2020 (10) TMI 700 - Tri - Law of Competition

Tribunal Approves Company Merger with Conditions: Compliance, Taxes, and Levies Required.

Sumangal Dealers Private Limited Versus Balaji Malts Private Limited

The Tribunal sanctioned the Scheme of Amalgamation between the Transferor and Transferee Companies, contingent upon adherence to statutory requirements, ... Approval of Scheme of Amalgamation - Sections 230 and 232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- The procedure specified in sub-sections (1) and (2) of section 232 of the Companies Act, 2013 has been complied with, and hence the Scheme of Amalgamation, as approved by the Petitioner Company, is hereby sanctioned, as prayed. The Scheme of Amalgamation (enclosed as Annexure-A to this Company Petition) is hereby sanctioned and the Appointed Date shall be 01st April, 2013. The effective date of the Scheme shall be the date of this order - Application allowed. Issues Involved:1. Approval of the Scheme of Amalgamation.2. Compliance with statutory requirements.3. Objections and observations raised by regulatory authorities.4. Consideration and share allotment.5. Tax implications and pending liabilities.6. Compliance with Corporate Social Responsibility (CSR) provisions.7. Effective date and appointed date of the Scheme.8. Procedural compliance and post-amalgamation formalities.Issue-wise Detailed Analysis:1. Approval of the Scheme of Amalgamation:The Petitioner Company sought approval for the Scheme of Amalgamation between Sumangal Dealers Private Limited (Transferor Company) and Balaji Malts Private Limited (Transferee Company) under Sections 230 and 232 of the Companies Act, 2013. The Scheme aimed at integrating business operations, eliminating duplicate efforts, and achieving economic and profitable business operations.2. Compliance with Statutory Requirements:The Transferee Company convened meetings of its Shareholders and Creditors as directed by the Tribunal, and the Scheme was unanimously approved. Notices were issued to the Registrar of Companies, Karnataka, Regional Director (SER), the Income Tax Department, and the Competition Commission of India. The Tribunal ensured compliance with the procedural requirements under sub-sections (1) and (2) of section 232 of the Companies Act, 2013.3. Objections and Observations Raised by Regulatory Authorities:The Regional Director and Registrar of Companies, Karnataka, raised several observations, including the outdated Appointed Date, the status of the Transferor Company, compliance with Section 232(3)(i) of the Companies Act, 2013, and discrepancies in Share Capital details. The Transferee Company responded to these observations, clarifying that the merger would be effective after obtaining orders from both NCLT Kolkata and Bengaluru Benches and filing them with the respective ROCs.4. Consideration and Share Allotment:The consideration involved allotting 1 Equity Share of the Transferee Company for every 23 Equity Shares of the Transferor Company held by its three shareholders. Additionally, the Transferor Company held 92,800 Equity Shares in the Transferee Company, which would be transferred to the three shareholders in their respective shareholding ratios.5. Tax Implications and Pending Liabilities:The Principal Commissioner of Income Tax-1 stated no objections to the Amalgamation subject to the payment of outstanding demands by the Transferee Company. The tax implications arising out of the Scheme are subject to the final decision of the concerned Income Tax Authorities.6. Compliance with Corporate Social Responsibility (CSR) Provisions:The Transferee Company had unspent CSR amounts for the years 2016-17 and 2017-18, violating Section 135 of the Companies Act. The Company undertook to spend the required quantum as per Section 135 and comply with the provisions.7. Effective Date and Appointed Date of the Scheme:The Appointed Date for the Scheme was set as 01st April 2013, and the Effective Date was the date of the Tribunal's order. The Scheme would be effective after obtaining favorable orders from both NCLT Kolkata and Bengaluru Benches and filing them with the respective ROCs.8. Procedural Compliance and Post-Amalgamation Formalities:The Tribunal directed the Petitioner Company to deliver a certified copy of the order along with the Scheme of Amalgamation to the Registrar of Companies within thirty days. The Transferee Company was also directed to file all due Statutory Returns immediately and ensure compliance with Section 135 of the Companies Act, 2013. The Transferor Company was instructed to hand over the Books of Accounts and other relevant documents to the Transferee Company.Conclusion:The Tribunal sanctioned the Scheme of Amalgamation, subject to compliance with statutory requirements, payment of outstanding demands, and fulfillment of procedural formalities. The order emphasized that the sanctioning of the Scheme should not be construed as an exemption from payment of Stamp Duty, taxes, levies, or other charges. The Transferee Company was directed to ensure compliance with the Companies Act, 2013, and submit quarterly/annual compliance status through an affidavit. The order disposed of the Company Petition along with pending IAs, if any.