Court approves amalgamation scheme between companies despite objections

Glofame Cotspin Industries Ltd., In re

Glofame Cotspin Industries Ltd., In re - [2006] 72 SCL 341 (GUJ.) Issues:
Petitions for sanction of a scheme of amalgamation under Companies Act, 1956.

Analysis:
1. The petitions were filed for the sanction of a scheme of amalgamation between the transferor-company and the transferee-company under sections 391 and 394 of the Companies Act, 1956. The transferor-company, a public limited company, is a part of the Welspun group of companies, with promoters holding about 74.82% of the total equity share capital. The transferee-company, also a public limited company, was incorporated in Maharashtra and later shifted to Gujarat, with promoters holding about 34% of the total equity share capital. The rationale behind the amalgamation was to create a composite unit for spinning and weaving, leveraging synergy and industrial benefits.

2. Company Petition No. 26 of 2005 and Company Petition No. 27 of 2005 were admitted, and meetings of shareholders and creditors were held, with the scheme being approved. The Official Liquidator's report stated that the affairs of the company were not conducted prejudicially. The auditor's report highlighted the company's compliance with tax and regulatory requirements, with no major objections raised against the scheme of amalgamation.

3. The Regional Director raised objections related to the transfer of assets between the companies, stamp duty issues, and redemption of preference shares. The court considered these objections and clarified that the objections did not impact the scheme's approval. The court granted sanction to the scheme of amalgamation between the two companies, emphasizing that it was not against public interest or the company's members' interests.

4. The court directed the petitioners to pay costs to the Assistant Solicitor-General representing the Central Government. Both petitions were disposed of, with the scheme of amalgamation between the companies approved by the court.