Amalgamation approved with curable capital defect to be remedied before the scheme takes effect.

A scheme of amalgamation was confirmed where shareholders and creditors had unanimously approved it and no material fraud, prejudice or public interest objection was established. The objection to the exchange ratio was rejected because, in the absence of fraud, shareholders were the proper judges of that commercial issue. The Regional Director's concern under Accounting Standard 14 was treated as premature because the accounting treatment would arise after amalgamation. The objection that the transferor company lacked the minimum paid-up capital was treated as a curable statutory defect, and approval was made subject to the company increasing its paid-up capital to the required level within one month.

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Issues: Whether the scheme of amalgamation was fit to be confirmed, and whether the objection regarding the transferor company's paid-up capital required rejection of the scheme.

Analysis: The shareholders and creditors of the companies had unanimously approved the scheme, and no material objection of fraud, prejudice, or public interest was established. The objection as to exchange ratio was not accepted in view of the unanimous consents and the principle that shareholders are the best judges of such matters in the absence of fraud. The Regional Director's objection based on Accounting Standard 14 was found premature, as the accounting treatment would arise after amalgamation. The Official Liquidator's objection that the transferor company had not met the minimum paid-up capital requirement under section 3(1)(iii) of the Companies Act, 1956 was treated as a valid and curable objection, and the petitioner undertook to increase the paid-up capital to the required level within one month.

Conclusion: The scheme of amalgamation was confirmed, but only after directing the transferor company to increase its paid-up capital to Rs. 1 lakh within one month.

Final Conclusion: The amalgamation was approved with a compliance condition, and the transferor company was directed to complete the capital enhancement before the scheme took full effect.

Ratio Decidendi: A scheme of amalgamation may be confirmed where shareholders and creditors unanimously consent and no fraud, prejudice, or public interest objection is shown, while a curable statutory defect may be permitted to be remedied as a condition of approval.

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