2009 (9) TMI 588 - HC - Companies Law

Scheme of amalgamation sanction seeked - Held that - It is an admitted position that the statutory process for convening of the meeting has been initiated after the ends of the accounting year of 2008-09, i.e., in April 2009. As regards the meeting of the Board of directors is concerned, the same is an internal management of the petitioner-company. The relevant date would be the initiation of the statutory process for convening of the meeting by moving to this court. If the contention is entertained that the Board had passed the resolution in the end of March and, thereafter, this court is moved at the earliest though accounting year is over, it would leave room for large number of uncertainty and it may also leave room for manipulations. Therefore, it appears to the court that if the statutory process is not initiated for convening of the meeting, the appointed date in the scheme normally should not be accepted beyond the date of beginning of such accounting year. No other explanation has come on record which may require this court to take a different view for maintaining the same appointed date as mentioned in the scheme. In view of the aforesaid, the scheme deserves to be modified to the extent that the appointed date shall be 1st April, 2009 and not 1st April, 2008 as provided in the scheme. Hence, order accordingly.

Issues Involved:
1. Sanction of the scheme of amalgamation.
2. Dispensation of meetings of equity shareholders and unsecured creditors.
3. Compliance with publication and notice requirements.
4. Examination by the official liquidator.
5. Appointed date of the amalgamation scheme.
6. Judicial scrutiny of the amalgamation scheme.
7. Delay in initiating the statutory process.

Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The petitions sought sanction for the amalgamation of Shree Balaji Cinevision (India) (P.) Ltd. with Balaji Electrical Insulators (P.) Ltd. The scheme was produced at Annexure C.

2. Dispensation of Meetings of Equity Shareholders and Unsecured Creditors:
In Company Petition No. 100/2009, the court dispensed with the meeting of equity shareholders and unsecured creditors as all had given written consent for the scheme. Similarly, in Company Petition No. 101/2009, the meeting of equity shareholders was dispensed with due to unanimous consent.

3. Compliance with Publication and Notice Requirements:
The petitions were admitted on 2nd May 2009, and ordered to be advertised in two daily newspapers, with notice issued to the Central Government and the official liquidator. Compliance with publication was confirmed by an affidavit dated 16th June 2009, and no objections were received.

4. Examination by the Official Liquidator:
The official liquidator filed a report stating that the affairs of the transferor-company were not conducted in a manner prejudicial to its members or public interest. The chartered accountant's opinion that the amalgamation was in the best interest of all parties was noted but not considered since it was unsolicited.

5. Appointed Date of the Amalgamation Scheme:
The scheme provided the appointed date as 1st April 2008 or such other date as directed by the court. The court has the power to alter this date under sections 392(1) and 394(1) of the Companies Act, 1956. The court emphasized that the appointed date should align with the statutory accounting year to avoid conflicts with fiscal liabilities.

6. Judicial Scrutiny of the Amalgamation Scheme:
The court referred to the Supreme Court's decision in Miheer H Mafatlal v. Mafatlal Industries Ltd., emphasizing that judicial scrutiny is necessary to ensure the scheme is fair, just, and reasonable, and not merely a rubber stamp approval. The court must consider all relevant factors, including compliance with statutory requirements and public policy.

7. Delay in Initiating the Statutory Process:
The statutory process for convening meetings was initiated after the accounting year 2008-09 had ended. The court found that the delay in moving the statutory process was not sufficiently justified, and thus, the appointed date in the scheme should be altered to 1st April 2009. The court criticized the approach of initiating the statutory process post the relevant accounting year and emphasized the need for timely action.

Conclusion:
The scheme of amalgamation was sanctioned with the modification that the appointed date shall be 1st April 2009 instead of 1st April 2008. The court quantified the costs for the Central Government and the official liquidator, directing the concerned company to make payments accordingly.

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