UNIVERSITY OF PETROLEUM & ENERGY STUDIES, DEHRADUN

SCHOOL OF LAW

ASSIGNMENT SUBMISSION

COMPANY LAW

BY - SANJANA SETH TO ARATRIKA DEB

ROLL NO. 55 ASSISTANT PROFESSOR

SAP ID: 500070291

Q1. Analysis of proviso of section 232(3) (b) r/w section 19 and 67 of companies act, 2013?
ANS- Section 232 (3) (b) says that,as a result of the compromise or arrangement, a transferee
company shall not hold any shares in its own name or in the name of any trust, whether on its
own behalf or on behalf of any of its subsidiary or associate companies, and any such shares
shall be cancelled or extinguished;”

Subsidiary companies can no longer own stock in their holding company, according to Section
19 of the Companies Act. A subsidiary company cannot hold stock in its holding company,
according to the general rule; if it does, the holding/allotment of shares is null and void.
Diversion of shares occurs when a subsidiary corporation owns stock in the holding company.

As a result, a subsidiary company is not permitted to own stock of its holding company in order
to prevent this diversion of funds. No corporation may now provide some kind of financial
assistance to its holding company, such as a loan, a guarantee, or the purchase of shares, as per
section 67 (2).

Q2. Analysis of Public Interest viz-a-viz Section 233(5) and Section 237 of Companies Ac,
2013?

ANS- Section 233(5)- According to section 233(4), the parties participating in the merger must
notify the ROC and the Official Liquidator, who will then make recommendations or objections.
The Central Government would then receive these recommendations or complaints.

The central government would then assess whether or not it is in the public interest. The power
of the central government to arrange for the amalgamation of companies in the public interest is
discussed in Section 237. When the central government believes that merging two firms is in the
best interests of the public, it issues an order in the official gazette to that effect.

Q3. Whether transfer of assets under scheme of amalgamation amount to assignment of

leasehold interest by the transferor company.

ANS- Mergers typically involve the transfer of all of the assets and liabilities of the Transferor
Companies. Land, houses, equipment, debtors, stock, jobs, borrowers, and borrowings are all
examples of this.

The assignment of leasehold interest by the transferor corporation occurs when properties are
transferred under a scheme of amalgamation.
The assignment of leasehold interest by the transferor corporation occurs when properties are
transferred under a scheme of amalgamation. Mrs. Asha Rohtagi & Ors. v. Erstwhile New Bank
of India held that "These cases specifically hold that even if there is an order of a court
sanctioning the Scheme of Amalgamation under sections 391 and 394 of the Companies Act
where under the leases, the transferor company's rights of rent or occupancy become transformed
and become the property of the transferee company."

In the case Brooke Bond Lipton India Ltd assignment of tenancy rights is not automatic; rather, a
deed of assignment of leasehold rights must be performed because the Transferee entity (merged
company) differs from the Transferor entity.

Q4. Whether power of NCLT to sanction scheme of arrangement trespasses with commercial
wisdom?

ANS- Following English law, the provisions for schemes of compromises/arrangements were
included in the Indian Companies Act, 1913 and its predecessors, the Companies Act,
1956/2013.

The scheme of arrangement is an arrangement between a corporation and its creditors or

representatives. This agreement is now rendered by the corporation for its own good. The NCLT
has the authority to approve or disapprove the scheme of arrangement. The NCLT is in charge of
safeguarding the public interest. It may also deny it if it believes public interests are being
jeopardised. As a result, the NCLT's ability to approve scheme of arrangement trespasses on
commercial wisdom.