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TMI Blog1991 (12) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... 1969, as a private company and became a deemed public limited company on September 9, 1981, pursuant to the provisions of section 43A of the Companies Act. The main objects of this company, inter alia , are as follows: "( a )To carry on business as manufacturers, designers, assemblers, contractors, dealers, exporters and importers of all kinds of automotive parts and accessories, equipment and fittings, including voltage regulators, horn relays, stop-light switches, oil pressure switches, all panel and other switches, flashers, dynamo armatures, starter armatures, commutators, field coils, wiper motors, wiper blades and arms, ignition coils, indicators, lamps of all types, dynamos, generators, starters, alternators, magnetos, trafficators, fans, lighters, electric horns, air horns, fuel pumps, electric bulbs, sealed beams, carbon and starter brushes, regulator points and resistances, horn points, distributors and parts thereof, heaters, cigar lighters, air-conditioners, ammeters, volt meters, ohm meters, fuel guages, etc., and components of all these abovementioned items and all parts for motor cars, motor trucks, station wagons, omnibuses, coaches, tractors, trailers, motor cyc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electronic instruments, electronic and electric equipment, electric components, magnetic tapes, ferrite rods, hard and soft ferrites, capacitors, connectors, micro switches electronic, switching equipment, power diodes, rectifiers, integrated circuits, resistors, reed relays and switches, printed circuit boards, keyboards and computers, mini-computers and micro-processor based systems. ( d )To acquire, to provide on lease or to provide on hire purchase basis industrial and office plant and equipment, machinery, vehicles, buildings and real estate. ( e )To manufacture, buy, sell, refine, manipulate, purchase distribute, import export or otherwise deal in all kinds of glass, glassware, glass bottles, vials, glass containers and acrylic substitutes of such bottles, vials and the like of all descriptions, kinds and forms. ( f )To carry on business as manufacturers, designers, assemblers, contractors, dealers, exporters and importers of all kinds of auto-motive parts and accessories. ( g )To carry on business as manufacturers and dealers of all kinds of electronic and electrical components. ( h )To amalgamate with any other similar company or companies". The Morarjee Goculda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructed by the company, either in cash, or to make advances on them or any of them. ( e )To act in conjunction with, unite or amalgamate with, create or constitute, or assist in creating or constituting any other company or association of a kind similar, wholly or partially, to this company, and to buy up or absorb all or any part of the business or property of any such company or association". The official liquidator has made his report dated November 15, 1991, pertaining to PMP Auto Industries Ltd. and reported that the investigations made by the investigating auditors do not show that the affairs of the company have generally been conducted in a manner prejudicial to the interest of their members or to public interest. He, therefore, submitted by his report that this company may be dissolved without winding up in terms of second proviso to section 394(1) of the Companies Act, 1956. By his report dated November 19, 1991, the official liquidator has, on the basis of the opinion of the investigating auditors, submitted that the affairs of S.S. Miranda Limited have not been conducted in a manner prejudicial to the interest of its members or the public and that this company m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f amalgamation which the court sanctions in exercise of its powers under section 394 of the Act. He further submits that there is nothing in section 394 of the Act which requires that there should be identity of objects of the transferor and transferee companies before an amalgamation could be sanctioned. Such identity of objects is neither required by statute nor precedent, urges the learned counsel. So far as the merits of the scheme are concerned, it is pointed out by learned counsel that all the three companies are under the same management. The Morarjee Goculdas Spg. and Wvg. Co. Ltd. has an all-India operation and for effectively carrying on its business it has a well established sales net-work. Further, in the opinion of the board of directors, the business of the Morarjee Goculdas Spg. and Wvg. Co. Ltd. could be most conveniently carried out in conjunction with the business being carried out by PMP Auto Industries Ltd. and S.S. Miranda Ltd., by effectively utilising the expertise and sales net-work established by the Morarjee Goculdas Spg. and Wvg. Co. Ltd. It is further pointed out that there is no objection whatsoever to the proposed integrated and composite scheme of ama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the doing of any act in a particular way, the provisions of that enabling section, and not those of section 153, must be followed. This was a judgment under the Old Act, i.e., 1913 Act. Under the 1956 Act, in my view, the postulated limitation to the general rule may not be applicable, for reasons which I shall shortly adumbrate. In Maneckchowk and Ahmedabad Mfg. Co. Ltd., In re [1970] 40 Comp. Cas. 819, a case which arose before the Gujarat High Court, a scheme of amalgamation was put forward before the court for sanction under section 394 of the Act. The proposed scheme itself envisaged reorganisation of share capital including the reduction of the share capital. An objection was raised that inasmuch as a distinct and different procedure has to be adopted for reduction and increase of share capital under the Companies Act, it was not permissible for the court to sanction a scheme involving reduction and increase of share capital while exercising its powers under section 394 of the Act. The Gujarat High Court rejected this contention by holding that section 391 of the Companies Act was a complete code which provided for a scheme of reconstruction and amalgamation of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air, it can be sanctioned under section 391 despite the fact that for some of those things included in the compromise another procedure is prescribed in the Companies Act and which has not been carried out. It, therefore, appears that section 391 is a complete code which provides for sanctioning of the scheme of compromise and arrangement . . . Therefore, it appears that the provisions contained in section 391 is a complete code". (emphasis supplied) The decision of the Gujarat High Court in Maneckchowh's case, [1970] 40 Comp. Cas. 819 was followed by this court in Vasant Investment Corporation Ltd. v. Official Liquidator, Colaba Land and Mill Co. Ltd. [1981] 51 Comp. Cas. 20. In this case the company was authorised by its memo-randum to de business in buying and selling of land and also to run a textile mill. The company went into liquidation and after the contributor were paid it was found that there was a surplus. Some of the shareholders proposed a scheme by which the company could, utilising the surplus funds, carry on the business of manufacturing chemicals. The official liquidator objected to the same on the ground that sanctioning the scheme would be meaning that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearance" system to ensure that the parties are not put to avoidable, unnecessary and cumbersome procedure of making repeated applications to the court for various other alterations or changes which might be needed effectively to implement the sanctioned scheme whose overall fairness and feasibility has been judged by the court under section 394 of the Act. It now remains to consider the observations of Justice Rangnekar in Katni Cement and Industrial Co. Ltd., In re [1937] 7 Comp. Cas. 348 , 359 : "...but this rule is subject to the limitation that if the Companies Act contains express provision enabling the doing of any act in a particular way, the provisions of that enabling section, and not those of section 153, must be followed". The limitation spelt out by these observations is no longer valid, in my judgment, for two reasons which have introduced qualitative changes in the legal matrix. First, Katni Cement's case, [1937] 7 Comp. Cas. 348 was decided under the 1913 Act. At the relevant time, there was no rule or procedure corresponding to rule 85 of the Companies (Court) Rules, 1959. The procedure was governed by the rules made on the original side of the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The introduction of section 394A, however, has made some change. It is now necessary for the court, before sanctioning any amalgamation, to issue notice to the Company Law Board of every application under section 391 or 394 and to take into consideration the representation, if any, made to it by the Company Law Board before passing any order under either section. I see no reason why the Company Law Board cannot raise all its objections at this stage. The notice under this section appears to be treated as a mere formality. If the Company Law Board has any objection to the proposed scheme of amalgamation, they must come forward and state them while opposing the scheme of amalgamation. It would then be possible for the court to appreciate the objections, if any, and adjudicate thereupon. If the court is satisfied that the objection based on the alteration of the memorandum has no substance, the court itself can decide it then and there and sanction the scheme even if it means a consequential amendment of the memorandum of association. The order of the Company Law Board would also be appealable under section 10F of the Act just as the court's order is appealable. I see no reason fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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