Scheme of amalgamation sanctioned despite compliance objections and share application money concerns, with liabilities preserved in pending proceedings.

A scheme of amalgamation under sections 391(2) and 394 of the Companies Act, 1956 was approved where shareholders and creditors had consented, the Official Liquidator reported no prejudice, and no third-party objection emerged. The Regional Director's concerns over prior compliance defaults were addressed through subsequent filings and remedial steps, while the treatment of share application money was found not to defeat the commercial basis of the scheme. The scheme also preserved pending suits and proceedings against the transferee company, maintaining liability for past transactions. In these circumstances, the Court found no legal impediment to sanction and approved the amalgamation.

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Issues: Whether the Scheme of Amalgamation of the transferor companies with the transferee company should be sanctioned under sections 391(2) and 394 of the Companies Act, 1956 despite the objections raised by the Regional Director relating to compliance defaults and the treatment of share application money.

Analysis: The Scheme had been approved by the shareholders and creditors, the Official Liquidator reported no complaint and no prejudice to members, creditors or public interest, and no objection was received from any other quarter. The objections regarding prior compliance defaults were dealt with by subsequent filings and steps taken by the companies, while the objection on share application money did not displace the commercial basis of the Scheme or justify refusal of sanction. The Scheme also provided that pending suits and proceedings would continue against the transferee company, preserving liability in respect of past transactions. The Court found no impediment to grant of sanction in view of the statutory reports and the approvals already obtained.

Conclusion: The objection of the Regional Director was rejected and the Scheme of Amalgamation was sanctioned in favour of the petitioners.

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