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TMI Blog1979 (3) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended on behalf of the petitioners that under section 394(1), second proviso, of the Companies Act, 1956, the official liquidator is required to make a report to the court only in respect of a company which is being wound up and not in respect of a company which is a going concern, and in support of this contention, reliance was placed upon the decision of a single judge of the Calcutta High Court in Marybong & Kyel Tea Estate Ltd., In re [1977] 47 Comp. Cas. 802 (Cal.). In view of this contention, Mrs. Sujatha Manohar J. directed that the official liquidator need not make any report under section 394(1) at this stage. The matter now comes up for consideration on the limited issue as to whether no report is necessary as contended on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following matters :.................... (iv)the dissolution, without winding up, of any transferor company ;....... Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other company or companies, shall be sanctioned by the court unless the court has received a report from the Company Law Board or the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest : Provided further that no order for the dissolution of any transferor company under clause (iv) shall be made by the court unless the official liquidator has, on scrutiny of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been presented or resolution for voluntary winding up has been passed. Further, the first proviso to section 394(1) contemplates a case of a company which is being wound up and before sanctioning the scheme, the report of the Company Law Board or the Registrar is a condition precedent. This proviso relates to a stage prior to the sanctioning of the scheme by the court, whereas the second proviso to section 394(1) contemplates the stage after sanctioning but before passing an order of dissolution under section 394(1)(iv) of the Companies Act, 1956, and, in my view, the said provision only applies to the company in respect of which an official liquidator has been appointed or could be appointed under the provisions of the Companies Act by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded on a basic fallacy, namely, that the official liquidator could come in only in the case of a winding-up of a company, whereas the second proviso provides for a special duty to be performed, namely, scrutiny of the affairs of the transferor-company. The learned single judge's line of reasoning seems to be that unless an official liquidator is appointed by the court for the company, he cannot perform the assigned functions under the second proviso. According to him, in the case of a company which is a going concern and seeks to terminate its existence by dissolution under s, 394(1)(iv), asking the official liquidator to make a report would be tantamount to appointment of official liquidator by the court. I beg to differ with the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission of Inquiry. Parliament had felt about the malpractices prevalent in the process of schemes of compromise or arrangement or reconstruction and amalgamation and wanted to check the same. At the same time, it inserted section 394A by the Companies (Amendment) Act, 1965, which is in these terms : "394A. Notice to be given to Central Government for applications under sections 391 and 394.-The court shall give notice of every application made to it under section 391 or 394 to the Central Government, and shall take into consideration the representations, if any, made to it by that Government before passing any order under any of these sections." The combined reading of the first and second provisos and section 394A shows that the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws at page 642 : "It is plain from the above analysis of the two provisos that the said provisos deal with different situations, in that while the first proviso relates to the sanction of a compromise or arrangement involving a scheme of amalgamation of a company 'which is being wound up', the second relates only to an order for dissolution of a transferor-company without winding up. It is no doubt true that a single scheme of amalgamation or reconstruction in a given case may involve both types of companies, namely, those under winding up and those which are not, one or more of the latter category coming in for dissolution. In such a situation both the provisos come into operation. On the other hand, there may be cases where, as in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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