Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (7) TMI 411 - MADRAS HIGH COURT

2016 (7) TMI 411 - MADRAS HIGH COURT - TMI - Scheme of Amalgamation - Held that:- Since the affidavit of the RD and the report of the OL indicate that the affairs of the transferor company No.1 and 2 are not carried out in a manner prejudicial to its member or the public, the scheme can be sanctioned, with a caveat, that the transferor companies will move applications for their dissolution, albeit, without winding up within 30 days of the "effective date". In this behalf, intend to append an add .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e holders and the secured creditors of the petitioners have approved the scheme, scheme sanctioned. - C. P. Nos. 119 to 121 of 2016 - Dated:- 6-6-2016 - Rajiv Shakdher, J. For Petitioners : Mr.P.H.Arvind Pandian, Mr.Harishankar Mani, Mr.G.Venkatesan For the Official Liquidator : Mr.Achutha Ramaiah ORDER 1. These are three petitions, filed, to seek sanction of a Scheme of Amalgamation (in short the Scheme), placed before this court by the petitioners herein. CP No. 119/2016 has been filed by Equi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mpany no. 1 and 2 with the transferee company. In this context, it is noticed that the first prayer in the three petitions is identical. Insofar as company petition No.191/2016 and 120/2016 are concerned, since these are the petitions filed by the transferor companies, quite obviously, they have made prayers with regard to the aspect pertaining to their delayed dissolution, albeit, without winding up as provided in clause (15) of the Scheme. Since, the prayers made are somewhat typical, therefor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

quitas Micro Finance Limited and the said Petitioner Company; b) The Petitioner Company be dissolved without the process of winding up in the manner provided under clause 15 of the Scheme of Amalgamation (i.e.) the Petitioner Company shall be dissolved on the thirtieth day from the Effective Date (as defined under clause 1.7 of the Scheme) and not on the date of sanction of the Scheme by this Hon'ble Court." "Company Petition No.121/2016 a) That Scheme of Amalgamation of Equitas Mi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

are subsidiaries of a company, going by the name Equitas Holdings Limited (hereafter referred to as the Holding company). The holding company, it appears, had applied to the Reserve Bank of India (in short the RBI) for grant of, in-principle, approval to establish a Small Finance Bank (in short 'SFB'), albeit, in the private sector. This application was made by the Holding company, evidently, on 30.01.2015 in consonance with Section 22 of the Banking Regulations Act, 1949 (in short the 1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

formalities by the Holding company including the conditions referred to above before it would consider issuing a banking license in favour of the proposed SFB, under Section 22 of the 1949 Act. 2.3. It is in this context that the petitioners took steps for bringing about the amalgamation/ merger of the transferor company no. 1 and 2 with the transferee company. 3. A perusal of the three petitions would show that the transferor company no.1 is, inter alia, engaged in the business of micro financ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ses of housing and, construction of residential and commercial complexes involving societies, companies, bodies, office, association of persons etc. It is averred that transferor company no.2, in this behalf, has been issued a certificate of registration by the National Housing Bank, exemplifying the fact that it is a Non-deposit accepting Housing Finance Company. 5. In so far as the transferee company is concerned, it is also in the business of providing finance, albeit, for purchase of vehicle .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on 29.09.2015. The scheme, it appears, was placed and, thus, approved by the respective Board of Directors (BODs) of the petitioner companies on even date i.e. 26.11.2015. 6.1. The record would show that the petitioner companies had moved this court by way of requisite company applications. The applications filed by the transferor company no. 1 and 2, as also, the transferee company were registered and numbered as : CA Nos.81/2016, 83/2016 and 85/2016 respectively. 6.2. These company application .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

scheme, which led to this court dispensing with their meeting. 6.4. However, in so far as the secured creditors were concerned, as requested by the petitioner companies, meetings were convened. The transferor company no.1 had demonstrated at the relevant point in time that it had thirty eight (38) secured creditors, while transferor company no.2 had ten (10) secured creditors. In so far as transferee company was concerned, it had ninety six (96) secured creditors. 6.5. Upon directions of this co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

efore, as would be evident upon perusal of the facts delineated above, that the shareholders and the secured creditors of each of the petitioner companies have given their consent to the scheme, which is being considered for grant of sanction by this court. 7. Upon notice being issued in the captioned petitions, the RD, Ministry of Corporate Affairs, Chennai, on behalf of the Central Government has filed his affidavit. The affidavit filed is dated 26.04.2016. A perusal of the affidavit would sho .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he RD avers that the effective date as defined in clause 1.7 provides that it would be the working day immediately preceding the date of commencement of business of bank by the proposed SFB. The RD raises a concern that there is no clear date fixed in the scheme, which would work as the effective date. 7.2. The second concern expressed by the RD is also linked with the effective date, in as much as, while the scheme immediately does not articulate as to what would be the share-exchange ratio, it .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the petitions, albeit, in the alternative, states that the transferor company no.1 and 2 would make separate applications to this court for dissolution without winding up within a period of 30 days from the effective date. 7.4. Thus, in effect, the RD has raised concerns with regard to the provisons incoporated in the scheme with respect to the appointed date , the effective date , the share-exchange ratio and, qua dissolution of transferor company no. 1 and 2. In sum, the RD expresses a con .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

advanced on behalf of the petitioner companies and the RD, what is required to be analyzed is : as to whether the scheme, as proposed, can be sanctioned with or without modification. Though, several judgments were cited by Mr.Arvind Pandian in support of the submissions advanced on behalf of the petitioner, none of them appear to be directly on the point. 9.1. According to me, what has to be examined is the relevant provision, as appearing in the Companies Act, 1956 (in short 1956 Act). Section .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h the transferee company, will take place prior to the matter being taken up for grant of a banking license. This requirement is complicated by the fact that the in-principle approval, which, as granted by the RBI, on 07.10.2015, has a validity period of eighteen (18) months and, therefore, would ordinarily exhaust itself on 07.04.2017. 9.3. Furtheremore, the manner in which the in-principle approval is framed, there is no guarantee that a banking licence would follow if, for any reason, the RBI .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat there is a possibility, (howsoever, unlikely it may seem, at this juncture), that the RBI may not issue a licence to the amalgamated company / the merged entity. 9.5. Therefore, to my mind, one would have to take recourse to the provisions of the Act, which according to me, provide the necessary width to deal with such like situations. For this purpose, I deem it necessary to extract the relevant parts of Section 394: "394. Provisions for facilitating reconstruction and amalgamation of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a" transferor company") is to be transferred to another company (in this section referred to as". the transferee company"); the [Tribunal] may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:- (i) the transfer to the transferee company of the whole or any .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g up, of any transferor company; (v) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement; and (vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out: [Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the company, made a report to the [Tribunal] that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.] 9.6. A perusal of the aforementioned provisions would show that the court either, while sanctioning the compromise or arrangement or, by a subsequent order is entitled to make provisions for all or any of the matters, including allotment of shares by the transferee company, dissolution without winding of the transfe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onducted in a manner prejudicial to the interests of its members or to public interest. 9.9. The second proviso, mandates that no order of dissolution of a transferor company under clause (iv) of sub section (1) of Section 394 can be ordered unless the Official Liquidator (OL), upon scrutiny of books and papers of the transferor company, has submitted a report that the affairs of such company have not been conducted in a manner prejudicial to the interests of its members or to public interest. 1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ependent on a banking licence being issued by the RBI under the 1949 Act, which, in turn, is dependent on the scheme being sanctioned. 10.2. As alluded to hereinabove by me, the RD, in its affidavit, has clearly recorded that no prosecution, complaint(s) or investigation(s) are pending either against transferor company No.1 and 2 or, the transferee company. It is also stated in the very same affidavit by the RD that the ROC has submitted a report that the petitioner companies have been regular i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nted date" and "effective date" . 12. To my mind, if this submission is accepted, which I have, then the other concern of the RD with regard to the share-exchange ratio will also have to be dealt with in the same manner. Quite correctly and logically, the determination of the share-exchange ratio can only be worked out based on the methodology articulated therein i.e. book value method, albeit, on the effective date. Since, the effective date is discernable, which is a date linked .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hich is, whether the dissolution without winding of transferor company No.1 and 2 in terms of clause 15.1 of the scheme can be deferred to the 30th day from the "effective date" or, in the alternative, leave be granted to the transferor company No.1 and 2 to file a separate application for the same purpose within a period of 30 days of the "effective date". 14.1. As is well settled, that, with the amalgamation of the transferor company with the transferee company, in law, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

delaying the date of actual amalgamation/merger of entities. In this case, the amalgamation of the transferor company No.1 and 2 with transferee company is dependent on issuance of a banking licence by the RBI and, in turn, the issuance of licence is dependent on this court sanctioning the scheme. 14.2. Therefore, in my view, since the affidavit of the RD and the report of the OL indicate that the affairs of the transferor company No.1 and 2 are not carried out in a manner prejudicial to its mem .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version