2004 (7) TMI 646 - HC - Companies Law

Summary

Issues:
1. Sanction of scheme of arrangement under Sections 391(2) and 393 of the Companies Act.
2. Objection by M/s Dream Cars and settlement with the transferor company.
3. Other objections to the proposed scheme of arrangement.
4. Grant of sanction to the Scheme of Amalgamation under Section 391(2) read with Section 394 of the Companies Act.

Analysis:
1. The petition filed under Sections 391(2) and 393 of the Companies Act sought the sanction of a scheme of arrangement between the transferor company, M/s Majestic Auto Limited, and the transferee company, M/s Hero Auto Limited, for the transfer of properties, rights, claims, and the entire undertaking related to the Ghaziabad business of the transferor company to the transferee company. The scheme had been approved by the respective Board of Directors of both companies, and no investigations or proceedings were pending under Sections 235 to 251 of the Companies Act. Meetings of shareholders and creditors were held, and resolutions were passed approving the scheme, leading to the filing of the present petition seeking sanction of the scheme.

2. An objection was raised by M/s Dream Cars, leading to a court order stating that the scheme could not be sanctioned pending the disposal of the proceedings. However, during the pendency of the appeal, a settlement was reached between the transferor company and M/s Dream Cars regarding an alleged debt, and a memorandum of understanding was executed. Consequently, M/s Dream Cars withdrew their objections, and the court dismissed the relevant application. With this settlement, one major objection to the proposed scheme was resolved.

3. Apart from the objection by M/s Dream Cars, other objections to the proposed scheme of arrangement were considered. The Regional Director, Department of Company Affairs, raised some objections, but after reviewing the averments made in the petition, the materials on record, and the affidavits filed by relevant parties, the court found no legal impediment to granting sanction to the Scheme of Amalgamation under Section 391(2) read with Section 394 of the Companies Act. Consequently, the court granted sanction to the scheme, leading to the dissolution of the Transferor Companies without the winding-up process.

4. In conclusion, the court disposed of the petition by granting sanction to the Scheme of Amalgamation, as all legal requirements were met, objections were addressed, and necessary approvals were obtained. The detailed process of meetings, approvals, objections, and settlements culminated in the court's decision to sanction the scheme, ensuring a smooth transition and dissolution of the Transferor Companies as per the provisions of the Companies Act.