registered Office from Karnataka to Tamil Nadu. The Registrar of Companies (ROC) observed that the Transferee Company must file necessary forms and obtain approval from the Central Government, as the jurisdiction falls under the Regional Director, Hyderabad. The Petitioner undertook to comply with these requirements, citing precedents where no separate approval was needed beyond the Tribunal's sanction.3. Change of Company Name:The Scheme proposed changing the name from 'Shriram Chits (Karnataka) Private Limited' to 'Shriram Chits (India) Private Limited.' The ROC noted that the necessary forms must be filed with the Registrar of Companies to comply with the provisions of the Companies Act, 2013. The Petitioner agreed to file the requisite forms.4. Compliance with Section 232(3)(i) of the Companies Act, 2013:The Scheme mentioned that the Transferee Company would not pay any additional fee on the clubbing of authorized capital, which the ROC found unacceptable under Section 232(3)(i). The Petitioner agreed to pay the differential fee after setting off the fee already paid by the Transferor Companies.5. Method of Accounting Treatment:The ROC observed that the Scheme did not specify the method of accounting treatment or include an auditor's report as required under Section 133 of the Companies Act, 2013. The Petitioner provided a Chartered Accountant's certificate confirming conformity with Accounting Standards, though the Scheme was silent on this detail.6. Share Exchange Ratio:A different share exchange ratio was adopted by the Board of Directors than what was recommended by the Chartered Accountant. The ROC noted this discrepancy. The Petitioner clarified that since the share capital of all companies involved was held by a single entity, the share exchange ratio would not affect any shareholders' interests. The Tribunal accepted this explanation, emphasizing the commercial wisdom of shareholders.7. Approval from Registrar of Chits:The ROC and the Regional Director emphasized the need for necessary approvals from the Registrar of Chits to protect the interests of chit holders. The Petitioner argued that the Chit Fund Act did not require prior approval but agreed to obtain all necessary approvals post-sanctioning of the Scheme. The Tribunal decided not to sanction the Scheme until such approvals were secured.8. Related Party Transactions:The Tribunal required clarification on related party transactions involving Shriram Ownership Trust, Shriram Investment Firm, and Shriram Chits Tamilnadu Private Limited. The Petitioner clarified that the transactions were compliant with Sections 184 and 188 of the Companies Act, 2013, and not in the nature of loans, thus not falling under Section 185.9. Details of Trust and its Beneficiaries:The Tribunal sought details about the Shriram Ownership Trust, its beneficiaries, and the dates of share acquisitions. The Petitioner provided the required details, including the acquisition dates and the number of shares purchased, and clarified that the Trust is a tax-paying entity with individual beneficiaries who are senior executives of the companies involved.Conclusion:The Tribunal acknowledged the necessity of protecting public interest and directed the Petitioner to comply with all observations and objections raised by the Regional Director and the ROC, particularly the approval from the Registrar of Chits. The Petition was disposed of with liberty to re-approach the Tribunal after obtaining the necessary approvals and addressing all objections.