Amalgamation scheme sanction depends on fairness and absence of prejudice; income-tax compliance issues do not by themselves block approval.

Sanction of an amalgamation scheme under the Companies Act, 1956 requires only limited supervisory scrutiny to ensure the proposal is fair, reasonable, transparent and not contrary to law or public interest. Procedural irregularities pointed out by the Regional Director did not defeat the scheme, and the Official Liquidator reported no prejudice to members, creditors or the public in the transferor company's affairs. Income-tax compliance was treated as a separate matter and did not bar approval; the companies undertook to comply with the Income-tax Act, 1961 and to seek compounding of procedural defaults if needed. The scheme was sanctioned as fair and unobjectionable.

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Issues: Whether the scheme of amalgamation deserved sanction under the Companies Act, 1956 in the absence of any prejudice to creditors, members or public interest.

Analysis: The scope of scrutiny in a petition for sanction of amalgamation is supervisory and limited to examining whether the scheme is fair, reasonable, transparent and not contrary to law or public interest. The Regional Director pointed out only procedural irregularities and the Official Liquidator reported that the affairs of the transferor company were not conducted in a manner prejudicial to members, creditors or the public. The Court also noted that income-tax compliance is a separate matter and does not bar sanction of the scheme. The companies undertook to comply with the Income-tax Act, 1961 and to seek compounding of procedural defaults, if necessary.

Conclusion: The scheme of amalgamation was sanctioned as fair and unobjectionable, with no prejudice shown to creditors, shareholders or public interest.

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