2008 (9) TMI 552 - HC - Companies Law

Amalgamation - Held that - According to the Central Government the scheme is not prejudicial to the interest of creditors shareholders and the public and according to the Official Liquidator the affairs of the petitioner Companies have not been conducted in a manner prejudicial to their members and the public amalgamation would be in the interest of the Companies and their members and creditors. The scheme of amalgamation is therefore required to be sanctioned.

Summary

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

Detailed Analysis:

1. Nature of Amalgamation:
The three petitioner companies sought sanction for the scheme of arrangement involving the amalgamation of two transferor companies with a transferee company under sections 391 and 394 of the Companies Act, 1956. The petitioner companies and the companies involved in the amalgamation belonged to the same group of management and were engaged in similar commercial activities in the related sector. The petitioners argued that the amalgamation would lead to the optimal use of resources, reduced administrative costs, effective management, centralized resources, and improved financial gearing, benefiting both the transferor and transferee companies.

2. Dispensation of Meetings:
Orders were passed dispensing with meetings of equity shareholders and unsecured creditors for all three companies involved in the amalgamation. The absence of secured creditors was confirmed through a certificate from a Chartered Accountant. Public notices were published in newspapers, and no objections were raised post-publication. The Official Liquidator confirmed that the companies' affairs were not conducted in a prejudicial manner.

3. Central Government's Involvement:
The Central Government was served notice, and the Regional Director, Corporate Affairs, Mumbai, raised concerns regarding non-compliance with certain sections of the Companies Act, 1956. The Regional Director highlighted issues related to section 58A and section 297 of the Act. The transferee company addressed these concerns by filing necessary documents and applications for compounding of offenses, ensuring compliance with statutory requirements.

4. Sanction of Amalgamation:
After considering submissions from all parties and the reports from the Official Liquidator and the Central Government, the Court concluded that the scheme of amalgamation was not prejudicial to the interests of creditors, shareholders, or the public. The Court sanctioned the scheme of amalgamation, emphasizing that the amalgamation would be in the best interest of the companies, their members, and creditors. However, the order specified that the sanction of amalgamation would not impede any criminal prosecution or legal proceedings against the transferee companies or their directors for past deeds.

5. Final Disposition:
The Court allowed the company petitions related to the amalgamation and quantified the costs to be paid to the Central Government Counsel. The petitions were disposed of accordingly, with the costs specified to be paid directly to the Central Government Counsel.

This detailed analysis outlines the key aspects of the judgment, including the nature of the amalgamation, dispensation of meetings, concerns raised by the Central Government, the sanction of amalgamation, and the final disposition of the petitions.