RECONSTRUCTION AND
AMALGAMATION
No order to be made by High Court for dissolution of
transferor company unless official liquidator makes report to the effect that
affairs of company have not been conducted in a manner prejudicial to interests
of its members.
Clarification
1
It has been reported by the official liquidator
attached to the Bombay High Court that there has been a practice followed by
the Bombay High Court whereunder the Court sanctions the scheme of amalgamation
under section 394 without passing any order for dissolution of the transferor
company without winding up. It has been
stated that in such cases the official liquidator submitted an adverse report
to the Court under the second proviso to section 394(1) stating that the
affairs of the transferor company were conducted in a manner prejudicial to the
interests of its members or to public
interest. Subsequently, on the
transferor company moving separate for dissolution, it was pointed out by the
official liquidator to the Court that he had submitted his report in the
meantime which went against it, but the Court, however, took the view that since
the amalgamation had already been sanctioned by it, nothing could be done even
if the official liquidator's report was adverse and ordered for dissolution of
the transferor company without winding up.
A reading of section 394 and its proviso will indicate
that the practice followed by the Bombay High Court in some cases in
sanctioning the scheme of amalgamation without simultaneously making any order
for the dissolution of the transferor company without winding up is permissible
but it should not be allowed to enfeeble the administration of the provisions
of the law.
The Company Law Advisory Committee before whom the
matter was placed has advised that the Regional Directors, Company Law Board
should make the best use of the opportunity that they get under section 394 to
make a representation to the Court in order to ensure that no wrong order is
passed by it.
* CIRCULAR
NO.35/75(51/1/72-CL-III), DATED 6.1.1975
Clarification
2
It was expected by the Department that the Regional
Directors would bring to the notice of the High Courts the provisions contained
in second proviso to section 394(1), which cast a duty on the part of the High
Courts to obtain a report from the official liquidatory about the affairs of
the transferor company before passing an order of dissolution of the said
company. It has, however, been observed
that in some cases the Court did not issue notices to the official liquidator
for furnishing his report as required under the aforesaid provisions of the
Act. The Regional Directors should,
therefore, point out invariably to the Court in all cases of notices under
section 394A pertaining to amalgamation of companies about the aforesaid
requirements of the second proviso to section 394(1).
*
CIRCULAR NO.10/75(23/9/75-CL-III, DATED 2.6.1975.