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Issues: Challenge to decision of specified authority under s. 72A(1) of the I.T. Act, 1961 regarding scheme of amalgamation of two companies.
Analysis: The petitioner, a leading bicycle manufacturer, promoted a subsidiary company facing losses. Expert advice recommended amalgamation to save the subsidiary. High Court approved the scheme of amalgamation under Companies Act. Petitioner applied for approval under s. 72A(1) for amalgamation. Govt. laid down guidelines for approval, including conditions related to the size of sick industrial units. Specified authority expressed inability to recommend to Central Govt. based on reasons not in line with s. 72A. Court held that financial viability and public interest are key for approval under s. 72A. Specified authority's reasons for rejection not aligned with guidelines or s. 72A. Court noted that amalgamating company faced technical problems and required huge investment for stabilization. Specified authority erred in considering the number of employees and value of assets incorrectly. Court emphasized the importance of fair market value of assets and relaxation of criteria for mass-consumption goods. Specified authority's concern about managerial expertise post-amalgamation deemed irrelevant. Court quashed the decision of the specified authority and directed a reconsideration in line with observations. No costs were awarded. This judgment highlights the importance of fulfilling conditions under s. 72A for approval of amalgamation schemes, emphasizing financial viability and public interest. It underscores the need for specified authorities to adhere to guidelines and consider all relevant factors, such as fair market value of assets and the nature of goods manufactured. The judgment provides clarity on the legal requirements for approval under s. 72A and the role of the specified authority in assessing such applications.
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