1991 (12) TMI 247 - HC - Companies Law

Summary

Issues Involved:
1. Sanctioning of schemes of amalgamation u/s 391 of the Companies Act.
2. Objections by the Company Law Board regarding the power of the transferee company to carry on the business activities of the transferor companies.
3. Whether the court has the power to sanction a scheme involving amendments to the memorandum of association without following the procedure u/s 17 and 19 of the Companies Act.

Summary:

1. Sanctioning of Schemes of Amalgamation u/s 391 of the Companies Act:
The petitions pertain to the sanctioning of schemes of amalgamation where PMP Auto Industries Ltd. is to be amalgamated with S.S. Miranda Ltd., and thereafter, S.S. Miranda Ltd. is to be amalgamated with Morarjee Goculdas Spinning and Weaving Co. Ltd. The court decided to address the three petitions by a common judgment and order.

2. Objections by the Company Law Board:
The Company Law Board raised objections to the integrated and composite scheme of amalgamation, arguing that the memorandum of association of the transferee company, Morarjee Goculdas Spg. and Wvg. Co. Ltd., does not have the power to carry on the business activities of the transferor companies, PMP Auto Industries Ltd. and S.S. Miranda Ltd. The Board contended that the transferee company should follow the procedure u/s 17 and 19 of the Act to amend its memorandum of association, and the court cannot usurp the powers of the Company Law Board.

3. Court's Power to Sanction Scheme Involving Amendments to Memorandum of Association:
The court held that sections 391 to 394 of the Companies Act constitute a complete code, intended to eliminate the need for frequent applications to the court. The court referenced several precedents, including Maneckchowk and Ahmedabad Mfg. Co. Ltd., In re [1970] and Vasant Investment Corporation Ltd. v. Official Liquidator, Colaba Land and Mill Co. Ltd. [1981], to support the view that section 391 is a complete code that allows the court to sanction schemes involving amendments to the memorandum of association without following the separate procedures prescribed for such amendments. The court emphasized that section 391 is intended to function as a "single window clearance" system, ensuring that parties are not subjected to unnecessary and cumbersome procedures.

The court also noted that the introduction of section 394A requires notice to the Company Law Board, allowing it to raise any objections at that stage. The court found no substance in the objections raised by the Company Law Board and rejected them.

Conclusion:
The court found no objections from the shareholders, creditors, or the official liquidator regarding the proposed scheme of amalgamation. The scheme was deemed fair, providing protection for the interests of creditors, shareholders, and staff. Consequently, the court sanctioned the amalgamation scheme and made the petitions absolute in terms of the prayers sought, with costs of Rs. 500 to the Company Law Board for each petition.