Company Division Split Approved; Assets, Liabilities Transferred; Taxes and Duties Still Apply.

The Tribunal sanctioned the Scheme of Arrangement under Sections 230 to 232 of the Companies Act, 2013, effective from April 1, 2020, involving the demerger of divisions from the Demerged Company to the Resulting Company. All assets, liabilities, and pending proceedings of the Demerged Company are transferred to the Resulting Company, subject to existing charges. The sanction does not exempt the payment of Stamp Duty, taxes, or other charges, which remain subject to the final decision of the Income Tax Authorities. Compliance with the Companies Act, 2013, is mandated, and the Tribunal reserves the right for any authority to take action for violations. The Scheme is deemed fair, reasonable, and not contrary to public policy.

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Issues Involved:
1. Sanction of the Scheme of Arrangement under Sections 230 to 232 of the Companies Act, 2013.
2. Compliance with statutory requirements and procedural formalities.
3. Observations and objections by statutory authorities.
4. Transfer of assets and liabilities.
5. Tax implications and compliance.

Detailed Analysis:

1. Sanction of the Scheme of Arrangement:
The Company Petition was jointly filed by the Applicant Companies seeking the sanction of the Scheme of Arrangement under Sections 230 to 232 of the Companies Act, 2013. The Scheme involves the demerger of the Export Division and Packaging Products Division from the Demerged Company (Prime Progression Icom (India) Private Limited) to the Resulting Company (Prime Progression Global Commerce Private Limited).

2. Compliance with Statutory Requirements and Procedural Formalities:
The Tribunal noted that the Applicant Companies had filed CA(CAA) No. 32/BB/2020 seeking to dispense with convening meetings of Equity Shareholders and Creditors. The Tribunal, by its order dated 07.09.2020, directed to dispense with these meetings. Notices were issued to statutory authorities, and compliance was affirmed through affidavits and newspaper publications.

3. Observations and Objections by Statutory Authorities:
- Competition Commission of India (CCI): The CCI stated that the Scheme had not been filed with them and sought an undertaking from the Companies that CCI approval was not required. The Petitioner Companies confirmed that they did not meet the thresholds prescribed under the Competition Act, 2002.
- Income Tax Department: The Deputy Commissioner of Income Tax confirmed that there were no outstanding demands against the Demerged Company.
- Registrar of Companies (ROC): Observations included the need for specific approvals from shareholders, obtaining NOC from Axis Bank for open charges, and compliance with related party transactions. The Petitioner Companies responded by providing necessary clarifications and consents.
- Regional Director (RD), Ministry of Corporate Affairs: Similar observations were made regarding shareholder approvals, asset transfer details, and compliance with related party transactions. The Petitioner Companies addressed these concerns satisfactorily.

4. Transfer of Assets and Liabilities:
The Scheme facilitates the transfer of assets and liabilities from the Demerged Company to the Resulting Company. The Tribunal ordered that the Demerged Company be transferred without further act or deed to the Resulting Company under Section 232 of the Companies Act, 2013. This includes all liabilities, taxes, and charges, which will become the responsibilities of the Resulting Company.

5. Tax Implications and Compliance:
The tax implications arising from the Scheme are subject to the final decision of the concerned Income Tax Authorities. The Tribunal emphasized that the acceptance of the Scheme should not be construed as an exemption from payment of Stamp Duty, taxes, or other charges, which must be dealt with in accordance with the law.

Tribunal's Order:
1. The Scheme of Arrangement is sanctioned, effective from April 1, 2020.
2. Sanctioning the Scheme does not exempt payment of Stamp Duty, taxes, or other charges.
3. The Demerged Company is transferred to the Resulting Company, subject to existing charges.
4. All liabilities of the Demerged Company are transferred to the Resulting Company.
5. Tax implications are subject to the final decision of the Income Tax Authorities.
6. Pending proceedings by or against the Demerged Company will continue against the Resulting Company.
7. The Petitioner Companies must deliver a certified copy of the Order to the Registrar of Companies within thirty days.
8. Compliance with all provisions of the Companies Act, 2013, must be ensured.
9. Books of Accounts and relevant documents of the Demerged Company must be handed over to the Resulting Company.
10. The Order does not preclude any authority from taking action for violations or offences.
11. Any contravention of Section 232 will result in penalties as per the Act.
12. Any person may apply to the Tribunal for necessary directions.
13. The Company Petition and all pending IAs are disposed of.

The Tribunal concluded that the Scheme of Arrangement is fair, reasonable, and not detrimental to the Members, Creditors, or contrary to public policy.

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