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TMI Blog1972 (3) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... terfall Estates Ltd., with Kothari (Madras) Ltd. The requisite majority in respect of each of the amalgamating companies had agreed to the amalgamation. The meetings of shareholders of each of these companies were held under the directions of the court, and the voting position in this regard has been set out in a tabulated form by Palaniswamy J., in paragraph 10 of his judgment which shows the number of persons who voted in person or by proxy for the resolution, the number of votes, the percentage of votes for amalgamation in relation to the total votes polled, and the percentage of voting for the scheme in relation to the paid-up capital. The dissentient shareholders in Waterfall Estates Ltd. opposed the related petition for sanction of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealing in cotton or other fibrous substances. The other three amalgamating companies were incorporated in 1943, and their main objects were to acquire, by purchase or otherwise, and to carry on the business of estate owners, cultivators, planters, growers and manufacturers, sellers and dealers in all kinds of coffee, tea, cardamom, etc. Blue Mountain further engaged itself in the business of manufacture, import, export and sale of fertilisers of all kinds, including chemical and natural fertilisers and mixtures thereof. Almost all the amalgamating companies have been sound. The new company, Kothari (Madras) Ltd., has been incorporated in July, 1970, with its registered office at Madras. Its nominal capital is Rs. 5,00,00,000 divided into 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of the proviso to section 25-FF of the Industrial Disputes Act. Provision also has been made in the scheme that in consideration of the transfer to the new company, the latter will allot fully paid-up shares in its capital to the existing members of the amalgamating companies in the manner set out in the statement in compliance with section 393 of the Companies Act. The new company will by payment in cash redeem the redeemable preference shares of Waterfall Estates Ltd. by paying capital paid thereon with a premium of 50 paise per share of Rs. 10 as provided in terms of the issue of the said shares, together with all the arrears of dividend up to the date of the scheme and all the preference shares of Balmadies Plantations Ltd., at pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares. In our opinion, neither of these objections has substance. The scheme of sections 101 and 102 of the Companies Act as well as rule 85 of the Companies (Court) Rules, 1959, clearly envisages that reduction in capital is in the context of an existing or continuing company. Where, as in this case, preference shares of amalgamating companies are paid out by the new company under a scheme of amalgamation by the terms of which the amalgamating companies go out of existence by a merger of the same in the new company, it will be hardly appropriate to view the process of such payment as involving reduction of capital of the amalgamating company which, by amalgamation, loses its existence and identity. The object of asking for confirmation by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the society. It is, of course, liable to be spent or lost in carrying on the business of the company, but no part of it can be returned to a member so as to take away from the fund to which the creditors have a right to look as that out of which they are to be paid". Lord Watson's observations which warranted the conclusion of the House of Lords is also worth noting : "One of the main objects contemplated by the legislature, in restricting the power of limited companies to reduce the amount of their capital as set forth in the memorandum, is to protect the interests of the outside public who may become their creditors. In my opinion the effect of these statutory restrictions is to prohibit every transaction between a company and a sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amalgamation. We do not think that there is anything in In re St. James' Court Estate Ltd. [1944] Ch. 6 (Ch. D.) to persuade us to take a different view. The first objection was rightly overruled. As to the second objection, it may be that payment of preference shares would be valid only in the case of winding-up of the company in accordance with the provisions of the Act. But it does not follow from it that there is a prohibition anywhere in the provisions of the Act from a scheme, as we have before us, providing for payment of preference shares in the course of amalgamation, resulting in the transfer of all the rights and liabilities of the amalgamating companies and the new company undertaking liability to all their creditors. As Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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