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Amalgamation – Holding
meetings of creditors - Companies Act, 1956 — S. 391
This petition is filed u/s.
391 for obtaining the sanction for the scheme of amalgamation. The transferor
company obtained sanction from the transferor company on the ground that both
the companies have same kind of business the merger would result in the
formation of the larger company. Both the companies would share the profits
and run the business economical and efficiently. The benefit of this would to
both the companies, their shareholders and employees. The Regional Director
raised an objection that no meeting of the creditors of the transferor company
was convened and that the exchange ratio for amalgamation was not worked out
by an independent valuer; and the board of directors has not given the
requisite information and explanation in their report.
The court held that even if
the Regional Director was sustained it has inherent power under Rule 9 of the
Companies Court Rules, 1959 to dispense with the requirement of giving notice
of meeting to the creditors of the company. The creditors of a company to be
merged in another company, and completely absorbed in the transferee by the
process of amalgamation and become the creditor of another company. The
existing company or a new company that the new company even though the
creditors or some of them have no dealings with the new entity and may
therefore have no confidence in the management and the creditors have got no
right to vote on the proposed amalgamation.
Shreya’s India (P) Ltd. vs.
Samrat Industries (P.) Ltd. [2007 80 SCL 131 (Raj)]
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Directors – Articles
empowered the removal of nominee Directors – Companies Act – S. 284
The defendant company was a
public limited company incorporated for setting up a project for the
manufacture of white crystal sugar. The plaintiff was a part of the management
according to the prospectus of the company. Dispute arose between the
management and the plaintiff. The management further issued him a letter
informing the plaintiff that his nomination as director by the co-promoter has
been withdrawn and he would cease to be a director. In a suit for declaration
and permanent injunction the plaintiff challenged his removal.
The court held that the
articles of association are in the nature of an agreement between the
shareholders of the company who are also the joint owners. If there is consent
between the shareholders then nothing precludes the members or the shareholder
from doing so. The co-promoters has exercised their rights and issued the
letter seeking to withdraw the nomination of the plaintiff as director of the
co-promoters of the company. Such right issued by the co-promoters for the
removal of the plaintiff as director from the board was proper.
Ravi Prakash Singh vs. Venus
Sugar Ltd. & Ors. [(2007) 140 Comp Cas 823 (Del)
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Merger – New company has to
pay fresh registration fees SEBI Act and Companies Act – Ss. 12, 391 to 394
The company RSL registered as
a broker with the National Stock Exchange paid initial registration fees for
the first year and for the subsequent four years paid fees on turnover basis
under the said Regulations for continuation of registration. RSL and the
appellant RSML mergered under the scheme of amalgamation sanctioned by the
High Court to meet the net worth criteria of Gupta Committee that no company
whose net worth less than Rs. 3 crores, would be allowed to trade as a broker
in the derivative segment of the stock exchange. The SEBI issued a circular
stating that in the case of merger carried out as a result of compulsion of
law, fees would not have to be paid afresh by the transferee entity, provided
the majority shareholding in the transferee entity. The SEBI demanded
registration fees on turnover basis under the said regulation. The appellant
claimed that the benefit of initial registration fees on turnover basis under
the said registration fees which RSL has paid as a broker in the cash and spot
market and contending that in a case of merger, which took place after
complying with the procedure prescribed under sections 391 to 394 of the
Companies Act duly approved by the High Court and the asset and liabilities of
the transferor company came into the hands of the appellant on account of
legal compulsion.
The court held that the RSL
has mergered into the appellant after complying with the provisions of
sections 391 to 394 of the Companies Act and it was equally true that the
scheme of amalgamation has been approved by the High Court. The amalgamation
in the instance case has taken place to in order to increase the ‘reserves’
component of the net worth. In the instance case on merger of the above two
companies a new entity stood which was given a right to operate in the
derivative segment and therefore it has to pay fresh registration fees on a
turnover basis. Therefore the new entity is not entitled to the benefit of
continuity of fees deposited earlier by RSL which got merged into RCML.
Ratnabali Capital Markets
Ltd. vs. Securities and Exchange Board of India [2007 80 SCL (SC)]
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Property pledged – Pawned
goods never became property of the company – Overriding preferential payment —
Companies Act – S. 529A
The appellant company case
before the company law board was that the respondent company in liquidation
had pledged goods in favour of the bank, under section 172 of the India
Contract Act, 1872. the goods pledged was lying in the factory premises of the
Company-in-liquidation when the sale took place. The other respondent called
the applicant–appellant to remove the goods which were pledged in its favour
by the Company-in-liquidation after the fixed assets were purchased by it. The
applicant called upon the Official Liquidator to redeem the said pledged goods
as liquidation orders of the company has been passed and also claim the
interest. The Official Liquidator stated that it had no objection for the
proposed sale of the pledged goods but insisted that while permitting the bank
to conduct the auction of the pledged goods an order to be made directing the
bank to make necessary contribution towards the workmen dues whenever Official
Liquidator determines their dues. On the appeal the applicant contended that
the properties which were pledged could not be termed to be the assets of the
Company-in-liquidation and such could not be subject matter of distribution in
terms of the section 529A.
The court held that the goods pledged towards the bank, at no point of the
time, became the property owned and possessed by the company. The pawned goods
never became the property of the company and even if used, they continue to
remain the goods of the bank. The court allowed the application of the bank
and held that the Official Liquidator would have no claim over the amounts
received by sale of the pledged goods by the bank and the judgment of the
Company Judged is modified.
Vaishu Engg. Industries Ltd.
In. re [2007] 80 SCL 171 (AP)
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Trust – Transfer of shares —
Held to be valid — Companies Act, Indian Trust Act, 1882, the Guardians and
Wards Act, 1890 and the Hindu Minority and Guardianship Act, 1956
The petitioner has held
certain shares in various companies which was transferred by the father of the
petitioner, to the trust created for the benefit of the petitioner when he was
minor. The petitioner in this petition has challenged the legality of the
trust as well as the transfer of those shares to trust as they are violate
Indian Trust Act, 1882, the Guardians and Wards Act , 1890 and the Hindu
Minority and Guardianship Act,1956. It is claimed that the name of the trust
has been without sufficient cause, entered in the register of the members of
the company. The petitioner is seeking direction against the companies for
rectification of the register by substituting his name in place of the trust.
The Petitioner lost all the benefit of the shares including the dividend
benefit which was created by his father and obtained an order of injunction
restraining from transferring the impugned shares in favour of the trust. The
trust created was to take away the rights of the petitioner in respect of the
impugned shares by transferring the shares to the trust. The trustees may not
act for the benefit of the petitioner and may not subscribe to the rights
share as and when issued by the company.
The court held that the
transfer of share was not in violation of the provision of the Guardians and
Wards Act or the Hindu Minority and Guardianship Act and the transfer were for
the benefit of the petitioner. it is clear that the petitioner was sole
beneficiary of the trust, saddled with the restrictive covenant elaborated. In
the circumstance of the case the transfer of shares to the trust for the
exclusive benefit of the petitioner though restrictive could not be said to be
violative of the provision of either of the above Act, that the petition was
dismissed.
Dhruv Agarwal vs. Bunny
Investment & Finance (P) Ltd. [2007] 80 SCL 99 (CLB-Chennai)
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