2011 (3) TMI 1483 - HC - Companies Law

Compromise or Arrangement - Held that - Considering the statutory power of amalgamation is invoked in the present case under sections 391(1), 393 and 394 of the Companies Act, 1956, and having regard to the decision(s) of the Calcutta, Delhi and Bombay High Courts and the steps already taken, the proposed amalgamation should be sanctioned without requiring the transferor company to amend its memorandum by resorting to section 17 of the Companies Act. The scheme of amalgamation at annexure A is accordingly sanctioned and the prayers (a), (b), (c), (d), (e), (f), (g), (h), (i), (j) and (k) are hereby granted. The transferor company will however follow the Accounting Standard 14 notified by the Central Government in formalising the amalgamation. Appeal allowed.

Summary

Issues:
Application under sections 391(1), 393, and 394 of the Companies Act, 1956 for sanctioning the scheme of amalgamation. Central Government's objections regarding accounting entries/adjustments and lack of clause in the memorandum of association for amalgamation.

Analysis:
1. The application sought the court's sanction for the scheme of amalgamation between the transferor and transferee companies under sections 391(1), 393, and 394 of the Companies Act, 1956.

2. The Central Government raised objections related to accounting entries/adjustments and the absence of a clause in the petitioner-company's memorandum of association enabling amalgamation with another company.

3. Regarding objection (a) on accounting entries/adjustments, the petitioner agreed to follow Accounting Standard 14 as notified by the Central Government under section 211(3A) of the Companies Act, 1956.

4. Concerning objection (b) about the lack of a clause in the memorandum of association, the petitioner argued that for statutory amalgamation with court sanction, specific power of amalgamation in the memorandum is not mandatory, citing legal precedents from various High Courts.

5. The Assistant Solicitor General of India acknowledged the legality of the amalgamation without a specific provision in the memorandum due to court sanction, aligning with the precedents set by different High Courts.

6. The court, considering the statutory power of amalgamation invoked under the Companies Act and the compliance with all formalities, including shareholder approval and Regional Director's views, sanctioned the amalgamation without requiring an amendment to the petitioner's memorandum.

7. The court approved the scheme of amalgamation and granted the requested prayers, directing the transferor company to adhere to Accounting Standard 14 for formalizing the amalgamation.

This detailed analysis covers the issues raised in the legal judgment, the objections by the Central Government, arguments presented by both parties, relevant legal precedents cited, and the court's final decision sanctioning the scheme of amalgamation under the Companies Act, 1956.