2007 (12) TMI 289 - HC - Companies Law

Compromise and arrangement - liability to pay fees for increase in authorised capital - Held that - Allow the appeal and direct that it is not necessary to pay any fee for giving any effect to the increase in the authorised share capital of the transferee-company pursuant to the said scheme and we also direct that it is not necessary to delete clause 11.7 as directed by the hon ble first court and accordingly the scheme is approved without substituting clause 11.7 thereof. By virtue of the interim order we directed to deposit of money with the advocate-on-record by the appellant and effect was given to the appellant-petitioner. Since we have allowed this appeal there will be no bar to refund the said amount which was deposited in terms of the interim order dated October 16, 2007. That interim order dated October 16, 2007, is vacated.

Issues Involved:
1. Whether the authorized capital of transferor companies can be combined with the authorized capital of the transferee company in a scheme of amalgamation without payment of any fee.
2. The validity of the deletion and replacement of clause 11.7 of the scheme as directed by the hon'ble company judge.
3. Compliance with sections 94 and 97 of the Companies Act, 1956, in the context of the scheme of amalgamation.
4. The applicability of previous High Court decisions on similar issues.
5. The Central Government's objection and its consistency with previous High Court rulings.

Detailed Analysis:

1. Combination of Authorized Capital Without Payment of Fee:
The primary issue in this appeal is whether the authorized capital of the transferor companies can be combined with the authorized capital of the transferee company, thereby increasing the authorized capital of the transferee company without the payment of any fee. The appellant's counsel argued that various High Courts, including Allahabad, Delhi, Madras, and Andhra Pradesh, have consistently held that such a combination is permissible without additional fees. The rationale is that the transferor companies have already paid the requisite fees for their authorized capital, and requiring further payment would amount to double payment. The court found substance in this argument, citing multiple precedents supporting this view, including Saboo Leasing P. Ltd., Jaypee Cement Ltd., Hotline Hol Celdings P. Ltd., Cavin Plastics and Chemicals P. Ltd., Juggilal Kamlapat Holding Ltd., and Bysani Consumer Electronics Ltd.

2. Deletion and Replacement of Clause 11.7:
The hon'ble company judge had directed the deletion and replacement of clause 11.7 of the scheme. The appellant contended that such a modification was unwarranted, especially since other High Courts had approved similar schemes without such modifications. The court agreed with the appellant, noting that the scheme had been unconditionally approved by the Delhi and Madras High Courts. Therefore, the deletion or substitution of clause 11.7 was deemed unnecessary.

3. Compliance with Sections 94 and 97:
The respondent argued that the transferee company must comply with sections 94 and 97 of the Companies Act, 1956, which pertain to the increase of authorized capital and the filing of relevant returns. The appellant countered that sections 391 to 394 of the Companies Act constitute a complete code, allowing for a single window clearance for amalgamations. The court found merit in the appellant's argument, emphasizing that the scheme of amalgamation is a statutory instrument that does not require separate compliance with sections 94 and 97.

4. Applicability of Previous High Court Decisions:
The appellant relied on several High Court decisions that supported the view that no additional fee is required for the increase in authorized capital due to amalgamation. These decisions include Maneckchowk and Ahmedabad Manufacturing Co. Ltd., Telesound India Ltd., PMP Auto Industries Ltd., and Rangkala Investments Ltd. The court found these precedents compelling and consistent with the appellant's position.

5. Central Government's Objection:
The Central Government had raised an objection to clause 11.7, which was upheld by the learned single judge. However, the court noted that similar objections had been rejected by other High Courts, and no appeals were filed against those decisions. Therefore, the Central Government's objection was not considered tenable. The court concluded that the Central Government could not raise the same objection again, especially in light of the consistent rulings by other High Courts.

Conclusion:
The court allowed the appeal, directing that no fee is required for the increase in the authorized share capital of the transferee company pursuant to the scheme. It also ruled that clause 11.7 should not be deleted or substituted. The interim order requiring the deposit of money was vacated, and the deposited amount was ordered to be refunded to the appellant. The scheme was approved without any modifications to clause 11.7, and the application was disposed of accordingly.

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