1994 (11) TMI 320 - HC - Companies Law

Issues Involved:
1. Sanction of the scheme of amalgamation under sections 391, 392, and 394 of the Companies Act, 1956.
2. Objection by the Central Government regarding the object clause of the transferee-company.
3. Compliance with section 17 of the Companies Act for alteration of the memorandum of association.
4. Applicability of section 149(2A) of the Companies Act.

Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The petitioners submitted two petitions seeking the sanction of the scheme of amalgamation between the transferor-company and the transferee-company under sections 391, 392, and 394 of the Companies Act, 1956. The transferor-company, Gujarat Organics Ltd., is a subsidiary of the transferee-company, Rangkala Investments Ltd., holding 97.58% of its paid-up equity share capital. The proposed amalgamation aimed to combine the activities of both companies to economize and run the company efficiently, avoid duplication, reduce administrative costs, and optimally utilize management and other resources. Advertisements were published, and court notices were issued to the Central Government as per section 394A. The official liquidator's report indicated no objection to the proposed scheme.

2. Objection by the Central Government:
The Central Government, through an affidavit by the Registrar of Companies, objected to the scheme on the grounds that the transferee-company's object clause did not include the power to carry on the business of the transferor-company, which involves manufacturing and selling para-aminobenzoic acid, adhesive, and sealants. The objection asserted that the transferee-company must amend its object clause by passing a special resolution under section 17 and obtaining confirmation from the Company Law Board (CLB) before the amalgamation could proceed.

3. Compliance with Section 17:
The objection highlighted that the jurisdiction to permit or confirm alterations in the object clause of a company's memorandum of association lies exclusively with the CLB under section 17. The Central Government argued that the prayers in the petitions contemplating automatic changes in the object clause without complying with section 17 could not be granted. The court examined the object clause of the transferee-company, which included sub-clauses for main objects, incidental or ancillary objects, and other objects. The court noted that the transferee-company's object clause under 'Other objects' included the power to manufacture and sell various chemicals, which would encompass the business of the transferor-company.

4. Applicability of Section 149(2A):
The petitioners argued that the requirements of section 149(2A) had already been complied with, as the transferee-company had approved the commencement of business under the 'Other objects' clause through a special resolution dated 21-5-1990. The court was presented with a true copy of the registration of the resolution and the declaration of compliance with section 149(2A). The petitioners contended that sections 391 and 394 provide a complete code for reconstruction and amalgamation, making it unnecessary to undergo duplication of procedures.

Judgment:
The court relied on precedents, including the Bombay High Court's decision in PMP Auto Industries Ltd. and its own decision in Maneckchowk & Ahmedabad Mfg. Co. Ltd., to conclude that section 391 is a complete code intended to provide a 'single window clearance' system. This system ensures that parties are not subjected to unnecessary and cumbersome procedures. The court held that it could sanction the scheme of amalgamation, including the consequential alteration in the object clause of the memorandum of association, without requiring separate compliance with section 17. The objection by the Central Government was found to lack substance, and the scheme of amalgamation was deemed fair and protective of all concerned interests, including employees.

Conclusion:
The petitions were granted, and the transferor-company was ordered to be amalgamated with the transferee-company with effect from 1st April 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.

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