2017 (12) TMI 1776 - Tri - Law of Competition

Tribunal Approves Company Merger Plan, Highlights Cost Savings and Shareholder Benefits.

The Tribunal approved the Scheme of Amalgamation under Sections 230 to 232 and Section 234 of the Companies Act, 2013, involving multiple companies. The ... Sanction of scheme of amalgamation under the Companies Act, 2013 - compliance with Reserve Bank of India / FEMA conditions - accounting compliance with applicable Accounting Standards including AS-14 and AS-5 - tax implications to be subject to Income Tax Authorities - filing of amended MOA & AOA and statutory e-forms - exemption from notice under the Competition Act for merger of subsidiary with holding company - dissolution of transferor companies without winding upSanction of scheme of amalgamation under the Companies Act, 2013 - Sanction of the Scheme of Amalgamation and making Company Scheme Petition No. 1075 of 2017 absolute. - HELD THAT: - The Tribunal considered the petition under Sections 230 to 232 and Section 234 of the Companies Act, 2013 for amalgamation of the four Transferor Companies with the Transferee Company. There were no objectors and no party controverted the averments in the petitions. The Official Liquidator reported that the affairs of the First and Second Petitioner Companies had been conducted properly and that they may be dissolved without winding up. The Regional Director's report, subject to specified observations, did not indicate that the scheme was prejudicial to shareholders or the public. The petitioners furnished clarifications and undertakings in respect of the Regional Director's and ROC's observations, which were accepted by the Tribunal. Having found that requisite statutory compliances have been fulfilled and that the scheme appears fair and reasonable and not contrary to law or public policy, the Tribunal allowed the petition and made it absolute in terms of the prayer clause. [Paras 19, 21]Scheme sanctioned and Petition No. 1075 of 2017 made absolute.Accounting compliance with applicable Accounting Standards including AS-14 and AS-5 - tax implications to be subject to Income Tax Authorities - Acceptance of undertakings concerning accounting standards and tax compliance raised in the Regional Director's report. - HELD THAT: - The Regional Director observed that, in addition to AS-14 (IND AS-103), the petitioner companies should pass such accounting entries as necessary to comply with other applicable Accounting Standards such as AS-5 (IND AS-8). The Regional Director also noted that tax implications arising out of the scheme would be subject to the final decision of the Income Tax Authorities and that serving a copy on the Income Tax Department was the existing practice. The Transferee Company and the Petitioner Companies furnished undertakings to comply with the applicable accounting standards and all provisions of the Income Tax Act, 1961, and to meet tax issues in accordance with law. The Tribunal accepted these undertakings. [Paras 9, 10, 11, 18]Undertakings on accounting and tax compliance accepted by the Tribunal.Compliance with Reserve Bank of India / FEMA conditions - no-objection from Reserve Bank of India - Compliance with RBI/NOC and foreign law requirements for Transferor Companies incorporated in Mauritius. - HELD THAT: - The Regional Director and ROC records showed that two transferor companies are foreign body corporates incorporated in Mauritius and that NOCs from the Reserve Bank of India had been obtained. The Transferee Company undertook that the Mauritius-incorporated transferor companies would comply with the laws of the Republic of Mauritius and that all conditions stipulated in the RBI letters of no objection would be complied with. The Tribunal accepted these clarifications and undertakings, noting that provisions of Section 234 had been complied with as necessary approvals were obtained from the RBI. [Paras 9, 12, 16, 18]Undertakings on compliance with RBI/FEMA and foreign law obligations accepted.Filing of amended MOA & AOA and statutory e-forms - filing and stamping directions - Directions for statutory filings, stamping and recordal following sanction of the scheme. - HELD THAT: - The Tribunal recorded ROC observations about amendment of authorised capital and filing of amended MOA & AOA on the MCA portal. The petitioners undertook to file the amended MOA & AOA and comply with e-form requirements. The Tribunal directed the petitioner companies to lodge a certified copy of the order and the Scheme with the Superintendent of Stamps for adjudication within 60 days and to file a certified copy of the order and Scheme with the Registrar of Companies electronically along with E-form INC 28 within 30 days. The Tribunal further directed all concerned authorities to act on a certified copy of the order and Scheme. [Paras 15, 22, 23, 26]Petitioners directed to effect statutory filings, stamping adjudication and related e-form submissions as specified.Exemption from notice under the Competition Act for merger of subsidiary with holding company - No requirement to file notice under the Competition Act for the merger of subsidiaries with the holding company. - HELD THAT: - The Counsel for the petitioners clarified that mergers of subsidiaries with their holding company are exempted from the purview of the Competition Act, 2002, and therefore no notice under the Competition Act was required. The Tribunal accepted this clarification in disposing of the ROC observation on the matter. [Paras 17, 18]Clarification accepted that no Competition Act notice was required for the mergers involved.Dissolution of transferor companies without winding up - Disposition regarding dissolution of the First and Second Petitioner Companies. - HELD THAT: - The Official Liquidator reported that the affairs of the First and Second Petitioner Companies had been conducted properly and that they may be ordered to be dissolved without winding up. The Tribunal, having sanctioned the scheme and made the petition absolute, proceeded on that basis. [Paras 19, 21]Official Liquidator's report accepted; transferor companies may be dissolved without winding up consequent to sanction.Costs payable to Regional Director and Official Liquidator - Costs awarded to the Regional Director and Official Liquidator and timelines for payment. - HELD THAT: - The Tribunal directed the petitioner companies to pay specified costs to the Regional Director, Western Region, Mumbai and to the Official Liquidator, High Court, Bombay, in the amounts ordered, and directed that such costs be paid within four weeks from the date of receipt of the order. [Paras 24, 25]Costs directed to be paid to the Regional Director and Official Liquidator within the stipulated timeline.Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation, made Company Scheme Petition No. 1075 of 2017 absolute, accepted the petitioners' undertakings on accounting, tax, RBI/FEMA and other statutory compliances, directed statutory filings and stamping, accepted the Official Liquidator's report regarding dissolution without winding up, and awarded costs to the Regional Director and Official Liquidator with directions for payment. Issues Involved:1. Sanction of the Tribunal under Sections 230 to 232 and Section 234 of the Companies Act, 2013 for a Scheme of Amalgamation.2. Benefits of the Scheme including rationalization of subsidiaries, cost savings, reduction in compliances, and enhancing shareholder value.3. Compliance with statutory requirements and approvals from regulatory authorities.4. Reports from the Regional Director and Registrar of Companies regarding the Scheme.5. Official Liquidator's report on the conduct of the Petitioner Companies.6. Fairness, reasonableness, and compliance with the law of the Scheme.7. Directions for stamp duty adjudication, filing with the Registrar of Companies, and payment of costs.Analysis:1. The judgment pertains to a petition seeking the Tribunal's sanction under Sections 230 to 232 and Section 234 of the Companies Act, 2013 for a Scheme of Amalgamation involving multiple companies. The Petitioner Companies have presented their case before the Tribunal, highlighting the purpose and benefits of the proposed Scheme.2. The Scheme aims to rationalize subsidiaries, achieve cost savings, reduce legal and regulatory compliances, and enhance shareholder value by combining complementary businesses. The Petitioners have outlined the key products and operations of the companies involved, emphasizing the strategic advantages and synergies expected from the Amalgamation.3. The Petitioner Companies have assured compliance with all statutory requirements, approvals from regulatory bodies, and necessary undertakings to adhere to the Companies Act, 2013, and related rules. Reports from the Regional Director and Registrar of Companies have been submitted, indicating general approval of the Scheme with minor observations and conditions to be met.4. The Official Liquidator has submitted a favorable report on the conduct of the Petitioner Companies, recommending their dissolution without winding up. The absence of objections from concerned parties and the overall fairness and legality of the Scheme have been acknowledged by the Tribunal.5. In light of the satisfactory fulfillment of statutory compliances and the absence of opposition to the Scheme, the Tribunal has granted approval to the Company Scheme Petition, directing the Petitioner Companies to complete certain procedural formalities such as stamp duty adjudication, filing with the Registrar of Companies, and payment of specified costs to relevant authorities.6. The judgment concludes with instructions for the Petitioner Companies to comply with the specified directives within stipulated timelines, ensuring the orderly implementation of the approved Scheme and subsequent administrative procedures in accordance with the law.This detailed analysis encapsulates the key aspects and implications of the legal judgment delivered by the National Company Law Tribunal, Mumbai, regarding the Scheme of Amalgamation presented before the Tribunal.