Whether Scheme of Amalgamation filed under Section 233 of the Companies Act, 2013 are permissible for alteration or not?
The intersection of business and law often brings up intriguing queries, one such being the permissibility of alterations in a scheme of amalgamation filed under Section 233 of the Companies Act, 2013. This topic recently came into the limelight when a case of amalgamation was presented before the Regional Director, and it was questioned if suitable modifications could be made post-filing the scheme.
BACKGROUND:
In this case, ROC made their submission/observation in Scheme of Amalgamation via its ROC Report and on consideration client is requested to make suitable modifications in the scheme and get it approved without withdrawing the said scheme and accordingly, we acted as per the requirement of our client.
On making the application for alteration, Regional Director directed the Registrar to submit its revised Report, where the ROC through its revised report directed that the provisions of Section 233 of the Companies Act, 2013 does not permitted to make any kind of changes/alteration/modification in the scheme and also suggested to forward this matter before the NCLT for their action.
FINDING:
In relation to the above, we have done extensive research on the observation made by the ROC and found that neither the provisions of Section 230 and 232 nor Section 233 of the Companies Act, 2013 talks about anything on modification/alteration in the Scheme of Amalgamation.
On further research, we found that for allowing the modification / alteration in the Scheme of Amalgamation is on the discretion of the authority i.e., NCLT or RD that the procedure laid down under the law is followed or not and the scheme is in public interest or not.
If the Company followed the procedure as laid down under the law and the scheme is in public interest then the modification made or alteration suggested were generally accepted by the authorities. (Based on the instances noted in previous judgement made under the law)
CASE LAWS:
Few of the case laws are mentioned for reference, on which we are relying on:-
Case: 1 Selina Exim Pvt Ltd. v. LNIND 2014 DEL 3999
After filing the second motion application, Board of directors of the petitioner company decided to carry out amendments in the Scheme of Amalgamation of Selina Exim Private Limited with Ecodel Projects Private Limited. The board of directors of the transferor company in its board meeting dated 28 January 2014 unanimously approved the revised scheme of amalgamation. Thereafter, an application was filed by the petitioner companies requesting to obtain sanction of the revised scheme
Case: 2 In the matter of VINAY SECURITIES PVT. LTD. AND ORS. V. SHAKTI IRRIGATION INDIA LTD., at the time of presenting revised scheme for NCLT sanction, the petitioner companies, in support of the concerned revised scheme, produced consent affidavits of preference shareholders of the concerned companies. Interlocutory Application No. 413 of 2019 (NCLT-Indore).
Case: 3 BORGOSESIA RINGS PVT. LTD. V.TEXSPIN BEARINGS LTD.
An interlocutory application was filed by the petitioner companies for seeking leave of NCLT in order to carry out certain amendments in the scheme filed before the concerned authority in line with the objections received from various statutory authorities. NCLT after satisfaction that the revision is not prejudicial to the interest of public allowed the application and directed petitioner companies to issue fresh notice to the statutory authorities along with the amended scheme. Interlocutory Application No. 495 of 2019 (NCLT-Ahmedabad).
Case: 4 EUROPLUS FINANCIAL SERVICES LIMITED AND ORS. V. ALANKIT TECHNOLOGIES LIMITED
The regional director in its report raised an objection with respect to clause 16(d) of the proposed scheme which referred to the Authorised share capital post amalgamation. In this regard it was pointed out that the sum of Authorised share capital post amalgamation would be Rs. 6,00,00,000 divided into 60,00,000 equity shares of Rs. 10/- each however, a sum of Rs. 8,00,00,000 divided into 80,00,000 equity shares of Rs. 10/- each was mentioned instead. Thereafter, in response to the observation raised, the concerned scheme was revised and circulated and the same was accordingly sanctioned since no objections were received. Company Petition No. CAA-107(PB)/2019 (NCLT-New Delhi).
RESULT:
On the basis of above, we got success to get our order reserved for pronouncement under Section 233 of the Companies Act, 2013.
Conclusion:
In conclusion, while the Companies Act, 2013, does not explicitly allow modifications in an amalgamation scheme under Section 233, the ultimate decision lies at the discretion of the concerned authorities. It is generally accepted if it adheres to the law’s procedural rules and serves the public interest. The question hence remains open-ended, its resolution predominantly hinging on the unique circumstances of each case and the interpretation of the law by the respective authorities.
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