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Issues Involved:
1. Proposal of amalgamation of two companies. 2. Objections raised by the official liquidator. 3. Compliance with statutory requirements and conditions for amalgamation. 4. Protection of shareholders' interests. 5. Legal implications of amalgamation and dissolution of companies. Detailed Analysis: 1. Proposal of Amalgamation of Two Companies: The judgment addresses two interlinked petitions under sections 391(1)(a), 392, and 394 of the Companies Act, 1956, concerning the proposed amalgamation of two companies. Notices were issued to the Registrar of Companies, and general meetings of the shareholders were directed to consider the proposal. The meetings were held, and the proposal was unanimously approved. The common scheme of amalgamation, exhibit C, was placed before the court, along with the respective memorandum and articles of association of the two companies, exhibit A. The managing directors filed affidavits supporting the scheme. The transferor company, Spring Steels Limited, and the transferee company, Gwalior Strips Limited, both have their registered offices in Gwalior and share common promoters. 2. Objections Raised by the Official Liquidator: The official liquidator raised three main objections: - Absence of clearance from the State Pollution Board, which could render the amalgamation order academic if the new venture cannot commence business. - Possible violation of the lease terms with the Madhya Pradesh Audyogik Vikas Nigam (MPAKVN), risking the transferor company losing its tenancy. - Alleged activities of the transferor company involving private placement of shares in 1986, which could lead to prosecution under section 68 of the Companies Act. 3. Compliance with Statutory Requirements and Conditions for Amalgamation: The court considered the statutory requirements and the objections raised. The Central Government suggested conditions for the amalgamation, including: - Keeping a specified amount in a separate bank account for refunding application money to non-allottees. - Ensuring the transferor company is not dissolved without winding up for at least one year to allow for any necessary legal actions regarding alleged violations of sections 67 and 68 of the Companies Act. The petitioners agreed to these conditions, and the court noted that the scheme incorporated modalities and conditionalities of amalgamation, ensuring compliance with all necessary approvals and declarations. 4. Protection of Shareholders' Interests: The court emphasized the importance of protecting shareholders' interests. It noted that despite public notices and individual communications, no objections were raised by the shareholders against the scheme. The court found the terms and conditions of the proposed amalgamation reasonable and in the best interest of the shareholders of both companies. 5. Legal Implications of Amalgamation and Dissolution of Companies: The court referred to precedents, including the Supreme Court's judgment in Saraswati Industrial Syndicate Ltd. v. CIT, which clarified that the transferor company's corporate entity ceases to exist upon amalgamation. The court also considered the legal position that the transferor company need not be dissolved immediately, allowing the Registrar of Companies or the Central Government to take necessary actions regarding alleged violations. Conclusion: The court concluded that a conditional order of amalgamation is warranted, considering the submissions and representations made. The proposed scheme of amalgamation was sanctioned with the following conditions: - Obtaining requisite clearance from the State Pollution Board within three months. - Renewal/transfer of the lease from MPAKVN within three months. - Investing the required amount for refunding share money to non-allottees in a separate bank account within one month. - Advertising for non-allottees of shares to apply for refunds and making refunds within three months. - The transferor company shall not be dissolved for one year to allow for any necessary legal actions. - The amalgamation shall be effective subject to these conditions being satisfied. The court directed the Registry to issue the order in the statutory form incorporating these conditions.
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