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CS Professional · Corporate Restructuring, Valuation and Insolvency · Process of M&A Transactions

Alpha Ltd absorbed its wholly-owned subsidiary Beta Ltd under the fast-track route. After the scheme was registered by the Central Government, Alpha's integration team asked what happens to Beta's pending court case against a supplier. What is the correct position?

The pending case continues by or against Alpha, the transferee company. Registration of a fast-track scheme transfers the transferor's legal proceedings to the transferee, and dissolution without winding-up does not cause the proceedings to abate or require fresh filing.

  1. AThe case abates because Beta stands dissolved on registration
  2. BThe case continues by or against Alpha as the transferee companyCorrect
  3. CThe case continues only if the Tribunal separately directs so
  4. DThe case must be withdrawn and a fresh case filed by Alpha

Explanation

Under section 233(9)(c), registration of the scheme means legal proceedings by or against the transferor company pending before any court continue by or against the transferee company. Dissolution under section 233(8) occurs without winding-up and does not abate proceedings. No separate Tribunal direction is required.

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