Normally on a merger, it is incumbent on both the proposed amalgamating and the proposed amalgamated company to file separate petitions before their respective High Courts seeking approval to the merger, but this formality is not necessary when a 100 per cent subsidiary is merging with its parent company without involving any compromise for creditors or alteration of the capital structure.
The Gujarat High Court in Reliance Jamnagar Infrastructure Ltd, a 100 per cent subsidiary of Reliance Industries Ltd, found that the former was merging with the latter, but the merger did not involve issuance of any new shares to RIL nor was any compromise called for on the part of any shareholder or creditor of the transferor company.
Furthermore, all assets and liabilities were being transferred to RIL and the transferor company’s net worth was in the positive.
The High Court said in the circumstances there was no need to follow the rigmarole of filing a separate petition for approval of the merger by RIL before the Bombay High Court that had the jurisdiction as far as RIL was concerned.
Since no one was adversely affected, the Gujarat High Court itself had the power to dispense with the formality to be complied with RIL and bless the merger on behalf of the Bombay High Court.
(The author is a New Delhi-based chartered accountant)