1997 (11) TMI 415 - HC - Companies Law

Summary

Issues:
1. Sanction of the scheme of amalgamation under sections 391 and 394 of the Companies Act, 1956.

Analysis:
The petition filed for the sanction of the scheme of amalgamation of two companies, Siel Financial Services Ltd. and Shriram Agro-Tech Industries Ltd., was brought before the High Court of Madhya Pradesh, Indore Bench. The chairpersons appointed to convene the meetings of equity shareholders and creditors of the petitioner-company submitted their reports stating that no objections were raised for sanctioning the scheme of amalgamation. Affidavits from the shareholders, creditors, and counsel for the transferee-company were presented to the Court, along with relevant papers. Notice of the petition was published in various newspapers and delivered to relevant government authorities. No objections were raised by the Central Government or the official liquidator regarding the scheme of amalgamation. The proposed scheme was unanimously approved in the meetings of the equity shareholders and creditors of the transferee-company.

The transferee-company, engaged in the processing and crushing of oil seeds, faced financial losses and required support for its financial health. The amalgamation was deemed necessary for corporate restructuring, growth, and achieving economies of scale. The shareholders of both companies stood to benefit from the amalgamation, with no objections raised by the official liquidator or Central Government. The Court found the scheme to be beneficial to the shareholders and not against public interest, citing precedents such as Hindustan Lever Employees' Union v. Hindustan Lever Ltd and Miheer H. Mafatlal v. Mafatlal Industries Ltd. The Court sanctioned the scheme of amalgamation with specified conditions to protect the interests of all parties involved.

The conditions imposed included ensuring the proper execution of documents for transferring property rights, addressing tax liabilities arising from the transfer, and not absolving companies or directors from past liabilities. The order directed the continuation of pending proceedings, share allotments, reduction and consolidation of equity share capital, and conversion of loans into preference shares. The transferee-company was required to file a certified copy of the order with the Registrar of Companies and allow interested parties to seek necessary directions from the Court. With the specified conditions, the scheme of amalgamation was approved, and the petition was finally disposed of by the Court.