JUDGMENT
Deepak Verma, J.
1. This petition has been filed under Sections 391 and 394 of the Companies Act, 1956 (hereinafter referred to as “the Act”), for sanction of the scheme of amalgamation of Siel Financial Services Ltd. with Shriram Agro-Tech Industries Ltd. both having been incorporated under the aforesaid Act and having their registered offices at Surya Kiran, 19, Kasturba Gandhi Marg, New Delhi, and village Chotta Malsapura, Post Siya, Distt. Dewas, Madhya Pradesh, respectively.
2. The matter had come up for hearing before this court on January 10, 1997. On the said date Shri P. B. S. Nair and Smt. Meena Chaphekar, practising advocates of this court, were appointed as chairpersons to convene the meetings of equity shareholders and creditors of the petitioner-company. SIEL Financial Services Limited is the transferor company, whereas Shriram Agro-Tech Industries Ltd. is the transferee company. Meetings of the equity shareholders and creditors of the transferee company were held. Both the chairpersons have submitted their reports. The shareholders and the creditors have raised no objection for sanctioning the scheme of amalgamation. Their affidavits together with relevant papers have been submitted to this court. The affidavit of counsel for the applicant transferee company, Agro-Tech Industries Ltd., has been filed with regard to the meetings convened by the chairpersons and approval of the scheme by the shareholders and the creditors.
3. Pursuant to the order of this court, notice was published in Free Press (Indore Edition) on January 22, 1997, Dainik Bhaskar (Indore Edition) on January 22, 1997, Indian Express (New Delhi edition) on January 22, 1997, and Economic Times on January 23, 1997. Similarly, the notice was also delivered on January 22, 1997, to the Government Press, Bhopal (MP), for publication in the Official Gazette. Copies of the petition were also directed to be issued to the Central Government through the Regional Director, Department of Company Affairs, Bombay, and the Registrar of Companies, Gwalior. After the meetings, as mentioned above were held, it was further directed to serve a complete set of papers to the official liquidator posted at Indore Bench. No objections have been raised either by the Central Government or by the official liquidator for sanctioning the scheme of amalgamation.
4. I have heard counsel for the petitioner as also the official liquidator. From the report of the chairpersons of the meetings, it appears, that the proposed scheme of amalgamation has been approved unanimously in the meetings of the equity shareholders and creditors of the transferee company.
5. The authorised capital of the transferee company is Rs. 20,00,00,000 (rupees twenty crores) divided into 1,90,00,000 equity shares of Rs. 10 each and 1,00,000 preference shares of Rs. 100 each. The issued and subscribed share capital is Rs. 5,37,50,070 (rupees five crores thirty-seven lakhs fifty thousand seventy only), consisting of 53,75,007 equity shares of Rs. 10 each. The paid-up equity share capital is Rs. 5,35,59,070 (rupees five crores thirty-five lakhs fifty-nine thousand seventy only). The objects of the transferee company for which it is established are set out in the memorandum and Articles of association annexed to the petition. The transferee company at present is engaged in the business of processing and crushing of oil seeds, oil extraction and production of deoiled cakes. The transferor company, S1EL Financial Services Ltd., is a closely held public limited company. The authorised capital of the transferor company is Rs. 20,00,00,000 (rupees twenty crores) divided into 2,00,00,000 equity shares of Rs. 10 each and the paid-up equity capital is Rs. 10,00,00,000 (rupees ten crores). The objects of the transferor company for which it is established are set out in the memorandum and Articles of association annexed to the petition. The transferor company, at present, is engaged in the business of financial services, such as hire purchase, leasing, forex advisory services, OTC dealings and merchant banking services, investment in securities and such allied businesses.
6. The transferee company has been incurring losses and its net worth has eroded substantially and, therefore, needs financial and management support for revival of its financial health. As a measure of corporate restructuring and to develop potential for further growth and diversification and to achieve the object of carrying on the businesses of the two companies more smoothly and profitably by rationalisation of the management and financial structure and obtaining economies of scale for further modernisation, growth and expansion of the respective business
and for better and more profitable utilisation of the combined resources of the two companies, it has become necessary to amalgamate both the companies.
7. The shareholders of both transferor and transferee companies would benefit from the proposed amalgamation as the value of shares of the transferee company will get enhanced. The above amalgamation would be in public interest. No objections have been raised either by the official liquidator or by the Central Government with regard to the sanction of the amalgamation scheme. From the perusal of the petition and the annexures filed along with it, I find that the scheme shall be greatly beneficial to the interest of the shareholders and the same is not against public interest.
8. In Hindustan Lever Employees’ Union v. Hindustan Lever Ltd. [1995] 83 Comp Cas 30 ; AIR 1995 SC 470 and Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp Cas 792 (SC), it has been held by the Supreme Court that if the shareholders and creditors of the transferee company are not going to be put to any loss and if the same is not going to be prejudicial to their interest, then the scheme has to be sanctioned.
9. Thus, on overall consideration of the matter, I am of the considered opinion that the scheme of amalgamation is beneficial to the interest of the shareholders and is not against public interest. The same is hereby sanctioned subject to the following conditions :
(1) That the approval of the scheme of amalgamation does not in any way dispense with the formality of execution of instruments of conveyance and other documents for effectively vesting of the property and rights of the transferor company in the transferee company and the same should be done strictly in accordance with law.
(2) If, as a result of the transfer of any assets or shares of the transferor company and liability of capital gains may arise against any company, or its shareholders or payment of tax which may be leviable under the existing taxing laws, then the concerned authorities shall be free to proceed in the matter of tax in accordance with law, irrespective of the order of amalgamation.
(3) The present order of amalgamation will not absolve any of the companies or its directors from the liability for breach of any law or control order, which might have been committed before the order of amalgamation. The aforesaid conditions should form part of the amalgamation.
10. That all proceedings now pending by or against the transferor company be continued by or against the transferee company ; that the transferee company do without further application allot to such members of the transferor company as have not given such notice of dissent as is required by Clause given in the scheme of amalgamation herein, the shares in the transferee company to which they are entitled under the said amalgamation ; that the paid-up equity share capital of the transferee company be reduced by cancelling the paid-up capital at the rate of Rs. 7.50 per equity share of Rs. 10 each. The resultant equity share with the paid-up capital of Rs. 2.50 each be consolidated into equity shares with paid-up amount of Rs. 10 each ; that the unsecured loan of Rs. 730 lakhs as at December 13, 1996, payable by the transferee company to SIEL Limited be converted into five cumulative preference shares redeemable at par and the option of the company at any time not later than the ninth year from the date of issue.
11. That the transferee company do file a certified copy of this order with the concerned Registrar of Companies in accordance with the provisions of the Companies Act, 1956. That any person interested shall be at liberty to apply to the court in the above matter for any direction that may be necessary.
12. With the aforesaid conditions, the scheme of amalgamation (annexure-6) is hereby approved. The petition, accordingly, stands finally disposed of.