2007 (11) TMI 412 - HC - Companies Law

Compromise and arrangement - order of the learned Company Judge sanctioning a Scheme of Amalgamation challenged raising an objection to clause 13.2 of the Scheme, which provides that the filing fee already paid by the Transferor Company on its Authorised Share Capital shall be deemed to have been so paid by the Transferee Company on the combined Authorised Share Capital Held that - The issue is not whether the fee, which is already paid by the Transferor Company would automatically be transferred to the Transferee Company. But, what is intended by section 391 of the Act is to reconstitute the Company without the Company being required to make a number of Applications under the Companies Act for various alterations which may be required in its memorandum and articles of association for functioning as a reconstituted Company under the scheme. Not only is section 391 of the Act is a complete code in itself, but it is intended to be in the nature of a single window clearance . Appeal dismissed.

Summary

Issues:
1. Objection to clause 13.2 of the Scheme regarding filing fee on Authorized Share Capital.
2. Interpretation of sections 391 to 394 of the Companies Act, 1956 in the context of a Scheme of Amalgamation.
3. Requirement of following separate procedures for increase of share capital post-merger.
4. Applicability of fee payment and notice requirements under sections 95 to 97 of the Companies Act.

Analysis:

1. The High Court of Madras heard an Appeal by the Regional Director and Registrar of Companies against the sanctioning of a Scheme of Amalgamation between two companies. The objection raised was regarding clause 13.2 of the Scheme, which dealt with the treatment of filing fees on the Authorized Share Capital post-amalgamation. The appellants contended that any increase in the Authorized Share Capital should follow the procedure under the Companies Act, 1956.

2. The Court considered the interpretation of sections 391 to 394 of the Companies Act in the context of the Scheme of Amalgamation. The appellants argued that compliance with section 97, which mandates filing a notice of increase of capital with the Registrar and paying fees, should not be exempted under sections 391 to 394. They relied on previous judgments to support their contention.

3. The respondent argued that for an increase in Authorized Share Capital post-merger, an order under section 391 of the Act suffices, citing precedents from the Bombay High Court and other High Courts. The Court referred to judgments emphasizing that section 391 provides a comprehensive framework for sanctioning schemes without the need for additional procedures for alterations in the company's structure.

4. Various High Courts' decisions were cited to support the view that no separate procedure or fee payment is required for merging Authorized Share Capital post-amalgamation. The Court highlighted that the sanction of a scheme by the Court itself serves as notice to the Registrar under the Companies Act, obviating the need for additional formalities. The judgment emphasized the efficiency of section 391 as a "single window clearance" system.

5. The Court dismissed the Appeal, noting the consistency in previous judgments regarding the interpretation of sections 391 to 394 and the treatment of filing fees and notice requirements under the Companies Act. The judgment reiterated the self-sufficiency of section 391 for approving amalgamation schemes and emphasized the intent behind providing a streamlined process for restructuring companies.