2005 (7) TMI 355 - HC - Companies Law

Summary

Issues Involved:
1. Sanction of the scheme of amalgamation.
2. Compliance with statutory requirements under the Companies Act, 1956.
3. Objections raised by the Regional Director of Company Affairs.
4. Retention of the name of the transferor-company by the new company.
5. Interests of shareholders, creditors, and employees.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The petitioners sought the sanction of the scheme of amalgamation, Annexure A, where the transferee-company, Hindhivac Private Limited, proposed to merge with the transferor-company, Hind High Vacuum Company Private Limited. The scheme was approved by the board of directors of both companies and was subject to confirmation by the Court. The Court reviewed the scheme and found that it was unanimously approved by the shareholders and creditors of both companies in meetings convened as per the Court's orders. Therefore, the statutory requirement under section 391(2) of the Companies Act, 1956, was complied with.

2. Compliance with Statutory Requirements:
Both companies had convened meetings of their shareholders and creditors in accordance with section 391 of the Act and the Court's orders. The auditor's report for the transferor-company indicated that the company's affairs were not conducted in a manner prejudicial to the interests of shareholders or creditors. The Official Liquidator also had no objections to the scheme. The Court noted that despite the publication of the hearing, no objections were raised by shareholders, creditors, employees, or any other person.

3. Objections Raised by the Regional Director of Company Affairs:
The Regional Director of Company Affairs objected that the objects of the transferor-company did not contain any enabling provisions for amalgamation and suggested that the memorandum of association needed to be amended accordingly. The Court, however, found that clause 32 of the memorandum of association of the transferor-company, though not explicitly mentioning "amalgamation," provided for the disposal of undertakings, which included amalgamation. Additionally, the Court referenced section 394(1)(iv) of the Act, which empowers the Court to order the dissolution of the transferor-company without winding up at the time of sanctioning a scheme of amalgamation.

4. Retention of the Name of the Transferor-Company:
The scheme proposed that the name of the transferor-company be retained by the new company. The Court ordered that this retention would be subject to compliance with the provisions of the Companies Act.

5. Interests of Shareholders, Creditors, and Employees:
The scheme provided that all assets, properties, rights, and liabilities of the transferor-company would be transferred to the transferee-company. The shareholders of the transferor-company would receive five equity shares of the transferee-company for every six equity shares held. The Court found this exchange ratio to be fair and noted that the interests of the shareholders were fully taken care of. The scheme also ensured that all employees of the transferor-company would become employees of the transferee-company without any break or interruption in service and on terms not less favorable than those with the transferor-company. The Court observed that no employees had opposed the scheme, indicating their interests were also protected.

Order:
(i) The scheme of amalgamation, Annexure A, is sanctioned and binding on the petitioner-companies, their shareholders, and creditors.
(ii) The transferor-company shall stand dissolved without an order of winding up.
(iii) The retention of the name of the transferor-company by the new company is subject to compliance with the Act.
(iv) The office is directed to draw up a decree in Form No. 42.
(v) The petitioners are directed to serve a copy of this order on the Registrar of Companies within 30 days.

Conclusion:
The petitions were allowed, and the scheme of amalgamation was sanctioned by the Court.