Presently, the High Court enjoys powers of sanctioning amalgamation matters under section 394 of the Act though it is a matter of time when this power will be exercised by National Company Law Tribunal, a forum where Chartered Accountants shall be authorized to appear.
Not losing sight of this opportunity coming way of the Chartered Accountants, the seminar on this very topic, assumes greater significance and it is imperative that professionals like Chartered Accountants should keep themselves informed of the provisions relating to merger and amalgamations.
The powers may be exercised by the courts for the purpose of proper working of the scheme. The effect of those interested should be indicated stating if and how far the same are different from the like interest of other persons. ALL ER It was held in this case that Where that matters involved are of considerable difficulty and doubt, it becomes the duty of the court to examine and scrutinize the content of notice or circular sent to the members and creditors who are parties to the scheme to make sure that the notice is sent contained appropriate disclosures under section 393(1) (a). CLOTNESS IRON COMPANY 1951 SC 476 It was held in this case that a statement made in general “Directors have no interest in the scheme other than as members along with other members” is not a sufficient compliance under the provisions.
Not only this, including any modification in the scheme, with only objective to ensure proper working of compromise or arrangement. Such explanation must be mentioned in the notice being advertised indicating therein that the explanations are available at the Company’s office. : PROVISIONS FOR FACILITATING RECONSTRUCTION AND AMALGAMATION OF COMPANIES. It appeared to the court that the scheme was by way of, what is known as commercial world as a reverse takeover which means that a profit making company merges itself into a loss making company for the purpose of having advantage for tax purpose of examining that the scheme is not that reason against public interest and for evasion of taxes.
Where application section 391(1) is considered, The Calcutta High Court has held that no notice to Central Government is necessary.
However, Allahabad High Court has held that in such a matter both the Central Government and the Shareholders of the company is entitled to be heard before any decision is made under this section.
CHAIRMAN’S REPORT While, sectioning the scheme of arrangement or compromise, the court may issue directions or make modification in the scheme as may be thought appropriate for proper working of scheme.The terms merger and amalgamation are synonyms and the term ‘amalgamation’, as per Concise Oxford Dictionary, Tenth Edition, means, ‘to combine or unite to form one organization or structure’.The provisions relating to merger and amalgamation are contained in sections 391 to 396A in Chapter V of Part VI of the Act.The Act and the relevant rules pertaining to amalgamation are to be followed scrupulously.The provisions of the Act also deal with compromise or arrangement within or without amalgamation or merger.