2009 (3) TMI 1085 - HC - Companies Law

Summary

Issues involved:
The petition seeks court sanction for a scheme of amalgamation between two companies. The key issues include compliance with procedural requirements, approval of shareholders, potential violations of Sections 295 and 297 of the Companies Act, and the validity of resolutions passed by the board of directors.

Compliance with Procedural Requirements:
The petitioners, part of the same group, propose amalgamation due to the transferor company's sustained losses and dependence on the transferee company for financial resources. The scheme aims to integrate operations, reduce costs, and enhance capacity for future expansion. Meetings of equity shareholders, secured creditors, and unsecured creditors were dispensed with, and necessary notices were served. The Official Liquidator affirms proper conduct of the transferor company's affairs.

Approval of Shareholders:
Equity shareholders of both companies unanimously approved the scheme, and no opposition was raised by members or creditors. The Regional Director, except for potential violations of Sections 295 and 297, found the scheme non-prejudicial to shareholders and the public. The court noted that the violations did not affect the scheme's legitimacy or propose any mala-fide intentions.

Potential Violations of Sections 295 and 297:
The Regional Director highlighted potential violations by the companies, prompting the need for penal action. The court clarified that mere violations of these sections do not automatically invalidate a scheme of arrangement under the Companies Act. The court scrutinized the violations, including loans granted by the transferee company to entities involving interested directors, but found no fraudulent intent or scheme protection.

Validity of Resolutions by Board of Directors:
Concerns were raised regarding the validity of resolutions due to disqualification of directors under Section 283(1)(h) of the Companies Act. The court analyzed the quorum requirements and applicability of Section 290 to save resolutions. Even if directors were disqualified, the resolution was deemed valid, and the court emphasized that scheme approval does not absolve liability for violations.

Conclusion:
The court made both Company Petitions absolute, directing the lodgment of the order and scheme for stamp duty adjudication. Costs were allocated to the parties involved, and the drawn-up order filing was dispensed with. The court instructed all relevant authorities to act upon the authenticated order copy.