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TMI Blog1976 (12) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies. As per the report of Mr. K.C. Dewan, advocate, chairman of a meeting of the shareholders of Ansal Properties and Industries Limited, held on 10th July, 1976, the scheme was unanimously approved by the shareholders present and voting at the meeting either in person or through proxy. Similarly, as per the report of Mrs. Santosh Jain, advocate, chairman of a meeting of the shareholders of Ansal Steels Private Limited, held on the same date, the shareholders present and voting at that meeting also unanimously approved the scheme. Thus, at meetings held under the directions of this court, the shareholders of both companies have unanimously approved the scheme. Now, these Company Petitions (C.P. No. 50/76 and C.P. No. 49/76) have been mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a scheme of merger between the two companies is to make the creditors of the transferor-company, the creditors of the transferee-company instead of the transferor-company. This may in some cases affect their interest adversely and the court would have to find out how their interests can best be protected. This question has to be considered now in the context of the two companies which are before me in these two company-petitions. I directed a list of creditors being filed so as to be able to consider what material effect the merger of the two companies would have on their interests. In the case of Ansal Steels Private Limited, the major creditor is the transferee-company itself. The only other creditor is a firm in Bengal having a cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question, it is interesting to note that when a company has to alter its memorandum, and this is a much smaller event than merging the company in another company, a notice has to be issued to the creditors if the court (now the Company Law Board) thinks that their interest would be affected. Similarly, when there is a reduction in the share capital, section 101 of the Companies Act, 1956, requires the court to issue notice to the creditors in order to obtain their consent. This notice can be dispensed with in the discretion of the court in special circumstances ; but the intention of the section is that the creditors should have a say in the matter of reduction of capital. Keeping this in mind, I think that the Act does contemplate that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fects the interests of the creditors to such an extent that their meeting is essential. To illustrate the lines on which the court might act, I would put forward two or three hypothetical examples, to illustrate what the court might do in a given situation. If the transferor-company happens to be an insolvent company with few assets and great liabilities, the effect of the merger is likely to be adverse to the creditors of the transferee-company as the credit-worthiness of their debtor would be adversely affected by such a merger. In such a case, it would be necessary to call a meeting of the creditors. It would not at all be necessary to call a meeting of the creditors of the transferor-company whose position would be improved by such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree instances in which the court may have to insist on meetings of the creditors or some of them being called. I may also notice that in the first proviso to section 394(1) of the Companies Act, 1956, there is a provision relating to a scheme of amalgamation of a company which is being wound up with another company. This is an obvious case in which there may be a heavily indebted company which is to merge with a solvent company. In such a case a report has to be received from the Company Law Board or the Registrar concerning the affairs of the company in question. It is equally clear that the merger of a going concern with one which is being wound up is, in most circumstances, likely to be detrimental to the interest of the creditors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge to the creditors of the Ansal Properties and Industries Limited ; rather, it may be in their interest because the steel project of Ansal Steels Private Limited will, after the amalgamation, become the property of Ansal Properties and Industries Limited itself. Therefore, I do not think that a meeting of the creditors of the transferee-company is necessary in the instant case. I do not think that the merger will affect the credit-worthiness of the transferee-company; rather, it will strengthen it. Hence, there is no impediment to the sanction of the scheme. I accordingly sanction the scheme. Turning now to the question of passing an order under section 394 of the Act, the report of the official liquidator is available. It states that on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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