2006 (10) TMI 513 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction and pending proceedings.
2. Approval of the scheme of amalgamation.
3. Objections raised by the Regional Director.
4. Compliance with Rule 85 of the Companies (Court) Rules, 1959.
5. Reduction of share capital and repayment to preferential shareholders.

Summary:

1. Jurisdiction and Pending Proceedings:
The petition u/s 391(2) - 393 of the Companies Act, 1956 was filed by M/s Karamchand Appliances Pvt. Ltd. (transferor company No. 1), M/s Roshni Appliances Pvt. Ltd. (transferor company No. 2), and M/s S.C. Johnson Products Pvt. Ltd. (transferee company). The registered offices of all companies are located in Delhi, within the jurisdiction of this Court. No proceedings u/s 235-251 of the Act are pending against the companies.

2. Approval of the Scheme of Amalgamation:
The requirement to hold meetings of shareholders and creditors was dispensed with, except for the unsecured creditors of transferor company No. 1, whose meeting approved the scheme unanimously. Citations were published, and no objections were received by the Official Liquidator (O.L.).

3. Objections Raised by the Regional Director:
The Regional Director raised two objections:
- The authorized share capital of the transferor companies cannot be clubbed with the transferee company without following the prescribed procedure and payment of stamp duty and fee to the ROC. This objection was overruled based on precedent.
- The proposed scheme requires reduction of capital and payment to the preferential shareholder, which must comply with Sections 100-101 of the Act. The Court noted the necessity of compliance with these sections.

4. Compliance with Rule 85 of the Companies (Court) Rules, 1959:
Rule 85 stipulates that procedures for reduction of capital must be followed before sanctioning a scheme involving such reduction. The Court reviewed precedents and determined that while re-organization of share capital within a scheme can be sanctioned without following the reduction procedure, actual reduction involving payment to shareholders requires compliance with Sections 100-104 of the Act.

5. Reduction of Share Capital and Repayment to Preferential Shareholders:
The scheme envisages setting off losses by reducing the security premium account, which does not invoke Rule 85. However, repayment to preferential shareholders from the security premium account requires compliance with Sections 100-104. The Court exercised discretion u/s 101(3) of the Act, waiving the need for a special resolution and meeting of unsecured creditors due to their unanimous consent. The creditors of the transferor companies approved the scheme under Sections 391-392.

Conclusion:
The Court sanctioned the scheme of amalgamation subject to compliance with statutory requirements and the above observations. The transferee company must file a certified copy of the order with the Registrar of Companies within five weeks. Upon the scheme's effectiveness, the transferor companies will stand dissolved without being wound up. The petition was disposed of accordingly.