2006 (12) TMI 220 - HC - Companies Law

Summary

Issues Involved:
1. Sanctioning the scheme of amalgamation u/s 391 and 394 of the Companies Act, 1956.
2. Objections raised by the Regional Director, Ministry of Company Affairs.
3. Compliance with statutory provisions and protection of interests.

Summary:

1. Sanctioning the Scheme of Amalgamation u/s 391 and 394 of the Companies Act, 1956:
The petitions were filed for sanctioning the scheme of amalgamation of the transferor companies with the transferee company effective from 31-3-2006. The transferor companies, wholly owned subsidiaries of the transferee company, aimed to enhance operations and optimize productivity through amalgamation. The scheme included the transfer of all properties, assets, and liabilities to the transferee company without further acts or deeds, and the dissolution of the transferor companies without winding up. The authorized share capital of the transferor companies would combine with that of the transferee company, and the scheme was deemed to have approval u/s 16, 31, and other applicable provisions of the Act.

2. Objections Raised by the Regional Director, Ministry of Company Affairs:
The Regional Director raised three objections:
(i) Clubbing of authorized capital: The authorized capital of the company is a notional limit and cannot be clubbed together. The court referenced a similar case, Cavin Plastics & Chemicals (P.) Ltd., In re, to dismiss this objection.
(ii) Application money pending allotment: The scheme did not specify the treatment of application money pending allotment. The court clarified that it would be treated as an unsecured loan in the transferee company's books.
(iii) Lack of enabling provisions for amalgamation in the memorandum of association of transferor company 2: The court cited Highland Electro Appliances (P.) Ltd., In re, and United Bank of India Ltd. v. United India Credit & Development Co. Ltd., to overrule this objection, stating that powers u/s 391 and 394 are not limited by the memorandum's provisions.

3. Compliance with Statutory Provisions and Protection of Interests:
The scheme protected the interests of employees, provided for the dissolution of transferor companies without winding up, and complied with all statutory provisions. The court found the scheme fair, just, sound, and not against public policy or interest. No proceedings were pending u/s 231 to 237 of the Companies Act. The Official Liquidator's report confirmed that the transferor companies' affairs were not conducted prejudicially to members or public interest, and no misfeasance by directors was found.

Conclusion:
The court approved the scheme of amalgamation with effect from 31-3-2006, as the procedures u/s 391 and 394 were duly complied with. The transferor companies were ordered to stand dissolved without winding up, and fees for the chartered accountant and senior Central Government standing counsel were specified.