Foreign-incorporated transferor companies can participate in amalgamation schemes if foreign law and regulatory requirements are satisfied.
A foreign-incorporated body corporate may be included as a transferor in an amalgamation because Section 394(4)(b) of the Companies Act, 1956 broadens the category of transferor entities beyond companies incorporated under the Act. The scheme must still satisfy the relevant foreign law requirements and the applicable FEMA/RBI framework, and it should not prejudice shareholders, creditors, or public interest. Where the record shows compliance with the foreign jurisdiction's law, regulatory alignment, and unanimous shareholder approval without material stakeholder prejudice, the scheme is legally capable of sanction.
Issues: (i) Whether a scheme of amalgamation could be sanctioned where one transferor company was incorporated outside India and was not liable to be wound up under the Companies Act, 1956. (ii) Whether the scheme was liable to be rejected for non-compliance with foreign law, RBI/FEMA requirements, or on the ground that it was prejudicial to shareholders, creditors, or public interest.
Issue (i): Whether a scheme of amalgamation could be sanctioned where one transferor company was incorporated outside India and was not liable to be wound up under the Companies Act, 1956.
Analysis: The definition of transferor company under Section 394(4)(b) of the Companies Act, 1956 expressly includes any body corporate, whether a company within the meaning of the Act or not. Read with Sections 391 and 394, this enables a foreign incorporated body corporate to be amalgamated with an transferee company. The contrary objection based on Section 390(a) was not accepted, because the statutory scheme in Section 394 specifically enlarges the category of transferor entities. The Court also relied on earlier High Court decisions taking the same view.
Conclusion: The foreign-incorporated transferor company could validly form part of the proposed amalgamation, and the objection to jurisdiction or maintainability failed.
Issue (ii): Whether the scheme was liable to be rejected for non-compliance with foreign law, RBI/FEMA requirements, or on the ground that it was prejudicial to shareholders, creditors, or public interest.
Analysis: The record showed compliance with the relevant Mauritian law governing amalgamation, supported by counsel's certificate and the statutory material placed before the Court. The scheme specifically contemplated compliance with applicable provisions under the Foreign Exchange Management Act, 1999 and the Reserve Bank of India framework. The Court also noted that the scheme had been unanimously approved by the equity shareholders and that no material prejudice to creditors, shareholders, or public interest was established.
Conclusion: The scheme was not hit by foreign law, RBI/FEMA concerns, or any prejudice to stakeholders or public interest.
Final Conclusion: The scheme of amalgamation was held to be legally permissible and fit for sanction, and the petition was disposed of by granting the requested relief.
Ratio Decidendi: Under Section 394(4)(b) of the Companies Act, 1956, a foreign-incorporated body corporate can be a transferor in an amalgamation with an company, provided the scheme does not violate the foreign jurisdiction's law and satisfies the statutory requirements of sanction.
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