2014 (1) TMI 1015 - HC - Companies Law

Amalgamation of company - Dispensing with meeting of equity shareholders and unsecured creditors - Held that - Court had directed the petitioner companies to file an affidavit indicating as to whether the lease can be transferred to Company No.2 which is 100% owned by foreign companies and whether Company No.2 is under any obligation to obtain any clearance from the Reserve Bank of India under Foreign Exchange Management Act - It may be noted that the transfer of lease, if any, is by one company to another company which have been incorporated under the Companies Act and are having their registered offices in India and, as such, transfer of lease between them would not be in favour of a foreign company or foreigners, though foreigners may be director in one of the companies. The Official Liquidator or the Regional Director are unable to show any condition in the lease deed which would stand violated in case the scheme of amalgamation is sanctioned. They have not specifically pointed out any guideline of the Reserve Bank of India or the provisions of the Foreign Exchange Management Act which may be infringed in case the scheme of amalgamation is sanctioned - There is nothing on record to indicate that the scheme of amalgamation is in any manner detrimental to the interest of its share holders or to its unsecured creditors or against the public public policy of India. The scheme does not appears to be in violation of any provisions of the Foreign Exchange Management Act or the guidelines of the Reserve Bank of India in this regard and in case any formalities in this regard are required to be completed the Director of the transferee company i.e. Company No.2 has undertaken to comply the same as and when required - Petition allowed.

Issues Involved:
1. Sanction of the scheme of amalgamation filed by petitioner-companies.
2. Convening/dispensing with meetings of equity shareholders and unsecured creditors.
3. Official Liquidator's report and objections raised.
4. Compliance with guidelines of Reserve Bank of India and Foreign Exchange Management Act.
5. Transfer of lease from one company to another.
6. Scheme's impact on shareholders, creditors, and public policy.

Analysis:
1. The petitioner-companies sought sanction for the scheme of amalgamation, merging Company No.1 with Company No.2. The Board of Directors of both companies approved the scheme, transferring employees of Company No.1 to Company No.2 without detriment. Meetings of unsecured creditors were convened, and the scheme was unanimously approved without objections.

2. The Court dispensed with meetings of equity shareholders and directed meetings of unsecured creditors, ensuring compliance with procedural requirements. The Chairpersons' reports confirmed proper notice and unanimous creditor approval, with no objections raised against the scheme.

3. The Official Liquidator's report highlighted minor concerns regarding land lease and foreign directors but acknowledged no adverse impact on members or the public. The Regional Director emphasized compliance with RBI guidelines and FEM Act, with no objections to the amalgamation scheme.

4. The Court directed the companies to confirm transferability of the lease to Company No.2, owned by foreign entities, and compliance with RBI guidelines and FEM Act. The Director of Company No.2 affirmed no legal barriers to industrial activities or land ownership by foreign shareholders, pledging compliance with regulatory requirements.

5. The transfer of lease between the companies did not violate lease conditions or regulatory provisions, as confirmed by the Director of Company No.2. The scheme's approval did not contravene any legal requirements regarding land transfer or foreign ownership.

6. The Court found the scheme not detrimental to shareholders, creditors, or public policy, with no violations of FEM Act or RBI guidelines. The amalgamation was deemed fair and reasonable, sanctioned to be binding on the involved companies, allowing for necessary applications for scheme implementation.

In conclusion, the Court approved the scheme of amalgamation, directing the companies to file the order copy with the Registrar of Companies for implementation within 30 days. The judgment disposed of the Company Petition and Application, ensuring compliance with legal procedures and regulatory requirements for the successful merger of the petitioner-companies.

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