Transferee-company shareholders' meeting requirement: petition for amalgamation cannot be sanctioned until statutory meeting is held.

In an amalgamation where the transferee takes the entire undertaking and shareholder composition or voting rights are affected, the HC held that both companies must be properly before the Court and the transferee-company must hold the statutory shareholders' meeting under section 391(1). The court reasoned that section 394(1) empowers directions affecting the transferee and that the Companies (Court) Rules governing meetings and approvals apply equally to the transferee; affidavits of consent by shareholders did not substitute for the statutory meeting, and the petition could not be finally sanctioned until that requirement was complied with.

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Issues: Whether, in an amalgamation under sections 391 and 394 of the Companies Act, the transferee-company must be before the court and its shareholders hold the statutory meeting contemplated by section 391(1).

Analysis: The Court examined the statutory scheme under sections 391 and 394 and the Companies (Court) Rules (Rules 67-87) governing compromises, arrangements and amalgamations. The Court considered the nature of the proposed amalgamation - a merger where the transferee-company takes the entire undertaking of the transferor-company and where shareholder composition and voting rights of the transferee-company are affected. The Court noted that the powers in section 394(1) enable the Court to give directions affecting the transferee-company (for example, continuation of proceedings by or against the transferee-company), indicating that both amalgamating companies must be properly before the Court. The Court rejected the contention that the Companies (Court) Rules apply only to the transferor-company and held that the rules governing meetings and approvals apply equally to the transferee-company in cases of amalgamation. The Court observed that, although all shareholders of the transferee-company had filed affidavits consenting to the scheme, the statutory requirement of holding the transferee-company's shareholders' meeting had not been complied with and therefore the petition could not be finally sanctioned at that stage.

Conclusion: The Court held that the transferee-company must be before the Court and must hold the statutory meeting of its shareholders under section 391(1); the petition cannot be finally sanctioned until that statutory requirement is satisfied.

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