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Issues: (i) Whether the objection that the authorised share capital of the transferor companies could not be clubbed with the authorised share capital of the transferee company without following the prescribed procedure and without payment of stamp duty and fee was sustainable. (ii) Whether the proposed scheme, to the extent it involved reduction of capital and repayment to preference shareholders out of the security premium account, attracted Rule 85 of the Companies (Court) Rules, 1959 and the procedure under Sections 100 to 104 of the Companies Act, 1956, and whether compliance with the meeting procedure could be dispensed with on the facts.
Issue (i): Whether the objection that the authorised share capital of the transferor companies could not be clubbed with the authorised share capital of the transferee company without following the prescribed procedure and without payment of stamp duty and fee was sustainable.
Analysis: The objection was tested against the prior view that in a complete merger the authorised share capital of the transferor company may be added to that of the transferee company, without requiring a separate levy of stamp duty and fee on that account. The reasoning treated such clubbing as permissible in a complete amalgamation and did not accept the Regional Director's objection.
Conclusion: The objection was rejected.
Issue (ii): Whether the proposed scheme, to the extent it involved reduction of capital and repayment to preference shareholders out of the security premium account, attracted Rule 85 of the Companies (Court) Rules, 1959 and the procedure under Sections 100 to 104 of the Companies Act, 1956, and whether compliance with the meeting procedure could be dispensed with on the facts.
Analysis: The scheme was examined in two parts. To the extent it provided for writing off debit balance and losses against the security premium account, the Court accepted that the arrangement could be sanctioned on the footing that it was a reorganisation of share capital supported by unanimous approval and substantial compliance. However, where the scheme provided for repayment to preference shareholders out of the security premium account, the Court held that Rule 85 read with Sections 100 to 104 was attracted because the proposal involved reduction of capital. At the same time, the Court exercised discretion under Section 101(3) because all shareholders and the relevant creditors had given written consent, making the convening of meetings unnecessary.
Conclusion: Rule 85 and Sections 100 to 104 were applicable to the repayment component, but the meeting procedure was dispensed with on the facts.
Final Conclusion: The scheme of amalgamation was sanctioned, the objections of the Regional Director were rejected to the extent indicated, and the petition was allowed with the scheme to operate in accordance with the Court's observations.
Ratio Decidendi: Where a scheme of amalgamation involves reduction of capital through payment from the security premium account, Rule 85 and Sections 100 to 104 of the Companies Act, 1956 are attracted, but the Court may dispense with the statutory meeting procedure when all affected shareholders and creditors have given written consent and further compliance would be an empty formality.
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