1993 (10) TMI 269 - HC - Companies Law

Summary

Issues involved: Petition for sanction to the scheme of amalgamation u/s 391 to 394 of the Companies Act, 1956 opposed by secured creditors, non-compliance with statutory requirements.

In this judgment, the High Court of Bombay considered a petition for sanction to a scheme of amalgamation under sections 391 to 394 of the Companies Act, 1956. The scheme involved the merger of a transferee company with a transferor company, with the transferee company taking over the liabilities of the transferor company. However, the merger was opposed by two secured creditors, Bank of India and Dena Bank, due to concerns regarding heavy debt levels of both companies and inadequate security assets compared to liabilities.

The creditors objected to the merger on the grounds that both companies were heavily indebted, with liabilities exceeding assets, putting their claims at risk. They also highlighted the lack of compliance with statutory procedures, such as not convening meetings of creditors and shareholders to obtain consent. The court noted that mandatory requirements, including holding meetings and obtaining consent, were not met, and emphasized the importance of disclosing all material facts related to the companies' financial positions.

The court found that the petitioners failed to provide authenticated financial information as required by the statute, presenting only "Unaudited (Provisional) Financial Results" in a vague manner. Due to the substantial objections raised by the creditors and the failure to comply with statutory provisions, the court rejected the petition for sanctioning the merger. The court upheld the creditors' concerns about the potential jeopardy to their claims in case of the merger. Consequently, the petition was rejected, with no order as to costs issued by the court.