Reliable Auto Ltd, is a tools and spares manufacturing company and has four wholly-owned subsidiary companies. A scheme of amalgamation was approved by the equity shareholders of the Company and its subsidiaries in their

The application by Reliable Auto Ltd to merge with itself its four subsidiaries was rejected by the Regional Director citing lack of solvency of the various companies being merged basis their submitted balance sheets. In a similar case of Asset Auto India Private Limited & 4 Ors (Petitioners) V/s. The Union of India & 3 Ors (Respondents) the Bombay High Court held that the phrase 'may' used in Section 233 (5) of the Companies Act 2023 will have to be Construed as Mandatory. The Petitioners in the decided case were companies with common Directors and Shareholders. Asset Auto India Pvt Ltd was the holding Company and the other four were wholly-owned subsidiary companies. Scheme of Amalgamation of the subsidiaries with the holding company was approved by the respective Equity Shareholders. The scheme has also been approved by ninety percent of the creditors. Asset Auto being the Transferee Company in the proposed amalgamation submitted an application for approval of scheme of amalgamation under Section 233 (2) of the Companies Act in the Form prescribed being Form No.CAA.11 as per Rule 25(4) of the of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. Relevant documents were annexed. Copy was also submitted to the Official Liquidator as well as the Registrar of Companies. The Application was rejected by the Regional Director on the grounds of lack of solvency of the companies as per the documents submitted by them. Petitioners aggrieved by the order passed by Respondent, Regional Director, appealed to the High Court. Section 233 (5) of the Companies Act, 2013 reads as under: '(5) If the Central Government after receiving the objections or suggestions or for any reason is of the opinion that such a scheme is not in public interest or in the interest of the creditors, it may file an application before the Tribunal within a period of sixty days of the receipt of the scheme under sub-section (2) stating its objections and requesting that the Tribunal may consider the scheme under section 232.' Hon'ble Bombay High Court (Division Bench) interpreted that on a conjoint reading of sub-sections (2), (3), (4) and (5), the phrase 'may' used in sub-section (5) of Section 233 of the Companies Act, 2013 will have to be construed as mandatory. Because if the Government is of the view that the scheme is not in the public interest or in the interest of the creditors then same is to be decided by the Tribunal. If the phrase 'may' in sub-section (5) is used as optional then company involved in the amalgamation scheme would be at the mercy of the Central Government if the scheme is rejected without any adjudication. It is, therefore, mandatory for the Central Government to make an application before the Tribunal and get adjudication on said issue. Therefore, going by the judgement in the aforesaid case, Reliable Auto Ltd can prefer an appeal to the High Court seeking a direction to the Regional Director to refer the scheme of amalgamation to the NCLT and get adjudication on said issue.