No order to be made by High Court for dissolution of transferor company unless official liquidator makes report to the effect that affairs of company have not been conducted in a manner prejudicial to interests of its members - Companies Law - No. 35/75

Circular : No. 35/75 [51/1/72 ‑ CL ‑ III], dated 6 ‑ 1 ‑ 1975. Subject:- No order to be made by High Court for dissolution of transferor company unless official liquidator makes report to the effect that affairs of company have not been conducted in a manner prejudicial to interests of its members It has been reported by the official liquidator attached to the Bombay High Court that there has been a practice followed by the Bombay High Court whereunder the Court sanctions the scheme of amalgamation under section 394 without passing any order for dissolution of the transferor company without winding up. It has been stated that in such cases the official liquidator submitted an adverse report to the Court under the second proviso to section 394(1) stating that the affairs of the transferor company were conducted in a manner prejudicial to the interests of its members or to public interest. Subsequently, on the transferor company moving separately for dissolution, it was pointed out by the official liquidator to the Court that he had submitted his report in the meantime which went against it; but the Court, however, took the view that since the amalgamation had already been sanctioned by it, nothing could be done even if the official liquidator s report was adverse and ordered for dissolution of the transferor company without winding up. A reading of section 394 and its proviso will indicate that the practice followed by the Bombay High Court in some cases in sanctioning the scheme of amalgamation without simultaneously making any order for the dissolution of the transferor company without winding up is permissible but it should not be allowed to enfeeble the administration of the provisions of the law. The Company Law Advisory Committee before whom the matter was placed has advised that the Regional Directors, Company Law Board should make the best use of the opportunity that they get under section 394 to make a representation to the Court in order to ensure that no wrong order is passed by it.