2006 (3) TMI 336 - HC - Companies Law

Summary

Issues Involved:
1. Objections to the scheme of amalgamation by United Wireless Technologies Ltd. (UWTL), United Telecom Ltd. (UTL), and Priyaraj Electronics Ltd. (PEL).
2. Approval of the scheme of amalgamation by the shareholders and creditors.
3. Adequacy of notice for the meeting of unsecured creditors.
4. Accuracy of the amounts due and payable to the objectors.
5. Classification of unsecured creditors.
6. Disclosure of material facts, including an FIR by the Central Bureau of Investigation.
7. Objections by the Regional Director, Ministry of Company Affairs.
8. Compliance with statutory requirements and procedural norms.

Detailed Analysis:

1. Objections to the Scheme of Amalgamation:
The objectors, UWTL, UTL, and PEL, raised concerns about an agreement executed between UTL and the transferee-company for establishing a Motorola Centre of Excellence. They alleged that the transferee-company breached the agreement, leading to financial losses and the filing of an FIR by the Central Bureau of Investigation. The objectors claimed that the transferee-company did not accurately reflect the outstanding dues and contingency liabilities in its financial statements, thereby perpetrating fraud.

2. Approval of the Scheme of Amalgamation:
The scheme of amalgamation was unanimously approved by the shareholders of the transferor and transferee-companies. The meeting of unsecured creditors of the transferee-company saw 98.01% in number and 98.43% in value voting in favor of the scheme. The objections filed by UWTL, UTL, and PEL were considered but found to be without merit.

3. Adequacy of Notice for the Meeting of Unsecured Creditors:
The objectors claimed they did not receive 21 clear days' notice for the meeting. The court found that notices were posted on 28-11-2005, and as per section 53(2)(b) of the Companies Act, notice is deemed to be effected 48 hours after posting. Therefore, the court held that the notice was adequate and the objection was an afterthought.

4. Accuracy of the Amounts Due and Payable to the Objectors:
The objectors alleged that the amounts due were not accurately disclosed. The court found that the amounts were reflected based on degree of estimation as per Accounting Standard 29. Even if the objectors' claims were considered, the scheme would still be approved by a significant majority.

5. Classification of Unsecured Creditors:
The objectors argued that the inclusion of Motorola Overseas entities as unsecured creditors was unjust. The court held that the classification was justified as the amount due to these entities was reflected in the books of account. The scheme did not propose any compromise or rearrangement of debt, and the rights of all unsecured creditors would remain unaltered.

6. Disclosure of Material Facts:
The objectors contended that the registration of an FIR by the Central Bureau of Investigation was not disclosed. The court found that the FIR was against an individual and not the transferee-company, and its non-disclosure did not affect the scheme's validity.

7. Objections by the Regional Director, Ministry of Company Affairs:
The Regional Director raised concerns about the authorized share capital and the need for procedural compliance. The court found that the authorized share capital would be sufficient post-merger, and the necessary fees and charges had been paid. The court also addressed the typographical error in the balance sheet and the treatment of amalgamation reserves.

8. Compliance with Statutory Requirements and Procedural Norms:
The court concluded that all statutory requirements were duly complied with. The scheme of amalgamation was sanctioned with the modification of clause 2.5.5.3, and the transferor-companies would stand dissolved without winding up.

Conclusion:
The court found no merit in the objections raised by UWTL, UTL, and PEL, and sanctioned the scheme of amalgamation with minor modifications. The order of sanctioning the scheme would be duly notified in specified publications within 30 days, and any interested person could approach the court for necessary directions.