RFB LATEX LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) The appellant herein is the respondent before the Company Law Board. The respondent No. 2 herein, namely, 20th Century Finance Corporation Limited, is the petitioner before the Company Law Board who had filed CP No. 11/1998 under Sections 397/398 of the Companies Act, 1956 (for Short 'the Act') alleging oppression and mismanagement on the part of the appellant and others. While these proceedings were pending, the respondent No. 2 herein filed an application before the Company Law Board (hereinafter called as 'the Board') for substitution of TCFC Finance Limited in place of 20th Century Finance corporation Limited. On the other hand, the appellant herein filed another application for dismissal of the petition.

(2.) The reason which led to the filing of the substitution application was sanctioning of the scheme of amalgamation by the Bombay High Court between 20th Century Finance Corporation Limited (hereinafter referred to as 'the transferor company') and TCFC Finance Limited (hereinafter referred to as 'the transferee company') and all the assets and liabilities pertaining to investments were also transferred to the transferee company. The transferor company, as a result of the aforesaid amalgamation, ceased to exist. It was, in these circumstances, application was filed for substitution of the transferee company in place of the transferor company along with copy of order of amalgamation dated 9th April, 1999, passed by the Bombay High Court in CP No. 28/1999. Although in view of the aforesaid facts, it was but natural for the Board to substitute the transferee company in place of the transferor company, however the appellant herein raised the contention that due to the aforesaid amalgamation as a result of which the transferor company ceased to exit, the petition filed by the transferor company under Section 397/398 of the Act did not survive and, therefore, was bound to be dismissed as the transferee company had no allegation of oppression against the appellant company. It was also pleaded that as on the date of presentation of the petition before the Board the transferee company was not in existence and, therefore, could not be allowed to continue the proceedings being not a shareholder of the respondent No. 2 at the time of presentation of the petition and the operative part of the discussion contained in the impugned order dated 4th August, 2003 is as follows:

(3.) The aforesaid conclusion and decision to substitute the transferee company in place of the transferor company, arrived at by the Board, is perfectly valid. The effect of amalgamation of one company into other is so obvious that it hardly needs any elaboration, when two companies amalgamate and merge into one, the transferor company losses its entity and ceases to have its existence. However, their respective rights or liabilities are to determined under the scheme of amalgamation. This principle is clarified by the Apex Couit in the Case of Saraswati Industrial Syndicate Ltd. Vs. CIT, Haryana, Himachal Pradesh, New Delhi. In the scheme of amalgamation between the two companies before us, as sanctioned by the Bombay High Court, in para 3(a), it was categorically provided that: