Amalgamation sanction with corrective accounting directions: scheme approved, while financial statement compliance was ordered before consolidation.

The scheme of amalgamation was sanctioned after the Tribunal found that the requirements of Sections 230 to 232 of the Companies Act, 2013 were satisfied, the arrangement was bona fide, fair, and supported by the requisite shareholder and creditor approvals, and the transfer of the undertaking as a going concern was . The Tribunal, however, accepted objections relating to accounting deficiencies in the transferor company's financial statements and directed corrective steps, including recognition of lease rental income, provision for depreciation, payment of due building taxes, preparation of cash flow statements, revision of the balance sheet, and corresponding consolidation by the transferee company. These directions did not sanction of the scheme, which was approved subject to compliance with statutory and accounting obligations.

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Issues: (i) Whether the proposed scheme of amalgamation satisfied the requirements of Sections 230 to 232 of the Companies Act, 2013 and deserved sanction; (ii) whether the objections relating to the transferor company's financial statements required corrective directions before approval of the scheme.

Issue (i): Whether the proposed scheme of amalgamation satisfied the requirements of Sections 230 to 232 of the Companies Act, 2013 and deserved sanction.

Analysis: The scheme was examined in the light of the materials placed on record, including the audited financial statements, directors' report, auditor's report, compliance affidavit, and the fact that the requisite majority of shareholders and creditors had approved the arrangement. The scheme was found to be genuine, bona fide, fair, and in the interest of shareholders and creditors. The statutory requirements under Sections 230 to 232 were held to be satisfied, and the transfer of the undertaking as a going concern was approved.

Conclusion: The scheme of amalgamation was sanctioned in favour of the petitioner companies.

Issue (ii): Whether the objections relating to the transferor company's financial statements required corrective directions before approval of the scheme.

Analysis: The objections concerning non-provision of depreciation, treatment of lease rent, property taxes, and incomplete financial statements were not accepted as answered by the petitioners. The Tribunal directed the transferor company to reflect lease rental as income, provide depreciation, pay building taxes if due, prepare cash flow statements for the relevant years, and file a revised balance sheet. The transferee company was also directed to incorporate the revised figures in the consolidated balance sheet.

Conclusion: Corrective directions were issued against the petitioner companies, but these objections did not prevent sanction of the scheme.

Final Conclusion: The amalgamation was approved, while ensuring compliance with accounting and filing requirements and preserving liabilities, taxes, stamp duty, and other statutory obligations.

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