BIFR pendency does not bar amalgamation sanction where company-court jurisdiction remains intact and objections to the scheme fail.

Pendency of proceedings before BIFR did not, by itself, exclude the company court's jurisdiction to sanction an amalgamation scheme under sections 391 and 394 of the Companies Act, 1956, because no inconsistency with the Sick Industrial Companies (Special Provisions) Act, 1985 was shown and the statutory bar provisions were inapplicable. The Court also rejected objections to the scheme concerning exchange ratio, authorised capital, creditors' meeting, and the equity subscription agreement, holding that the explanations offered were sufficient, the creditors were not prejudiced, and a contractual restriction could not override statutory jurisdiction. The scheme was treated as fair and in the interest of the companies, members, and creditors, and sanction was granted.

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Issues: (i) Whether the pendency of proceedings before the Board for Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985 barred sanction of the scheme of amalgamation under sections 391 and 394 of the Companies Act, 1956. (ii) Whether the objections raised to the scheme, including those relating to exchange ratio, authorised capital, creditors' meeting, and the objection founded on the equity subscription agreement, prevented grant of sanction.

Issue (i): Whether the pendency of proceedings before the Board for Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985 barred sanction of the scheme of amalgamation under sections 391 and 394 of the Companies Act, 1956.

Analysis: The scheme had been placed before the Court even though a reference concerning the transferor company was pending before the BIFR. The Court held that the jurisdiction under sections 391 and 394 of the Companies Act, 1956 was not excluded merely because a reference had been registered under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. It found no inconsistency between the two enactments. Section 22 did not apply because the present proceedings were not of the kind suspended by that provision, and section 26 was also inapplicable to these company-court proceedings. The overriding provision in section 32 operated only where there was inconsistency, which was not shown.

Conclusion: The pendency of proceedings before BIFR did not bar the Court from sanctioning the scheme.

Issue (ii): Whether the objections raised to the scheme, including those relating to exchange ratio, authorised capital, creditors' meeting, and the objection founded on the equity subscription agreement, prevented grant of sanction.

Analysis: The Court accepted the explanations given to the Regional Director's objections. The exchange ratio was found to be properly adjusted in light of the subsequent bonus issue and the corresponding change in share value. The objections concerning filing fees and increase in authorised capital were held not to invalidate the scheme. The grievance that no separate creditors' meeting of the transferee company had been held was not treated as a bar because the scheme did not prejudice the transferee company's creditors. The objection based on the equity subscription agreement was rejected because a contractual clause restraining recourse to the Court for a scheme of amalgamation was held to be unenforceable and could not override statutory jurisdiction, especially when the scheme had been approved by the requisite majority.

Conclusion: The objections did not survive and did not prevent sanction of the scheme.

Final Conclusion: The scheme of amalgamation was found to be in the interest of the companies, their members, and their creditors, and sanction was granted.

Ratio Decidendi: Pendency of proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 does not by itself exclude the company court's jurisdiction to sanction a scheme under sections 391 and 394 of the Companies Act, 1956, and a contractual restriction cannot defeat such statutory jurisdiction when the scheme has the requisite approval and is otherwise fair and .

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