Amalgamation sanction and compliance objections resolved while revenue authorities retain power to assess tax and penalty.

A scheme of amalgamation under sections 391 and 394 of the Companies Act, 1956 may be sanctioned where the Official Liquidator reports no prejudice to members or public interest and objections from the Regional Director are satisfactorily answered through affidavits and undertakings. The discussion also notes that compliance concerns on accounting treatment, employee continuity, statutory filings and similar matters can be addressed as conditions of approval. Any sanction does not curtail the Income Tax Authorities' power to examine the relevant years, assess income, review share allotment at premium and recover tax or penalty in accordance with law.

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Issues: Whether the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956 deserved sanction in view of the reports of the Official Liquidator and the Regional Director and the compliance objections raised regarding accounting treatment, statutory filings and tax assessment.

Analysis: The requirements for convening meetings had already been dispensed with. The Official Liquidator reported no complaint and no indication that the affairs of the companies had been conducted prejudicially to members or public interest. The Regional Director's objections relating to accounting standards, employee continuity, filing of return of allotment, compliance certificate and other statutory concerns were answered by the petitioners through affidavits and undertakings. The Court also preserved the of the Income Tax Authorities to examine the relevant financial years, assess income, consider allotment of shares at premium and recover any tax or penalty in accordance with law, without the sanction order affecting such powers.

Conclusion: The Scheme of Amalgamation was sanctioned and the petition was allowed, with directions for compliance with statutory requirements and preservation of the tax authorities' powers.

Ratio Decidendi: A scheme of amalgamation may be sanctioned where the statutory reports disclose no public or member prejudice and the objections of the authorities stand satisfactorily addressed, while safeguarding the lawful powers of the revenue authorities.

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