2016 (4) TMI 1017 - HC - Companies Law

Court Approves Amalgamation Scheme in Real Estate Sector Benefiting Stakeholders

The Court sanctioned the Scheme of Arrangement for the Amalgamation of two companies in the Real Estate Construction and Development sector, finding it ... Scheme of Arrangement - Amalgamation - Sanction of Scheme - Amendment of Appointed Date - Liabilities of Transferor to vest in Transferee - Preservation of books and records - Directions for stamping and filing with Registrar - Costs awardedScheme of Arrangement - Amalgamation - Sanction of Scheme - Sanction of the proposed scheme of amalgamation between Transglobe Industries Private Limited (Transferor) and Ishverkrupa Estate Consultants Private Limited (Transferee). - HELD THAT: - Having considered the petitions, the affidavits (including confirmations that shareholders' meetings were dispensed with by earlier orders), the report of the Official Liquidator, the affidavit of the Regional Director, and oral submissions, the Court found that objections, if any, have been addressed and that the Scheme is in the interest of shareholders, creditors and the public. Publication requirements were satisfied and no objections were received. The Court therefore sanctioned the Modified Scheme placed on record. [Paras 8, 9, 10, 11, 12]The Modified Scheme of Arrangement is sanctioned and the prayers in the Company Petitions are granted.Amendment of Appointed Date - Grant of amendment to the Scheme to change the Appointed Date from 16th March 2016 to 1st April 2016. - HELD THAT: - The Official Liquidator's report noted the originally proposed Appointed Date appeared illogical. The petitioners' boards, authorized under the Scheme, passed resolutions to amend clause 1.2 to 1st April 2016 and placed authenticated copies on record. The Court, after noting the amendment and supporting affidavits, allowed the limited modification to the Scheme. [Paras 7, 10]Amendment of the Scheme to substitute the Appointed Date as 1st April 2016 is granted.Liabilities of Transferor to vest in Transferee - Preservation of books and records - Direction that liabilities of the Transferor shall remain enforceable and requirement to preserve books and records of the Transferor for eight years. - HELD THAT: - The Official Liquidator's report recorded no mismanagement prejudicial to members or public interest but noted outstanding service tax dues. Petitioners represented that all liabilities would be assumed by the Transferee and that the outstanding service tax would be paid as per law. The Court directed that the Transferee preserve the Transferor's books and records for eight years from sanction and not dispose of them without prior Central Government permission, and reiterated that the Transferor shall comply with statutory liabilities even after sanction. [Paras 5, 6]Transferee to preserve Transferor's books and records for eight years and Transferor's statutory liabilities are not extinguished by sanction of the Scheme.Directions for stamping and filing with Registrar - Directions to lodge authenticated order and schedule of immovable assets for stamp adjudication and to file the order and Scheme with the Registrar of Companies. - HELD THAT: - The Court directed the petitioner companies to lodge a copy of the order, the detailed schedule of immovable assets of the Transferor and the Scheme authenticated by the High Court Registrar with the Superintendent of Stamps for adjudication within 60 days. The petitioners were also directed to file the order and Scheme with the Registrar of Companies electronically (with INC28) and in physical form as required by law. [Paras 13, 14]Petitioners to lodge authenticated order and schedule for stamp adjudication and to file the order and Scheme with the Registrar of Companies as directed.Costs awarded - Quantification and imposition of costs to be paid to Central Government counsel and to the Official Liquidator. - HELD THAT: - The Court quantified costs payable to the Central Government Standing Counsel at Rs. 7,500 per petition to be paid to the Assistant Solicitor General and directed the Transferor Company to pay Rs. 7,500 to the Office of the Official Liquidator. [Paras 12]Costs quantified and directed to be paid as ordered.Final Conclusion: The High Court sanctioned the Modified Scheme of Amalgamation (with the Appointed Date amended to 1st April 2016), directed preservation of the Transferor's records and continued enforceability of its statutory liabilities, ordered compliance with stamping and filing formalities, and awarded specified costs to the Central Government counsel and the Official Liquidator. Issues:Sanction of Scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956.Analysis:1. The petitioner companies sought the sanction of a Scheme of Arrangement for the Amalgamation of two companies belonging to the same management group, involved in Real Estate Construction and Development activities. The purpose was to achieve synergic benefits through consolidation. The benefits of the Scheme were detailed in the petitions.2. Meetings of Equity Shareholders and Creditors were dispensed with as written consent letters were provided, and no objections were raised. Public notices were advertised, and no objections were received even after publication. The Official Liquidator confirmed that affairs were not prejudicial and requested preservation of books and records for eight years post-Scheme sanction.3. The Court addressed outstanding Service Tax dues and a logical modification to the proposed Appointed Date in response to observations made by the Official Liquidator's Chartered Accountant. The Board of Directors decided to change the Appointed Date to address concerns raised, and the modification was granted by the Court.4. The Regional Director's observations were addressed through a Common Additional Affidavit, confirming compliance with the Income Tax Act and rules. No complaints were received against the companies, and no objections were raised against the Scheme. The Court found the Scheme to be in the interest of shareholders, creditors, and the public, sanctioning the Modified Scheme.5. The Court granted the prayers in the Company Petitions and disposed of the matter, quantifying costs to be paid to the Central Government Standing Counsel and the Office of the Official Liquidator. The petitioner companies were directed to comply with stamp duty adjudication, lodge copies of the order and Scheme, and file with the Registrar of Companies.6. Filing and issuance of the drawn-up order were dispensed with, and all concerned authorities were directed to act on the authenticated copy of the order. The Registrar was instructed to issue the authenticated copy of the order and Scheme promptly.This comprehensive analysis outlines the key aspects of the judgment regarding the sanctioning of the Scheme of Arrangement under the Companies Act, 1956, addressing various legal and procedural considerations and modifications required for the successful implementation of the Amalgamation.