Amalgamation scheme and book-value share exchange accepted where banking approval was conditional and deferred dissolution was safeguarded.

A scheme of amalgamation linked to conditional RBI approval for small finance bank business was sanctioned, with the court accepting that the appointed date could coincide with the effective date and that the share-exchange ratio could be fixed on a book-value basis as on that date. Section 394 of the Companies Act, 1956 was treated as permitting transfer of undertaking, share allotment, dissolution without winding up, and other incidental or consequential directions needed to make the amalgamation effective. The objections to the appointed date, effective date, exchange ratio, and deferred dissolution disclosed no legal impediment, and the reports of the Regional Director and Official Liquidator showed no prejudice to members or public interest.

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Issues: Whether the Scheme of Amalgamation could be sanctioned despite the objections regarding the appointed date, effective date, share-exchange ratio, and deferred dissolution of the transferor companies.

Analysis: The petitioners' proposed merger was linked to the Reserve Bank of India's in-principle approval for commencement of small finance bank business, and the scheme was framed to operate in that regulatory context. Section 394 of the Companies Act, 1956 permits the court, while sanctioning a scheme or by a subsequent order, to provide for transfer of undertaking, allotment of shares, dissolution without winding up, and other incidental or consequential matters necessary to make the amalgamation effective. In view of the conditional nature of the banking approval, the court held that the scheme could validly keep the appointed date tied to the effective date and determine the share-exchange ratio on the basis of book value as on that date. The objections of the Regional Director did not disclose any legal impediment, and the reports of the Regional Director and Official Liquidator did not reveal prejudice to members or public interest.

Conclusion: The Scheme of Amalgamation was sanctioned, and the court accepted the deferred dissolution mechanism with the safeguard of a further application by the transferor companies within the stipulated period.

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