2019 (12) TMI 287 - AT - Companies Law

Appellate Tribunal Overturns Rejection of Amalgamation Scheme

The Appellate Tribunal set aside the Tribunal's rejection of the scheme of amalgamation due to lack of clarity and failure to provide grounds for the ... Sanction of Amalgamation of companies - convening and holding of meeting of shareholders and the creditors of the company for the purpose of approving with or without modification, to obtain sanction of the Tribunal to the scheme of amalgamation - Section 230 – 232 of the Companies Act, 2013 - HELD THAT:- Since the requirement of the holding and convening of meetings of the equity shareholders and creditors of the company, on 28th February, 2018 the Appellant filed the petition for sanction of the scheme of amalgamation under Sections 230 – 232 of the Companies Act, 2013 read with Companies (Compromise, Arrangements and Amalgamations) Rule, 2016. Notice was issued to the office of the Regional Director, Registrar of Companies, Official Liquidator, Income Tax Department and Reserve Bank of India. The Tribunal also directed for publication of the notices in ‘English daily Newspaper’ (the Hindu), Bangalore Edition and ‘Udayavani, Kannada daily Newspaper’, Bangalore Edition and ordered to list the matter for hearing. The Tribunal has not shown any provision and also not record any ground while passing the impugned order dated 17th December, 2018. It is also not made clear as to how such stand has been taken by the Tribunal while earlier order of amalgamation as detailed above with regard to the Transferor Company and the Transferee Company (Appellant) has been approved. Matter remitted to the Tribunal to pass appropriate order approving the scheme of amalgamation/merger under Section 230 -232 of the Companies Act, 2013 with such condition as required to be imposed in terms of any law including ‘The Chit Funds Act, 1982’, taking into consideration the Appellant – Transferee Company otherwise fulfils the conditions and if so required may allow the Appellant/parties to take consent of the foreman and all the subscribers to the chits in terms of section 15 of the Chit Funds Act, 1982; approval of the registration of chits in terms of Section 19 of the Chit Funds Act, 1982 which prohibits persons from carrying on chit business in a new place of business without obtaining prior approval of the concern registry of chits - appeal allowed. Issues:1. Appellant's application for amalgamation under Sections 230-232 of the Companies Act, 2013.2. Requirement of approval from the Registrar of Chits for the scheme of amalgamation.3. Observations and objections raised by the Regional Director and Registrar of Companies.4. Tribunal's rejection of the scheme of amalgamation.5. Appellant's compliance with legal procedures and absence of objections.6. Tribunal's lack of clarity in requiring permission/approval from the appropriate authority.7. Tribunal's failure to provide grounds for rejection of the scheme.8. Appellate Tribunal's decision to set aside the impugned order and remit the matter for appropriate approval.Analysis:1. The Appellant, 'Shriram Chits (Karnataka) Private Limited,' filed an application seeking directions for the amalgamation of several companies under Sections 230-232 of the Companies Act, 2013. The Tribunal initially dispensed with the requirement of convening meetings for shareholders and creditors based on consent affidavits and directed publication of notices for the scheme.2. The Regional Director and Registrar of Companies raised concerns about the scheme, emphasizing the need for approval from the Registrar of Chits due to the nature of the business involving ordinary public and chit holders. The Appellant responded, stating that necessary approvals would be obtained as required by law, and the interest of chit subscribers was adequately protected.3. Despite the absence of objections from any party, the Tribunal rejected the scheme on 17th December 2018, citing the need for permission/approval from the appropriate authority without providing clear grounds for its decision. The Appellate Tribunal noted the lack of clarity and allowed the Appellant to implead the 'Registrar of Chit Funds, Karnataka' to ascertain the requirement for prior permission for amalgamation under the Companies Act, 2013.4. The Tribunal's decision lacked legal basis, as no provision or ground was cited for the rejection, especially when previous amalgamations involving the Appellant had been approved. Consequently, the Appellate Tribunal set aside the impugned order and remitted the matter to the Tribunal for appropriate approval, considering compliance with 'The Chit Funds Act, 1982,' and other necessary conditions within a specified timeframe.5. In conclusion, the appeal was allowed with directions for the Tribunal to pass a final order on the scheme of amalgamation within three months, ensuring compliance with all legal requirements and addressing the concerns raised by the Regional Director and Registrar of Companies. No costs were awarded in the matter.