Research › Search › Judgment

Calcutta High Court · body

2007 DIGILAW 494 (CAL)

AREVA T AND D INDIA LIMITED v. STATE

2007-07-05

SANJIB BANERJEE

body2007
( 1 ) TWO issues of some importance arise in this the proposed transferee company's petition for sanction of a scheme of amalgamation. The registered offices of the transferor companies are situated in other states and the proposed transferor companies have applied for approval of the scheme from the appropriate High Courts. ( 2 ) THE first issue is as to whether the authorised capital of a transferor company merges into the authorised capital of the transferee company upon the scheme being sanctioned and implemented, along with the rights relating thereto. There are two aspects to such matter the first, whether following a scheme of amalgamation or complete merger the authorised capital of the transferor company gets added on to the authorised capital of the transferee company so that the post-amalgamation authorised capital of the transferee company swells by the amount of the authorised capital of the transferor company ; secondly, whether following such increase of the authorised capital of the transferee company, if permissible, the transferee company is not obliged to pay the additional fee for the increase in its authorised capital in terms of Schedule X to the Companies Act, 1956. ( 3 ) THE other issue is as to the treatment of the difference between the amount recorded as the additional share capital issued by the transferee company to the shareholders of the transferor companies in terms of the scheme and the amount of share capital of the transferor companies received by the transferee company in lieu whereof the additional shares of the transferee company are issued. ( 4 ) THE first limb of the principal issue in these proceedings, is, in effect, an issue as to the form, but this has a bearing on the second part of the issue. If by virtue of a scheme of amalgamation, all assets and liabilities of a transferor company merges into and vests in the transferee company and if the right to the unissued authorised capital is a property, the corollary may follow: the right accrued to a transferor company as to its authorised share capital upon payment of requisite fees therefor should also merge into and vest in the transferee company without the transferee company being required to pay additional fees for the consequential increase. ( 5 ) AUTHORITIES that rule the field, some as appealing in vintage as in flavour, have been placed by the petitioner to assert that the Act recognises the en masse journey of all properties and liabilities from a transferor company to the transferee following a scheme of amalgamation, such that there is only an imaginary existence of the transferor company thereafter. ( 6 ) COUNSEL for the petitioner has begun from the very beginning. The sixth and seventh editions of Black's Law Dictionary have been placed as to the definition of authorised share capital and the meaning thereof. Authorised capital or nominal capital is such value of shares that a company is authorised by its association documents to issue (Black's, 7th Ed. , page-200 ). Such definition in the later edition is not much at variance with the one found in the earlier edition of the book : "authorised stock.-That amount of stock which the corporate character permits the corporation to issue. The shares described in the articles of incorporation which a corporation may issue. Modern corporate practice recognises authorisation of more shares than it is currently planned to issue. " (Black's, 6th Ed. , page 1416) ( 7 ) AUTHORISED or nominal capital is defined in the following words in words and Phrases Legally defined (3rd Ed. , Volume 1, page-219): "nominal capital the word 'capital', as used in the Companies Act, 1948 [repealed; see now the Companies Act, 1985] and the statutes which it replaces, always means share capital in contradistinction to borrowed money, which is sometimes referred to as loan capital. It sometimes means the 'nominal' capital of the company, namely, that which is stated in the memorandum of association of any company, limited by shares or by guarantee with a share capital, or in the articles of an unlimited company which has a capital divided into shares, and any increase of that nominal capital which has been made in the manner required by statute. This 'nominal' capital does not at the outset, or necessarily at any time, represent money in the coffers of the company, or assets of any kind, but the amount of nominal capital at any given time limits the power of the company to limit shares. [7 Halsbury's Laws (4th edn) para 135]. This 'nominal' capital does not at the outset, or necessarily at any time, represent money in the coffers of the company, or assets of any kind, but the amount of nominal capital at any given time limits the power of the company to limit shares. [7 Halsbury's Laws (4th edn) para 135]. " ( 8 ) EVEN without the benefit of the definition of authorised capital as is now understood in the shores where such corporate principles originated, it is elementary that authorised capital does not represent any capital at all, hut sets a limits that the! paid up capital of a company may touch at any given point of time. There is no embargo on a company started with a small number of shares of small value having an ambitious figure for its authorised capital. Authorised capital is, as the first word of the expression implies, the authority given by the subscribers or shareholders to the concerned company as to the upper limit, at any point of time, to which the paid up capital may tend or even reach. It is notional in nature and does not reflect any money in the till of the company or any corporeal asset that it must relate or answer to. The worth of a company is not decided by its authorised capital, its paid up capital may reflect upon it. ( 9 ) YET Schedule X to the Act provides for a fee being based on the quantum of the authorised capital that the subscribers to the memorandum of association, or the shareholders, of a company may set as the limit that the paid up capital of the company may climb up to. ( 10 ) THE petitioner asserts that a company's right to increase its paid up capital to the limit of its authorised capital is but a property of such company. The petitioner next urges that such right that vests in a company upon it having paid the requisite fees on the basis of its authorised capital, is likewise a property that the definition found in Section 394 (4) (a) of the act recognises and is capable of being transferred to and vesting in the transferee company. Section 394 (4))a) defines "property" such as may be transferred by a transferor company to a transferee in a scheme covered by the section, thus : "394. Section 394 (4))a) defines "property" such as may be transferred by a transferor company to a transferee in a scheme covered by the section, thus : "394. Provisions for facilitating reconstruction and amalgamation of companies.-(1) Where an application is made to the Court under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Court, (a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies, and (b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a "transferor company") is to be transferred to another company (in this section referred to as the "transferee company")the Court may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters :- (i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company ; (ii) the allotment or appropriation by the transferee company of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person ; (iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company ; (iv) the dissolution, without winding up, of any transferor company ; (v) the provision to be made for any person who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement ; and (vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out : 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 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 the books and papers of the company, made a report to the Court that the affairs of the company have not be conducted in a manner prejudicial to the interests of its members or to public interest. (2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the I labilities of, the transferee company ; and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect. (3 ). . . . . . . . . (4) In this section- (a) "property" includes property, rights and powers of every description ; and "liabilities" includes duties of every description ; and (b ). . . . . . . . . . . " The petitioner suggests that the definition of property is of widest import. It is contended that the authority of and company to have its paid up capital enhanced to the limits of its authorised capital is a right which is acquired upon payment of requisite fees unden Schedule X and it is a property covered by the definition and capable of being passed on, under the scheme, to the transferee company. A scheme of merger, the petitioner submits, results in the transferor being denuded of the entirety of its properties and the same coming into the transferee. The right accused by a company upon its payment of the requisite fee for its authorised capital, it is argued, cannot evaporate and has either to remain in the transferor or travel, along with properties of other description, to the transferee. ( 11 ) IN aid of such contention and as to the treatment of the properties of a transferor company upon its amalgamation with the transferee, several decisions have been cited, not the least of them being the one reported at 40 Company Cases 819 (In re : Maneckchowk and Ahmedabad manufacturing Company Limited) which has been referred to in many later decisions involving sanction of schemes under Chapter V of Part VI of the act. In that case, a scheme of compromise and arrangement between the creditors and members of the company was being considered for sanction. The Gujarat High Court held, as Iras been recognised and accepted, that section 391 (and, the ancillary sections) formed a "complete code". In that case, a scheme of compromise and arrangement between the creditors and members of the company was being considered for sanction. The Gujarat High Court held, as Iras been recognised and accepted, that section 391 (and, the ancillary sections) formed a "complete code". If the provisions for sanction of a scheme were not a complete code and if it were intended "that various things that can be done by way of a scheme of compromise and arrangement, if they were to fall under different provisions of the Companies Act which prescribe certain procedure for doing the same and that procedure has to be gone through, it was not necessary to provide specifically that if the scheme of compromise and arrangement includes reduction of capital special procedure in respect of reduction of capital must be gone through before it could be sanctioned as part of the scheme of compromise and arrangement. " ( 12 ) THE application for sanction of a scheme, whether one of amalgamation or of compromise or reconstruction is, in effect, a combined application to obtain a single-window approval in respect of various matters that would otherwise have required multiple applications being made. A scheme of amalgamation may provide, for instance, for the alternation of the objects clause in the memorandum of association of the transferee company ; the reduction of the transferee company's paid up capital ; and the alternation of one or more of its articles, in addition to the transfer for which the imprimatur of the Count is sought. In the usual course, the transferee company would have had to apply to the Company Law Board for the addition of further objects clauses or the deletion of any existing clause ; apply to the Court under Section 100 for the reduction of its share capital and obtain approval of its shareholders separately for effecting any alteration to its articles of association. The multiple steps need not be taken if all the aforesaid three changes are proposed by way of a scheme approved by its shareholders and the sanction of the scheme by Court will suffice. ( 13 ) IN the Maneckchowk case, it was held that Rule 85 of the companies (Court) Rules (which, incidentally, were framed with the approval of the Supreme Court) recognises the authority to sanction a scheme to include the authority to also sanction reduction of share capital. ( 13 ) IN the Maneckchowk case, it was held that Rule 85 of the companies (Court) Rules (which, incidentally, were framed with the approval of the Supreme Court) recognises the authority to sanction a scheme to include the authority to also sanction reduction of share capital. If the scheme involves such reduction, "section 391 provides a complete Code of putting through a scheme of compromise and arrangement which may even include reorganisation of share capital". In discussing the wide powers conferred at the time of considering sanction of a scheme, the Maneckchowk case continued : "the nature of compromise that can he entered into under Section 391 is not defined. The definition of reorganization of capital is an inclusive definition which would not exclude reduction of share capital or increase of share capital which would also be a kind of reorganization of the share capital of a company. If Section 391 was subject to other provisions; of the Act every time the scheme of compromise and arrangement is put forth for the sanction of the Court, if it includes things for which specific provisions are made and that will have to be gone through before the scheme is sanctioned, it would result in unnecessary duplication of procedure and would be cumbersome. On the contrary, it appears that if the creditors and members of the company arrive at a certain compromise which the court considers fair, it can be sanctioned under Section 391 despite the fact that for some of those things included in the compromise another procedure is prescribed in the Companies Act and which has not been carried out. It, therefore, appears that Section 391 is a complete code which provides, for sanctioning of the scheme of compromise and arrangement. If such a scheme of compromise and arrangement includes increase of share capital, it can be done as a part of the reorganization of the share capital, which would be part of the arrangement that would be brought about between the company and its members. In case of reduction of share capital, in view of rule 85, the procedure prescribed under Section 100 and onwards will have to be gone through. In case of reduction of share capital, in view of rule 85, the procedure prescribed under Section 100 and onwards will have to be gone through. Looking at the matter from a slightly different angle, it appears that Section 391 is a special provision for sanction of a scheme of reconstruction of companies, of amalgamation of companies and for a scheme of compromise and arrangement. The scheme of compromise and arrangement, or for that matter even the scheme of amalgamation, of two companies, may envisage reorganisation of share capital of one or the other company. The companies Act no doubt makes provision for reduction of share capital simpliciter, increase of share capital simpliciter, or fresh issue of capital simpliciter without its beiing part of any scheme of compromise and arrangement. The scheme of compromise and arrangement can be brought about only between the company which is liable to be wound up under the Companies Act and its members or creditors. The special provision contained in Section 391, namely, sanction of the scheme of compromise and arrangement would in my opinion exclude general provisions for reduction of share capital or for issue of fresh capital. It is well settled that a special provision should be given effect to the extent of its scope, leaving the general provision to control cases where the special provision does not apply : vide south India Corporation (P) Ltd, v. Secretary Board of Revenue (AIR 1963 SC 207) and C. Rajagopalachari v. Corporation of Madras ( AIR 1964 SC 1172 ). Therefore, it appears that the provisions contained in Section 391 is a complete code. As a necessary corollary, if the scheme of compromise and arrangement includes reorganization of share capital except reduction of-share capital, it can be sanctioned as a part of the scheme of compromise and arrangement. In the case of reduction of share capital as part of the scheme of compromise and arrangement, Rule 85 will have to be given full effect. The scheme has been approved by a statutory majority as will be presently pointed out and if the scheme is to be sanctioned as part of such a scheme, reorganization of the share capital except the reduction of share capital can be sanctioned. It will, of course, be necessary to find out whether the procedure prescribed for effecting reduction of share capital has been gone through or not. It will, of course, be necessary to find out whether the procedure prescribed for effecting reduction of share capital has been gone through or not. " ( 14 ) IN the case of amalgamation, as the petitioner rightly suggests, there is complete transfer of all the property of the transferor to the transferee and a vesting thereof in the transferee. The process is well-picturised in the judgment reported at 53 Company Cases 926 (Telesound India Ltd. , in re.) : "amalgamation of a company with another or an amalgamation of two companies to form a third is brought about by two parallel schemes of arrangements entered into between one company and its members and the other company and its members and the two separate arrangements bind all the members of the companies and the companies when sanctioned by the Court. Amalgamation is, therefore, an absorption of one company into another or merger of both to form a third, which is not a mere act of the two companies or their members but is brought about by virtue of a statutory instrument and to that extent has statutory genesis and character, and to that extent it is distinguishable from a mere bilateral arrangement to merge or join in a common endeavour, an undertaking or enterprise J. K. (Bombay)P. Ltd. v. New Kaiser-in-Hind Spg. and Wvg. Co. Ltd. (1970)40 Comp cas 689 (SC ). Once the Court sanctions the amalgamation, the amalgamation is made effective and binding by virtue of statutory power, inter alia, by the transferor to the transferee company of the whole or any part of the undertaking, property rights and liabilities of the transferor-company by virtue of the provisions of Section 394 of the Act, which are intended ho facilitate the process of amalgamation ; sailendra Kumar Ray v. Bank of Calcutta Ltd. (1948)18 Comp cases 1 (Cal ). The expression "property" and "liabilities", which can be transferred on amalgamation, under Section 394 (1) have been defined in very wide terms by sub-section (4) (a) of that section, so as to include "nights and powers of every description" and "duties of every description" respectively. The expression "property" would, therefore, be wide enough to include rights under a contract, including a contract of tenancy. The expression "property" would, therefore, be wide enough to include rights under a contract, including a contract of tenancy. These are co-extensive with the property and right which the transferor-company has in relation to its assets, but could not be wider than what the transferor-company was entitled to enjoy. The rights, property, as indeed the liabilities of the transferor company, become the rights, property and liabilities of the transferee-company by virtue of the order of vesting made by the Court consequent on amalgamation. It is neither an assignment of right or property, nor an assignment of property by the company. It is the transfer of rights, property and liabilities along with the company itself and it is only as a result of confusion of thought that it could be described as an assignment by the company to another person, which is independent and distinct from the company. Such a notion ignores the peculiar position of amalgamation in company law and its true legal incident. It is for historical reasons that the device of amalgamation was built into the company law for facilitating the merger of companies, inter alia, with a view to help restoration of sick units to health, better, more effective and economical management of the corporate sector to ensure continued production, increased employment avenues and generation of revenue's. Section 72a of the I. T. Act is one of the incentives for this kind of absorption of one company into another. On amalgamation the transferor-company merges into the transferee-company shedding its corporate shell, but for all purposes remaining alive and thriving as part of the larger whole. In that sense the transferor-company does not die either on amalgamation or on dissolution without winding-up under subsection (1)of Section 394. It is not wound up because it has merged into another. Winding-up is unnecessary. It is dissolved not because it has died, or ceased to exist, but because for all practical purposes, it has merged into another forming part of one corporate shell. The dissolution is the death of its independent corporate shell, because a company cannot have two shells. It is, therefore, dissolved because, the independent shall or corporate name is superfluous. The company in its essence means its members, who compose it, the assets, property and rights that it had, its liabilities, its undertaking, business or other activity. It is not synonymous with the shell or name. It is, therefore, dissolved because, the independent shall or corporate name is superfluous. The company in its essence means its members, who compose it, the assets, property and rights that it had, its liabilities, its undertaking, business or other activity. It is not synonymous with the shell or name. On amalgamation and consequential dissolution all these attributes continue to live as part of a larger entity. The only part that dies is the shell and the name. It is unlike the death of a natural person and yet in a larger and deeper sense the same. It is unlike it, because a natural person, as ordinarily understood, does not survive the death in any physical form. The transferor-company, however, does survive, in that there is a continuity even after dissolution of its members, its assets, undertaking, etc. The estate of a natural person continues in the hands of the successor for a limited period. In a larger and a deeper sense even a natural person survives his physical death in the continuation of a being, which is supposed to merge in the wider cosmic whole. That, however, is an area of study of life after death, or what is sometimes described as life after life, where the process is of a different dimension and defies description and is, in any event, too deep and wide for the rrarrow compass of this judgment. The analogy, therefore, between the death of a natural person and dissolution without winding-up is inappropriate. " ( 15 ) THE next judgments cited by the petitioner, reported at 80 company Cases 289 (PMP Auto Industries Ltd. , In re :) and 89 Company cases 754 (Rangkala Investments Ltd. , In re :) also recognise that the provisions found in Sections 391 to 394 of the Act constitute a complete code and such provisions obviate additional applications being made for amending the objects clause of the memorandum of association of the transferee company. Indeed, the Court receiving a petition for sanction of a scheme becomes, at the same time, the window that can receive an application for reduction of share capital, the window that can entertain a plea for amendment of the memorandum of association of one or more of the companies involved, and the authority to accord sanction to the scheme, all rolled into one. Courts have repeatedly frowned upon suggestions by objectors for duplication of procedure. Courts have repeatedly frowned upon suggestions by objectors for duplication of procedure. Though it is accepted that the provisions in the Act relating to divers approvals need to be complied with, but as to whether they have been complied with, need be tested only at the one window at which approval of the scheme is sought. There is good reason for recognition of such single-window clearance. It is the Court sanctioning the scheme that has to sanction every bit of it and a part of it may involve alteration of the memorandum of association of one or more of the companies involved or the reduction of share capital of one more of the applicants. The statutory prerequisites of alteration of memorandum and of reduction of share capital must necessarily be complied with for the scheme to be made fit for sanction. It would be unnecessary for two sets of proceedings to be instituted for approval of the same scheme being facilitated as the court that may approve the scheme can also conveniently enquire as to whether other provisions, whether for alteration of memorandum or reduction of capital or any other matter, have been complied with. ( 16 ) BUT that is not what is in issue in these proceedings. If the Act were to require that a fee would be payable for the alteration of the memorandum of association of a company, the fact that a scheme involved such alteration and that the statutory pre-conditions therefor were met, would not relieve the company seeking such alteration from its liability to pay the fee. The sanctioning Court's right to receive requests that would otherwise have been directed under different provisions of the Act, would not result in the company's obligation to pay fees, if applicable, being obliterated. The answer to this issue may be found more in Schedule X to the Act than in chapter V of Part VI of the Act. IK is irrelevant whether such fee, as the one payable for increase in authorised capital, is regulatory or compensatory ; it is enough that a fee is recognised to be payable upon increase of the authorised capital of a company. IK is irrelevant whether such fee, as the one payable for increase in authorised capital, is regulatory or compensatory ; it is enough that a fee is recognised to be payable upon increase of the authorised capital of a company. ( 17 ) COUNSEL for the petitioner argues that if the abstract right under a licence enjoyed by a transferccr company can become the property of the transferee company upon the transferor's merger, there should be no difficulty in the right to increase the authorised capital of the transferor company and the fee paid in that regard being vested in the transferee company upon amalgamation, for the transferee company to enjoy the benefit of such fee already paid. Though such analogy appears attractive, there are some other factors that differentiate the two situations. Licence, however personal it may be to the grantee, is a more tangible right that the notion that authorised capital denotes and the right that accrues to a company to increase its paid up capital to its authorised capital upon deposit of the requisite fee for the authorised limit. ( 18 ) RIGHTS under a licence arrd rights of similar nature are some what capable of being assessed in value. Similar rights as copyright, trademark and patent certainly standl transferred upon merger and vest in the transferee company. However abstract such rights, the goodwill relating thereto can be assessed by accountants and there are measures therefor. The right to increase the paid up capital of a company to a part or the outer limit of its authorised capital, cannot be assessed and there is no need to assess it. Such right cannot be equated to the quantum of the fee paid in that regard by a company, and, in any event, payment of fees, is a different matter altogether. The goodwill in a registered trademark is not weighed by the quantum of the fixed fee paid by the trader. The goodwill in an unregistered mark is not diluted only by the owner not having had the mark registered or on not paying the registration fee. ( 19 ) THERE are certain things that do not move upon merger of a company with another and the ipso facto transfer thereupon of all the properties and liabilities of the transferor to the transferee. For one, the name of the transferor is left behind ). ( 19 ) THERE are certain things that do not move upon merger of a company with another and the ipso facto transfer thereupon of all the properties and liabilities of the transferor to the transferee. For one, the name of the transferor is left behind ). After all, the transferee cannot have two names. The name, and the goodwill in it, of the transferor company is left with the shell, to borrow the Telesound expression, that remains to be pronounced dead upon the dissolution of the transferor company without winding up. For another, the memorandum and articles of the transferor company or the rights of the transferor company qua the members thereunder and the corresponding rights of the members of the transferor company inter se, do not vest in the transferee company. The memorandum and articles of association of the transferor company are abandoned and attach, meaninglessly, with the same shell that remains and is ultimately declared dead. The articles of a transferor company may give it certain rights as regards procedure in dealing with certain matters that the companies Act leaves a company free to choose. The articles may give special rights to all or a class of shareholders qua the company or qua other members. Such rights are not carried over by the group of shareholders of a transferor company once such shareholders become members of the transferee company, nor can the additional rights that they had there to before enjoyed under the articles oil the transferor company, be carried forward. Such matters again attach to the useless shell that is left behind. ( 20 ) EVERY company is required to pay a fee for its registration and such fee gives a right to the company or its shareholders through the company to carry on business. Upon the merger of a company with another, the registration fee paid by the transferor company, and the rights corresponding thereto, are not carried forward to the transferee company. The transferee company had already paid a fee upon its registration and such fee would permit it to continue its business, receive assets under any scheme from another company or give up assets under any scheme to another company. The registration fee paid by the transferor company is lost to the transferor company upon the merger of its properties with another. The registration fee paid by the transferor company is lost to the transferor company upon the merger of its properties with another. There is no reason why the fee paid tor the authorised capital of a transferor company should not be similarly lost. Conceptually, there is nothing that requires the fee paid for the authorised limit of capital to be treated on a higher pedestal than the fee paid toy a company for its registration. If the one can be lost upon merger and dissolution, so can the other. ( 21 ) THIS leads to the consideration of the other aspect, a thought that appears to have been sown in the Maneckchowk and Telesound decisions and which has found mention in the later judgments cited on behalf of the petitioner. Does the authorised capital of the transferor company merge with and into the authorised capital of the transferee company ? ( 22 ) IT must be understood that authorised capital, notional as it is, is an imaginary capital, the right relating to it being more intangible than other intangible, but somewhat assessable, rights under any licence or on account of any intellectual property. A notional right such as this is incapable of being transferred. What has been described, in a number of decisions as a merger of authorised capitals, is, with respect, not a merger in fact. The authorised capital of a transferor company does not ipso facto vest in the authorised capital of the transferee company. True, that upon the shareholders of the transferee company approving a proposed scheme of amalgamation which provides for merger of authorised capitals, there is implicit approval that can be culled out for the authorised capital of the transferee company to stand increased by the quantum of the authorised capital of the transferor company upon merger. It is equally possible that, the shareholders of the transferee company may require the authorised capital of the transferee to be maintained. It is also conceivable that the scheme makes no mention of the merger of authorised capitals or of any increase in the authorised capital of the transferee company. It is equally possible that, the shareholders of the transferee company may require the authorised capital of the transferee to be maintained. It is also conceivable that the scheme makes no mention of the merger of authorised capitals or of any increase in the authorised capital of the transferee company. If there were to be an automatic transfer of the authorised capital of a transferor company into the authorised capital of the transferee company, the right of the shareholders of the transferee company to maintain its authorised capital at the prevailing level or to increase it by an amount which is greater or less than the combined authorised capitals of the companies involved, has to be overlooked or not recognised. A scheme of amalgamation may be completely silent as to the merger of authorised capitals or as to any change in the authorised capital of the transferee company consequent upon the merger. In such a case, the right in respect of the authorised capital of the transferor company, if it is a right at all, does not come into the transferee company and remains with the transferor company that is capable of being abandoned upon its dissolution. The matter would be different if the right were to be a more tangible right. Say, the shareholders of a transferee company do not approve of the transfer of one of the immovable properties of the transferor company in the proposed scheme of merger. The effect of that would be that there would be no merger at all, as in merger nothing is left behind in the transferor company. If, say, the share holders of the transferee company were not to approve of the vesting of the rights relating to a registered trademark or a copyright, again there would be no complete merger though the right in such intellectual property is an intangible right which may as well be abandoned by the transferor company and its dissolution may be obtained with ths goodwill in the excepted intellectual property right, going abegging. ( 23 ) WHAT is commercially known as merger of one company into another is, legally speaking, the merger of the properties and liabilities of the transferor company with the transferee company. Companies do not merge, their assets and liabilities may. The shell of the transferor company is left behind to be ultimately discarded.