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Interpretation of Section 391 of the Companies Act, 1956 regarding the inclusion of amalgamation in arrangements or compromises between companies. Analysis: The judgment delves into the interpretation of Section 391 of the Companies Act, 1956, focusing on whether an amalgamation is encompassed within arrangements or compromises between companies. Section 391 empowers the Court to sanction compromises or arrangements between a company and its creditors or members, binding all parties upon approval. The provision mandates disclosure of material facts and filing of orders with the Registrar for legal effect. Additionally, the Court can stay legal proceedings against the company during application processing. The judgment scrutinizes the use of the terms "compromise" and "arrangement" in Section 391, leading to the pivotal question under consideration. It contrasts Section 391 with Section 392, which grants the High Court authority to oversee and modify approved compromises or arrangements for effective implementation. Notably, the term "amalgamation" is absent in Section 392, while Section 394 specifically addresses reconstruction and amalgamation of companies. Section 394 elucidates the facilitation of reconstruction and amalgamation, emphasizing the transfer of assets, liabilities, and legal proceedings between companies under a sanctioned scheme. The provision mandates compliance with Court directives and filing of orders for registration. Notably, the definition of "amalgamation" in the Income-tax Act, 1961 is referenced, highlighting the merger of companies and the transfer of assets and liabilities in such transactions. The judgment clarifies that the definition of "amalgamation" in the Income-tax Act is specific to tax implications and cannot be directly applied to the Companies Act. It emphasizes that interpreting one statute's definition in another would amount to impermissible interpretation by lifting provisions. Ultimately, the Court concludes that Section 391 encompasses arrangements, compromises, and amalgamations between companies, aligning with the provisions of Section 394 for comprehensive corporate restructuring. In conclusion, the judgment resolves the interpretative ambiguity by affirming that Section 391 of the Companies Act includes the power to sanction arrangements, compromises, and amalgamations between companies, providing a holistic framework for corporate restructuring and legal compliance.
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