PRACTICAL PROBLEM

Jlns. (i) A scheme of compromise or arrangement may provide for amalgamation of companies under Section 394 of the Companies Act, 1956. Section 394(4)(b) defines the 'transferee' and 'transferor' companies. While the 'transferee company' does not include any company other than a company within the meaning of the Companies Act, 1956 the transferor company includes any body corporate "Yhether a company within the meaning of the Companies Act or not. Hence the scheme of amalgamation may provide for transfer of foreign companies to Indian companies.
(ii) Majority in number representing three-fourths in value of members or class of members, as the case may be, present and voting either in person or by proxy, where proxies are allowed under the rules made under Section 643 must approve the scheme or arrangement providing for amalgamation of companies [Section 391(2)]. Any member who though present at the meeting, does not vote for or against, but remains neutral, is not to be taken into consideration.
As the expression used is 'member', not only holders of equity shares but also prefereace shareholders will have to be taken into account and the value of their shares be included or, if the meeting of holders of preference shares and equity shares are
ordered by the court to be held separately, the three-fourths majority of each class will
have to be ascertained separately.
(iW The scheme may provide for the dissolution, without wD:'ding ~p, of any
The Court shall not order dIssolution of any
trans error company transferor company unless the Official Liquidator has, on scrutiny of the boo an
made a re ort to the court that the affairs of the company have
papers of the company, Pedicel to the interests of its members or to public
not been conducted m a manne~ pre)u
interest [Second proviso to Section 394(2)].
PRACTICAL PROBLEM
P. 1. ABC Co. Ltd. was amalgamated with, and merged in XYZ Co. Ltd. Some
workers of ABC Co. Ltd. refuse to join as workers of XYZ Co. Ltd. and claim
compensation for premature termination of service. XYZ Co. Ltd. resists the claim on
the ground that their services are transferred to XVZ Co. Ltd. by the order of
amalgamation and merger and, therefore, the worlLId. and cannot claim any compensation. Who will succeed-lhe worlLId or the XYZCo. LId? Give reasons. ICA (Final) Nov., 1998J
.9[n.s. An order under section 394 transfening the property, rights and liabilities of
oae company to another does oot automatkally transfer contracts of personal service,
which are in their nature, incapable of being transferred and 00 contract of service IS
thereby created between an employee of the transferor company on the oae hand and
the traru;\ree company on the other. In Nokes Vs. Doucaster Amalgamated Collieries LId
[(1940) 3 All & K 549J, the House of Lords categorically stated that workers are not
furniture and their services cannot be tranSferred without their consent. Therefore, the
workers of ABC Co. Ltd will succeed against XYZ Co. Ltd.