2005 (3) TMI 482 - HC - Companies Law

Issues Involved:
1. Approval of the Scheme of Amalgamation
2. Transfer of Properties, Rights, Liabilities, and Obligations
3. Compliance with Section 394 of the Companies Act, 1956
4. Procedural Requirements and Notifications
5. Continuation of Legal Proceedings
6. Allotment of Shares and Employee Transition
7. Conditions for Scheme Effectiveness and Modifications
8. Financial and Tax Implications

Detailed Analysis:

1. Approval of the Scheme of Amalgamation:
The Court sanctioned the proposed Scheme of Amalgamation between the Transferor-Company and the Transferee-Company as per sections 391 and 394 of the Companies Act, 1956. The approval was based on the majority vote of the Unsecured Creditors of both companies, with 10 percent of the value present and voting in favor.

2. Transfer of Properties, Rights, Liabilities, and Obligations:
The judgment directed that all properties, rights, interests, and powers of the Transferor-Company, along with its liabilities, obligations, duties, and engagements, shall be transferred to and vested in the Transferee-Company. This transfer is to occur without any further act or deed, pursuant to section 394(2) of the Companies Act, 1956.

3. Compliance with Section 394 of the Companies Act, 1956:
The certified copy of the order must be filed by the Petitioner-Companies with the Registrar of Companies, Kanpur, within 30 days of issuance as per section 394(3) of the Companies Act, 1956. The Court's order also included directions for the transfer of all property, rights, and powers, as well as liabilities and duties, to the Transferee-Company.

4. Procedural Requirements and Notifications:
The petition included the reading of the order dated 30-1-2004, which directed the convening of separate meetings of Unsecured Creditors. Notices for these meetings were published in 'The Pioneer' (English) and 'Amar Ujala' (Hindi). The affidavit confirming the publication and dispatch of notices and the Chairman's report on the meeting results were also considered.

5. Continuation of Legal Proceedings:
All pending legal proceedings by or against the Transferor-Company shall continue by or against the Transferee-Company. This ensures that the legal status and obligations are seamlessly transferred and maintained.

6. Allotment of Shares and Employee Transition:
The Transferee-Company is to allot shares to the members of the Transferor-Company who have not dissented as per the Scheme of Amalgamation. Additionally, all employees of the Transferor-Company will become employees of the Transferee-Company, with their service continuity and terms and conditions preserved.

7. Conditions for Scheme Effectiveness and Modifications:
The Scheme is conditional upon obtaining necessary consents, approvals, and sanctions, including those from the High Court. The Transferor-Company and the Transferee-Company may modify or amend the Scheme as required and resolve any arising doubts or difficulties.

8. Financial and Tax Implications:
The amalgamation includes provisions for the transfer of all assets, liabilities, and financial interests. Tax implications, such as the treatment of Tax Deducted at Source (TDS) and advance tax paid by the Transferor-Company, are addressed, ensuring continuity and compliance with tax laws. The Scheme also outlines the accounting treatment for the amalgamation in the books of the Transferee-Company, including the transfer of reserves and profit and loss accounts.

Conclusion:
The High Court of Allahabad sanctioned the Scheme of Amalgamation between the Transferor-Company and the Transferee-Company, ensuring a comprehensive transfer of assets, liabilities, and obligations. The judgment addressed all procedural, legal, and financial aspects to facilitate a seamless amalgamation, with provisions for employee transition and continuation of legal proceedings.

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