2007 (4) TMI 368 - HC - Companies Law

Summary

Issues Involved:
1. Sanction of a scheme of amalgamation u/s 391 to 394 of the Companies Act, 1956.
2. Objections by the Regional Director regarding compliance with sections 21, 94/97 of the Companies Act, 1956.

Summary:

Issue 1: Sanction of a Scheme of Amalgamation u/s 391 to 394 of the Companies Act, 1956

The Court was approached for sanctioning a scheme of amalgamation u/s 391 to 394 of the Companies Act, 1956. The transferor and transferee companies, both in the same line of business, sought to amalgamate their assets and liabilities. Shareholders of both companies consented to the scheme, and notices were furnished to secured creditors. The scheme was proposed in the commercial interest of both companies.

Issue 2: Objections by the Regional Director

Two objections were raised by the Regional Director in an affidavit dated 29-3-2007:
(a) Compliance with section 21 for the name change of the transferee company.
(b) Compliance with sections 94/97 for the automatic increase in authorized share capital of the transferee company.

The Court addressed these objections by referring to precedents. It was held that section 391 is a complete code for sanctioning schemes of compromise and arrangement, and separate compliance with other provisions of the Companies Act is not required. This view was supported by judgments from various High Courts, including the Gujarat High Court in Maneckchowk & Ahmedabad Mfg. Co. Ltd. In re, the Bombay High Court in Vasant Investment Corpn. Ltd. v. Official Liquidator, Colaba Land Mill Co. Ltd., and PMP Auto Industries Ltd. In re.

The Court concluded that the furnishing of a notice to the Registrar of the scheme as sanctioned constitutes substantial compliance with section 21. Similarly, no separate payment of fees to the Registrar of Companies is warranted for the increase in authorized share capital, as requisite fees have already been paid.

Conclusion:

The Court found that all requisite statutory compliances were fulfilled, and the scheme was not prejudicial to shareholders, creditors, or the public. Therefore, the scheme was sanctioned, and the Company Petitions were made absolute in terms of prayer clause (a). The petitioner was directed to pay costs of Rs. 2,500 each to the Regional Director and the Official Liquidator within four weeks. Filing and issuance of a drawn-up order were dispensed with.