Amalgamation scheme sanctioned where accounting disclosure was sufficient and no extra dividend restriction was imposed.

The Gujarat HC sanctioned the scheme of amalgamation after finding that the requisite consents were obtained, no objections were filed after publication, the Official Liquidator reported no prejudicial conduct in the transferor company's affairs, and the Regional Director's concerns were answered by additional affidavit. It also held that, where the scheme adopted the pooling of interest method and any deviation from accounting standards was disclosed in the first financial statements, no further condition was required to restrict dividend distribution out of reserves. The scheme was found fair, beneficial to shareholders and creditors, and not contrary to public interest, so the request for an additional dividend restriction was declined.

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Issues: Whether the scheme of amalgamation should be sanctioned, and whether the objections relating to accounting treatment and dividend restriction required imposition of additional conditions.

Analysis: The scheme was supported by the requisite consents, no objections were received after publication, the Official Liquidator reported that the transferor company's affairs were not conducted prejudicially, and the Regional Director's observations stood answered by the additional affidavit. The Court also accepted that, where the scheme provided for accounting treatment under the pooling of interest method and any deviation from accounting standards was disclosed in the first financial statements, no further condition was necessary to restrict distribution of dividend out of reserves. On the material placed on record, the scheme was found to be fair, beneficial to shareholders and creditors, and not contrary to public interest.

Conclusion: The scheme of amalgamation was sanctioned, and the request to impose an additional restriction on distribution of dividend out of reserves was declined.

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