2020 (11) TMI 803 - Tri - Companies Law

Tribunal approves scheme of arrangement and amalgamation, with equity shares cancellation and reduction.

The Tribunal approved the composite scheme of arrangement and amalgamation involving several companies, including the cancellation and reduction of equity ... Approval for composite scheme of arrangement and amalgamation - Section 230-232 of Companies Act, 2013 - HELD THAT:- This Tribunal is of the considered view that the scheme as contemplated amongst the petitioner companies seems to be prima facie beneficial to the company and will not be in any way detrimental to the interest of the shareholders of the company. In view of absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal sanctions the scheme of arrangement appended as annexure 'A1' with the company petition as well as the prayer made therein. Learned senior counsel for the petitioner-companies submitted that no investigation proceedings are pending against the transferor or transferee companies under the provisions of the Companies Act, 1956 or the Companies Act, 2013 and no proceedings against the petitioner-companies for oppression or mismanagement have been filed before this hon'ble Tribunal or erstwhile Company Law Board - Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the petitioners. While approving the scheme as above, it is clarified that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any, payment is due or required in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law - Application allowed. Issues Involved:1. Approval of the composite scheme of arrangement and amalgamation.2. Directions for convening meetings of shareholders and creditors.3. Compliance with statutory and regulatory requirements.4. Observations and objections from statutory authorities.5. Valuation report and accounting treatment.6. Final approval and conditions imposed by the Tribunal.Detailed Analysis:1. Approval of the Composite Scheme of Arrangement and Amalgamation:The board of directors of M/s. Aztec Auto Ltd., M/s. Freins Metal Ltd., M/s. Freins Engineering Ltd., M/s. Task Pressing Ltd., M/s. Wichitra Auto Ltd., M/s. Modular Auto Ltd., and M/s. Transenergy Ltd. approved the composite scheme of arrangement and amalgamation in meetings held on August 9, 2019, and August 12, 2019. The scheme involved the cancellation and reduction of 9,260 equity shares of the transferee company and the amalgamation of the transferor companies with the transferee company.2. Directions for Convening Meetings of Shareholders and Creditors:The first motion application was filed jointly by the transferor and transferee companies seeking directions for convening meetings of equity shareholders and unsecured creditors, and for dispensing with the requirement of convening meetings of secured creditors. Directions were issued by the Tribunal on November 7, 2019, and the meetings were held as directed. The chairman's report was filed on December 30, 2019, and the second motion petition was filed on January 2, 2020.3. Compliance with Statutory and Regulatory Requirements:The Tribunal directed the petitioner-companies to issue notices to statutory/regulatory authorities, including the Regional Director, Registrar of Companies, Income-tax Department, Official Liquidator, and other sectoral regulators. Notices were also published in newspapers. An affidavit of service was filed on March 5, 2020, confirming compliance with these directions.4. Observations and Objections from Statutory Authorities:- Regional Director: The RD filed a report on February 10, 2020, stating that the interests of employees were protected and that the companies were regular in filing statutory returns. The RD sought directions for the transferee company to file an amended memorandum and articles of association and to pay fees for the enhanced authorized capital as required by section 232(2)(i) of the Companies Act, 2013. The petitioner-companies undertook to comply with these requirements.- Official Liquidator: The official liquidator appointed M/s. Sony Associates to verify the affairs of the transferor companies. The report confirmed that the companies were maintaining separate bank accounts, filing statutory returns, and had no pending IT or GST appeals. The Tribunal directed the transferor companies to pay Rs. 1,00,000 towards the auditor's fees.- Income-tax Department: The DCIT and ACIT issued notices regarding outstanding tax demands. The petitioner-companies filed affidavits stating that the demands were either paid or no outstanding amounts existed. The Tribunal noted that the rights of tax authorities to recover dues remain intact and can proceed against the transferee company if necessary.- Other Statutory Authorities: No objections were raised by other statutory authorities, including the Reserve Bank of India.5. Valuation Report and Accounting Treatment:The valuation report recommended the issuance of optionally convertible redeemable preference shares to the shareholders of the transferor companies. The statutory auditors certified that the accounting treatment in the scheme complied with applicable Indian Accounting Standards.6. Final Approval and Conditions Imposed by the Tribunal:The Tribunal found the scheme beneficial and not detrimental to shareholders' interests. The scheme was sanctioned with the following conditions:- Reduction of the equity share capital and securities premium account of the transferee company.- Transfer of properties, rights, interests, liabilities, and duties of the transferor companies to the transferee company.- Continuation of pending proceedings by or against the transferee company.- Transfer of employees to the transferee company without interruption.- Filing of revised memorandum and articles of association and payment of differential fees for enhanced authorized capital.- Delivery of a certified copy of the order to the Registrar of Companies within thirty days for registration and dissolution of the transferor companies.The Tribunal clarified that the order does not exempt payment of stamp duty, taxes, or other charges and allowed any interested person to apply for necessary directions. The company petition was allowed on these terms.