2007 (8) TMI 465 - HC - Companies Law

Amalgamation - Held that - Scheme of amalgamation proposed is essentially to achieve administrative excellence. It will enable the transferee-company to run their business more effectively and economically. None of the liabilities of any nature of either companies are in any way going to be adversely affected by the Scheme if allowed to be implemented. So far as the rights of the creditors are concerned, they also remain intact so too of shareholders who will be paid dividend on their shareholding depending upon the profitability of the company and the business done. Allow the petition and grant sanction to the proposed Scheme of arrangement/merger ( Annexure A-12) as prayed. It is however made clear that the sanction so granted by this Court would be subject to grant of sanction by other High Courts. A separate order as per rules 81 and 84 in Form Nos. 41 and 42 is accordingly, passed. Petitioner to pay fees of standing counsel for the Central Government ₹ 10,000.

Issues:
1. Amalgamation of multiple companies under section 391/394 of Companies Act.
2. Exemption from convening meetings of shareholders and creditors.
3. Sanctioning the scheme of amalgamation.
4. Compliance with legal requirements and reports from specified authorities.
5. Granting final sanction subject to approval by other High Courts.

Issue 1: Amalgamation of multiple companies under section 391/394 of Companies Act:
The company petition filed sought amalgamation of a transferor-company with a transferee-company under section 391/394 of the Companies Act. The petition detailed the grounds for amalgamation based on administrative and commercial exigencies, emphasizing the integration of mobile telephone services businesses, cost reduction, and focus enhancement. The transferor-company was a wholly-owned subsidiary of the transferee-company, with all shares held by the latter. The scheme aimed at generating economies of scale and adding value for stakeholders.

Issue 2: Exemption from convening meetings of shareholders and creditors:
The Court had previously granted exemption from convening meetings of shareholders and creditors in a related case to maintain consistency. The current petition sought reliefs including sanctioning the scheme, delivering a certified copy to the Registrar of Companies, and dissolution of the transferor-company without winding up. The Court directed notices to relevant authorities and the petition was advertised as per requirements. Reports from authorities, including the Regional Director and Official Liquidator, indicated no objections to the scheme.

Issue 3: Sanctioning the scheme of amalgamation:
After hearing counsels and reviewing the case record, the Court found no infirmity or illegality in the proposed scheme. The scheme had the approval of shareholders and creditors, ensuring their interests were safeguarded. The scheme aimed at achieving administrative excellence, reducing expenses, and protecting the rights of shareholders and creditors. Reports from authorities confirmed compliance with legal requirements and the absence of prejudicial conduct.

Issue 4: Compliance with legal requirements and reports from specified authorities:
Reports from the Regional Director, Official Liquidator, and Registrar of Companies indicated no objection to the scheme and compliance with legal provisions. The scheme was found to be in conformity with the law and not prejudicial to the interests of members or public interest. The Court noted the approval of the scheme by the Gujarat High Court during the petition's pendency, supporting the grant of sanction by the current Court.

Issue 5: Granting final sanction subject to approval by other High Courts:
The Court granted sanction to the proposed scheme of arrangement/merger, subject to approval by other High Courts. The sanction was based on the unanimous approval of shareholders and creditors, compliance with legal requirements, and reports from specified authorities. The order specified the payment of fees and the need for approval from other High Courts before the scheme could be implemented.

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