Case Note & Summary
The court addressed the petition at the admission stage itself, with the consent of Counsel. The petitioners, consisting of five companies with common directors and shareholders, challenged the Regional Director’s rejection of their amalgamation scheme. The court found that the Regional Director lacked the authority to reject the scheme and should have referred the matter to the National Company Law Tribunal (NCLT) if objections existed. The court quashed the impugned order and disposed of the petition.
1. Introduction
The court, with the consent of Counsel, decided to dispose of the petition at the admission stage itself.2. Rule
Rule made returnable forthwith. Respondents waive service.3. Background of Petitioners
Five petitioners are companies with common Directors and Shareholders. Petitioners 2 to 5 are wholly-owned subsidiaries of Petitioner 1. Petitioners are aggrieved by the order dated 12th November 2018, by Respondent 2, the Regional Director, rejecting their amalgamation scheme.4. Petitioners' Case
Petitioners claim that Respondent 2 illegally rejected their application under Section 233 of the Companies Act, 2013, without legal authority.5. Notices Inviting Objections/Suggestions
Petitioners invited objections/suggestions on 10th January 2018, as required under Section 233(1)(a) of the Companies Act and Rule 25(1) of the Companies Rules.6. Approval of Scheme
Equity shareholders of Petitioner 1 approved the scheme on 24th April 2018. Equity shareholders of Petitioners 2 to 5 also approved the scheme. Final draft of the scheme was prepared.7. Application Submission
Petitioner 1, as the Transferee Company, submitted an application for approval on 26th April 2018, attaching relevant documents. Additional documents were submitted on 28th September 2018.8. Impugned Order
Respondent 2 rejected the application on 12th November 2018, citing insolvency of Petitioners 2 to 5 as per the balance sheet dated 31st March 2017.9. Argument by Petitioners' Counsel
Mr. Petkar argued that Respondent 2 lacked the authority to reject the scheme and should have referred the matter to the NCLT if objections existed.10. Respondent's Stand
Mr. Vyas, representing Respondent 2, maintained that Petitioners 2 to 5 were insolvent, justifying the rejection.11. Court's Disagreement with Respondent
The court did not agree with Respondent 2's stand.12. Section 233 of the Companies Act, 2013
Detailed the provisions of Section 233, highlighting the process and requirements for amalgamation schemes.13. Compliance with Section 233
Petitioners complied with the pre-conditions of Section 233(1). The scheme was submitted as required under Section 233(2). No objections/suggestions were received from the Registrar or Official Liquidator.14. Approval by Creditors
Ninety percent of the creditors approved the scheme.15. Regional Director's Decision
The Regional Director’s order cited Rule 25(2) but failed to follow the correct procedure.16. Mandatory Application to NCLT
The court emphasized that the Central Government must refer the matter to the NCLT if objections exist.17. Declaration of Solvency
The declaration of solvency was filed. The scheme was approved as required.18. Impugned Order Quashed
The court quashed the impugned order dated 12th November 2018 due to procedural non-compliance.19. Consequences of Quashing the Order
Following the quashing of the order, the consequences under Section 233 of the Companies Act will follow.20. Petition Disposed
The petition was disposed.
Issue of Consideration: Asset Auto India Private Limited Ors. Versus The Union of India Ors.
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