9911796707
TMI Blog1976 (5) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out that the petitioner-company was merging into M/s. Choudhari Metal Industries (P.) Ltd., which had its registered office in West Bengal. The effect of the order would have been that the company's assets would go to another company which was outside the jurisdiction of this court and, therefore, further orders may be difficult to pass. Though I do not fully agree with the Registry's view, I saw the possibility of an eventual conflict and so I directed the matter to be relisted before the court for passing an order which would finally dispose of the petition in every respect, i.e ., I wanted to pass an order which would dispose of the petition both under section 391 and section 394 of the Companies Act, 1956. In order to pass this composite order, I have to give some of the grounds which have already been mentioned in the judgment dated 19th April, 1976. In spite of the repetition involved, I think this is an appropriate case in which certain observations have to be made regarding the procedure to be adopted in casts of this type. When the petition was originally moved before the court, notice was issued to the Central Government and the court also directed that a meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Industries (P.) Ltd., i.e ., the transferee-company. I had noticed a decision of the Bombay High Court, Bank of India Ltd. v. Ahmedabad Manufacturing Calico Printing Co. Ltd. [1972] 42 Comp. Cas. 211 (Bom.), where this question had been analysed. It had there been noticed that in certain cases it would be necessary for the transferee-company to get the proposed compromise or scheme sanctioned by the court before it would become binding on both companies. I also noticed that the transferor-company (the petitioner) was a wholly-owned subsidiary company of the transferee-company and, therefore, it was not necessary for the transferee-company to approve the scheme. The reason I reached this conclusion was that section 391 of the Act deals with two special cases : ( a ) when there is a compromise or arrangement between a company and its creditors or any class of them and ( b ) where the compromise or arrangement is between a company and its members or any class of members. Considered from the point of view of the petitioner-company there is a scheme affecting the members of the company because, as a result of the scheme, the transferor-company will cease to exist and will be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atures of the present scheme under consideration are that two companies are merging with each other. Therefore, it is a contract between companies. Such a contract does not require the approval of the court. But, as one of these companies will merge into the other and will thereafter have to be dissolved under section 394 of the Companies Act, 1956, considered from the point of view of that company which is to cease to exist, the scheme or arrangement between the two companies is also a scheme or arrangement between the transferor-company and its shareholders and creditors, etc . That is why the scheme requires to be placed for consideration in the manner required by section 391. It also requires the sanction of the court. Seen from the point of view of the transferee-company, the agreement is essentially a contract which does not affect the creditors or members of the transferee-company in any manner. Therefore, the scheme does not require to be sanctioned from the point of view of the transferee-company under section 391 of the Act. However, if the scheme had some flaws whereby the rights of the transferee-company were affected, it would require the approval of those persons at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transferee-company has not only approved the scheme but has actively brought about the arrangement and certainly wants to enforce the scheme. For these reasons, I think that in the present case, there can be no doubt that the scheme is not going to be thrown overboard and there is no such intention. The contract is, therefore, binding on the transferee-company. All it requires now is the approval of the court. As soon as the scheme is sanctioned, it becomes effective. For the purpose of deciding this petition notices were issued to the Central Government and also to the income-tax authorities. There was some objection from the income-tax authorities which has been withdrawn. The Central Government also had no particular objection to the amalgamation. A citation was ordered and published in accordance with the order in the newspapers and journals as directed. No creditor has appeared to oppose the petition. There is in fact no opposition to the petition at all. I, therefore, find no reason to with hold the sanction of the court. However, there are certain features of the scheme, which require that the court should alter the terms of the scheme to some slight extent. This has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner-company were also members of the transferee-company and the petitioner-company is a totally owned subsidiary company. Therefore, I have to conclude that the affairs of the petitioner-company are not being conducted in a manner prejudicial to the interest of its members or public at large and hence there is no impediment to the dissolution of the petitioner-company because the second proviso to section 394(1) has been complied with. The result would be that the whole and every part of the undertaking, property and liabilities of the transferor-company will be transferred to the transferee-company ; any legal proceedings which may be pending by or against the transferor-company may now be continued by the transferee-company and the transferor-company will be dissolved without winding up. There is no requirement to make any further incidental, consequential or supplementary orders except to indicate the property which is to be included in the formal order in Form No. 42. The learned counsel for the petitioner has specified the property of the transferor-company which is now to be transferred. It consists of a factory plot at Faridabad, a factory building with staff quarters in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
