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Issues Involved:
1. Scheme of Amalgamation 2. Objections by Creditors 3. Objections by Central Government 4. Interest of Workmen 5. Exchange Ratio of Shares 6. Alleged Tax Evasion Issue-Wise Detailed Analysis: 1. Scheme of Amalgamation: The appellants, Bengal Tea & Industries Limited (Appellant No. 1) and Bengal Tea & Fabrics Limited (Appellant No. 2), proposed a scheme of amalgamation under sections 391(1) and 393 of the Companies Act, 1956. The scheme included the transfer of all assets and liabilities from Appellant No. 1 to Appellant No. 2, effective from April 1, 1985. The scheme was approved unanimously by the shareholders of both companies in meetings held on November 16, 1985. The appellants then filed a petition under sections 391(2) and 394 for the Court's sanction of the scheme. 2. Objections by Creditors: Punjab National Bank (Respondent No. 2) opposed the scheme, arguing that it did not adequately provide for the transfer of cash balances, reserve funds, investments, and other assets. They contended that the scheme did not ensure that the liabilities of Appellant No. 1 would become the liabilities of Appellant No. 2. However, the Court found these objections unsubstantial, noting that the scheme explicitly included all assets and liabilities of the transferor company and that the creditors could proceed against the transferee company as they could against the transferor company. 3. Objections by Central Government: The Regional Director, Company Law Board, opposed the scheme, arguing that the exchange ratio was highly unfavorable to the shareholders of Appellant No. 1. They contended that the break-up value of the shares was significantly higher than the proposed exchange ratio. Additionally, it was argued that Appellant No. 2 had not carried out any significant business and was liable to be wound up under section 434(c) of the Companies Act, 1956. The Court dismissed these objections, stating that the valuation of shares is a matter of expert opinion and that the shareholders of Appellant No. 1 had unanimously approved the scheme. 4. Interest of Workmen: The Central Government argued that the scheme might result in the retrenchment of workmen due to the proposed economies of a centralized and larger concern. The Court found this objection without substance, noting that the scheme explicitly provided for the transfer of all employees from Appellant No. 1 to Appellant No. 2 without interruption in their service and on the same terms and conditions. 5. Exchange Ratio of Shares: The Regional Director contended that the exchange ratio was unfair and unfavorable to the shareholders of Appellant No. 1. The Court noted that the shareholders of Appellant No. 1, who held 93.8% of the shares, had unanimously approved the scheme. No shareholder had objected to the scheme, either during the meeting or after the advertisement of the application for sanction. The Court held that the fairness of the exchange ratio is primarily a matter for the shareholders to decide, and in the absence of any objection from them, the Court would not interfere. 6. Alleged Tax Evasion: The Central Government also suggested that the scheme might be a device for tax evasion. However, the Court found no evidence to support this claim. There was no specific allegation in the affidavit filed by the Regional Director, and no particular tax evasion was identified. The Court concluded that unless it is specifically established that the scheme was a device for evasion of payment of any tax, it cannot be rejected on this ground. Conclusion: The Court allowed the appeal, setting aside the judgment and order dated July 11, 1986, and sanctioned the scheme of amalgamation under sections 391(2) and 394 of the Companies Act, 1956. The objections raised by the creditors and the Central Government were dismissed, and the scheme was found to be fair and reasonable, benefiting both companies and their shareholders. The Court also provided specific directions for the Official Liquidator to file and serve his return within stipulated timeframes.
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