TMI Blog1983 (7) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... th. Mr. B. R. Shah, the learned advocate for the transferee-company, enumerated before us the various difficulties standing in their way. We appreciate the contention and, therefore, order that the copy of the reasons shall be made available to these three appellants as early as possible, but not later than 6th August, 1983, and the interim relief shall continue to operate only up to 31st August, 1983, but no further. A copy to be applied for urgently by those who have applied for interim relief to continue, the certified copies to be given to those appellants on the top most priority basis. On 30th July, 1983, we passed the following order : "For the reasons to be declared hereafter, we hereby dismiss all the four appeals with no order as to costs". Now, we proceed to state the reasons for dismissing these four appeals. These four appeals arise out of the decision rendered by the learned single judge (R. C. Mankad J.) in Company Petition No. 182/82, connected with Company Application No. 127/82, whereby the learned judge granted sanction to the scheme of amalgamation of the two companies, viz ., Ambalal Sarabhai Enterprises Ltd. (hereinafter referred to as "the transferee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions and articles and compounds, cements, oils, paints, pigments and varnishes, drugs, makers of and dealers in proprietary articles of all kinds of chemical, surgical, scientific and mechanical apparatus, instruments, appliances and materials. The principal business of the said company is manufacture and sale of bulk drugs, chemicals and formulations. The said company is having its registered office at Calcutta. The transferor-company holds industrial licences for manufacture of bulk antibiotics erythromycin and ampicillin and has received Government approval for expansion of its capacity for manufacture of bulk penicillin. These development schemes of the company were established to involve additional investment of Rs. 6.5 crores which the transferor-company (SPL) was unable to raise or provide for. The said company, therefore, approached the transferee-company (ASE). It is the case of these two companies that on an overall consideration of the various aspects, the directors of both the transferee-company and the transferor-company reached a decision that amalgamation of the transferor-company with the transferee-company would not only facilitate the implementation of the proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act. In response to the notice issued as aforesaid, the Central Govt. filed appearance and opposed this petition. One Nafendra Shodhan (hereinafter referred to as Mr. Shodhan) had appeared personally to oppose this petition. He also filed written objections dated December 9, 1982. Mr. Shodhan did not remain present when the petition was taken up for hearing before the learned company judge although the date of hearing was fixed in his presence. The petition was opposed by Albright Morarji Pandit Ltd., which claims to be the creditor of the transferee company. No affidavit-in-reply was filed on behalf of the said company in the said petition. The said company relied upon the, affidavit of its secretary filed in Company Petition No. 174/82, which was also filed by the transferee-company. When the petition was being heard, almost at the fag and of the hearing, the Commissioner of Income-tax, Gujarat (Central), took out judge's summons seeking leave to oppose the petition. No affidavit was filed on behalf of the Central Govt. The learned counsel, appearing for the Central Govt., contested the petition on the ground that as Part A of Chap. III of the Monopolies an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax in substance contended that the Revenue would suffer loss to the extent of Rs. 60 lakhs if the date of amalgamation was allowed to be changed from 1st July, 1981, to 1st April, 1980. The learned company judge, R. C. Mankad J., who heard these petitions, after considering the relevant provisions of the Companies Act and the Monopolies and Restrictive Trade Practices Act, and the submissions made before him, overruled the objections raised by the Central Govt., the Commissioner of Income-tax, Mr. Shodhan and Albright Morarji Pandit Ltd. and allowed the petitions holding that no ground existed to withhold sanction to the scheme of amalgamation as per the modified scheme, annexure-B. Being dissatisfied with the said order passed by the learned company judge, these four appeals have been filed. O.J. Appeal No. 12/83 is filed by the Central Govt., O.J. Appeal No. 13/83 is filed by the Commissioner of Income-tax, O.J. Appeal No. 14/ 83 is filed by Mr. Shodhan, while O.J. Appeal No. 18/83 is filed by Albright Morarji Pandit Ltd. The same contentions which were raised before the learned company judge by the learned counsel on behalf of the Central Govt., Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Govt. in fixing prices. He contended that the transferor-company had made profits in the subsequent years and that would show that, even without amalgamation, the transferor-company would have been entitled to the benefit of carry forward loss. He contended that there was no substance in the contention that this amalgamation and the change in the date were merely for the purpose of getting benefit of the carry forward loss. He contended that the main object was to utilise the licences, which were in favour of the transferor-company, and that the benefit of carry forward loss was only an incidental one. He contended that it must be borne in mind that the transferee-company was taking over assets as well as liabilities of the transferor-company and that way, carry forward loss, as provided by the I.T. Act, was only an incidental one. He contended that, on the contrary, amalgamation of the two companies was in public interest because the transferee-company, by utilising import licences, would be able to manufacture life saving drugs and thereby reduce the import of these drugs resulting in the saving of a substantial amount of foreign exchange. He contended that the transferor-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the objection raised on behalf of the Commissioner of the Income-tax is against the change in the date from which the amalgamation has to become effective and so far as the Central Govt. is concerned, the only ground on which the prayer sanctioning the scheme of amalgamation is opposed has been that the scheme of amalgamation in question falls within the purview of section 23(1) of the MRTP Act, and, as such, before the transferee-company could approach this court for obtaining sanction to the scheme, the said company ought to have made a necessary application to the Central Govt. for sanction of the scheme and prior approval of the Central Govt. to the scheme is necessary. On the other hand, the contention raised by the transferee-company in this regard is that the scheme of amalgamation in question squarely falls within the exceptions which are provided in sub-section (3) of section 23, and, as such, no prior approval of the Central Govt. to it is necessary, and it is open to this court to accord its sanction to the scheme under section 394 of the Companies Act. If the contention raised by the Central Govt. is acceptable, then the question of according sanction to the scheme unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are interconnected with each other in any of the following manner, viz . : ... ( iii )where the undertakings are owned by bodies corporate, ( a )if one manages the other, or ( b )if one is a subsidiary of the other, or ..". Section 20 of the Act provides as to which undertakings Part A applies. There is no dispute that Part A of the Act, which comprises sections 20 to 26 is applicable to the transferee-company (ASE) and transferor-company (SPL) and, hence, it is not necessary to reproduce section 20. Section 23 deals with merger, amalgamation and take-over. Sub-sections (1), (2) and (3) of section 23 and also sub-section (9) of section 23, which are relevant for our purpose, read as under: 23(1)Notwithstanding anything contained in any other law for the time being in force, ( a )no scheme of merger or amalgamation of an undertaking to which this Part applies with any other undertaking; ( b )no scheme of. merger or amalgamation of two or more under takings which would have the effect of bringing into existence an under taking to which clause ( a ) or clause ( b ) of section 20 would apply; shall be sanctioned by any court or be recognised for any purpose or be giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the exception contained in sub-section (3) of section 23, three conditions are required to . be satisfied : ( a ) that the scheme of merger or amalgamation must relate to two interconnected undertakings; ( b ) that such interconnected under takings should not be dominant undertakings; and ( c ) that these under takings should be such as produce the same goods. It is not disputed in the present case that conditions as stated above at ( a ) and ( b ) are satisfied. The question is whether the third condition is satisfied in the present case or not. So far as the third condition is concerned, there is a controversy whether the undertakings in question should produce the same goods or different goods so as to attract the provisions of sub-section 9(3) of section 23 of the Act. The learned counsel, Mr. B. R. Shah, who appeared for the Central Govt. contended before us, relying upon the decision of this court In re Kril Standard Products Pvt. Ltd. [1976] 46 Comp. Cas. 203 , that the benefit of section 23 (3) can be availed of only if the two interconnected undertakings are not producing the same goods. In the case of Kril Standard products Pvt. Ltd., one of the questions which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e substantive section would be achieved. Therefore, both from the point of view of plain grammatical meaning of the language employed in sub-section (3) as well as the object sought to be achieved by the provision contained in Part A of Chapter III, the meaning that can be assigned to the expression 'as are not dominant undertakings and as produce the same goods' would be that none of the undertakings sought to be amalgamated is a dominant undertaking, and they are not producing the same goods. In order, therefore, to attract subsection (3), three conditions which must be satisfied are that: ( i ) the scheme of amalgamation is in respect of inter-connected undertakings; ( ii ) that none of them is a dominant undertaking; and ( iii ) the undertakings sought to be amalgamated are not producing the same goods. If these three conditions are satisfied, sub-section (3) will be attracted". As pointed out by the learned author, Mr. A. M. Chakraborti, in his book MRTP, A Compendium, the rationale behind the provision contained in sub-section (3) of section 23 of the MRTP Act is that the act of merger or amalgamation of such undertakings, do not in any case add to concentration of econom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Desai J. took the view in the case of In re Kril Standard Products Pvt. Ltd. [1976] 46 Comp Cas 203 , that section 23( a ) or section 23( b ) of the MRTP Act did not apply to either of the two undertakings for the amalgamation of which the scheme was under his consideration, and, hence, the question whether the scheme of amalgamation of these two undertakings fell within the purview of section 23(3) did not arise. The learned single judge held that it was not necessary for the court to decide in that case whether the exemption carved out in sub-section (3) of section 23 was attracted in that case. We, sitting as a Division Bench, are free to take a different view from the one expressed by D. A. Desai J., even if the view expressed by D. A. Desai J. was not obiter. In view of this, we do not propose to go into the question whether the view expressed by D. A. Desai J. was obiter, though we are inclined to say that, prima facie, the learned single judge was right in saying that the observations made by D. A. Desai J. were obiter. We may mention here that leaving aside the question whether the view expressed by D.A. Desai J. can be said to be obiter or not, the said view is entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition, both the undertakings should be producing the same goods. If it is so, it is difficult to read sub-section (3) of section 23 as laying down that the two undertakings in question should not be producing the same goods. It appears to us that the provisions of sub-section (9) of section 23 of the Act, which clearly go to show that the two undertakings must be producing the same goods for claiming exemption under the said sub-section, were not brought to the notice of D. A. Desai J., and that is why, he took the view that these two undertakings should not be producing the same goods, if they wanted to claim exemption under section 23(3) of the Act. There does not appear to be any reason why the Legislature should have provided in sub-section (9) that both the undertakings must be producing the same goods, while it should have provided in sub-section (3) by using a different phraseology that the undertakings should not be producing the same goods. We feel that if this position was brought to the notice of D. A. Desai J. he would not have interpreted sub-section (3) of section 23 as laying down that the undertakings should not Be producing the same goods. The view taken by D. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to be producing the same goods as required by sub-section (3) of section 23 of the Act. The learned counsel for the Central Govt. contended before the learned company judge and also before us that even if it was held that for the purpose of claiming exemption under section 23(3) of the Act, the undertakings must be producing the same goods, then also, it could not be said in the present case that the transferee and the transferor-companies were producing the same goods and, therefore, also, they were not entitled to claim exemption under sub-section (3) of section 23 of the Act. The learned company judge, R. C. Mankad, has dealt with this aspect in detail at pages 30 to 37 of his judgment and come to the conclusion that the two undertakings can be said to be producing the same goods as contemplated by the provisions of section 23(3) of the Act. Now, there is no dispute that the transferee-company manufactures goods as enumerated in the annual report for the year 1980-81 of the transferee-company. It is clear from the said report that besides manufacture of drugs, chemicals and formulations, the transferee-company was engaged in the manufacture and sale of detergent soaps, dyestu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his view, the Division Bench disagreed with the view taken by Padmanabhan J. in Coimbatore Cotton Mills Ltd. [1980] 50 Comp. Cas. 623 (Mad.). After referring to the decision of the Bombay High Court in In re Tata Iron Steel Co. Ltd. [1975] 45 Comp. Cas. 355 (Bom.), the Division Bench of the Calcutta High Court observed that the question which arose before it did not arise before the Madras High Court. The learned company judge found himself unable to agree with the view taken by the Calcutta High Court for the reasons given by him and we are in agreement with him so far as this aspect is concerned. It is difficult to read the expression "same goods" in the manner in which it has been read by the Calcutta High Court. If the view taken by the Calcutta High Court is correct, both the undertakings, whose merger or amalgamation is sought, must produce same goods item by item and if one of the items is not the same, provisions of sub-section (3) of section 23 of the Act would not be attracted. In the present case, it is not in dispute that both the transferor and transferee-companies manufacture drugs and medicines. It is also not in dispute that so far as the transferee-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worthwhile referring to the relevant provisions of the Monopolies and Restrictive Trade Practices (Classification of Goods) Rules, 1971 Rule 2 of the said Rules lays down : " 2 (1) For the purposes of Chapter III of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969), goods shall be classified in the manner specified in the Schedule to these rules. (2) For making the classification referred to in sub-rule (1), ( i )goods falling within a group specified in the Schedule, and not falling within any sub-group or item, shall be classified as goods of one description; ( ii )where any goods falling within a group, also fall within a subgroup, goods falling within that sub-group shall be classified as goods of one description; ( iii )where goods falling within any sub-group, also fall within any item specified under that sub-group, goods falling within that item shall be classified as goods of one description". Group 313 specified in the Schedule describes drugs and medicines, and sub-groups thereunder are as under : "313.1. Analgesics, antipyretics and anaesthetics. 313.2. Antihistaminics. 313.3. Antihbiotics. 313.4. Halogenated oxy-quinolines. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me as a fait accompli and to accord sanction merely upon a casual look at it. It must still scrutinise the scheme to find out whether it is a reasonable arrangement which can by reasonable people conversant with the subject be regarded as beneficial to those who are likely to be affected by it. In the pursuit of such inquiry, the court is not tied down by any rigid principles or strait-jacket formulas and no enumeration contained in judicial decisions of the factors which can be taken into account, howsoever precise, can be treated as exhaustive so as to limit the scope of the inquiry which, having regard to varying circumstances, might differ from case to case. The burden lies on the petitioner-company to show that the scheme of amalgamation is fair, reasonable, workable and such that a man of business would reasonably approve. The court would, of course, take into account the fact that it has been approved by a big majority vote, but it would not shirk its duty to scrutinise the scheme, especially when it involves amalgamation of large companies in which many interests are at stake". Referring to the above observations made by P. D. Desai J., D. A. Desai J. observed as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some felt need, some purpose, some object and that must have some co-relation with the public interest. If the only purpose discernible behind amalgamation is defeating certain tax and prior to the amalgamation a situation is brought about by creating a paper company and transferring an asset to such company which can, without further consequence, be amalgamated with another company to whom the capital asset was to be transferred so that, on amalgamation, it can pass on to the amalgamated company, it would distinctly appear that the provision for such a scheme of amalgamation was utilised for the avowed object of defeating tax. It was observed that the court is charged with a duty, before it finally permits dissolution of the transferor-company by dissolving it without winding up, to ascertain whether its affairs have been carried on not only in a manner not prejudicial to its members but even in public interest. The expression "public interest" must take its colour and content from the context in which it is used. The context in which the expression "public interest" is used should permit the court to find out why the transferor-company came into existence, what object was sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hardly any local manufacture has been established. Manufacture of these drugs will, therefore, according to the transferee-company, result in substantial saving in foreign exchange. The expansion of penicillin is also essential as large quantities of penicillin are also required in the manufacture of semi-synthetic pencillin such as ampicillin. It is submitted that these developmental schemes of the transferor-company are estimated to involve an additional investment of about Rs. 6.5 crores which the transferor-company is unable to raise. It was in these circumstances that the transferor-company approached the transferee-company and on an overall consideration of various aspects, that the transferee-company and the transferor-company reached a decision to amalgamate the transferor-company with the transferee-company, which will not only facilitate the implementation of the projects which the transferor-company has on hand but will attain substantial growth and development of both the companies. It is submitted that since erythromycin and ampicillin which are essential drugs are not yet produced in adequate quantities in the country and, therefore, have a good market potential. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 40%. On the other hand, consequent upon the transfer of various undertakings to the transferee-company, the transferee-company came to hold 60% shares in Synbiotics. As such through Synbiotics, Squibb was having a shareholding of 30% in the transferor-company and the transferee-company was having 45%. As pointed out above, the transferor-company was holding licence for manufacture of erythromycin and ampicillin, but it did not have the funds in the estimated amount of Rs. 6 crores required for the manufacture of erythromycin and ampicillin. Squibb was not interested in these new drugs to be manufactured in India. It is stated that after two years of negotiations, Squibb was prevailed upon to agree to transfer its entire shareholding of Synbiotics in the transferor-company to the transferee-company. This understanding with Squibb as collaborator in Synbiotics was to be executed in two stages. The first stage was that the shareholding of Synbiotics in the transferor-company was to be transferred to the subsidiary of Synbiotics, viz ., Subhanpura Containers Ltd., and thereafter the shares of Subhanpura Containers Ltd. were to be transferred to the transferee-company. This arrangeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transferee-company. As stated in the further affidavit of Mr. P. N. Shah, director of the transferee-company, dated May 3, 1983, which is also not controverted, that there is substantial future for the manufacture of erythromycin and ampicillin which are two basic drugs and for which the transferor-company holds industrial licences. It is stated that demand for these products far exceeds the present supply as also the anticipated supply in the next 5 years. It is stated that the total production of ampicillin in the organised sector in the country was in the vicinity of 8.37 tons in 1979-80 which increased to 23.56 tons and 43.86 tons in 1980-81 and 1981-82. During the same period, that is, from 1979-80 to 1981-82, imports were as under : 1979-80 54.82 M.Tons. 1980-81 74.44 M.T. 1981-82 50.05 M.T. It is further stated that demand for ampicillin for the period 1982-83 onwards as reflected in the Indian Pharmaceutical Guide, 1982, published by Pamposh Publications, which is universally accepted as an authoritative guide on the pharmaceutical industry in the country, is 120 tons, leaving a gap of more than 70 tons per an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the transferee-company. Mr. S. N. Shelat, learned counsel appearing for the Commissioner, stated that the Commissioner had no objection to the scheme of amalgamation as such if it was to take effect from July 1, 1981, the date which was originally fixed. It is submitted that in the assessment year 1981-82 (accounting year 1980-81), the transferor-company had suffered loss to the extent of Rs. 98,31,454. If amalgamation takes effect from April 1, 1980, this loss suffered by the transferor-company will be treated as loss of the transferee-company and, as a result, the transferee-company would save tax to the extent of Rs. 60 lakhs. On the other hand, if the date with effect from which the amalgamation is to take effect is not allowed to be changed, in other words, if the amalgamation takes effect from July 1, 1981, then the question of carry forward of the loss of Rs. 98,32,454 would not arise since the transferor-company would cease to exist and the successor-company, namely, the transferee-company, would not be able to claim benefit of adjustment of this loss against its income. It is in the background of these facts, it is contended on behalf of the Commissioner that shifting of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1980-81 was not considered for the purpose of determining the fair market value of their shares. The transferee-company, as pointed out above, controls 76% shares of the transferor-company and, therefore, the fact that the transferor-company has suffered loss in the year 1980-81 would have been known to the transferee-company and with the services of the tax experts available to it, the transferee-company would also know that if July 1, 1981, is fixed as the date with effect from which the amalgamation is to take effect, it would not get the benefit of setting off of the aforesaid loss suffered by the transferor-company. However, in spite of this known legal position, the date of July 1, 1981, was originally fixed. It was only on account of the modifications suggested by the shareholders of the transferor-company that it was duly agreed to shift the date with effect from which the amalgamation was to become effective from July 1, 1981, to April 1, 1980. There was no oblique or ulterior motive in shifting the date. As pointed out above, the transferor-company is in existence since last many decades. It was not brought into existence with some ulterior purpose or for the purpose of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the chartered accountants dated August 2, 1982 (page 151 of the paper-book). Mr. Shodhan is right on this point. It appears that the directors had taken a decision to advance the date to April 1, 1980, prior to August 2, 1982. This shows that the amendment may have been proposed by some shareholder or shareholders at the meeting at the instance of some of the directors. But that does not necessarily indicate any oblique motive behind advancing the date. When the transferee-company is taking over liabilities along with assets of the transferor-company, there is nothing wrong if the transferee-company evolves a scheme so as to take as much advantage as possible as may be permissible according to law. We cannot infer oblique motive from this. This takes us to the question whether the exchange ratio of the shares of the transferor-company is not fair to shareholders of the transferee-company as contended by Mr. Shodhan. In this connection, it is pointed out that under the amalgamation scheme as originally framed for 100 equity shares of Rs. 10 each of the transferor-company, 14 equity shares of the transferee-company of Rs. 10 each and five redeemable bonds of Rs. 100 each carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s determined at 20.15. It was on the basis of the fair market value of the shares of the transferor-company and the transferee-company as aforesaid that the exchange ratio was worked out as already stated above. By the second report dated August 2, 1982, the valuers determined the exchange ratio on the basis that the amalgamation was to become effective from April 1, 1980. The valuers followed the same two methods, namely, break-up method and yield method, in determining the value of the shares of both the companies. On that basis, the fair market value of the equity shares of the transferor-company was worked out at Rs. 12 per equity share and that of the transferee-company at Rs. 20.15 and, on that basis, the exchange ratio of the equity shares and deferred shares of the transferor-company was worked out. While determining the value of the equity shares of the transferor-company on yield method, the valuers took into account the loss suffered by the transferor-company in the year 1980-81. Discounting factor at 60% on account of the pricing policy was taken into account for adjustments. It is pointed out on behalf of the transferee-company that if the discounting factor of 60% was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und Rs. 4.85 crores. If the date is not shifted, the transferee-company would not get the benefit of carry forward loss of more than Rs. 27 lakhs. Therefore, it has nothing to gain by adhering to the original date of July 1, 1981. Therefore, there does not seem to be any justification in the objection raised by Mr. Shodhan that shifting of the date is prejudicial to the interest of the shareholders of the transferee-company. In our opinion, the exchange ratio does not seem to be unfair or unreasonable so far as the shareholders of the transferee-company are concerned. Mr. Shodhan contended that some independent expert should be appointed for fixing the exchange ratio. As discussed above, the exchange ratio has been fixed in accordance with the recognised method of valuation which appears to be quite fair. In view of this, we do not find any substance in the contention of Mr. Shodhan that the exchange ratio is requir-ad to be refixed by appointing some other experts. Hence, we reject this contention raised by Mr. Shodhan. Mr. Shodhan contended that the statutory requirements had not been satisfied in the present case. He contended that the notice of amalgamation which was issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The notice, in the present case, which will be found at page 61 of the paper book clearly indicates the possibility of modification being proposed and approved at the proposed meeting. It is true that if law does not permit any such modification, then any such mention in the notice will not validate the resolution. But as we observed a little earlier, this was not a meeting for passing special resolution and, hence, the ratio of the decision cited by Mr. Shodhan will not apply to the present case. Mr. Shodhan then urged that the action of the shareholders at the meeting was not bona fide and it showed that they did not act properly and it also disclosed non-application of mind. He contended that the minutes of the meeting did not show that there was any discussion at the meeting and that even it appears that the resolution was taken as read. There does not appear to be any substance in this submission of Mr. Shodhan. The report of the chairman of the meeting will be found at page 50 of the paper book. It will appear from what is stated at page 52 that the executive chairman of the transferee company explained the scheme of amalgamation and outlined the salient features thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst this, there was only likely to be a saving of only Rs. 60 lakhs on account of the carry forward loss and, that way, it was not fair to the shareholders of the transferee-company. Mr. Shodhan forgets, while putting forward this contention, that the transferor-company has made profit during the subsequent years. We cannot take the loss only and that too of a short period and ignore the future profits while considering whether it was fair to the shareholders of the transferee-company or not. Mr. Shodhan also contended that the financial position of the two companies was not disclosed to the shareholders and that there was no full and frank disclosure of all the details to the shareholders and, therefore, also, the scheme should not be approved. Id this connection, we may point out that necessary details are given in the notice of the proposed meeting and the explanatory statement attached therewith. The affidavit of Mr. P. N. Shah, director of transferee-company, will be found at page 25 onwards in the paper-book. It shows that there was correspondence between Mr. Shodhan and the transferee-company before the meeting. What is stated at page 95 of the paper-book (para. 4 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the transferee-company. Now, while advancing this argument, Mr. Shodhan forgets one important factor and it is this that the formulation division belongs to one Opec Innovation Ltd., which is a wholly owned subsidiary company of the transferor-company, and on merger, the said Opec Innovation Ltd. will also become a wholly owned subsidiary company, of the transferee-company. In view of this, the benefits which would accrue to their subsidiary company would also go to the transferee-company. Mr. Shodhan urged that Opec Innovation Ltd. would remain a separate identity even though it would be a wholly owned subsidiary company of the transferee-company and that the transferee-company would have only a share in the dividends of the said Opec Innovation Ltd., and would have no other right in that company. There appears to be some substance in the contention of Mr. Shodhan. But even then the fact remains that this Opec Innovation Ltd. will be a wholly owned subsidiary company of the transferee-company. It cannot be said that Opec Innovation Ltd. is a concern which will have no connection with the transferee-company after the amalgamation. Mr. Shodhan then contended that looking to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not a relevant factor to be taken into consideration for the purpose of deciding whether or not the sanction should be accorded to the amalgamation of the transferor-company with the transferee-company. If any irregularities or illegalities are committed by the transferee-company, at or before the time it went to public, it may be open to Mr. Shodhan to take appropriate steps under law, if it is open to him to take such steps. There also does not seem to be any substance in the allegation that the scheme of amalgamation is made for the benefit of the members of the family. The discussion made above and the contents of the affidavits of Mr. P. N. Shah, a director of the transferee-company (paper-book pages 94 to 305), and that of Dr. N. A. Mehta, another director of the company (pages 306 to 315 of the paper book), clearly show that there is no substance in any of the contentions raised by Mr. Shodhan. We, therefore, reject the same finding as there is no substance in it. Albright Morarji Pandit Ltd. which claims to be a creditor of the transferee-company, has also opposed the scheme of amalgamation. The learned Advocate General, who appeared on behalf of this company, f ..... 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