1994 (11) TMI 310 - HC - Companies Law

Summary

Issues Involved:
1. Sanction of the scheme of amalgamation under sections 391, 392, and 394 of the Companies Act, 1956.
2. Objection regarding the object clause of the transferee-company's memorandum of association.
3. Compliance with procedural requirements under section 17 and section 149(2A) of the Companies Act, 1956.
4. Jurisdiction of the Court versus the Company Law Board (CLB) in altering the memorandum of association.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The petitioners sought the Court's sanction for the scheme of amalgamation between Gujarat Organics Ltd. (transferor-company) and Rangkala Investments Ltd. (transferee-company) under sections 391, 392, and 394 of the Companies Act, 1956. The primary reasons for the proposed amalgamation were to combine activities for efficiency, avoid duplication, reduce administrative costs, and optimize resource utilization. The Court noted that necessary advertisements were published, and there were no objections from the official liquidator. The scheme was deemed fair and protective of all concerned interests, including employees.

2. Objection Regarding the Object Clause:
The Central Government, through Mr. Jayant Patel, raised an objection that the transferee-company's memorandum of association did not include the power to carry on the business of the transferor-company, specifically the manufacture and sale of chemicals like para-aminobenzoic acid, adhesives, and sealants. It was argued that the transferee-company must amend its object clause under section 17 of the Act to include these activities.

3. Compliance with Procedural Requirements:
Mr. Sanghi, representing the petitioners, argued that the transferee-company's object clause under 'Other objects' already included the necessary business activities. He cited section 13(1)(c) and (d) and section 149(2A), which require a special resolution for a company to commence business activities listed under 'Other objects'. The transferee-company had already complied with these requirements by passing and registering the necessary resolutions. Thus, there was no need for further amendments under section 17.

4. Jurisdiction of the Court versus the CLB:
The Court considered whether the jurisdiction to alter the memorandum of association lies exclusively with the CLB. It was argued that section 391 provides a complete code for sanctioning schemes of amalgamation, allowing the Court to approve necessary alterations without requiring separate procedures under section 17. The Court referred to precedents, including PMP Auto Industries Ltd. and Maneckchowk & Ahmedabad Mfg. Co. Ltd., which established that section 391 is intended to provide a 'single window clearance' system. The Court concluded that it has the authority to sanction the scheme, including necessary alterations to the memorandum of association.

Conclusion:
The Court ruled that the objections raised by the Central Government were not sustainable. The scheme of amalgamation was sanctioned with effect from April 1, 1993. All rights, liabilities, and duties of the transferor-company were transferred to the transferee-company, and the transferor-company was dissolved without winding up. The petitions were disposed of accordingly.