1974 (2) TMI 58 - HC - Companies Law

Court approves UK-India company merger under Companies Act. Dissolution without winding up. No need for memorandum alteration.

Marybong & Kyel Tea Estate Ltd., In re

The court sanctioned the scheme of amalgamation under sections 391, 392, 393, and 394 of the Companies Act, 1956, approving the merger of a ... Amalgamation, Principles for interpretation of statutes Issues Involved:1. Sanctioning the scheme of amalgamation.2. Dissolution of the company without winding up.3. Powers of the court under section 394 of the Companies Act, 1956.4. Necessity of altering the memorandum of association.5. Role and report of the official liquidator under section 394(1)(b).Detailed Analysis:1. Sanctioning the Scheme of Amalgamation:The petitioner companies sought the court's sanction for a scheme of amalgamation under sections 391, 392, 393, and 394 of the Companies Act, 1956. The petitioner No. 1, a UK-incorporated company, became a wholly-owned subsidiary of petitioner No. 2, an Indian company, following the purchase of shares approved by the Central Government. The scheme of amalgamation was unanimously approved in shareholders' meetings held as directed by the court. The court noted that the amalgamation was beneficial and complied with the statutory requirements, thus sanctioning the scheme.2. Dissolution of the Company Without Winding Up:The court addressed whether it could order the dissolution of a company without winding up under section 394(1)(iv) of the Companies Act, 1956. It was argued that the court has the power to dissolve a company at the time of sanctioning the scheme of amalgamation without the necessity of winding up. The court held that section 394(1)(iv) provides for dissolution without winding up for various types of companies, including those that are going concerns. Therefore, the court found no impediment in making an order for dissolution as requested.3. Powers of the Court Under Section 394 of the Companies Act, 1956:The court examined its powers under section 394, particularly the second proviso to section 394(1)(b), which mandates a report from the official liquidator before sanctioning a scheme of amalgamation. The court concluded that this proviso applies only to companies in liquidation where an official liquidator has been appointed. For going concerns where no winding-up petition is pending, the court can dissolve the company without such a report, thereby harmonizing the main provision with the proviso.4. Necessity of Altering the Memorandum of Association:The Company Law Board contended that without altering the memorandum of association to include the power to amalgamate, the scheme could not be sanctioned. The court rejected this argument, stating that the statutory power to amalgamate under sections 391 to 396 of the Companies Act, 1956, overrides the need for specific powers in the memorandum. The court cited previous judgments supporting the view that statutory provisions for amalgamation suffice without altering the memorandum.5. Role and Report of the Official Liquidator Under Section 394(1)(b):The necessity of a report from the official liquidator was debated, with the Company Law Board asserting it as a mandatory condition. The court clarified that the second proviso to section 394(1)(b) applies only to companies in liquidation. For going concerns, no such report is required. The court emphasized that the official liquidator's role is relevant only when a winding-up process has commenced, which was not the case here.Conclusion:The court sanctioned the scheme of amalgamation and ordered the dissolution of the petitioner No. 1 without winding up. The objections raised by the Company Law Board were overruled, and the court found that statutory provisions and previous case law supported the petitioners' contentions. The court's decision harmonized the main provisions of the Companies Act with the relevant provisos, ensuring a reasonable and consistent interpretation of the law. The petitioners were also directed to pay costs to the Company Law Board.