1973 (8) TMI 117 - HC - Companies Law

Summary

Issues Involved:
1. Non-approach of the transferee-company to the court under section 391(1) of the Companies Act.
2. Applicability of Part A of Chapter III of the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) to the transferor-company.
3. Compliance with statutory provisions for sanctioning the scheme of amalgamation under the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Non-approach of the transferee-company to the court under section 391(1) of the Companies Act:

The first ground of attack was that the transferee-company had not approached the court under section 391(1) of the Companies Act for directions to convene meetings of its members to consider and approve the scheme of amalgamation. It was contended that the court cannot sanction the scheme unless both the transferor and transferee companies approach the court and obtain directions for convening meetings of members and creditors. The court held that it is incumbent upon both the transferor-company and the transferee-company to approach the court under section 391(1) and seek proper directions. The court made it conditional that the scheme of amalgamation would take effect only if sanctioned by the Maharashtra High Court upon an application made by the transferee-company.

2. Applicability of Part A of Chapter III of the MRTP Act to the transferor-company:

The second contention was that the scheme of amalgamation could not be sanctioned unless approved by the Central Government as required by section 23 of the MRTP Act. The court examined the applicability of Part A of Chapter III of the MRTP Act, which applies to undertakings with assets not less than twenty crores of rupees or dominant undertakings with assets not less than one crore of rupees. It was found that the total value of the assets of the inter-connected undertakings, excluding Hindustan Spinning and Weaving Company Ltd., did not exceed twenty crores of rupees. Therefore, section 20(a) of Part A did not apply. Additionally, neither the transferor-company nor the transferee-company was a dominant undertaking, and their combined assets did not exceed one crore of rupees, thus section 20(b) was also not applicable. Consequently, section 23(1)(a) and (b) of the MRTP Act were not attracted, and the scheme did not require prior approval of the Central Government.

3. Compliance with statutory provisions for sanctioning the scheme of amalgamation under the Companies Act, 1956:

The court examined whether the statutory provisions were complied with, whether the classes were fairly represented, and whether the arrangement was such as a man of business would reasonably approve. The court found that the statutory provisions were complied with, as the board of directors of the transferor-company adopted a resolution proposing the scheme, and directions were sought under section 391(1). The meetings of secured and unsecured creditors were convened, and the scheme was approved by a statutory majority. The court also noted that the transferor-company was a wholly-owned subsidiary of the transferee-company, implying consent. The court concluded that classes were fairly represented, and the scheme was reasonable from a business perspective. The court accorded sanction to the scheme of amalgamation, subject to the condition that it would take effect only if sanctioned by the Maharashtra High Court.

Conclusion:

The court sanctioned the scheme of amalgamation of the transferor-company with the transferee-company, subject to the condition that the scheme would take effect only if sanctioned by the Maharashtra High Court. The court also ordered the transferor-company to pay Rs. 1,000 to the Central Government as costs.