2012 (8) TMI 502 - HC - Companies Law

Amalgamation - Scheme of arrangement held that - the scheme of arrangement being fair and reasonable and all statutory provisions have been complied with and it is not adverse to public policy, and pursuant to the order passed by this court, public notice has been taken out by the petitioners in the newspapers and none have appeared to oppose the scheme of amalgamation, the same is required to be approved. The official liquidator has also filed a report stating that the transferor companies have not conducted their business prejudicial to the interest of its shareholders or public at large. Amalgamation approved.

Issues:
Approval of scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 involving three companies engaged in similar businesses. Observations and queries raised by the Regional Director for Company Affairs regarding the scheme's compliance with legal provisions, including dissolution, amalgamation provisions in the memorandum of association, compliance with Foreign Exchange Management Act, and authorized capital requirements for issuing shares. Compliance with statutory provisions, public notice, and official liquidator's report.

Analysis:

1. Scheme of Arrangement Approval:
The judgment pertains to the approval of a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 involving three companies: two transferor companies and one transferee company engaged in similar businesses. The board of directors of these companies approved the scheme and sought court approval. The court noted the absence of secured creditors and the approval of trade creditors for the proposed scheme. Public notice was issued, and no opposition was raised. The official liquidator reported that the transferor companies did not conduct business prejudicial to shareholders or the public.

2. Observations by Regional Director:
The Regional Director raised several observations and queries regarding the scheme's compliance with legal provisions. The first query concerned the dissolution of the transferor companies without winding up, which was addressed by stating the specific prayer for dissolution in the petition. The second query related to the amalgamation provisions in the memorandum of association of the transferee company, which was defended citing the court's wide powers under sections 391 to 394 of the Companies Act. The third query involved compliance with the Foreign Exchange Management Act, which was addressed by the managing director of the transferee company providing an undertaking for necessary reporting. The fourth query regarding the authorized capital of the transferee company was resolved by a provision in the scheme for the consolidation of authorized capital.

3. Compliance and Approval:
The court found that all statutory requirements were fulfilled, and compliance was in place. Affidavits of undertaking were filed by the authorized signatories of the transferor companies and the managing director of the transferee company. The court held that the scheme of amalgamation was fair, reasonable, and not adverse to public policy. Considering the commercial wisdom exercised by the board of directors and the absence of opposition, the court approved the scheme of amalgamation.

4. Court Order:
In conclusion, the court allowed the Company Petitions and approved/sanctioned the scheme of amalgamation. The transferor companies were ordered to be dissolved without winding up. The petitioner-companies were directed to file a certified copy of the order within 30 days. The judgment emphasized the fulfillment of statutory requirements, compliance with legal provisions, and the absence of opposition as key factors in approving the scheme of arrangement.

This detailed analysis covers the issues involved in the judgment, the observations raised by the Regional Director, compliance with legal provisions, and the court's decision to approve the scheme of arrangement.

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