Power to Amalgamate: Whether necessary in the Memorandum of Association?

Power to Amalgamate: Whether necessary in the Memorandum of Association?
A moot point for consideration is, whether or not, the two or more companies under a scheme of reconstruction or arrangement should have power in their Memorandum to go for reconstruction or amalgamation. According to a decision of the English Court-Oceanic Steam Navigation Co. Ltd., In re [1938]3 All ER 740, the Court has no jurisdiction to sanction a scheme of amalgamation if it is ultra vires the Memorandum of Association. The Calcutta High Court does not, however, agree that the Court is
.powerless to sanction an arrangement where the company does not have power as per its objects clause to have jurisdiction for amalgamation-Harikrishan Lohia Vs. Hoolungooree Tea Co., In re [1970]40 Compo Cas. 458; Marybong & Kyel Tea Estates Ltd., In re [1977] 47 Compo Cas 802 and United Bank of India Ltd. Vs. United India Credit & Development Co. Ltd. [1977] 47 Compo Cas. 689. Similar view was expressed by the Bombay High Court also in Sir Mathrudas Vesanji Foundation, In re [1992]8 CLA 170. These views of the Calcutta High Court proceed on the basis that a power which is conferred by the statute itself need not be a derivative of the objects clause of the Memorandum. Moreover, to amalgamate, with another company, is an inherent power of the company and need not be the object of the company.
Effect of Amalgamation
The true effect of and character of amalgamation largely depends on the scheme of merger. But, when two companies amalgamate and merge into one, the transferor company loses entity as it ceases to have its business. However, their respective rights and liabilities are determined under the scheme of amalgamation but corp
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r ." 'ty of the transferor company ceases to exist with effect from the date the amal." '" is made effective-Saraswati Industrial Syndicate Ltd. Vs. CIT [1991] 70 Comp '. . .:' sq.
Duties of the Court with Respect to ReconstructionIAmalgamati0',J,
The duties of the Court with respect to a scheme of reconstruction/ am.
1. To see that the Scheme is Reasonable and Fair. For this purpose, it is not enough to show that the members of the company had unanimously agreed to the schemeCarron T. Co. Ltd., In re [1966]2 Compo LJ 278 (Cal.).
"Amalgamation should not only be beneficial to the companies, but should also be in the interests of the creditors and members of both the transferor and transferee companies and should also be in public interest-Shankaranaryana Hotels (P.) Ltd. Vs. Official Liquidator [1992] 74 Compo Cas. 290 (Kar.).
2. To Ascertain the Wishes of the Members. It is the duty of the Court to ascertain the wishes of the members by directing the calling of an extraordinary general meeting under Section 391. This procedure cannot be dispensed with even if the shareholders have already unanimously approved the merger at an ordinary meeting-Southern Automotive Corporation (E) Ltd. In re [1960] 30 Compo Cas 119 (Mad.).
3. To See that the Scheme is Designed to Overcome Difficulties and Reestablish the Business. The object of amalgamation or reconstruction is to enable companies to come out of difficulties and to reestablish their business-Pioneer Dyeing House Ltd. V s. Dr. Shankar Vishnu Marathe [1967] 37 Compo Cas. 546 (Bom.). In this case, the Court rejected a scheme filed by the creditors without understanding its implications. It also