Amalgamation scheme approval turns on substantial compliance, bona fide majority support, and fairness, not speculative commercial success.

Substantial compliance with meeting formalities, including notice, explanatory statement and adjournment, was treated as sufficient where shareholders were adequately informed and the later court-directed meeting cured objection. A scheme of amalgamation was to be sanctioned if it was fair, reasonable and supported by a bona fide statutory majority, with the court declining to speculate on future commercial success unless the scheme was plainly unfair. The transferor-bank was held to retain corporate existence despite acquisition legislation, and its memorandum, read with section 391 of the Companies Act, 1956, was sufficient to permit amalgamation. The scheme was therefore capable of court sanction subject to compliance with directions.

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Issues: (i) Whether the statutory requirements for convening and holding the shareholders' meetings, including notice and the explanatory statement, were complied with and the adjourned meeting was valid; (ii) whether the scheme of amalgamation was fair, reasonable and approved by a proper statutory majority; and (iii) whether the transferor-bank remained a company capable of amalgamation and had power under its memorandum and the Companies Act, 1956, to effect the proposed amalgamation.

Issue (i): Whether the statutory requirements for convening and holding the shareholders' meetings, including notice and the explanatory statement, were complied with and the adjourned meeting was valid.

Analysis: The notice and explanatory statement were treated as having been settled in substantial compliance with the statutory requirements. Notice to shareholders outside India was held sufficient on the facts through service on the Custodian of Enemy Property and by newspaper publication. The chairman was held to have an implied power to adjourn the meeting in the face of disorder, and the later court-directed meeting cured any objection to the earlier adjournment.

Conclusion: The statutory meeting procedure was valid and the objection based on notice, explanatory statement and adjournment failed.

Issue (ii): Whether the scheme of amalgamation was fair, reasonable and approved by a proper statutory majority.

Analysis: The Court held that it would not speculate on the future commercial success of the amalgamated business and would interfere only if the scheme was plainly unfair or unsupported by a bona fide majority. The voting figures showed a statutory majority in favour after excluding interested votes. The scheme was found to be commercially justifiable in the light of the business climate and the proposed merchant-cum-development banking structure.

Conclusion: The scheme was fair, reasonable and approved by a proper statutory majority.

Issue (iii): Whether the transferor-bank remained a company capable of amalgamation and had power under its memorandum and the Companies Act, 1956, to effect the proposed amalgamation.

Analysis: The banking acquisition legislation was held not to dissolve the transferor-bank or extinguish its corporate existence; it remained an existing company entitled to compensation. Reading the memorandum as a whole, the Court found sufficient power to amalgamate, and in any event section 391 of the Companies Act, 1956 empowered the Court to sanction an amalgamation where the statutory conditions were satisfied.

Conclusion: The transferor-bank remained capable of amalgamation and the proposed scheme was not ultra vires.

Final Conclusion: The scheme of amalgamation was sanctioned with modifications, the transferor-company was ordered to be dissolved on compliance with the directions, and the petitioners succeeded.

Ratio Decidendi: In a scheme under sections 391 to 394 of the Companies Act, 1956, the Court will sanction an amalgamation if the statutory procedure is substantially complied with, the meeting represents a bona fide statutory majority, and the scheme is one that an intelligent and honest shareholder could reasonably approve; the Court will not reject it merely because the transferor company has ceased its original business or because the future commercial success of the scheme is uncertain.

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