MARYBONG AND KYEL TEA ESTATE LTD Vs. STATE

JUDGEMENT

(1.) This is an application under Sections 391, 392, 393 and 394 of the Companies Act, 1956, for sanctioning the scheme of amalgamation between the petitioner companies and for various orders as stated in the prayers of the petition.

(2.) The facts of the case shortly are that the petitioner No. 1, Marybong & Kyel Tea Estate Ltd., was incorporated in the United Kingdom on the 20th of April, 1916, under the English Companies Acts, 1908 and 1913, in the name and style of Kyel Tea Estate Ltd. The registered office of the petitioner No. 1 is situate at 37, Mincing Lane, London E.C., and its principal place of business in India is situate at No. 31, Netaji Subhas Road, Calcutta. The petitioner No. 2, Birpara Tea Co. Ltd., was incorporated in India and has been and still carrying on business of growing, manufacturing and sale of tea since its incorporation. Several companies, namely, Killcott Tea Co. Ltd., Gungaram Tea Co. Ltd., Bunglee Rungliot Tea Co. Ltd., New Cinnatolliah Tea Co. Ltd., Kotamillai Tea Co. Ltd and Ledo Tea Co. Ltd., have merged with the petitioner No. 2, It appears that with the approval of the Central Government contained in their letter dated 24th of November, 1972, for purchase of 15,000 ordinary shares in the petitioner No. 1, the petitioner No. 2 has purchased the said shares and consequent thereupon the petitioner No. I is now a wholly-owned subsidiary of the petitioner No. 2. It further appears that while granting the said approval under Section 372(4) of the Companies Act, 1956, to the petitioner No. 2 to purchase the said shares of the petitioner No. 1, the Central Government imposed, inter alia, the conditions that the petitioner No. 2 shall initiate necessary steps and make formal application to the competent authorities in order to bring about the merger of petitioner No. 1 with the petitioner No. 2 within a period of one year from the date of acquisition of the said shares in the petitioner No. 1 by the petitioner No. 2. It is stated that the said amalgamation, besides it was a condition in the said letter approving the purchase by the petitioner No. 2 of the shares of the petitioner No. 1, is also beneficial on the grounds as stated in paragraph 15 of the petition. The main provision of the scheme of amalgamation has been set out in paragraph 18 of the petition and a copy of this scheme is annexed to the petition and marked with the letter "D". The Government of India. Department of Company Affairs, also forwarded by its letter dated 24th November, 1972, to M/s. Duncan Brothers & Co. Ltd., secretaries of the petitioner No. 2, a certified copy of the order under Section 23(4) of the Monopolies & Restrictive Trade Practices Act passed by the Central Government approving the proposal of Birpara Tea Co. Ltd., i.e., the petitioner No. 2, for acquiring the shares in the Marybong & Kyel Tea Estate Ltd. The said letter and the copy of the order is at pages 35 and 36 of the petition. Thereafter, by an order dated 24th of September, 1973, in Company Petition No, 278 of 1973, a meeting of the ordinary shareholders of the petitioner No. 1 was directed to be held and by the said order it was also directed that separate meeting of the ordinary shareholders of the petitioner No. 2 be held under Section 391(1) of the Companies Act. A separate meeting was directed to be held of the preference shareholders of the petitioner No. 2. It appears, the meetings were duly held on the 9th November, 1973, as directed by the said order and the scheme of amalgamation was passed unanimously. Thereafter, the present application was presented on the 27th of November, 1973, and notice was duly served on the Central Government and advertisements were published pursuant to the order made on the 4th of December, 1973, and, thereafter, the matter appeared in the list for hearing. The Company Law Board, through the Regional Director, Prasanta Kumar Mallick, has filed an affidavit affirmed on the 14th of January, 1974, and in paragraph 13 it has been stated that the petitioner No. 1 is a wholly owned subsidiary in the petitioner No. 2 and the interest of any particular shareholder is not likely to be affected by the proposed amalgamation. Furthermore, the financial position of the petitioner No. 1 appears to be sound as revealed by the balance-sheet as at 31st December, 1972. It has been stated also that the memoranda and articles of association of the petitioners Nos. 1 and 2 have no express power of amalgamation with another company in terms of the memoranda and articles of association. It is further submitted in the said affidavit that no order in terms of prayer (a) of the petition, being dissolution of the company, be made at this stage without the official liquidator making scrutiny of the books and papers of the petitioner No. 1 and making a report to this court that the affairs of the petitioner No. 1 had been conducted in a manner prejudicial to the interest of its members or to the public.

(3.) For the petitioner, Mr. S.B. Mukherjee appeared and submitted that under the provisions of Section 394 of the Companies Act, 1956, the court can make an order for dissolution at the time of sanctioning the scheme of amalgamation under Section 391(2) of the Companies Act, 1956. He further submitted that the second proviso to Section 394(1)(b) has no application in the present case where the transferor-company is admittedly a going concern and not being wound up by any order or was not in voluntary liquidation. He further submitted that under Section 3 of the English Companies Act a company may by special resolution alter the provisions of its memorandum with respect to the objects of the company which included power to amalgamate with another company or body of persons and such an alteration is not required to be confirmed by the company as under Section 17 of the Companies Act, 1956, and Mr. Mukherjee submitted that the petitioner No. 1, the transferor-company, being a foreign company incorporated under the English Companies Act, does not require sanction by the court in respect of its alteration of the memorandum of association giving power to amalgamate. Mr. Mukherjee also referred to the decision of this court in Hari Krishna Lohia v. Hoolungooree Tea Co. Ltd. in support of his proposition that, apart from Section 17, the company has a statutory right to amalgamate with another company under Section 391 of the Companies Act. Mr. Mukherjee in support of his contention submitted that the second proviso to Section 394(1)(b) of the Companies Act, 1956, has no application in the case of a foreign company which has not been wound up by referring to Part XI of the Companies Act, 1956, starting from Section 391, making the provisions of Sections 592 to 602 applicable to foreign companies. The petitioner No. 1, the transferor-company, is admittedly a foreign company within the meaning of Section 591 of the Companies Act, 1956. He also drew my attention to Section 2(10) and Section 3 of the Companies Act, 1956. Mr. Mukherjee also referred me to Sections 390(a), 583, 584, and 589 of the Companies Act in support of his proposition that unregistered companies and foreign companies are liable to be wound up under the provisions of the Indian Companies Act. Mr. Mukherjee also referred me to Section 481 where the provision for dissolution of the company is provided for, which deals with the case of a company when its affairs have been completely wound up or any other circumstances set out in the said section. Mr. Mukherjee also referred to Section 509, Sub-section (6), of the Companies Act, which provides for dissolution of a company in voluntary liquidation and the official liquidator reports to the court that the affairs of the company have not been conducted in a manner prejudicial to the interest of its members or to the public interest, Mr. Mukherjee also referred to the decision in In re Rivers Steam Navigation Co. Ltd. [1967] 71 CWN 854, 872, 874 (Cal), paragraphs 50 and 52 in support of his proposition, wherein it has been held :