2021 (5) TMI 500 - Tri - Companies Law

Tribunal sanctions Amalgamation Scheme under Companies Act 2013

The Tribunal approved the Scheme of Amalgamation between the Transferor Company and Transferee Company under Sections 230 to 232 of the Companies Act, ... Sanction of the Scheme of Amalgamation - dispensation of meetings of shareholders and creditors - transfer and vesting of assets and liabilities under Section 232(3) of the Companies Act, 2013 - appointed date for amalgamation - continuity of employees' service - filing revised Memorandum and Articles of Association and payment of differential fee for enhancement of authorised capital - entitlement of the Income Tax Department to recover statutory dues post-amalgamation - sanction subject to compliance with stamp duty, taxes and other statutory requirements - Official Liquidator's report and payment for auditor's investigation fees - certificate of compliance with Accounting StandardsSanction of the Scheme of Amalgamation - dispensation of meetings of shareholders and creditors - certificate of compliance with Accounting Standards - Sanction of the Scheme of Amalgamation and related procedural compliances - HELD THAT: - The Tribunal, after noting service of statutory and regulatory notices, publication in the nominated newspapers, filings before the Registry and the reports of the Regional Director and the Official Liquidator, found that requisite statutory compliances under the Act and Rules had been fulfilled and accepted the certificate of the independent statutory auditor in respect of compliance with Accounting Standards. The Tribunal accordingly sanctioned the Scheme of Amalgamation annexed to the petitions and recorded that, in the absence of any objection recorded on file (including non-representation by the Income Tax Department), the Scheme could be sanctioned. The earlier order dispensing with meetings of shareholders and creditors pursuant to consent affidavits was treated as having been correctly made and the sanction followed subject to the conditions and directions recorded in the order.Company Petition sanction granted and the Scheme of Amalgamation is sanctioned subject to the terms and directions contained in the order.Transfer and vesting of assets and liabilities under Section 232(3) of the Companies Act, 2013 - appointed date for amalgamation - continuity of employees' service - Legal effect of the sanction: transfer/vesting of assets and liabilities, continuation of proceedings, appointed date and employee continuity - HELD THAT: - The Tribunal declared that, pursuant to the Scheme and Section 232(3), all properties, rights, interests, liabilities, obligations and duties of the Transferor Company shall, without further act or deed, be transferred to and vested in the Transferee Company. Proceedings pending by or against the Transferor Company shall continue by or against the Transferee Company. The Tribunal fixed the appointed date as specified in the Scheme and confirmed that employees of the Transferor Company in service immediately prior to the effective date shall become employees of the Transferee Company without break or interruption.Assets, liabilities and proceedings stand transferred to the Transferee Company from the appointed date and employee service continuity is preserved.Filing revised Memorandum and Articles of Association and payment of differential fee for enhancement of authorised capital - Obligation to file revised constitutional documents and to make payment of any differential fee on account of enhancement of authorised capital - HELD THAT: - Having noted the Regional Director's observation that the Scheme's clause stating that no further fee or stamp duty would be payable was contrary to the statutory position, the Transferee Company furnished an undertaking to file revised Memorandum and Articles of Association and to make payment of the differential authorised capital fee. The Tribunal directed the Transferee Company to file the revised MOA/AOA with the Registrar of Companies and to make requisite payment of the differential fee (after setting off fees paid by the Transferor Company) in accordance with law.Transferee Company to file revised MOA/AOA and pay any differential fees for enhanced authorised capital as directed.Official Liquidator's report and payment for auditor's investigation fees - Recording of Official Liquidator's report and payment towards the auditor appointed by the Official Liquidator - HELD THAT: - The Official Liquidator filed his report concluding that the affairs of the Transferor Company were not conducted prejudicially. The Chartered Accountant appointed by the Official Liquidator made observations on statutory books, deposits, filings and tax compliance. The Tribunal took those reports on record and directed that the Transferor Company make payment to the Official Liquidator towards the fees payable to the auditor who investigated the affairs of the Transferor Company.Reports recorded and payment to the Official Liquidator for the auditor's fees directed to be made by the Transferor Company.Entitlement of the Income Tax Department to recover statutory dues post-amalgamation - sanction subject to compliance with stamp duty, taxes and other statutory requirements - Protection of statutory recovery rights and non-exemption from taxes or duties despite sanction - HELD THAT: - The Tribunal, relying on prior authority and observations in earlier decisions, clarified that sanctioning the Scheme does not bar the Income Tax Department from taking appropriate proceedings for recovery of statutory dues from the transferor, transferee or any other person liable for such dues. Likewise, the Tribunal expressly stated that its order does not grant exemption from payment of stamp duty, taxes or any other charges and that sanction will not prevent action being taken in accordance with law if deficiencies or violations are found.Sanction granted subject to the Income Tax Department's right to recover dues and without exemption from stamp duty, taxes or other statutory requirements.Final Conclusion: The Tribunal, after recording compliance with statutory procedures and taking on record statutory and Official Liquidator reports, sanctioned the Scheme of Amalgamation on the terms recorded, directed ministerial steps including filing of revised constitutional documents and payment of differential fees and investigator's remuneration, and made clear that the sanction is without prejudice to recovery of statutory dues or other enforcement action in accordance with law. Issues: Approval of Scheme of Amalgamation under Companies Act, 2013Analysis:1. The Company Petitions CP/1394 & 1395/CAA/2019 were filed for the approval of the Scheme of Amalgamation between the Transferor Company and Transferee Company under Sections 230 to 232 of the Companies Act, 2013, and other applicable provisions.2. The First Motion Application sought dispensation of meetings of shareholders and creditors, which was granted by the Tribunal. The second motion petition was filed for the sanction of the Scheme of Amalgamation.3. Notices were ordered to be issued to Statutory/Regulatory Authorities and published in newspapers. Affidavits of service were filed to show compliance with the Tribunal's orders.4. The Regional Director's report highlighted provisions related to the merger of authorized capital, which required compliance by the Transferee Company. The Transferee Company undertook to fulfill the necessary requirements.5. The Official Liquidator's report confirmed that the affairs of the Transferor Company were conducted properly. The Chartered Accountant's report also indicated compliance with various statutory requirements.6. The Tribunal directed the Transferor Company to pay fees to the Official Liquidator for the Auditor's remuneration. The absence of objections from the Income Tax Department was noted.7. The Independent Statutory Auditor's certificate regarding compliance with Accounting Standards was submitted by the Petitioner Companies.8. The NCLT New Delhi's observations regarding the IT Department's rights in a similar case were considered, granting protection to the IT Department for recovery of any tax dues.9. The Petitioner companies confirmed the absence of any pending investigation proceedings or actions against them under relevant provisions of the Companies Act.10. With all statutory compliances fulfilled and no objections raised, the Tribunal sanctioned the Scheme of Amalgamation, with a caution that non-compliance with any law could lead to actions against responsible individuals.11. The Tribunal clarified that its order did not exempt the parties from payment of stamp duty, taxes, or other charges required by law.12. Detailed orders were issued regarding the transfer of properties, liabilities, continuation of proceedings, appointed date, employee transfers, share allotments, filing of revised documents, and dissolution of the Transferor Company.13. Any interested party was given the liberty to apply for necessary directions to the Tribunal. The Company Petitions were allowed based on the terms mentioned in the judgment.