1994 (5) TMI 199 - HC - Companies Law

Summary

Issues Involved:
1. Amalgamation of companies under Section 394 of the Companies Act, 1956.
2. Confirmation of the scheme of amalgamation.
3. Execution of instruments of conveyance.
4. Liability to capital gains tax.
5. Liability for breach of law or control order.

Issue-wise Detailed Analysis:

1. Amalgamation of companies under Section 394 of the Companies Act, 1956:
The judgment addresses Company Petition Nos. 1 to 4 of 1994, which seek the amalgamation of several companies into four transferee companies. The petitions were filed under Section 394 of the Companies Act, 1956. The transferee companies involved are Seshasayee Properties Ltd., Gwalior Properties & Estates Ltd., Trapti Trading & Investments Ltd., and Turquoise Investments & Finance Ltd. The transferor companies include Dakshinanchal Commercial Ltd., Veraval Properties Ltd., Manglik Properties Ltd., Siddhpeeth Commercial Ltd., Indrayon, ESM, Dakshinanchal Finance Ltd., Veraval Finance & Investments Ltd., Sub-Holding Ltd., Marigold, and BU.

2. Confirmation of the scheme of amalgamation:
Each petition was supported by the scheme of amalgamation, the memorandum and articles of association of the applicant company, and the other amalgamating companies. Meetings of the shareholders were convened, and the schemes were approved unanimously without any modifications. The Chairman's report, financial statements, and auditor reports were submitted to the court. The schemes were published in newspapers, and no objections were received. The Government of India did not raise any objections, and the official liquidator did not report adversely.

3. Execution of instruments of conveyance:
The court emphasized that the approval of the amalgamation scheme does not dispense with the formality of executing instruments of conveyance or other documents for the effective vesting of property and rights of the transferor companies in the transferee company. The transfer must comply with the Transfer of Property Act, 1882, and necessary sanctions must be obtained for properties with transfer or sub-letting restrictions.

4. Liability to capital gains tax:
The court clarified that if the transfer of assets or shares results in a liability to capital gains tax, the order of amalgamation does not absolve the companies or shareholders from paying the taxes. Taxing authorities are free to proceed with tax matters irrespective of the amalgamation order.

5. Liability for breach of law or control order:
The court stated that the amalgamation order does not absolve any company or its directors from liability for any breach of law or control order committed before the amalgamation.

Conclusion:
The court sanctioned the amalgamation schemes in Company Petition Nos. 1 to 4 of 1994, subject to the conditions mentioned above to protect public interest. The schemes aim to convert small companies into larger entities with a wider capital base, enhance business expansion, reduce expenses, and streamline administration by centralizing registered offices.