- (1.) The nature of the objections raised by the Central Government to the sanction of the proposed scheme of amalgamation has inspired the court to revisit a matter that apparently stands concluded by virtue of a judgment of a Division Bench of this court.
(2.) The Central Government says that two of the clauses of the proposed scheme of amalgamation, Clauses 4.2 and 4.3 of Part III, should not be approved even if the scheme is otherwise sanctioned. The two relevant clauses provide as follows: "4.2 The resolutions, including resolutions passed under Section 293(1)(d) of the Act, if any, of the Transferor Companies, which are valid 2 and subsisting on the Effective Date, shall, mutatis mutandis, continue to be valid and subsisting and be considered as resolutions of the Transferee Company and if any such resolutions have upper monetary or other limits being imposed under the provisions of the Act, or any other applicable provisions, then the said limits shall be added and shall constitute the aggregate of the said limits in the Transferee Company." "4.3 With effect from the Effective Date, without following any further procedure as laid in Section 149(2A) and other applicable provisions of the Act, the Transferee Company shall be deemed to be authorised to commence such business as laid down in the Objects Clauses of the Memorandum of Association of the Transferor Companies."
(3.) The petitioners suggest that since special resolutions at shareholders' meetings of all the three companies have been passed to approve the proposed scheme, there should be no impediment to either of the aforesaid clauses being retained in the scheme notwithstanding the Central Government's objection. It is necessary to dwell at some length on either clause to visualise what has happened and what the petitioner seeks to obtain. Clause 4.2 envisages the carrying over of approvals accorded by the general bodies of the shareholders of the three companies to the respective boards of directors for the effective merger of the resolutions in the post-merger entity that the transferee company is to become. In practice, there may not be much difficulty but in principle, it is a most absurd notion of merger that was bound to follow upon the court's acceptance of the merger of other things notional. A public company, or a private company which is a subsidiary of a public company, cannot undertake certain transactions through its board of directors unless such matters have the sanction of the general body of the shareholders of the concerned company. That is the mandate of the Section 293 of the Companies Act. In practice, general approvals are accorded by the shareholders (say, the limit to which the company may borrow) and the board functions within the ambit of such general approvals in respect of the matters covered thereby. These petitioners, buoyed no doubt by the recent acceptance by courts of the merger of authorised capitals of companies in course of a scheme of amalgamation, seek to carry the proposition to the dizzy 3 heights of absurdity. The implication of the approval of Clause 4.2 would be that if the first transferor company has an outstanding resolution under Section 293(1)(d) for borrowing money, the amount approved for borrowing by its shareholders will be added to the amount approved by the shareholders of the second transferor company and both these limits would get added on to the limit sanctioned by the shareholders of the transferee company. It is inconceivable that such a clause can be accepted in principle, even though in practice it may not be of much relevance.;