2017 (2) TMI 41 - HC - Companies Law

Court approves Scheme of Amalgamation between Sharma Farms & Globus Projects under Companies Act, 1956

The court granted condonation of delays in filing various documents and approved the Scheme of Amalgamation under Sections 391 and 394 of the Companies ... Scheme of arrangement - Held that:- Upon considering the approval accorded by the members and creditors of the Petitioner Companies to the proposed Scheme, and the affidavits filed by the Regional Director, Northern Region, Ministry of Corporate Affairs and the Official Liquidator attached to this Court, whereby no objections have been raised to the proposed Scheme, there appears to be no impediment to the grant of sanction to the Scheme. Consequently, sanction is hereby granted to the Scheme under sections 391 and 394 of the Act. The Petitioner Companies will however, comply with the statutory requirements, in accordance with law. A certified copy of this order, sanctioning the Scheme, be filed with the ROC, within thirty (30) days of its receipt. Resultantly, it is hereby directed that the Petitioner Companies will comply with all provisions of the Scheme and, in particular, those which are referred to hereinabove. In any event, notwithstanding what has been stated on behalf of the Petitioner Companies hereinabove, the Transferee Company will file an undertaking with this Court, within two weeks from today, stating therein, that it will take over and defray all liabilities of the Transferor Company. It is also made clear, that the concerned Statutory Authority will be entitled to proceed against the Transferee Company qua any liability which it would have fastened onto the Transferor Company for the relevant period, and that, which may arise on account of the Scheme being sanctioned. The Transferor Company shall stand dissolved without being wound up. ISSUES PRESENTED AND CONSIDERED 1. Whether delays in filing affidavits, rejoinders and official reports under the Companies (Court) Rules, 1959 and Section 394-A/394(1) of the Companies Act, 1956 should be condoned. 2. Whether the Court has jurisdiction to adjudicate the petition for sanction of a scheme of amalgamation under Sections 391 and 394 of the Companies Act, 1956. 3. Whether the statutory and procedural requirements for sanctioning a scheme of amalgamation-board approvals, meetings (or dispensation thereof), notices, publication of citations, filing of financial statements and statutory forms, and reports of the Official Liquidator and Regional Director-have been complied with such that the scheme may be sanctioned. 4. Whether objections raised by the Regional Director (non-appointment of whole-time company secretary; non-filing of balance sheet/annual return) and any other objections preclude sanction of the scheme. 5. What conditions, undertakings and consequential directions should attend sanction (including costs, liabilities, dissolution, and preservation of rights of taxing/statutory authorities and remedies against directors/officials). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of filing delays Legal framework: Rule 7 and Rule 9 of the Companies (Court) Rules, 1959; Section 394-A and second proviso to Section 394(1) of the Companies Act, 1956 authorise filings and reports subject to Court direction and allow condonation where justified. Precedent Treatment: The Court applied established judicial discretion to condone procedural delays where reasons are furnished and supported by affidavit (no specific authorities cited in the text). Interpretation and reasoning: The Court considered applications supported by affidavit explaining delays of 80, 93 and 94 days in filing the Regional Director's affidavit, rejoinder, and Official Liquidator's report respectively. After hearing, the Court found the reasons sufficient and took the documents on record. Ratio vs. Obiter: Ratio - the Court exercises discretion to condone delay when adequate explanation and supporting affidavit are placed on record; Obiter - none beyond the exercise of discretion. Conclusion: Delays of 80, 93 and 94 days were condoned and the respective affidavits/reports were taken on record. Issue 2 - Jurisdiction to sanction the scheme Legal framework: Sections 391 and 394 of the Companies Act, 1956 govern court-sanctioned schemes of compromise, arrangement and amalgamation; jurisdiction is territorial where registered offices are situated. Precedent Treatment: The Court examined registered offices and concluded territorial jurisdiction existed; the judgment follows the standard jurisdictional test (no contrary precedent discussed). Interpretation and reasoning: Both companies' registered offices are in the National Capital Territory of Delhi; therefore, the Court has jurisdiction to adjudicate the petition. Ratio vs. Obiter: Ratio - territorial location of registered office confers jurisdiction to the Court to entertain the petition under Sections 391/394. Conclusion: The Court has jurisdiction to adjudicate the petition for sanction of the scheme. Issue 3 - Compliance with statutory and procedural requirements for sanction Legal framework: Sections 391 & 394 (procedure for scheme approval), requirements for board resolutions, convening/dispensing with meetings, publication of citations, service on Official Liquidator and Regional Director, and filing of financial statements and statutory forms under the Companies Act. Precedent Treatment: The Court applied established principles that sanction is appropriate if statutory safeguards (meetings or dispensation, notices, publication, report of OL/RD) are observed and no prejudice is shown to members/creditors or public. Interpretation and reasoning: The Scheme had board approvals; the Court earlier dispensed with certain meetings and directed convening of unsecured creditors' meeting of the transferee, whose chairperson's report showed unanimous approval. Citations were published as directed. The Official Liquidator filed a report stating no complaints and that affairs were not prejudicial to members/public. Affidavits evidencing filing of MoA/AoA, audited financials, and statutory forms (AOC-4, MGT-7, DIR-12) were on record. The Court reviewed these materials and found no impediment to sanction. Ratio vs. Obiter: Ratio - sanction may be granted where statutory procedural requirements are complied with or validly dispensed with, notice/publication obligations fulfilled, and OL/RD raise no unresolved objection. Conclusion: Procedural and statutory requirements were satisfied (or dispensed with lawfully) and supported by reports and documents; no bar to sanctioning the scheme. Issue 4 - Effect of objections raised by the Regional Director Legal framework: The Regional Director may report objections under Section 394-A; non-compliance with statutory provisions (e.g., Section 383A, Section 92 & 137 read with Section 403) can affect Court's exercise of discretion. Precedent Treatment: The Court considered the RD's affidavit as material which may impede sanction unless remedied; established practice requires that prima facie non-compliances be addressed before sanction. Interpretation and reasoning: The RD alleged the transferee had not appointed a whole-time company secretary and had not filed the balance sheet/annual return for FY ending 31.03.2015. The transferee filed an affidavit and documentary proof showing appointment of a whole-time company secretary (Form DIR-12) and filing of the relevant balance sheet and annual return (Form AOC-4, MGT-7). These filings satisfied the RD's objections; neither the RD nor OL maintained any objection thereafter. Ratio vs. Obiter: Ratio - remedial compliance with regulatory defaults, demonstrated by documentary proof, eliminates the RD's objection and permits sanction; Obiter - the Court's reliance on up-to-date compliance as condition precedent to sanction. Conclusion: Objections raised by the Regional Director were satisfied by subsequent filings; no outstanding regulatory objection bars the sanction. Issue 5 - Conditions, undertakings and consequences of sanction Legal framework: Court's power to sanction subject to conditions and to give consequential directions (dissolution, costs, undertakings), and to protect rights of statutory authorities; provisions preserving right of action against persons for statutory violations. Precedent Treatment: The Court followed principle that sanction does not confer immunity from tax/stamp duty or prevent statutory authorities from taking action for violations; transferee's undertaking to assume liabilities can be required. Interpretation and reasoning: The Court sanctioned the scheme but imposed directions: (a) certified copy to be filed with Registrar within 30 days; (b) transferee to file an undertaking within two weeks to take over and defray all liabilities of transferor; (c) sanction does not prevent statutory authorities from proceeding against the transferee for liabilities or against directors/officials for violations; (d) the transferor shall stand dissolved without winding up; (e) no exemption from stamp duty, taxes or other charges; and (f) costs of Rs. 1,00,000 to be deposited in the Official Liquidator's Common Pool Fund. Ratio vs. Obiter: Ratio - sanction may be conditional upon filing of certified copy, undertakings to meet liabilities, deposit of costs, and expressly preserves rights of statutory authorities and remedies against persons for violations. Obiter - emphasis that sanction is not a shield against subsequent statutory proceedings. Conclusion: Scheme sanctioned subject to specified conditions and undertakings; transferor dissolved; costs directed to be deposited; and preservation of statutory authorities' rights and remedies against concerned persons affirmed.