JUDGMENT
D.R. Dhanuka, J.
1. These petitions have been filed by Shri Saibaba Castings Pvt. Ltd., hereinafter referred to as “the transferor company”, and Kamanwala Industries Ltd., hereinafter referred to as “the transferee company”, for sanction of the court in respect of the scheme of arrangement and amalgamation annexed as exhibit “C” to both the petitions with or without modifications as the honourable court deems fit.
2. By the proposed scheme, the transferor company is sought to be amalgamated with the transferee company on the footing that the transferee company shall allot to the members of the transferor company one equity share of the transferee company of Rs. 10 each (fully paid-up) for 10 shares of Rs. 10 each (fully paid-up) held by the member concerned of the transferee company is sought to be increased as set out in the said scheme. The transferee company has agreed to discharge all the liabilities of the transferor company and has agreed to take over all the employees of the transferor company willing to join the transferee company.
3. All the members of the transferor company have given their consent in writing in respect of the scheme of arrangement and amalgamation exhibit “C”, to both the petitions. Notices have been published in the various newspapers inviting those who are interested in supporting or opposing to remain present before the court.
4. Oriental Bank of Commerce is the secured creditor of the transferor company as well as the transferee company.
5. On October 8, 1994, a meeting of the secured creditors of the transferor company was held as directed by the court. The scheme was adopted by the meeting of the secured creditors of the transferor company.
6. On October 8, 1994, a meeting of the unsecured creditors of the transferor company was also held as directed by the court. The said meeting was attended by 29 unsecured creditors through their proxies. The resolution proposing. The chairman of the transferor company has filed his report on affidavit being report dated October 24, 1994.
7. The official liquidator has submitted his report in writing being report dated August 8, 1995, as contemplated under the second proviso to section 394(1) of the Companies Act, 1956. The official liquidator has made the said report in the light of the report of the auditors who are appointed by the official liquidator to scrutinise the audited accounts of the transferor company for the period of five years ended March 31, 1994. The said report is favorable to the petitioners. The affairs of the transferor company have not been conducted in a manner prejudicial to the interest of its members or to the public interest.
8. The State Industrial and Investment Corporation of Maharashtra Limited (i.e. SICOM) has given its approval is respect of the proposed scheme of amalgamation of the transferor company, i.e., Shri Saibaba Castings Pvt. Ltd. with the transferee company, i.e., Kamanwala Industries Ltd. on the condition that the approvals of financial institution/banks should also be obtained in respect of the proposed amalgamation.
9. By an order passed by this court on August 4, 1994, on Company Application No. 251 of 1994 filed by the transferee company it was directed that the meetings of the members as well as the secured and unsecured creditors of the transferee company be convened for considering and if thought fit approving the scheme of arrangement and amalgamation of Shri Saibaba Castings Pvt. Ltd. with Kamanwala Housing Development Finance Company Limited. The shareholders of the transferee company have unanimously approved the scheme. The unsecured creditors of the transferee company have also unanimously approved the scheme.
10. A meeting of the secured creditors of the transferee company was convened on October 8, 1994. It appears that there are two secured creditors of the transferee company, i.e., (1) Oriental Bank of Commerce, (2) Punjab National Bank. The Oriental Bank of Commerce approved the scheme. The Punjab National Bank did not approve the scheme.
11. Thus, the scheme of amalgamation was opposed initially by the Punjab National Bank. The Punjab National Bank had sanctioned the short-term loan of Rs. 50 lakhs in favour of the transferee company subject to certain conditions. Kamanwala Industries Ltd., the transferee company, had executed an equitable mortgage in favour of the Punjab National Bank in this behalf on January 23, 1989. A sum of Rs. 19,63,000 was disbursed by he Punjab National Bank in favour of the transferee company. The Punjab National Bank wanted its dues to be cleared by the transferee company expeditiously and from this point of view it appears to have opposed the proposed scheme of amalgamation.
12. I am happy to record that the controversy between Kamanwala Industries Ltd. and the Punjab National Bank is mutually sorted out. The transferee company as well as the Punjab National Bank have arrived at certain consent terms. In substance, the transferee company has agreed to pay the balance of Rs. 25,20,000 to the Punjab National Bank on or before March 31, 1996, alongwith interest, etc., more particularly set out in the consent terms filed before the court. The consent proposal made on behalf of the transferee company and the Punjab National Bank is quite reasonable. The scheme, exhibit “C”, to the petition is modified in terms of the consent terms arrived at between Kamanwala Industries Ltd. and the Punjab National Bank duly signed by the parties as modified for its final sanction. Thus, the objection to the scheme urged by the Punjab National Bank, one of the secured creditors, no longer subsists.
13. The only objection which now survives for consideration of the court is as to the objection raised on behalf of the Regional Director as set out in the affidavit of Shri M.L. Shah dated August 30, 1995. The Regional Director has opposed the scheme on the ground that the entire paid-up capital of the transferor company has already been eroded and the balance-sheet of the transferor company indicates that the transferor company has accumulated losses to the extent of four times of its paid-up capital. In my opinion, there is no merit in this objection. If the transferor company is amalgamated with the transferee company which is undoubtedly a sound and healthy company no public interest it likely to suffer particularly when the transferee company has undertaken to discharge all the liabilities of the transferor company. I have no hesitation in overruling the objection raised on behalf of the Regional Director.
14. Both the petition are allowed. The scheme, exhibit “C”, to the petition as modified by terms of the modification of the scheme contained in consent terms tendered before the court marked “X” for identification is hereby sanctioned.
15. Petition No. 493 of 1994 is made absolute in terms of prayers (a) to (e) with the addition of the words “the scheme as modified” by the consent terms marked “X” for identification. The transferor company is hereby dissolved without winding up as permissible under section 394(1)(b)(iv) of the Act. The petitioner in Petition No. 493 of 1994 is directed to pay a sum of Rs. 500 towards the costs of the petition to the official liquidator a further sum of Rs. 500 towards the cost of the petition to the Regional Director.
16. Company Petition No. 494 of 1994 is also made absolute in terms of prayers (a) to (e) with addition of the words “Scheme as modified”.
17. The petitioner is directed to pay a sum of Rs. 500 towards the cost of the petition to the Regional Director.
18. The undertaking of Kamanwala Housing Development Finance Company Limited as well as the Punjab Bank contained in the consent terms pertaining to consent modification of the scheme marked “X” for identification are accepted.
19. Issue of certified copy is expedited.