TMI Blog1983 (7) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... nterim 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-company "), with Standard Pharmaceuticals Ltd. (hereinafter referred to as " the transferor-company "), with effect from 1st April, 1980, overruling the objections raised by the Union of India, Commissioner of Income-tax, Narendra Shodhan, a shareholder of the transferee-company and Albright Morarji Pandit Co. Ltd., a creditor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icals 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 projects which the transferor-company had on hand but would attain substantial growth and development of both the companies. The board of directors of both the companies, therefore, formulated a scheme of amalgamation (hereinafter referred to as "the scheme"), which is at annexure A to the original petition. The transferee-compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a 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 and Restrictive Trade Practices Act, 1969 (hereinafter referred to as " the Act "), applied to the transferee and transferor-companies, the court could not accord its sanction to the scheme of amalgamation of the transferor-company with the transferee-company unless the same had been approved by Central Govt. as provided in s. 23 of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trictive 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 Income-tax and Albright Morarji Pandit Ltd., were raised before us also. Mr. Shodhan, who did not appear before the learned company judge at the time of hearing, appeared before us and raised several contentions in support of his objections. The learned counsel, Mr. S. N. Shelat, who appeared on behalf of the Commissioner of Income-tax in O.J. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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-company was not in a position to raise the funds for implementing the project, so as to utilise the import licences, while the transferee-company was in a position to do so and, therefore, this amalgamation was sought for and that was the main object and not any other ulterior or oblique motive as contended by the appellants. The learned counsel, Mr. B. R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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-s. (3) of s. 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 s. 394 of the Companies Act. If the contention raised by the Central Govt. is acceptable, then the question of according sanction to the scheme under s. 394 at this stage would not survive and, therefore, before dealing with the scheme on merits and objections raised by the Commissioner of Income-tax and Mr. Shodhan, it would be proper to deal with the aforesaid contention raised on behalf of the Central Govt. The only question, which arises for our consideration is whether the scheme in question falls within the exception provided in s. 23(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, hence, it is not necessary to reproduce s. 20. Section 23 deals with merger, amalgamation and take-over. Sub-sections (1), (2) and (3) of s. 23 and also sub-s. (9) of s. 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 undertakings which would have the effect of bringing into existence an undertaking 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 given effect to unless the scheme for such merger or amalgamation has been approved by the Central Government under this Act. (2) If any undertaking to which this Part applies frames a scheme of merger or amalgamation with any other undertaking, or a scheme of merger or amalgamation is proposed between two or more undertakings, and, if as %a result of such merger or amalgamation, an undertaking would come into existence to which clause (a) or clause (b) of section 20 would apply, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 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-s. (3) of s. 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 s. 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 was considered was whether the two undertakings which were sought to be merged, fell within the exception carved out by sub-s. (3) of s. 23 of the MRTP Act. As in the present case, first two conditions of sub-s. (3) were satisfied in that case also. The controversy centred round the third condition which was required to be satisfied. It is pertinent to note that it was contended on behalf of the Central Govt. in that case that the third condition which was required to be satisfied was that both the undertakings must produce the same goods, while on the other hand, it was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 sub-s. (3) of s. 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 economic power. If the two undertakings produce the same goods and are also interconnected, their combined production is taken into account to determine whether both or either of them is a dominant undertaking as defined in sub-s. 2(d) of the Act. Looking to the definition of " dominant undertaking the undertakings would become dominant undertakings, if they produce, supply, distribute or otherwise control not less than 1/3rd of the total goods of any description produced, supplied or distributed in India or any substantial part thereof. In view of this, merger or amalgamation of two interconnected undertakings, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 entitled to a great weight, though not binding on us. We are, however, inclined to say with great respect to D. A. Desai J., that we are not inclined to accept the view expressed by him so far as the interpretation of sub-s. (3) of s. 23 of the Act is concerned. We are inclined to agree with the view taken by the learned single judge on this point. The learned single judge has given cogent reasons for taking a different view. We may mention here that sub-s. (3) of s. 23 carves out an exception in respect of the scheme of merger or amalgamation, while sub-s., (9) carves out an exception in case of acquisition or purchase covered by sub-s. (4). Both sub-ss. (3) and (9) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile it should have, provided in sub-s. (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 subs. (3) of s. 23 as laying down that the undertakings should not be producing the same goods. The view taken by D. A. Desai J. in the case of In re Kril Standard Products Pvt. Ltd. [1976] 46 Comp Cas 203 (Guj), does not appear to get support from any other decision of an other High Court or even of this High Court. On the contrary, it appears that the Madras and Bombay High Courts have taken the same view, which the learned single judge, R. C. Mankad J., was inclined to take and with whom we are inclined to agree. In the case of In re Coimbatore Cotton Mills Ltd. [1980] 50 Comp Cas 623 (Mad), one of the questions which arose before Padmanabhan J. was whether the scheme of amalgamation of two companies, which was under his consideration, was exempted under sub-s. (3) of s. 23 of the MRTP Act. Padmanabhan J. disagreed with the view taken by D. A. Desai J. referred to above and held that on a plain grammatical meaning of the language employed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated 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, dyestuffs, chemicals and pharmaceutical machinery, toilet preparations and electronic goods such as computers, while the transferor-company was mainly engaged in the manufacture and sale of bulk drugs, chemicals and formulations. It was urged by the learned standing counsel for the Central Govt. that these two companies could not be said to be producing the same goods. He contended that both the companies must produce the same goods item by item and only then it can be said that they are producing the same goods so as to claim exemption as contemplated by sub-s. (3) of s. 23 of the Act. Mr. Shah relied upon a decision of the Calcutta High Court, Regional Director, Company Law Board, Eastern Region v. Hindusthan General Electrical Corporation (Appeal No. 171/82 arising out of Company Application No.274/82 and Company Petition No. 75/82, decided on September 13, 1982, [1984] 55 Comp Cas 557), a copy whereof is placed on record. The q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. 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 is concerned, it also manufactures other items. However, so far as drugs and medicines are concerned, it must be held that both the companies are manufacturing the same goods. In order to find out whether exemption under sub-s. (3) of s. 23 is available, the question which one has to ask to self is : Are the companies whose merger or amalgamation is sought producing the same goods ? If the answer to this question is in the affirmative, exemption should be available provided the other conditions laid down in the said provision are satisfied. The transferee as well as transferor-companies are producing drugs and medicines and, therefore, it must be held that they are producing the same goods. It cannot be said that they are not producing the same goods merely because in addition to these goods, the transferee company is also producing some other goods. The construction placed on the expression " same goods " by the Calcutta High Court is a very narrow construction, which is not warranted or ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: " 313.1. Analgesics, antipyretics and anaesthetics. 313.2. Antihistaminics. 313.3. Antibiotics. 313.4. Halogenated oxy-quinolines. 313.5. Immunological agents (sera, vaccines, etc.) 313.6. Other products of animal origin. 313.7. Phyto-chemicals. 313.8. Sulpha drugs. 313.9. Vitamins. 313.10. Other chemothera peutic agents. " It was not disputed that the goods to which Mr. Shah drew our attention with reference to the annual report, fell under group 313 and sub-group enumerated therein and, therefore, as provided in rule 2, the goods shall be classified as goods of the same description. In other words, the goods produced by both the transferor and transferee-companies are the same. We are, therefore, inclined to hold agreeing with the learned single judge that it is not necessary that the two companies should produce the same goods, item by item, as contended by the learned counsel for the Central Govt. We, therefore, hold that the third condition is also satisfied so as to enable the transferee as well as transferor-companies to claim exemption. This takes us to the question of consideration of the scheme on merits. But before going to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies 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 in the case of Wood Polymer Ltd., In re and Bengal Hotels P. Ltd., In re (1977] 47 Comp Cas 597 (Guj), at p. 604 : "Viewed from a slightly different angle, it would appear that power of such amplitude as is discernible from the provisions contained in section 391(2) is conferred on the court to achieve some definite purpose or object. It is more often said that sections 391 to 396 constitute a complete code and the provisions are in a way derogatory to the law of Contract. To illustrate, when compromise or arrangement is offered to a class of creditors and/or a class of members of the company, and if the offer is accepted by a statutory majority, and the court accords sanction to it, it would be binding on the dissenting minority. The result that can be achieved by the scheme can as well be achieved by compromise being offered to each member forming a class or each creditor forming a class, but in that event, it would be binding on those who become a party to the agreement and the dissenting minority would not be bound by it. When a compro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession " public interest " is used should permit the court to find out why the transferor-company came into existence, what object was sought to be achieved through creation of the transferor-company and why it is I not being dissolved by merging it with another company. That is the colour and content of the expression " public interest " as used in s. 394(1), second proviso. In the present case, we are not concerned with the second proviso to s. 394(1). However, it is not disputed that if the proposed amalgamation of two companies (transferor and transferee-companies) is not in public interest, the court has power to refuse to sanction the scheme of amalgamation. The learned counsel for the Commissioner of Income-tax drew our attention to the two decisions of the Gujarat High Court, which we have already referred to earlier, and also relied upon a decision of the Bombay High Court in In re Sakamari Steel Alloys Ltd. [1981] 51 Comp Cas 266. We have already discussed the two Gujarat decisions, which lay down that if the proposed amalgamation of two Companies is not in public interest, the court has power to refuse to accord sanction to the scheme of amalgamation. The learned ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re essential drugs are not yet produced in adequate quantities in the country and, therefore, have a good market potential. The licensed production capacity of erythromycin is 6 tons and ampicillin 5 tons per annum. It is submitted that advantages of early implementation of the projects for the manufacture of these life saving drugs are such that their exploitation would be eminently in the interest of the shareholders of both the transferee and the transferor-companies. It is further submitted that the transferee-company will also be able to manufacture and market formulations of these drugs which have a very substantial market in the country. It is in the background of these facts which are not controverted that merger of the transferor-company with the transferee-company is sought. The transferor-company is in existence since last several decades. It is not a company which has come into existence only in the recent past. The transferor-company had obtained industrial licence for the manufacture of penicillin but could not take effective steps to implement this licence up to 1960. At that point of time, one Dr. Ghosh, who was research scientist in the transferor-company, approach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., and thereafter the shares of Subhanpura Containers Ltd. were to be transferred to the transferee-company. This arrangement was worked out in agreement with the foreign equity participators, viz., Squibb, whose approval was necessary for such steps being taken as per the articles of association of Synbiotics Ltd. In accordance with this understanding, the board of directors of Synbiotics Ltd., which included the representatives of Squibb, agreed to disinvest in the transferor-company at the price of Rs. 7,80 per equity share and Rs. 0-75 per deferred share. This price was worked out on the basis of the market value of the said shares as on July 1, 1981. We mention this fact because according to the transferee-company, when the scheme of amalgamation was first framed (annexure-A), July 1, 1981, was fixed as the date with effect from which amalgamation was to come into force, because the market value of the shares of the transferor-company on that date was taken as the basis for transfer of shareholding of Squibb as aforesaid. It would appear from the facts stated above, that 76% shares of the transferor-company are controlled or owned by the transferee-company. In other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try in the country, is 120 tons, leaving a gap of more than 70 tons per annum. This would show that there is shortfall of nearly 70 tons per annum of ampicillin. The licensed capacity of the transferor-company for ampicillin is only 5 tons per annum which would indicate that there is an assured market for this product. So far as erythromycin is concerned, it is stated that the total production of erythromycin in the organised sector in the country was in the vicinity of 23.05 tons in 1979-80 which increased to 25.01 tons and 22.52 tons in 1980-81 and 1981-82. During the same period, i.e., from 1979-80 to 1981-82, imports were as under : 1979-80 5,358.5 kg. 1980-81 1,686.6 kg. 1981-82 290 kg. As against this, demand for erythromycin for the period 1982-83 onwards as reflected in the Indian Pharmaceutical Guide, 1982, published by Pamposh Publications, is 80 tons leaving a gap of more than 50 tons per annum. Thus, even today, there is shortfall of nearly 50 tons per annum of erythromycin. The licensed capacity of the transferor-company for erythromycin is only 6 tons per annum which would, therefore, indicate that there is an assured market for this product as well. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner that shifting of the date with effect from which the amalgamation is to come into force is against public interest. It is not disputed that 1980-81 (assessment year 1981-82) was the only year in which the transferor-company had suffered loss since the time it came into existence in 1931. It is submitted on behalf of the transferee-company that the loss which the transferor-company suffered in 1980-81 (assessment year 1981-82) was not Rs. 98,31,454 as alleged on behalf of the Commissioner, but was Rs. 94,77,745. It is submitted that this loss was incurred on account of the delay on the part of the Central Govt. in sanctioning remunerative prices of the drugs manufactured by the transferor-company. After the Government sanctioned the prices, the transferor-company made a profit of Rs. 32 lakhs in the course of its operation for the last 9 months of the financial year 1981-82, after set off of the loss of Rs. 41 lakhs which was made in the first three months in that very financial year. In the year 1982-83, as per the present estimate, the transferor-company is likely to make a profit of around Rs. 45 lakhs. It is therefore, submitted that even without the scheme of amalgamatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of evading tax. It is true that incidentally as a result of the shifting of the date, the transferee-company would get the advantage of setting off of the loss suffered by the transferor-company as this loss would be treated as loss of the transferee-company but that can hardly be considered to be good or sufficient ground for refusing to sanction the modified scheme (annexure-B). As held by the Supreme Court in CIT v. A. Raman Co. 1968] 67 ITR 11 (SC), avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the I.T. Act. legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may lawfully be circumvented. In our opinion, it is open to the transferor company and the transferee-company to shift the date so that the arrangement which is found to be mutually satisfactory and reasonable is evolved. In the case of Wood Polymer [1977] 47 Comp Cas 597 (Guj), the only purpose discernible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying interest at 10,5% were to be given by the transferee-company. The bonds were redeemable in three equal instalments commencing from July 1, 1983. In the same way, for 1,000 deferred shares of Re. each of the transferor-company, 14 equity shares of the transferee-company and five bonds as aforesaid were to be given by the transferee-company. A shareholder of preference shares of Rs. 100 each of the transferor-company was required to be given bonds as aforesaid. However, as a result of the modification of the scheme of amalgamation, exchange ratio is altered as follows. For 100 equity shares of the transferor-company, the transferee-company has to give 20 equity shares and 8 bonds of Rs. 100 each carrying interest at the rate of 15%. Bonds are to mature on July 1, 1987. Similarly, for 1,000 deferred shares of Re. 1 each of the transferor-company, the transferee-company has to give 20 equity shares and 8 bonds as aforesaid and for one preference share of the transferor-company, the transferee-company has to give one bond as aforesaid. It is submitted that the exchange ratio is unfair to the shareholders of the transferee-company. Now, it appears that the exchange ratio was de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not taken into account, the fair market value of the equity shares of the transferor-company would work out to Rs. 16.50 as against the value of Rs. 12 adopted by the valuers. There is nothing on record, nor is any factor pointed out, which would indicate that the determination of the fair market value of the shares of the two companies by the valuers is not proper. The value is made in accordance with the recognised methods of valuation. There is absolutely no reason to discard the fair market value determined by the valuers. In this connection, it is important to remember that 76% of the shares of the transferor-company are held or controlled by the transferee-company. Therefore, the exchange ratio would be material only so far as 24% of the shareholding of the transferor-company is concerned. As a result of the change in the exchange ratio due to shifting of date from July 1, 1981, to April 1, 1980, the transferee-company is required to pay only Rs. 8 lakhs more to the 24% shareholders of the transferor-company. As against this additional payment of Rs. 8 lakhs, it will save at least 54 lakhs in tax on account of the adjustment of the carry forward loss of the transferor com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the present case, indicated the proposed date of amalgamation as 1st July, 1981, and that date was advanced to 1st April, 1980, at the meeting, which was not according to law, and, therefore, the scheme incorporating the amendment could be (not ?) sanctioned. He relied upon a decision of the Chancery Division In re Moorgate Mercantile Holdings Ltd. [1980] 1 All ER 40; [1980] 1 WLR 227. At first sight, one may be inclined to say that this decision supports the contention raised by Mr. Shodhan. But on carefully going through this decision, it appears there is no substance in the contention raised by Mr. Shodhan. In that case, a special resolution was proposed to be passed to the effect that "the share premium account of the company amounting to pounds 1,356,900.48 be cancelled ", while at the meeting, amendment was proposed and, ultimately, a resolution was passed reducing the share premium account of the company amounting to pounds 1,356,900.48 to pounds 321.17. The court held that the requirements of s. 141(2) of the Companies Act were not complied with and the court ultimately refused to approve the action. Section 141(2) of the Act is reproduced at page 44 of the Report. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the meeting. It also reveals that the executive vice chairman and director of the transferor-company also explained the scheme of amalgamation to the shareholders present at the meeting, It also reveals that the executive vice-chairman informed the shareholders present at the meeting that the transferor-company had on 7th August, 1982, passed a resolution approving the scheme of amalgamation. It shows that at the said meeting, modification was sought to advance the date from 1st July, 1981, to 1st April, 1980. Page 55 of the report of the chairman shows that a shareholder of the transferee-company suggested some amendments, one of them being advancing the date from 1st July, 1981, to 1st April, 1980. It also shows that some other amendments including change of exchange ratio were proposed by the said shareholder and approved at the said meeting. It appears from what is stated at page 51 that with the consent of those who were present, the notice, the scheme of amalgamation and the explanatory statement annexed thereto, were taken to have been read at the meeting. There is thus no substance in this contention of Mr. Shodhan. Mr. Shodhan contended that mycetin products had no go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the director, Mr. Shah, had requested Mr. Shodhan to come to the office of the company for oral discussion when all the problems which were troubling him could be resolved and clarification could be given on the basis of the records which would be readily available at the company's office. But Mr. Shodhan did not accept this offer and insisted that director of the company should meet him at his residence with all the data, details and information required by him. This exhibited a novel method of asserting the shareholder's right over the management as rightly pointed out by the director in his affidavit. Hence, this contention of Mr. Shodhan is without any substance. Mr. Shodhan contended that Squibb (E. R. Squibb Sons of New York), one of the major shareholders of Synbiotics, which, in turn, had shareholding to the tune of 76 % in the transferor-company was not interested in these new drugs to be manufactured in India, which shows that the idea of amalgamation of the transferor-company with the transferee-company for having this project implemented was not profitable and, therefore, also the scheme should not be sanctioned. It is difficult to accept this contention of Mr. Shod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scheme could not be approved because neither the transferee-company nor the transferor-company could be said to be one liable to be wound up. Mr. Shodhan urged that a company could be said to be liable to be wound up only if the financial condition thereof was not sound. There is a judgment of the Bombay High Court in the case of Seksaria Cotton Mills Ltd. v. A. E. Naik [1967] 37 Comp Cas 656 (Bom), which supports the contention of Mr. Shodhan Justice Tarkunde (as he then was) held in that case (p. 661) : "Whatever may be the correct meaning of the expression any company liable to be wound up under this Act which occurred in section 153(6) of the Indian Companies Act, 1913, and which now occurs in clause (a) of section 390 of the Companies Act, 1956, it seems to me obvious that section 391 of the present Act which empowers the court to sanction a compromise or other arrangement can have no application to a company which is in a sound financial condition. " There is, however, a later decision of the said High Court reported in Khandelwal Udyog Ltd. and Acme Mfg. Ltd., In re [1977] 47 Comp Cas 503 (Bom). The learned judge has explained as to what is meant by " any company lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to call a meeting of the creditors, but was desirable that such a meeting was called, so as to enable the creditors to have their say with regard to the proposed scheme. We do not find any substance in this contention. The interest of the creditors is in no way affected by the scheme of amalgamation. As a result of the scheme of amalgamation, if sanctioned, the transferor-company shall stand dissolved and its assets will vest in the transferee-company. It is not pointed out that the liability of the transferor-company exceeds its assets. So far as the loss suffered by it in 1980-81 is concerned, the transferee-company is in an advantageous position in the sense that it would get the advantage of the adjustment or set-off of carried forward loss against its income. In our opinion, therefore, the interest of the creditors of the transferee-company is in no way affected by the scheme of amalgamation. We may point out at this stage that though Albright Morarji and Pandit Ltd. claims to be a creditor of the transferee-company, the transferee-company denies that allegation. It is an admitted position that the said company has filed a suit against the transferee-company in the High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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