Amalgamation as compromise or arrangement under the Companies Act, with section 394 confirming sanction of merger schemes.

An amalgamation scheme falls within the expression "compromise or arrangement" under section 391 of the Companies Act, 1956 when read with section 394, because section 394 expressly contemplates reconstruction and amalgamation of companies. The Companies Act meaning controls this context, and the definition of amalgamation in the Income-tax Act, 1961 cannot be imported into section 391 by borrowing definitions across enactments. On that basis, a scheme of amalgamation may be sanctioned within the statutory framework of sections 391 and 394.

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Issues: Whether an amalgamation of companies falls within the scope of a compromise or arrangement under section 391 of the Companies Act, 1956.

Analysis: Section 391 empowers the Court to sanction a compromise or arrangement, while section 392 provides supervisory powers over a sanctioned compromise or arrangement. Section 394 expressly deals with reconstruction and amalgamation of companies and shows that an application under section 391 may relate to a scheme for amalgamation of two or more companies. The definition of amalgamation in the Income-tax Act, 1961 was held to be confined to that statute and could not be imported into the Companies Act by a process of lifting the definition from one enactment into another.

Conclusion: Amalgamation is included within the fold of compromise or arrangement under section 391 read with section 394 of the Companies Act, 1956, and the question was answered in the affirmative.

Final Conclusion: The Court clarified that a scheme of amalgamation can be sanctioned within the framework of sections 391 and 394 of the Companies Act, 1956.

Ratio Decidendi: Where the Companies Act expressly links section 391 with section 394, the expression compromise or arrangement includes a scheme for amalgamation of companies, and definitions from another statute cannot control that meaning.

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