ABSENCE OF COMPANYS POWER TO AMALGAMATE IN MOA: A CASE STUDY

A PROJECT ON

ABSENCE OF COMPANYS POWER TO AMALGAMATE IN MOA: A CASE STUDY

SUBJECT: CORPORATE LAW II

SUBMITTED TO: DR. B. R. N. SHARMA (FACULTY FOR CORPORATE LAW II)

SUBMITTED BY: SHUBHA KEERTI CHATURVEDI ROLL. -362 VIII SEMESTER, 4TH YEAR

CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

CHANAKYA NATIONAL LAW UNIVERSITY

ABSENCE OF COMPANYS POWER TO AMALGAMATE IN MOA: A CASE STUDY

ACKNOWLEDGEMENT

The present project on ABSENCE OF COMPANYS POWER TO AMALGAMATE IN MOA: A CASE STUDY has been able to get its final shape with the support and help of people from various quarters. My sincere thanks go to all the members without whom the study could not have come to its present state. I am proud to acknowledge gratitude to the individuals during my study and without whom the study may not be completed. I have taken this opportunity to thank those who genuinely helped me. With immense pleasure, I express my deepest sense of gratitude to Dr. B. R. N. Sharma, Faculty of Corporate Law II, Chanakya National Law University for helping me in my project. I am also thankful to the whole Chanakya National Law University family that provided me all the material I required for the project. I have made every effort to acknowledge credits, but I apologies in advance for any omission that may have inadvertently taken place. Last but not least I would like to thank Almighty whose blessing helped me to complete the project.

SHHUBHA KEERTI CHATURVEDI Roll- 362

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ABSENCE OF COMPANYS POWER TO AMALGAMATE IN MOA: A CASE STUDY

RESEARCH METHODOLOGY

AIMS AND OBJECTIVES: The aim of the project is to present a detailed study of the topic Absence of Companys power to Amalgamate in MOA: A Case Study through decisions and suggestions and different writings and articles.

SCOPE AND LIMITATIONS: Though the topic Absence of Companys power to Amalgamate in MOA: A Case Study is an immense project and pages can be written over the topic but because of certain restrictions and limitations I was not able to deal with the topic in great detail.

SOURCES OF DATA: The following secondary sources of data have been used in the project1. Articles/Journals 2. Books 3. Websites

METHOD OF WRITING AND MODE OF CITATION: The method of writing followed in the course of this research paper is primarily analytical. The researcher has followed Uniform method of citation throughout the course of this research paper.

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ABSENCE OF COMPANYS POWER TO AMALGAMATE IN MOA: A CASE STUDY

CONTENTS

INTRODUCTION..5 CORPORATE RESTRUCTURING...6-7 AMALGAMATION...8-9 LEGAL ASPECTS OF AMALGAMATION.10-20 CONCLUSION21 BIBLIOGRAPHY22

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INTRODUCTION
The rapid advancement of technologies related to new product development and design, engineering, manufacturing, marketing, and distribution has caused many companies to gain new competitive advantages over rivals with regard to the efficiency of providing products and services. Conversely, companies that have failed to incorporate these advancements have lost the ability to compete effectively, resulting in losses in market share and profit margin. These companies have resorted to basic reengineering of business processes, invention of those processes at lower costs, speed production and reaction to changing consumer demands, lower cycle times, and improve quality. This process often involves a general restructuring of the existing enterprise. Noncore businesses, defined as less profitable or lower-growth sideline operations that share few synergies with the principal business, are sold or closed down, with the proceeds used to invest in improvements in the core business. These improvements commonly involve increased automation and better-organized logistical processes, often resulting in the elimination of jobs. The combination of spinning off noncore businesses and reducing employment is referred to as "downsizing," or "right-sizing." In fact, the operative factor is really more a matter of improved skill matching, where outmoded job skills are replaced by skill sets that are better matched to new business processes. This is typically synonymous with workforce reductions as new, more efficient processes allow consolidation of job functions. During the 1980s, many companies in the service and manufacturing sectors restructured in response to increased competition, both from within the domestic economy and from foreign competitors able to enter new markets because of the progressive removal of trade barriers. Corporate Restructuring is an expression that connotes a restructuring process undertaken by business enterprises for the purpose of bringing about a change for the better and to make the businesses competitive. The term signifies the restructuring undertaken by a company and company secretaries play a predominant role in devising, designing, executing and completing the restructuring process.

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ABSENCE OF COMPANYS POWER TO AMALGAMATE IN MOA: A CASE STUDY

CORPORATE RESTRUCTURING

Restructuring as per oxford dictionary means, to give a new structure to, rebuild or rearrange". Corporate restructuring thus implies rearranging the business for increased efficiency and profitability. The meaning of the term 'Corporate Restructuring' is quite wide and varied. Depending upon the requirements of a company, it is possible to restructure its business, financial and organizational transactions in different forms. Restructuring is a method of changing the organizational structure in order to achieve the strategic goals of the organization or to sharpen the focus on achieving them. The essentials of Corporate Restructuring are efficient and competitive business operations by increasing the market share, brand power and synergies. Simply stated, Corporate Restructuring is a comprehensive process, by which a company can consolidate its business operations and strengthen its position for achieving its short-term and long-term corporate objectives - synergetic, dynamic and continuing as a competitive and successful entity. The expression Corporate Restructuring implies restructuring or reorganizing a company or its business (or one of its businesses) or its financial structure, in such a way as to make it operate more effectively. This is not a legal term and has no precise meaning nor can it be defined with precision. In the words of Justice Dhananjaya Y. Chandrachud, Corporate Restructuring is one of the means that can be employed to meet the challenges which confront business. Corporate restructuring is the process of redesigning one or more aspects of a company. The process of reorganizing a company may be implemented due to a number of different factors, such as positioning the company to be more competitive, survive a currently adverse economic climate, or poise the corporation to move in an entirely new direction. Here are some examples of why corporate restructuring may take place and what it can mean for the company. Restructuring a corporate entity is often a necessity when the company has grown to the point that the original structure can no longer efficiently manage the output and general interests of the company. For example, a corporate restructuring may call for spinning off some
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departments into subsidiaries as a means of creating a more effective management model as well as taking advantage of tax breaks that would allow the corporation to divert more revenue to the production process. In this scenario, the restructuring is seen as a positive sign of growth of the company and is often welcome by those who wish to see the corporation gain a larger market share.

Characteristics The selling of portions of the company, such as a division that is no longer profitable or which has distracted management from its core business, can greatly improve the company's balance sheet. Staff reductions are often accomplished partly through the selling or closing of unprofitable portions of the company and partly by consolidating or outsourcing parts of the company that perform redundant functions (such as payroll, human resources, and training) left over from old acquisitions that were never fully integrated into the parent organization. Other characteristics of restructuring can include: Changes in corporate management (usually with golden parachutes) Retention of corporate management sometimes "stay bonus" payments or equity grants Sale of underutilized assets, such as patents or brands Outsourcing of operations such as payroll and technical support to a more efficient third party Moving of operations such as manufacturing to lower-cost locations Reorganization of functions such as sales, marketing, and distribution Renegotiation of labour contracts to reduce overhead Refinancing of corporate debt to reduce interest payments A major public relations campaign to reposition the company with consumers Forfeiture of all or part of the ownership share by pre restructuring stock holders

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ABSENCE OF COMPANYS POWER TO AMALGAMATE IN MOA: A CASE STUDY

AMALGAMATION
Amalgamation is an arrangement or reconstruction. Amalgamation is a legal process by which two or more companies are joined together to form a new entity or one or more companies are to be absorbed or blended with another and as a consequence the amalgamating company loses its existence and its shareholders become the shareholders of new company or the amalgamated company. Similar to merger the shareholders of amalgamating companies get shares of amalgamated company. All the approvals explained in the case of merger are required to be obtained in the case of amalgamations also. The shareholders of each amalgamating company become the shareholders in the amalgamated company. To give a simple example of amalgamation, we may say A Ltd. and B Ltd. form C Ltd. and merge their legal identities into C Ltd. It may be said in another way that A Ltd. + B Ltd. = C. Ltd. The word amalgamation or merger is not defined anywhere in the Companies Act, 1956. However Section 2(1B) of the Income Tax Act, 1961 defines amalgamation as follows: Amalgamation in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as amalgamating company or companies and the company with which they merge or which is formed as result of the merger, as the amalgamated company), in such a manner that (i) all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation; (ii) all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation; (iii) shareholders holding not less than three-fourth in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation,

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otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first mentioned company.

Right to amalgamate No company involved in amalgamation need be financially unsound or under winding-up though as per Section 390(a), for purposes of Section 391 company means any company liable to be wound up. But it does not debar amalgamation of financially sound companies.1 Section 390(a) is applicable to a company incorporated outside India. If court has jurisdiction to wind up such a company on any of the grounds specified in the Act, court has jurisdiction to sanction scheme of amalgamation if a company incorporated outside India is a transferorcompany.2 There is no bar to a company amalgamating with a fifteen-day old company having no assets and business.3 Amalgamation calls for compliance with both Sections 391 and 394. While Section 391 requires sanction of court for compromise or arrangement, Section 394 empowers the court to provide for the matters stated in that section to facilitate amalgamation.

Bank of India Ltd. v. Ahmedabad Manufacturing & Calico Printing Co. Ltd. (1972) 42 Comp Cas 211 (Bom); Re. Rossell Inds. Ltd. (1995) 5 SCL 79 (Cal). 2 Bombay Gas Co. Pvt. Ltd. v. Regional Director (1996) 21 CLA 269 (Bom.). 3 Re. Apco Industries Ltd. (1996) 86 Comp Cas 457 (Guj.).

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LEGAL ASPECTS OF AMALGAMATION

Companies Act, 1956 has provided for a set of provisions specially dealing with amalgamation of companies, to facilitate the transactions. The statutory provisions relating to Merger and Amalgamations are contained in Sections 390 to 396A of the Companies Act, 1956.4 Section 391 lays down in detail the power to make compromise or arrangements with creditors and members. Under this section, a company can enter into a compromise or arrangement with its creditors or its members, or any class thereof without going into liquidation. Section 392 lays down the power of the High Court while Section 393 specifies the information as to compromises or arrangements that are to be sent with every notice calling the meetings of members and creditors. The provisions for facilitating reconstruction and amalgamation of companies are contained in Section 394. Section 395 prescribes the power and duty of the transferee company to acquires shares of shareholders dissenting from scheme or contract approved by majority. Powers of Central Government to provide for amalgamation of companies in national interest is laid down under Section 396. Section 396A specifies provisions for preservation of books and papers of amalgamated company. The salient features of Sections 391 and 394 are: There should be a scheme of compromise or arrangement for restructuring or amalgamation. An application must be made to the court for direction to hold meetings of shareholders/creditors. However, as per clause 24(f) of the Listing Agreement, a copy of the scheme has to be filed with all the stock exchanges where the shares of the company are listed at least one month prior to it being submitted to the court. Court may order a meeting of shareholders/creditors. Meeting(s) of shareholders/creditors should be held as per courts order. Scheme of compromise or arrangement must be approved by 3/4th in value and majority in number of creditors, class of creditors, members, and class of members.
4

The Companies (Second Amendment) Act, 2002 has transferred to the National Company Law Tribunal the powers vested in the Court under Sections 391 to 396 of the Companies Act, 1956. However, the Amendment Act has not become effective as yet. Accordingly, r elevant references to the High Court or Court will stand replaced with Tribunal after the relevant provisions of the Companies (Second Amendment) Act, 2002 are enforced. Likewise, all references to the Company (Court) Rules, 1959 will stand replaced by the rules/regulations that will be framed to enforce compromises and arrangements.

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Another application must be made to the court (after the results of the meetings are submitted with the court) sanctioning the scheme of compromise or arrangement. An approved scheme duly sanctioned by court is binding on all the shareholders/creditors/company(ies). Courts order takes effect only after a certified copy of it has been filed with the Registrar of Companies. This filing date being called as the effective date. Copy of courts order should be annexed to every copy of memorandum o f association of the company. Court may stay commencement or continuation of any suit or proceeding against the company after application has been moved in the court. Courts order is appealable in a superior court.

Section 391 Section 391 lays down in detail the power to make compromise or arrangements with its creditors and members. Under this Section, a company can enter into a compromise or arrangement with its creditors or its members, or any class thereof without going into liquidation. The salient features of Section 391 are as follows: Sub-section (1) Where a company proposes a compromise or arrangement between it and its creditors or between it and its members or with any class of the creditors or any class of members, the company or the creditor or member may make an application to the court. On such application the court may order a meeting of the creditors or members or any class of them as the case may be and such meeting shall be called, held and conducted in such manner as the court may direct. In the case of a company which is being wound up, any such application should be made by the liquidator. The key words and expressions under sub-section are creditors, court, class of creditors or members, a company which is being wound up, liquidator. When a company is ordered to be wound up, the liquidator is appointed and once winding up commences liquidator takes charge of the company in all respects and therefore it is he who could file any application of any compromise or arrangement in the case of a company which is being

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wound up. A company which is being wound up would mean a company in respect of which the court has passed the winding up order. Sub-section (2) Sub-section (2) provides that when the court directs the convening, holding and conducting of a meeting of creditors or members or a class of them, a particular majority of the creditors or members or a class of them should agree to the scheme of compromise or arrangement. As per the sub-section, the majority required is the majority in number representing three-fourths in value of the creditors or members or a class of them, as the case may be, present and voting in the meeting so convened either in person, or by proxy. After the said meeting agrees with such majority, if the scheme is sanctioned, by the court, it shall be binding upon the creditors or members or a class of them, as the case may be. As per the proviso under Sub-section (2), no order sanctioning any compromise or arrangement shall be made by the court unless it is satisfied that the applicant has made sufficient disclosure about the following particulars: All material facts relating to the company; Latest financial position of the company; Latest auditors report on the accounts of the company; Information about pendency of any investigation proceeding in relation to the company under Sections 235 to 251 and the like. Sub-section (3) The order made by the court under Sub-section (2) should be filed with the Registrar of Companies. If the order is not filed with the Registrar, it will not have any effect. The requirement under this section is limited to filing of the order of the court and it does not specify the need for the Registrar to register it. Sub-section (4) It is necessary to annex a copy of every such order to every copy of the Memorandum of company issued after the filing of the certified copy of the order. In the case of a company not having a memorandum the order aforesaid shall be annexed to every copy of the instrument constituting or defining the constitution of the company.

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Sub-section (5) Any default in complying with Sub-section (4) invites the penalty prescribed in this subsection. As per the penal clause contained in this sub-section, the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs.100/for each copy of the Memorandum or other instrument in respect of which the order of the court has not been annexed. The penal clause under this sub-section is confined to any default under Sub-section (4). The section is silent in respect of contravention of any other statutory requirement. This does not mean contravention of other requirements can take place. It is necessary to note that if the requirements under Sub-sections (1) to (3) are not complied with or could not be obtained, the scheme itself will not be effective. Therefore, these requirements are very important and if there is any omission, default or deficiency, it would prove fatal to the scheme of compromise or arrangement. Sub-section (6) The court has powers to stay the commencement of or continuation of any suit or proceeding against the company on such terms as it thinks fit until the application is finally disposed of.

Section 392 Sub-section (1) The court has the power to supervise the carrying out of the scheme. The court may give such directions or make such modifications to the scheme for the purpose of proper working of the scheme. Sub-section (2) The court has the power to order winding up of the company if it thinks that the scheme sanctioned cannot work satisfactorily. Section 393 Sub-section (1) Every notice of any meeting called as per orders of court under Section 391, should include an explanatory statement. The statement should set out the terms of compromise or
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arrangement and all material interests of the directors, managing director or manager of the company and effect of such interest on the scheme. It can also be given by way of an advertisement containing the above mentioned particulars. Sub-section (2) Such disclosure shall also be made, in the case of a scheme affecting debenture holders, about the interest of the debenture trustees. Sub-section (3) If the notice states that creditors or members can have copies of the scheme from the company, the company shall provide copies of the scheme of compromise or arrangement, to the creditor or member who applies for the same. Sub-section (4) This sub-section is a penal clause. In case of default in complying with the requirements of Section 393, the default is a punishable offence. Sub-section (5) Every director, managing director, manager or as the case may be, the debenture trustees, shall give all necessary information to the company failing which they shall be liable for the penal consequences stipulated in this sub-section.

Section 394 It is only in Section 394 of the Act there is reference to reconstruction of any company or companies or amalgamation of any two or more companies. Sub-section (1) Where the scheme involves reconstruction of any company or companies or amalgamation of any two or more companies and vesting of the whole or substantially the whole of the properties or liabilities of any company concerned in the scheme (Transferor Company) to another company (Transferee company), the court may make provision for the following matters also:
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Transfer to the Transferee Company of the whole or any part of the undertaking, property or liabilities of any transferor company; The allotment or appropriation by the Transferee company of any shares, debentures to any person under the scheme. Continuation of proceedings by or against the Transferee Company of any legal matters pending by or against any Transferor Company. The dissolution, without winding up, of any Transferor Company. Provision to be made for any person who does not agree to the scheme. Such incidental, consequential and supplemental orders passed by the court as it may think fit so that the reconstruction or amalgamation could be fully and effectively carried out. As per the proviso under this sub-section, it is necessary to have the report from the Registrar of companies in case the scheme involves a company that is being wound up and the report of the liquidator, in case the scheme involves the dissolution of a company. These reports are mandatory in order to ensure that the affairs of the company in question have not been conducted in a manner prejudicial to the interests of its members or to public interest.

Sub-section (2) The sub-section provides for the order of the Court and the vesting of the properties and liabilities of the transferor company to the transferee company. Sub-section (3) Under this sub-section, the time limit for filing the order of the Court for registration by the Registrar is 30 days after the making of the order. Sub-section (4) As per clause (a), the expression property has been defined to include property, rights and powers of every description and the expression liabilities includes duties of every description. As per clause (b), Transferee Company does not include any company other than a company within the meaning of this Act but Transferor company includes anybody corporate, whether a company within the meaning of this Act or not. Thus, the transferee company in a scheme of merger or amalgamation has to be necessarily a company within the meaning of the Act.

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Section 394A The court is supposed to give notice of every scheme under Section 391 or 394 to the Central Government and consider representation, if any by the said Government. Therefore, merger or amalgamation under a scheme of arrangement as provided under Sections 391-394 of the Act is the most convenient and most common method of a complete merger or amalgamation between the companies. There is active involvement of the Court and an amalgamation is complete only after the Court sanctions it under Section 394(2) and takes effect when such order of court is filed with the Registrar of Companies. In fact, Sections 391 to 394 of the Act read with Companies (Court) Rules, 1959 serve as a complete code in themselves in respect of provisions and procedures relating to sponsoring of the scheme, the approval thereof by the creditors and members, and the sanction thereof by the Court.

Accordingly, amalgamation can be effected in any one of the following ways: (i) Transfer of undertaking by order of the High Court (Section 394 of the Companies Act, 1956) Under Section 394 of the Companies Act, the High Court may sanction a scheme of amalgamation proposed by two or more companies after it has been approved by a meeting of the members of the company convened under the orders of the court with majority in number of shareholders holding more than 75 percent of the shares who vote at the meeting, approve the scheme of amalgamation, and the companies make a petition to the High Court for approving the Scheme. The High Court serves a copy of petition on the Regional Director, Company Law Board and if they do not object to the amalgamation, the Court sanctions it. Once the Court sanctions the scheme, it is binding on all the members of the respective companies. (ii) Purchase of shares of one company by another company (Section 395 of the Companies Act, 1956) Under Section 395 of the Companies Act, 1956, the undertaking of one company can be taken over by another company by the purchase of shares. This section obviates the need to obtain the High Courts sanction. While purchasing shares, the company which acquires shares should comply with the requirements of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and Section 372A of the

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Companies Act, 1956. This Section also provides the procedure for acquiring the shares of dissenting members. (iii) Amalgamation of Companies in National Interest (Section 396) Where the Central Government is satisfied that an amalgamation of two or more companies is essential in the public interest, then the Government may, by an order notified in the Official Gazette, provide for the amalgamation of those companies into a single company. The amalgamated company shall have such constitution, property, powers, rights, interest and privileges as well as such liabilities, duties and obligations as may be specified in the Governments order. (iv) Amalgamation of Companies under Section 494 Amalgamation of two companies is also possible under Section 494 of the Companies Act, where the liquidator of a company transfers its assets and liabilities to another company. (v) Amalgamation for Revival and Rehabilitation The Board for Financial and Industrial Reconstruction (BIFR) can in exceptional cases order amalgamation for the revival and rehabilitation of a sick industrial company under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985.

Scope of Section 391 Section 391 deals with the rights of a company to enter into a compromise or arrangement (i) between itself and its creditors or any class of them; and (ii) between itself and its members or any class of them. The arrangement contemplated by the section includes a reorganisation of the share capital of a company by consolidation of its shares of different classes or by subdivision of its shares into shares of different classes or by both these methods. Once a compromise or arrangement comes within the ambit of the section, it may be sanctioned by the court, even if it involves certain acts for which a particular procedure is specified in other sections of the Act e.g., reduction of share capital of a company may form part of a compromise or arrangement and when the court sanctions the compromise or arrangement as a whole, reduction of share capital is also sanctioned and the company is not required to follow the procedure laid down in Section 100 of the Act. The court can refuse to sanction a scheme of merger or amalgamation or reconstruction if it is satisfied that the
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scheme involves any fraud or illegality. Once the reduction of share capital of a company is a part of a compromise or arrangement, the requirements of the Companies Act as regards reduction of share capital are not applicable because the court is empowered to sanction reduction of share capital as a part of the compromise or arrangement. The section also applies to compromise or a management entered into by companies under winding up. Therefore, an arrangement under this section can take a company out of winding up. Once a compromise or arrangement under this section is approved by statutory majority, it binds the dissenting minority, the company and also the liquidator, if the company is in the process of winding up.

Authority to amalgamate: The power to amalgamate may flow from the memorandum of association or it may be acquired by resorting to the Section 17 of the Companies Act which indicates that a company, which desires to amalgamate with another company, will take necessary steps to come before a company for alteration of its memorandum in aid of such amalgamation. The amalgamation is the right given by the statute and its validity does not depend upon the constitution of the company. Hence the absence of power to amalgamate in memorandum of association does not invalidate the scheme of amalgamation and court is empowered to sanction a scheme of amalgamation even though no application under section 17 for alteration of abject clause has been filed.5 B.N. Srikrishna J., Bombay High Court held that merely because there is absence of power to amalgamate in the objects clause of the memorandum of association of the transferee company, sanction of a scheme of amalgamation could be refused.6 Once again, the Calcutta High Court in Eita (I) Ltd.7 has held that the power to amalgamate is a statutory power and this power may be exercised notwithstanding the fact that the memorandum of association of the company does not contain express power to amalgamate with another company. The company should have the power to amalgamate. In case such power is not defined in
5 6

Associated hotels of India ltd. (1968)2 comp. L.J. 292 (cal.). Sir Mathuradas Vissanji Foundation, In re, (1996) 1 Comp LJ 530 (Bom); see also, A. Lakshmanaswami Mudaliar (Dr.) v. LIC, AIR 1963 SC 1185. 7 (1996) 4 CLJ 346; see also, Highland Electro Appliances (P) Ltd., In re , (2003) 42 SCL 516 (Del); Hindhivac (P) Ltd., In re, (2006) 71 SCL 423 (Ker); RBR Knit Process (P) Ltd., In re, (2007) 138 Comp Cas 176 : (2008) 82 SCL 147 (Mad.).

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memorandum, in articles of association of the companies, the same should be amended. The Calcutta High Court in Marybong and Kyel Tea State Ltd. and in Re: Hari Krishna Lohia v. Hoolungooree Tea Co. Ltd.8, held that Section 394 gives jurisdiction to the Court to sanction and arrangement even though there may be no power in its memorandum and the Court is empowered to sanction a scheme of amalgamation without specific powers in memorandum of both the companies and without an application under Section 17 of the Act for alteration of the objects clauses. In earlier decision in Hari Krishna Lohiya v. Hoolungooree Tea Co. Ltd.9, the Calcutta High Court had also taken a view that even if there is no express power in the memorandum of a company to amalgamate with another company, by virtue of statutory power under Section 391 of the Companies Act, 1956 a court can always sanction a scheme of amalgamation if the statutory requirements are complied with. Similarly, in Feedback Reach Consultancy (P) Ltd.10, the Delhi High Court expressed that there is no need to have in the memorandum a clause empowering a company to amalgamate with another company, and held: It is quite clear that the powers under Sections 391 to 394 are not circumscribed or predicted on the applicant company possessing powers under its objects clause to amalgamate with any other company. The memorandum of association of most of the companies contain provisions in their objects clause, authorising amalgamation, merger, absorption, take-over and other similar strategies of corporate restructuring. If the memorandum of a company does not have such a provision in its objects clause, the company should alter the objects clause, for which the company is required to hold a general meeting of its shareholders, pass a special resolution under Section 17 of the Companies Act, 1956 and file e-Form No. 23 along with a certified copy of the special resolution along with copy of explanatory statement under Section 173 and Memorandum of Association & Articles of Association and a copy of agreement with the concerned Registrar of Companies and the prescribed filing fee. The e-form should be digitally signed by Managing Director or Director or Manager or Secretary of the company duly authorized by the Board of Directors. The e-form should also be certified by chartered accountant or cost accountant or company secretary (in whole time practice) by digitally
8

In re, (1970) 40 Comp Cas 458 (Cal); Marybong and Kyel Tea Estates Ltd., In re , (1977) 47 Comp Cas 802; United Bank of India Ltd. v. United India Credit & Development Co. Ltd ., (1977) 47 Comp Cas 689. 9 Id. 10 (2003) 52 CLA 260 (Del).

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signing the e-form. Alteration should be registered by the Registrar of companies and only on such registration the alteration will become effective. No confirmation by the Company Law Board or by any outside agency is now required. The compromise or arrangement should be within the powers of the company and not ultra vires. If it is beyond the companys objects or power, the court will have no jurisdiction to sanction it.11 There are two different opinions expressed by various courts on a simple query that whether the court can sanction an amalgamation when the Memorandum of Association of the company does not contain powers to amalgamate. It has been held by certain courts that there is no necessity to have special power in the objects clause of the memorandum of association of a company for its amalgamation with another company as to amalgamate with another company, is a power of the company and not an object of the company. The Karnataka High Court in Hindhivac (P) Ltd.12, the High Court had sanctioned the scheme of amalgamation taking note of the fact that the shareholders of both the companies had unanimously approved the scheme. The Court held that Section 17 is an aid to company seeking amalgamation, reconstruction etc. Therefore, there would be no impediment on the scheme of amalgamation even if there is no provision in the objects clause of Memorandum of Association as to amalgamate with another company. In Marybong & Kyel Tea Estates Ltd.13, a previous decision in Hari Krishan Lohia v. Hoolungoree Tea Company14, was followed and it was asserted that where there is a statutory provision dealing with the amalgamation of companies, no special power in the objects clause of memorandum of association of a company is necessary for its amalgamating with another company. It is submitted that to amalgamate with another company is a power of the company and not an object of the company. Amalgamation may be effected by order of the court under Sections 391 and 394. Also in PMP Auto Industries Ltd., S.S. Mirando Ltd. and Morarjee Goculdas Spg & Wig Co. Ltd.15, it has been held that not only is Section 391 a complete code (as is the view of various High Courts), it is intended to be in the nature of single window clearance system to ensure that the parties are not put to avoidable, unnecessary and cumbersome procedure of making repeated applications to the court for various other alterations or changes which might be needed effectively to implement the sanctioned scheme whose overall fairness and feasibility has been judged by the court under Section 394.
11 12

Oceanic Steam Navigation Co., Re, (1939) Com Cases 229: (1938) 3 All ER 740 (Ch.D). In re (CP No.15 and 16 of 2005), (206) 62 CC 58. 13 Re (1977) 47 Com Cases 802. 14 (1970) 40 Com Cases 458: AIR 1969 Cal 312 (DB). 15 (1994) Com Cases 289 (Bom).

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CONCLUSION
Corporate restructuring has become a major force in the financial and economic environment. In the context of liberalization and globalization of the economy, restructuring is the latest buzzword in corporate circles. Companies are competing with one another for excellence and competitive edge, experimenting with various tools and ideas. The change of environment at the national and international level has brought about a radical change in the way business is conducted and restructuring has become a continual process for most corporate sectors in order to sustain and expand the business. Corporate restructuring is generally understood as a technique to restructure the assets and liabilities of a corporate entity, including its debt-equity structure, to promote its overall efficiency and growth. The restructuring can be for facing domestic and global competition, identification and exploitation of core competencies, technological competitiveness leading to quality improvement and cost effectiveness, innovative financial strategies and capital restructuring. One can conclude stating that, corporate restructuring has a major role in creating value and hence companies engage in constant endeavour to undertake restructuring exercise in some form or other that will add to their value. It has become one of the techniques to corporate entity to reorganise their business structure in the competitive global business environment.

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BIBLIOGRAPHY
Books: 1. A.K. Majumdar and Dr, G.K. Kapoor, Company law, (12th ed., Taxmann Allied Service s Ltd. 2009). 2. 3. 4. 5. Avtar Singh, Company law, (15th ed., Eastern Book Company, 2007). Dr. N. V. Paranjape, Company law, (4th ed., Central Law Agency, 2009) Dr. G.K. Kapoor, Corporate Laws, (1st ed., Taxmann Allied Service s Ltd., 2009). A Ramaiya, Guide to the Companies Act, (16th ed., Lexis Nexis, Butterworths Wadhwa Nagpur, 2008.) 6. 7. 8. 9. Sebi Manual, 2nd Vol., (13th ed. Taxmann Allied Service s Ltd., 2009). Corporate Laws, (19th ed., Taxmann Allied Service s Ltd., 2009). Companies Act, 2nd Vol., (23rd ed. Taxmann Allied Service s Ltd., 2009). Stephen M Bainbridge , Corporate Law, (Foundation Press).

11. Kenneth S Ferber, Corporation Law, (1st ed., Prentice Hall , 2001). 12. Garg K C, Chawla R C and Gupta Vijay, Company Law, (18th ed., Kalyani, 2008). 13. Mohanta Babita, Company Law, (1st ed. 2006 Rept., Kalyani, 2008).

Websites Surfed: 1. www.google.com 2. www.bloggernewsnetwork.com 3. www.wikipedia.com 4. www.Yahoosearch.com 5. www.supremecourtjudgments.com 6. www.timesofindia.com 7. www.legalserviceindia.com.

8. www.indlaw.com

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