Approval of Scheme of Amalgamation under Companies Act, 2013

In Re : Silversand Distributors Limited and Ors.

In Re : Silversand Distributors Limited and Ors. - TMI Issues Involved:
1. Approval of the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013.
2. Dispensation of meetings of equity shareholders and creditors.
3. Compliance with statutory requirements and notifications.
4. Justification and necessity of the Scheme of Amalgamation.
5. Observations and objections raised by the Regional Director.
6. Responses and rejoinders by the petitioner companies.
7. Compliance with accounting standards and statutory audits.
8. Compliance with Section 68 of the Companies Act, 2013 regarding buyback of shares.
9. Final approval and sanction of the Scheme of Amalgamation.

Detailed Analysis:

1. Approval of the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013:
The petitioners, Silversand Distributors Limited (Transferor Company) and Prarthana Sales Private Limited (Transferee Company), sought approval for a Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013. The scheme intended to transfer all assets, properties, rights, and obligations of the Transferor Company to the Transferee Company.

2. Dispensation of meetings of equity shareholders and creditors:
The Tribunal dispensed with the meetings of the equity shareholders and creditors of the petitioner companies based on consent letters and affidavits received, as per the order dated 5th February 2019, in CA(CAA)914/KB/2018.

3. Compliance with statutory requirements and notifications:
The petitioners served notices to the Central Government through the Regional Director, Registrar of Companies, West Bengal, and other regulatory authorities. Joint publication in newspapers was made, and an affidavit was filed with the Tribunal confirming compliance with the order dated 5th February 2019.

4. Justification and necessity of the Scheme of Amalgamation:
The petitioners justified the amalgamation on several grounds, including consolidation of group structure, synergies in business activities, economies of scale, and enhanced profitability. The amalgamation aimed to establish a larger company with greater resources and a larger capital base, benefiting shareholders, employees, and all concerned.

5. Observations and objections raised by the Regional Director:
The Regional Director raised several objections in affidavits affirmed on 5th August 2019, 6th January 2020, and 12th February 2020, including:
- Clause 13.2 of the scheme not complying with Section 232(3)(i) of the Companies Act, 2013.
- The appointed date being too old (1st April 2017).
- Defective accounting treatment contrary to Accounting Standard-14.
- Non-compliance with Section 68 regarding buyback of shares.
- Lack of response from the Income Tax Department.

6. Responses and rejoinders by the petitioner companies:
The petitioners filed rejoinders addressing the Regional Director's observations:
- Provided statements showing clubbing of authorized capital.
- Justified the appointed date as per Ministry of Corporate Affairs' clarification.
- Amended the scheme to comply with the pooling of interest method under Accounting Standard 14.
- Submitted a certificate from the company's statutory auditor regarding accounting treatment.
- Clarified that clause 11.2 did not amount to a buyback of shares.

7. Compliance with accounting standards and statutory audits:
The petitioners rectified the mistake of not initially providing a certificate from the statutory auditor and submitted the required certificate confirming that the scheme's accounting treatment conformed to prescribed standards.

8. Compliance with Section 68 of the Companies Act, 2013 regarding buyback of shares:
The petitioners clarified that clause 11.2 dealt with fractional shares and did not amount to a buyback of shares. They undertook to settle fractional entitlements in cash, ensuring compliance with relevant provisions.

9. Final approval and sanction of the Scheme of Amalgamation:
The Tribunal, after considering all submissions, affidavits, and rejoinders, found no impediment in sanctioning the Scheme of Amalgamation. The scheme was sanctioned with effect from 1st April 2017, and all properties, rights, liabilities, and proceedings of the Transferor Company were transferred to the Transferee Company. The Transferor Company was dissolved without winding up, and the petitioners were directed to comply with all statutory requirements.

Order:
The Scheme of Amalgamation was sanctioned, binding the Transferor and Transferee Companies and their respective shareholders. The petitioners were directed to deliver a certified copy of the order to the Registrar of Companies, West Bengal, within 30 days. The CP No. 426/KB/2019, connected with CA (CAA) No. 914/KB/2018, was disposed of accordingly.