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2017 (10) TMI 358 - Tri - Companies LawMerger and Amalgamation of Companies - purpose of notifying scheme to the regulating authorities - purpose of notifying scheme to the regulating authoritieswhen external arrangement does not alter the rights of the stakeholders of that company, do we need to insist upon such company to call and hold meetings in respect to such scheme? - Held that:- In section 232(1), it has been said that the provisions of sub-section (3) to (6) of section 230 shall apply mutatis mutandis. For no meeting is ordered to be held with either members or creditors, giving a notice to them under sub section (3) will not arise, because their rights are not affected by this demerger/merger, but when it comes to notice to various regulating authorities under sub-section (5) of section 230, a notice has to go to all those authorities along with documents as mentioned under section 232(2), - (a) the draft of the proposed terms of the scheme drawn up and adopted by the directors of the merging company; (b) confirmation that a copy of the draft scheme has been filed with the Registrar; (c) a report adopted by the directors of the merging companies explaining effect of compromise on each class of shareholders, key managerial personnel, promoters and non-promoter shareholders laying out in particular the share exchange ratio, specifying any special valuation difficulties; (d) the report of the expert with regard to valuation, if any; (e) a supplementary accounting statement if the last annual accounts of any of the merging company relate to a financial year ending more than six months before the first meeting of the company summoned for the purposes of approving the scheme. Since the purpose of notifying scheme to the regulating authorities is not only to know about holding meeting, but also to look into as to whether various stakeholders interest is protected or not, this notice about scheme with the documents shall be sent to various authorities as stated under sub-section (5) of section 230, therefore this Bench cannot and will not exempt the transferee company form complying with sending notice to the regulating authorities and giving advertisement. Soon after compliance of above, if this Bench is satisfied with compliance under section 232(1) & (2) as mentioned above, may sanction the scheme with provisions for, in this case, for transfer of undertaking of transferor to its holding company; since allotment of shares not happening in transfer company, no provision need to be made for it; transfer of legal proceedings by or against transferor companies if any to its holding company, transfer of transferors' employees to the transferee company; a certificate over accounting treatment by the company auditor. When the statute clearly mandates all these aspects to be complied with, so as to make the transferee as party to the approval of the scheme and make this approval binding upon the holding company, the holding company shall be a party to the approval of scheme, to get such binding, the holding company shall also file an application for notifying the fact of proposal of scheme as mentioned above. Therefore we cannot go to that extent to say that no application is required to obtain for approval for Scheme because if application is not there from two parties who are separate entities entering into a Scheme, we doubt about the binding nature of this order over the two parties entered into a Scheme. Therefore, this Transferee Company shall file an application before this Bench with the power it has from its Board of Directors by notifying it to all Regulating Authorities as mentioned above.
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