1. All these petitions have been moved for getting sanction of Scheme of Amalgamation placed at Exh. C in the respective petitions moved by ArvindIntexLtd. having its registered office at Raipur Road, Ahmedabad, ('AIL' or 'the transferee-company' as the case may be) with Arvind Products Ltd. ('APRL' or 'the transferee-company') with effect from 1-10-1998. The other companies which are to join as the transferor- companies in the scheme of Amalgamation are Arvind Polycot Ltd. (APL) and Arvind Cotspin Ltd. ('ACL'). Company Petition No. 69 of 1999 has been moved by AIL, Company Petition No. 70 of 1999 has been moved by APL, Company Petition No. 71 of 1999 has been moved by ACL and Company Petition No. 72 of 1999 has been moved by APRL for getting approval of Scheme of Amalgamation as aforesaid.

2. The Scheme of Amalgamation placed at Exh. C might be referred to from Company Petition No. 69 of 1999, which is the first petition. The scheme provides for the amalgamation of AIL, APL and ACL into APRL pursuant to sections 391 to 394 and other relevant provisions of the Companies Act, 1956 (' the') from 1-10-1998 being the appointed date. The scheme is to take effect from the date on which all the conditions and matters referred to in clause 18 are fulfilled and approvals and consents referred to therein have been obtained. After reciting the respective share capitals the scheme proceeds to deal with transfer and vesting of the undertakings including assets and liabilities, debts and obligations, rights and duties, etc. and reorganisation of the capital in the following exchange ratio:

(A)Equity Shares of Rs. 10 each, credited as fully paid-up, to the equity shareholders of the Intex whose names are recorded in its Register of Members on the Record Date in the ratio of the 4 equity shares of the face value of Rs. 10 each in the transferee-company for every 7 equity shares of the face value of Rs. 10 each in Intex;

(B)Equity shares of Rs. 10 each, credited as fully paid-up, to the equity shareholders of Polycot whose names are recorded in its register of members on the record date in the ratio of 1 equity share of the face value of Rs. 10 each in the transferee-company for every 1 equity share of the face value of Rs. 10 each in Polycot; and

(C)Equity shares of Rs. 10 each, credited as fully paid-up, to the equity shareholders of Cotspin whose names are recorded in its register of members on the record date in the ratio of 5 equity shares of the face value of Rs. 10 each in the transferee-company for every 7 equity shares of the face value of Rs. 10 each in Cotspin.

The ratio accordingly will be as under :

Transferee-company	Transferor-company
APRL	AIL
4	7
APRL	APL
1	1
APRL	ACL
5	7

The provisions with regard to calls in arrears and fractional certificates have then been set out. It has been provided in the scheme that the transferor and transferee shall be entitled to declare and pay dividends, whether interim or final, to their respective equity shareholders in respect of the accounting period prior to the effective date. In respect of the effective date clause 18 provides as under:

"This Scheme is conditional upon and subject to :

(a)the Scheme being agreed to by the requisite majorities of the various classes of members and creditors (where applicable) of the transferor-companies and the transferee-company as required under the and the requisite orders of the High Court of Gujarat at Ahmedabad referred to in clauses 15 and 16 above being obtained;

(b)the approval of the Reserve Bank of India under the Foreign Exchange Regulation Act, 1973 being obtained for the issue and allotment of equity shares to non-resident shareholders pursuant to this Scheme;

(c)such other sanctions and approvals including sanctions of any Governmental authority, creditor, lessor or contracting party as may be required by law or contract in respect of the Scheme being obtained; and

(d)the certified copies of the Court orders referred to in this Scheme being filed with the Registrar of Companies, Gujarat."

3. It would be appropriate to reproduce clause 19 or the scheme at this stage:

"In the event of the Scheme failing to take effect finally by June 30, 1999 or by such later date as may be agreed by the respective Boards of Directors of the Transferor-Companies and the Transferee-Company, this Scheine shall become null and void and in that event no rights and liabilities whatsoever shall accrue to or be incurred inter se by the parties or their shareholders or creditors or employees or any other person. In such case each company shall bear its own costs or as may be mutually agreed." [Emphasis supplied]

In respect of the aforesaid clause the transferee and transferors-companies moved Misc. Civil Application Nos. 55 to 58 of 1999 in all these petitions for placing on record the fact with regard to extension of time by the respective board of directors. The said miscellaneous civil applications were highly contested and by order dated 10-9-1999 all the said applications were granted in terms of following order:

"All the four misc. civil applications are hereby granted, permitting to place on record in the respective company petitions true copies of the resolutions coupled with Pursises signed by all the Directors of the respective companies stating that the time for the Scheme to take effect is extended upto 31st December, 1999, on condition that each of the applicant-company shall deposit on or before 16-9-1999 in this Court a sum of Rs. 5,000 (Rupees five thousand only) each for the respective applications totalling to Rs. 20,000 (Rupees twenty thousand only). Upon deposit of such amount, the same shall be transmitted to Chief Minister's Fund for National Defence purposes as and when the Registrar of this Court receives the receipt of Rs. 5,000 each from the Fund in the name of the respective companies, the said receipts shall be handed over to Mr. Soparkar, learned advocate for the applicants in each of these misc. civil applications.

In so far as cost of the objectors is concerned, the same shall be taken into consideration bearing in mind even the present applications while deciding the Scheme matters in the main company petitions. These misc. civil applications are disposed of accordingly."

4. It would, therefore, appear that the effective date has been extended to 31-12-1999.

The scheme further recites about transfer and vesting of undertakings including assets and liabilities of the respective transferor-companies into the transferee-company as per Part III of the scheme containing clauses 4 to 9. What is important to be noticed from the respective clauses of the transfer and vesting of the undertakings is that all employees of the transferor-company in service on the effective date, are to become the employees of the transferee-company on such date without any break or interruption in service and on terms and conditions as to remuneration not less favourable than those subsisting with reference to the relevant transferor-company as on the said date and the transferee-company would stand substituted for the concerned transferor-company for the purposes of provident fund, gratuity, superannuation fund or any other such scheme/s or funds created or existed for the benefit of the employees of the transferor-companies. As per the terms provided in the respec- tive trust deed coupled with all rights, duties, powers and obligations of the relevant transferor-company in relation to such scheme/fund it has been clarified mat the services of the employees of all the transferor-companies are to be treated as having been continuous for the purposes of all the scheme/fund.

5. The circumstances and reasons/grounds justifying the scheme of amalgamation had been set out in the respective petitions and briefly stated they are :

"( a)Having regard, to all the circumstances the amalgamation will integrate business operations, introduce considerable synergies and reduce inter-company transactions;

(b)The amalgamation will financially strengthen the transferee-company by capturing the intrinsic synergy between cotton yarn, gabardine and denim.

(c)The consolidated financials arising upon the amalgamation of the transferor-companies will be significally larger and the financial statements will be able to present the strengths and operations of the group in a more effective way to its shareholders. The shareholders of all the companies will Benefit from this exercise.

(d)If necessary, the amalgamation could pave the way for further restructuring/consolidation in the Group in its best interests."

It has also been asserted in the respective petitions that AIL was incorporated by taking over the original Nagari Mills Ltd., and APL was constituted by taking over the original Saraspur Mills Ltd. It could be noticed from the submissions made that originally the said companies whose names have been respectively changed as AIL and APL went financially weak and Arvind Group having had taken them over as aforesaid, the financial condition of the said respective companies stood improved. Arvind cotspin Ltd. was originally Arvind Worsted Ltd. incorporated on 12-9-1989, as can be seen from the certificate of incorporation coupled with change of name of the said company.

6. The petitioner-companies moved respective company Applications bearing Nos. 18, 19, 20 and 21 of 1999 for requsite directions for convening required meetings of the shareholders and/ or creditors of the company. The notice of the meeting was individually sent to the shareholders of the concerned company together with a copy of the scheme, explanatory statement, proxy form and other required documents. In so far as the transferee-company as well as in so far as the transferor-company ACL is concerned, the shareholders appear tohave voted unanimously in favour of the scheme and none opposed the scheme of amalgamation. In so far as the transferor-company APL is concerned, out of 458 equity shareholders, who attended the meeting, one equity shareholder holding one equity share of Rs. 10 voted against the scheme. The votes of 10 equity shareholders holding 650 shares were declared invalid. Rest on the equity shareholders voted in favour of approval bf scheme of amalgamation. Thus, there was the requisite majority of the equity shareholders who approved the scheme at the meeting. In so far as the transfer-company AIL is concerned, out of the equity shareholders who attended the meeting (440 in number) holding value of shares in the sum of Rs. 5,00, 15,011,419 equity shareholders holding share value of shares in the sum of Rs. 4,90,70,010 voted in favour of the scheme of amalgamation; whereas 15 (equity shareholders holding value of Rs. 7,85,651 voted against the scheme. The votes of 6 shareholders holding value of the shares to the extent of Rs. 1,59,250 were declared invalid. Thus, the scheme of amalgamation was approved by the requisite majority of the equity shareholders.

7 Under the aforesaid circumstances, the petitioners have prayed for according sanction to the scheme of amalgamation as aforesaid for the benefit of the shareholders, creditors, workers and all concerned as also for the benefit of the concerned industry generally.

8. The notices as directed in all these petitions came to be served. In so far as the Official Liquidator is concerned, he has submitted his report dated 12-4-1999 in Company Petition No. 69 of 1999 where AIL, the transferor- company is the petitioner He has asserted that the affairs have not been conducted in a manner prejudicial to the interest of the members or of public interest. Since he was permitted to appoint Chartered Accountant from the penal of Chartered Accountants, he appointed Kiran Shah & Associates, C.A. for the purpose of investigation of the affairs of the company and upon report of the said C.A. he expressed his opinion as aforesaid. The report of the Chartered Accountant has been annexed with the Official Liquidator's report. In so far as the Company Petition No. 70 of 1999 filed by petitioner transferor-company APL is concerned, similar is the report dated 12-4-1999 of the Official Liquidator. In case of petitioner transferor-company ACL in Company Petition No. 71 of 1999 is concerned, such report dated 12-4-1999 has also been filed by the Official Liquidator. At the time of hearing of all these petitions neither the Official Liquidator nor his Chartered Accountant had anything to say against the scheme of amalgamation in question. They have not come out with any suggestion either amending or altering in any manner the proposed scheme of amalgamation. He has also not made any submission or suggestion with regard to exchange ratio in question. At this very stage it might be noted that report of Chartered Accountant Kiran Shah & Associates has been relied upon by the respective objector/s during the course of their submissions. The same shall be dealt with at an appropriate place. However, as on date no suggestion adverse to the scheme of amalgamation in question or shares exchange ratio has come forward from the said Chartered Accountant.

9. In reply to the notices issued from this Court the Central Government, through the Registrar of Companies, Gujarat, addressed a communica- tion No. ROC/STA/Amlg/91 of 1998-99 dated 20-4-1999 with regard to the subject "In the matter of Amalgamation of

Arvind Index Ltd.

Arvind Polycot Ltd.

Arvind Cotsmn Ltd.

with

Arvind Products Ltd.

Com. Petn. No. 69-72/99 asserting that the matter might be left to be decided by the Court on its own merits. It was suggested that the petitioner-company might be directed to make specific prayer for waiver of procedure under section 100 of the Companies Act for cancellation of shares held by the concerned company. However, the learned Addl. Standing Counsel who appeared at the time when the submissions were made did not make any submission either for sanction of prayer of amalgamation or for rejection thereof. No submission either was made with regard to the making of a specific prayer for Waiver of procedure under section 100 of the Companies Act."

OBJECTIONS:

10. There are three objectors who have objected to the grant of sanction to the scheme of amalgamation in question. One of the three objectors has been represented by the learned advocate Mr. Mahesh Bhavsar, the other two have appeared in person.

One Hasmukhlal C. Shah has submitted his objection in Company Petition No. 70 of 1999 concerning petitioner transferor-company APL (Arvind Polycot Ltd.). He has submitted his objections for himself and on behalf of other shareholders belonging to the family of said Hasmukhlal C. Shah or being his close relations. They are Sushilaben Viththaldas Shah, Jayendra Hasmukhlal Shah, Bhaskar Hasmukhlal Shah, Sanjay Hasmukhlal Shah, Swat: Jayendra Shah, Harsha Bhaskar Shah and Niti Sanjaykumar Shah. With his forwarding letter dated 8-3-1999 he has submitted his objections, inter-alia stating that he and his other partners held 6,090 shares in the transferor-company APL. The first grievance was that he was not given notice of meeting of the shareholders, which was to be held on 5-3-1999 for according sanction to the scheme of amalgamation in question. The notices are sent under certificate of posting, but there might be cases of collusion between the persons from the Post and the persons from the concerned company and, therefore, actual dispatch of the notices under certificate of posting would require scrutiny. It is his case that only he received the notice and all his other relations did not receive the notice of the meeting. According to his say he informed about this fact to the APL. However, without taking into consideration this objection of the objector, meeting was held on 5-3-1999. It has next been submitted that required particulars/facts have not been communicated or informed to the shareholders and intentionally suppressed. Such particulars relate to the capital growth of the respective companies and the schemes whether present or prospective with regard to the business of the companies. He has also contended that immovable properties have not been valued at the market rate prevalent on the proposed date of amalgamation. He has, therefore, submitted that it would not be possible to ascertain the real worth of the shares of respective companies sought to be amalgamated. Shares of the most of the companies do not have any dealings in the market and they are also not listed. Hence, there would not be any other material except a reliable valuation report for understanding value of shares of respective companies sought to be amalgamated. In spite of requestioning copies of valuation report, the same has not been supplied. Reference in this connection has been made to letter dated 3-3-1999 received by the objector. Under such circumstances the objector made requisite for cancelling meeting dated 5-3-1999. It has been alleged that particulars with regard to when the work of valuation report was entrusted to the valuer have not been given. On report is stated to have been submitted/prepared on 22-1-1999; whereas permission to call meeting was obtained from the Court within 7 days thereof, i.e., 29-1-1999, Saturday, Sunday and 26-1-1999 being Republic day were the intervening holidays.

Permission of the Court has been obtained under such circumstances which generates suspicion about the procedure followed by the compa nies/their Directors. It has also been alleged that on earlier occasion there was an attempt made for amalgamation of some of the companies out of the companies who have filed present petitions and the effort of obtaining sanction of such amalgamation was frustrated as some foul play was suspected. It has been submitted that according to the annual reports the equity value and other capital value of the respective transferor- companies along with their respective reserve funds would appear as under:

Name of the Company	Equity Capital (Rs. in lakhs)		Other Capital (Rs. in lakhs)		Reserves (Rs. in lakhs)
ArvindIntexLtd.	5135.30		4.42		911.57
Arvind Cotspin Ltd.	4200.00		-		7522.76
Arvind Polycot Ltd.	2410.00		-		7648.37
		11745.30		4.42		16082.70

In all Rs. 27,832.42 lakhs.

The said transferor-companies are old companies having properties, which also must be old properties and the values thereof stated in the books also might be matchless than the market Value. If that is considered, total worth of all three transferor-companies would be more than Rs. 278 crores. The three transferor-companies are sought to be amalgamated with the transferee-company, which has total paid-up capital of Rs. 15 lakhs with reserves of Rs.5 lakhs, totalling to Rs. 20 lakhs being its capital worth. If the balance of profit and loss to the extent of Rs. 5.38 lakhs is deducted from the said capital, it would reflect total capital of Rs. 15 lakhs or less in so far as the transferee-company is concerned. The transferee-company has invested a sum of Rs. 78.30 lakhs on the quoted shares and the market price thereof was Rs. 22.33 lakhs as on 31-3-1998 as stated in the report. It has been asserted that there is no material to know the market value of unquoted investments in the sum of Rs. 13.19 lakhs. It has thus been submitted than there has been negative value of Rs. 30 per share in so far as transferee-Company is concerned. Besides, there is a debt in the sum of Rs. 115 lakhs which the transferee-company owes. There are no particulars for showing who would have to pay or who would have to bear this debt. It is a new company as compared to the other companies and it has no specific business. It is a highly indebted company. Thus, it is merely a company in name with some assets and with no tangible property. It has been asserted that upon being asked by the objector for supply of annual reports of all the four companies, only annual reports of financially sound companies were supplied and valuation report and annual report of the transferee-company were not supplied and they were supplied at the last moment upon repeated reminders. It has, therefore, been asserted that financially sound transferor-companies are sought to be merged into financially weak transferee-company. The objector has, therefore, sought for dismissal of the petitions with a request that necessary additions of the objections might be made at the time of hearing.

11. One Mr. Dipakkumar J. Shah, shareholder of one of the transferor- companies has submitted his objections dated 13-4-1999. At the outset it might be noted that there were highly objectionable assertions and averments in his affidavit. When he opened his submissions with a preliminary objection following direction dated 26-4-1999 came to be issued in Company Petition No. 69 of 1999 in Company Application No. 18 of 1999:

"Mr. Dipakkumar J. Shah, while addressing this Court on his objections of April 1999 has taken a preliminary objection that the company has not produced the original certificates of posting under which communications were sent to the shareholders. While canvassing that preliminary objection, he also stated before the Court that certain certificates of posting might have been purchased from the post office. He is directed to state this objection on oath by setting out the particulars about the certificates of posting, which according to him, are either false in the sense that purchased for the purpose of making a show that the communications were sent under certificate of posting. He is given time upto 4-5-1999 to state these facts with particulars on affidavit. It is made clear to him that if he fails to do so, he might face consequences of making such a statement before the Court."

Thereafter hesought for inspection of the certificates of posting which was permitted, by calling all the books containing the certificates of posting from the office and he had taken inspection in the open Court in presence of the concerned Assistant in the OJ Department of this Court and submitted before the Court that having taken the inspection he might file the affidavit as indicated in the aforesaid order. He was accordingly granted time to file affidavit by 10-5-1999. It was also clarified that his objections ought to have been filed in Company Petition No. 70 of 1999 in Company Application No. 19 of 1999. In order dated 7-5-1999, while making such observations, attention of the objector was drawn to the following facts in the affidavit setting out his objections appearing at pages 48 and 49 of the record of this petition:

"B.... This is supported by wrong affidavits of sending the notices by Under Certificate of Posting by Chairman of petitioner-company, which is saleable commodity under our all corrupted departments for which small persons have to Suffer a lot. Not only this but also this Hon. Courts sanction such a wrong affidavit as a gesture. Knowing this fallacies of such certificate this Horn Courts accepts as legal documents A separate public interest litigation shall be filed by the objector taking the matter of all earlier such petitions where in all this U.C.P. has been accepted and also in general. If this unscrupulous documents are accepted as legal document by this Hon. Courts, at the same time there shall also be a severe loss of Revenue to the Government also very big amount and encouragement of unscrupulous persons in gay and also the intermediaries who have got such fake documentary evidences. Hon. Justices are appointed and taking under oath to guarantee true justice without any favour and influence of any person or his position and also dismissing the petition by this Hon. Court in other matter is a Great services made by Hon. Justice for the cause of which an oath has been taken before taking as a Justice. Not to pass the proper order and not giving Justice and allow to such practice is also a corruption, to my firm mind.... Does this Hon. Court permits such wrong acts in legally"

Having realised the consequences of aforesaid statement made in the petitions, this party-in-person had given in his own hand addressed to this Court following apology by filing pursis:

"I, Dipakkumar J. Shah, the objector do hereby, withdraw the statements made in my objection para. 'B' and all other papers to this Hon. Court which may amount to any contempt specifically. apologize for the same having done by me at this juncture."

Accordingly he was granted time to file affidavit upto 10-5-1999. Those objections might first be noted.

While generally stating the formalities regarding issuing communications under certificates of posting, he has asserted that three articles together are required to be seen under certificate of posting by affixing postal stamps of Rs. 2 against each of the 3 addresses. He has asserted that the time of harming over of the articles and defacing of the postal stamp of the post office should also appear. He has asserted that following facts have been noticed by him and that might be accepted or rejected, but he would not make comment in proving the same or otherwise. He has accordingly set out following particulars :

"From the face of the Registers I found the following aspects which should be considered by this Hon. Court with respect. Only major is mentioned here.

Volume No. 8lpages 3, 4, 8, 9, 10, 11, 12, 15, 17, 18, 19, 20, 21 and almost every volumes third column of register has not been stamped as receipt of the stamps.

On page No. 22 As. 5,23 Rs. 2, final column affixed 25 Rs. 2.35 Rs. 2.39 only 1/4th round 40 Rs. 5, 43 Rs. 2, 44 Rs. 5, 46 Rs. 2, 48 Rs. 5 and 2, 54 Rs. 5, 55 Rs. 2, 81 Rs. 2 affixed over Rs. 10, 83, 85, 87 Rs. 2, 92, 93 Rs. 5, 95, 101,, Rs. 2, 103, 104, Rs 5, 120, 122 Rs. 10, 124, Rs. 5, 140 Rs. 10, 144, Rs. 7,147 Rs. 10, 159 Rs. 10 hot cancelled.

Volume No. 3 pages 25, 30, 38 Rs. 2, 41 Rs. 10, 43, 48, 65, 66, 67, 70, 77 Rs. 2 not cancelled but page No. 70 separately cancelled. 125 Rs. 2 separately cancelled page No. 191 not cancelled but only by X mark only.

Volume No. 4 pages 1,6,7,17,18,19,20,120 Rs. 2 stamped. On last pages wrongly pasted.

Volume 5 page 199 Rs.2 not cancelled.

Volume 23 Rs. 10 stamp Apt cancelled 42,47, 50 Rs. 2 not cancelled. Page No. 73 Defaced Stamp of Rs. 10 is used. Page 97 Rs. 10 cancelled affixed. Volume 24 pages 24, 26, 45 68, 92, 140, 168, 185, Rs. 2 not cancelled.

Volume 6 Page 172 over stamped not cancelled. 147 Over stamp Rs. 2,148, 178,179,153,152,158,159,180,159 Rs. 2 not cancelled 166 Rs. 2 cancelled 184, 186 Rs. 2 not cancelled. 188, 190 Rs. 2 over stamped not cancelled.

Volume 8 pages 3, 4, 5, 8, Rs. 2 stamp not cancelled. Page 9 Rs. 5 affixed cancelled. 35, 43, 46 Rs. 2 not cancelled 81 gather cancelled.

Volume 9 Page 1, 7 Rs. 2 not cancelled.

Volume 10 page 19 Rs. 10 stamp cancelled used. But in almost all the ledgers third column of side is not stamped as an ordinary mark of receipt of the articles"

In the rest of the portion of the affidavit the objector has once again repeated his apology on oath. Turning to his main objections dated 13-4-1999, copy whereof appears to have been given on 12-4-1999, he has in the first place objected to non-supply of copies of petitions other than the petition in which he was not concerned. However, only on 10-4-1999 copies of the petitions were supplied to him and that was the day before the final day of submitting objections. His grievance has also been with regard to non-receipt of notice of meeting of shareholders alleged to have been sent under certificates of posting. He has also made grievance with regard to non-receipt of valuation report by saying that he would submit detailed objections upon receipt of valuation report. He has referred to some past affairs of the company with regard to making right issue in 1994, with regard to entering into business known as Piramyd T.V., Denim Business, etc. He has asserted that first demerger took place in the case of Ankur Textile Mills, business whereof was transferred to Arvind Polycot Ltd. (APL) by parent company Arvind Mills Ltd. by way of concentrating in one line 'Denim' core business only. He has asserted that hard earned money would be wasted by deceiving the shareholders by resorting to the amalgamation, sanction whereof has been prayed for by the petitioner-companies. Hi main grievance is that poor/minority share holders would have 10 suffer ultimately, whereas the management would personally gain as a result of the amalgamation in question. He has, therefore, asserted that the amalgamation is not in the interest of share holders at large.

12. One Mr. KiritH. Patel represented by Mr. M.N. Bhavsar, the learned advocate has filed his affidavit dated 29-4-1999 objecting to the proposed sanction being accorded-to the scheme of amalgamation in question. He has asserted that he and his associate shareholders belonging to the same family are holding 19,100 equity shares of ArvindIntexLtd. According to his say the scheme is not in the interest of transferor-company AIL. He has asserted that Mr. Sanjay S. Lalbhai, who was the Chairman of the meeting of the shareholders of the said transferor-company was personally interested in getting the scheme approved since he was having large number of shares of transferor-company APL (Arvind Polycot Ltd.) and that share exchange ratio has accordingly been loaded in favour of shareholders of APL. He has asserted that all the material facts have not been disclosed in the scheme of amalgamation and explanatory statement annexed to it. Hence, the voters did not know what they were doing while voting in favour of the scheme of amalgamation. His grievance is that his objections were not considered by the Chairman and by any of the authorities to whom he has sent His objections. He has asserted that meeting of 13.5 per cent preference shareholders was not held and, therefore, it can be said that resolution were not passed by the statutory majority in value and in number at the meeting or meetings as contemplated by section 391. At this very stage it might be noted that as asserted in the affidavit of one Mr. Amar Merita of the transferor-company Industrial Development Bank of India, the sole 13.5 per cent Cumulative Redeemable Preference Shareholder of the petitioner-company has given its 'no objection' to the scheme of amalgamation in question and the report/communication dated 22-4-1999 issued from the said shareholder, namely, Industrial Development Bank of India appears at page 49 stating that the IDBI as preference shareholder has no objection to the proposed merger.

It has further been asserted by the objector that, as stated on page 7 of the explanatory statement under section 173 as also, section 393 of theit is not made clear mat all the Directors have shares of transferor-company APL only. In this background, share exchange ratio 1:1 between the transferor and transferee-company is for the benefit of the Directors personally and at the cost of the interest of the minority shareholders of the transferor-company AIL. Even the meeting of the creditors which would vitally be affacted by the scheme of amalgamation was not held and, therefore, the scheme should not be sanctioned on account of such public interest. It has been asserted that the transferee-company is wholly owned by the Arvind Mills Ltd. (AML), as the same has been acquired by ASMAN making APRA a wholly owned subsidiary of AML and yet no material facts of AML nave been disclosed before this Court. The transferee-company does not have any significant business activity so as to ensure that the share exchange ratio is fair. Ultimately the amalgamation in substance would be With AML and not with APRL. It would, therefore, be with a view to defraud the interest of shareholders at large. There has been no independent appraisal of the earning capacity value of the shares of every company since me Chartered Accountants/Valuers were informed only of internal projections made by the company. There has been no independent appraisal of valuation by any third party. The scheme, therefore, should be treated as unjust and might not be sanctioned in the interest of public. According to the objector, market price of the equity shares as quoted on a stock exchange is normally considered as the fair value thereof. The market price of equity shares of APL over the last year ending October 1998 as quoted on the Ahmedabad Stock Exchange has been Rs. 9 per share only and the last available quoted price of the transferor-company AIL was Rs 20 as on 12-5-1998. As against this, APL has not been listed on any of the Stock Exchanges. In so far as the dividend of the companies is concerned, APL. has paid dividend at 10 per cent on the equity share; whereas AIL has paid also dividend for the value of the equity shares for the period of 1995-96, 1997-98, but APRL (transferee-company) has not declared any dividend for the last 4 years. In this view of the matter, the share exchange ratio offered in the proposed explanatory statement in the scheme of amalgamation would be hardly fair to the shareholders of the petitioner-company (AIL).

It has also been asserted that Valuers/Chartered Accountants had not computed value of the equity shares of any of the companies on the basis of intrinsic worth of net assets of the respective companies. Besides, APRL transferee-company does not have any fixed assets as on 30-9-1998. It has been asserted that authenticity of the information furnished to the Chartered Accountants is also doubtful. It has been alleged that the Chartered Accountants/Valuers C.C. Chokshi &Co. and Banshi Mehta & Co. have not performed their functions objectively and honestly and in accordance with financial norms and practice, they having acted in collusion with the management of the respective companies sought to be amalgamated. The valuation has been made on the basis of book value in contrast with the market value of the fixed assets in absence of valuation report in that respect and, therefore, intention to defraud the creditors is spelt out from this. Hence, while calling for the explanation of the Chartered Accountants/Valuers they should be directed to revise their report. There has been illegality and/or irregularity in the report of the Chartered Accountants/Valuers in fixing the share exchange ratio in view of what is stated above, alleges the objector. He has, therefore, prayed for appointment of independent Chartered Accountants for that purpose. Placing the history of the petitioner transferor-company it has been asserted that it was originally Nagari Mills Ltd., incorporated on 15-8-1925 and became sick company in November 1987. Subsequently its name was changed to petitioner transferor-company on 20-1 -1993 as per the fresh certificate of incorporation issued by the Registrar of Companies and AIL came out of purview of BIFR in the year 1995-96 with positive net worth coming out of the debts of crores of rupees and has become efficient and profit-making company. The APRL, in contrast, does not have any substantial business activities while having assets of Rs. 141.52 lakhs almost negligible in comparison to the assets of transferor-company. It has been asserted that AML (Arvind Mills Ltd.) is the single largest assured customer of AIL and user of yarn produced by AIL. It has, therefore, been asserted that AML (Arvind Mills Ltd.) wants to purchase AIL and other transferor-companies through the medium of transferee-company APRL. Under such circumstances, there is no question of amalgamating APRL with the transferor-companies. Placing the history of the transferee company it was asserted that it was incorporated as a private limited company on 19-8-1986 and then converted into a public limited company. There is no reason for AIL, a profit-making company being merged with APRL which was initially a private limited company. It has been asserted that the Chartered Accountants/Valuers have considered provisional working results of last six months ending on 30-9-1998 and yet it is not explained how the share exchange ratio for AIL is fixed to 7:4, although as on 12-5-1998 the market price of one equity share of Rs. 10 each of AIL was Rs. 20. Although the Valuers/Chartered Accountants have arrived at the exchange ratio on the basis of book value of the net assets of the companies such book values might not indicate true worth of the assets. Hence, the share exchange ratio has not been properly computed. It has been asserted by the Valuers that realisable value of all the fixed assets has not been furnished and, therefore, the shares exchange ratio is not fair and just. The report is also qualified accordingly by the said Chartered Accountants/Valuers and unless such qualification is not removed, the report should not be relied upon.

It has, then, been asserted that the objector mortgaged shares of other companies and got the loan from the bank to invest in AIL and the interest on the amount of loan of Rs. 63,000 is paid by the objector and, therefore, the interest of the company deserves to be protected. It has been asserted that by not disclosing any details of AML (Arvind Mills Ltd.) the petitioner is shrewdly misleading the Court.

While admitting that there was required majority in approving the scheme of amalgamation it has been asserted that approximately 37 per cent of the equity shares of APL have been held by AML, 50 per cent of the equity shares of the ACL have been held by AML and 21 per cent of the equity shares pf the AIL, i.e., the petitioner transferor-company have been held by the AML. Only 17 per cent equity shares have been held by the public and thus in all these companies AML (Arvind Mills Ltd.) and Arvind Group of companies held major portion of equity capital of the transferor and transferee-companies and, therefore, voting was bound to be by required majority, but interest of the minority shareholders would stand defeated on account of what is stated above. It has been also asserted that the latest financial position of the companies under amalgamation has not been disclosed as required under section 392 of the. Under such circumstances, the objector has opposed the grant of sanction to the scheme of amalgamation in question.

13. In rejoinder It has been asserted that the last mentioned objector deliberately suppressed the reply dated 26-2-1999 given by the petitioner to the objector. In that reply it was categorically stated that joint valuation report was made valuable at the Registered Office of the company during the specified period as stated in the notice and explanatory statement and the objectors were invited for inspection of the same. The objectors were also informed that upon merger the objectors were to be benefited in as much as they were to participate in much larger and consolidated business resulting in enhanced value to their shares. With regard to the allegations concerning shri Sanjay Lalbhai holding shares of Arvind Polycot Ltd., it has been asserted that the holding is of 20,690 shares of Arvind Polycot Ltd. (APL) as against 241 lakhs equity shares issued by the said company, as is clear from the explanatory statement issued under section 393(1), which was served to the objector also. All the necessary information was supplied and disclosed in the said explanatory statement and the objector was permitted to make his presentation in the meeting of the shareholders of the petitioner-company. Even in the meeting the objector did not allege that he was not permitted to present his point of view as reflected in the objections. It has been asserted that the equity capital of APRL (transferee-company) is as low as Rs. 15 lakhs and on amalgamation the capital would be more than Rs. 80 crores and accordingly the capital of the transferee-company (APRL) is being restructured. In that view of the matter, AML (Arvind Mills Ltd.) would hardly have any shares in APRL as compared to the shares being allotted by APRL. It has been asserted that lead financial institutions of the country, viz., ICICI, IDBI, UTI had their nominees being on the board of directors of all the transferor-companies and they would never agree to accept such exchange ratio as would prejudice any one of the companies under amalgamation. It has been asserted that the Valuers have given adequate reasons for the method of valuation chosen by them and they are well known Chartered Accountants, whose expertise has been accepted by the Hon'ble Supreme Court of India. None of the valuers has been associated with any of the four companies or AML either as an Auditor or as Tax Adviser and their impartiality could not even otherwise be doubted. It has been asserted that valuation report of assets could have been relevant only if the valuation was being done on the basis of break-up value method and that method is not the only method for valuation. The valuers have not based their opinion only on that basis and, therefore, it was not necessary to obtain valuers' report. They have not proceeded to fix the exchange ratio on the basis of any of the assets of the company. In reality, three companies, viz., AIL, APL and ACL are being merged into APRL, which is a shell company and, therefore, a comparison of relevant financial strength of two companies is hardly needed. What is relevant, therefore, is the relevant strength of the three merging companies (Transferor-Companies) and their shares in the ultimate merged company. APRL is only the vehicle to amalgamate three companies and there is no mala fide intention behind this merger. The fact that in past the proposal of merger of AIL with AML was withdrawn, is not a matter of consequence in so far as the present petitions are concerned. ACL and APL both are profit-making companies and that factor would assume importance rather than examination of the working of APRL, which is a shell company. It has been asserted that on amalgamation the present holding of AML into APRL would become extremely insignificant, i.e., less than 0.1 per cent. Thus, the allegations revolving round the presence of AML in the transferee-company prior to amalgamation are stated to be baseless. With regard to the allegation that the objector borrowed a sum of Rs. 63,000, the objector has not mortgaged the shares with AIL and the mortgage has taken place after scheme proceedings commenced, that is to say as late as on 11-3-1999. This is apart from the fact that there is no relevance of such a transaction with the present petition. Similarly statement of financial position of AML would also be irrelevant. If the interest of AML was to be prime consideration, the share exchange ratio would not have been the one suggested in as much as AML and other group companies have been holding 83 per cent shares of AIL, the petitioner transferor-company and AML would be the loser more than the objector and his associates. It has been asserted that latest position of all the companies has been disclosed while denying all the allegations contained in the objections.

14. Dealing with the objections of other two objectors in so far as APL (another transferor-company) is concerned, it has been asserted in the affidavit-in-rejoinder filed in Company Petition No. 70 of 1999 on 19-4- 1999 that the notices of the meetings were despatched in accordance With the other dated 24-1-1999 as modified by the order dated 20-2-1999 (Goxam : H.L. Gokhale, J.) and they were sent under certificate of posting addressed to all the equity and preference shareholders. The photocopies of such certificates of posting have been produced. The objectors hold in all 3,300 shares and at the meeting of the Shareholders the scheme was voted in favour of amalgamation by the shareholders holding more than 97 lakhs equity shares. Thus, the scheme, even if the objectors holding 3,300 share of the transferor-company voted against the scheme, would have been assed by more than 99.9 per cent majority in value. It has been asserted that the objections with regard to report of the valuers are irrelevant apart from being misleading. Valuers were requested as per letter datedp-11-1998 to undertake the valuation. Further the report was available on22-1-1999. The same was placed in the meeting of the board of directors of the company held on 24-1-1999. Thereupon the work of drafting of the petitions was undertaken. The application was filed on 28-1 1999.Thus, there was no question of raising any suspicion with regard to report of the valuers. Referring to the earlier proceedings it has been asserted that the petition for sanction of the scheme of amalgamation of ArvindIntexLtd. (transferor-company AIL) with Arvind Mills Ltd. (AML) was withdrawn because of the stand taken by the foreign investors holding large number of shares in Arvind Mills Ltd., and that small shareholders were likely to be prejudicially affected. In fact, there were no mala fides either in the proposed scheme or withdrawal thereof. The valuers' reports have been considered by the Chartered Accountants appointed by the Official Liquidator and by the office of the Regional Director, Department of Company Affairs, Bombay and they have found no objection to the same. It cannot be said that the valuers have done valuation without taking into consideration all the relevant facts including market value as well as market value of the assets of the respective companies coupled with profits earned by them. The reasons for amalgamation of the three companies have been stated in the explanatory statement issued under section 393 and they have been reiterated. The valuers/the two renowned firms of the Chartered Accountants, namely, Bansi Mehta & Co. and C.C. Chokshi & Co., have arrived at their opinion with regard to fixation Of share exchange ratio, after taking into all relevant factors and that the valuers are either directly or indirectly unconnected with any of the companies under amalgamation. There is, therefore, no reason to discard their opinion as regards share exchange ratio. The inspection of the valuation report was permitted at the registered office of the company between 10.00 a.m. to 12.00 noon on any working day prior to the date of meeting. None of the objectors have made any attempt/effort to inspect the said reports. Under such circumstances and in law there is no question of giving copy of the valuation report to the individual shareholders. It has been submitted that along with the money order the objector communicated for supply of copies of the individual reports of the amalgamating companies only and the same came to be supplied as and when demanded. It has been asserted that the transferee-company is not an insolvent company and that apart the same is being used as Shell company in which three transferor-companies are being amalgamated and in substance there would be amalgamation of three transferor-companies. The reiterated propositions /reasons for the pro-posed amalgamation as appearing in the explanatory statement (paras. 14 and 15) are reproduced. They may be reproduced here :

"(14). The transferee-company is a company which is wholly owned by the Arvind Mills Ltd. the transferee-company currently does not carry on any significantbusiness activity. After the amalgamation, the transferee-company will be able to effectively, capture business synergies that exist between Cotton Yarn, Denim and Gabardine particularly in the light of Gabardine production capacity being set up by the Arvind Mills Ltd.

(15) The amalgamation of the transferor-companies into the transferee- company will integrate business operations and introduce considerable synergies in the business of the transferor-companies. The amalgamation is also expected to result in a structure elimination, the cross holdings between these groups companies and would also eliminate inter-company transactions and the inefficiencies arising as a result of such inter company dealings. The Group believes that upon merger the Group would reap the benefit of consolidation through focused management and lower costs and would reflect a better consolidated financial picture. Upon completion of the current restructuring exercise, the Group will have a more focused and leaned structure and would reflect a better consolidated financial picture."

15. With regard to the second objector Mr. Dipak J. Shah it has been asserted that he has been in habit of raising all sorts of frivolous disputes against the Lalbhai Group Companies and against large number of other companies, particulars whereof have been set out on page 56. They need not be repeated as it cannot be said that merely because he is in minority such as holding two shares in APL he is not entitled to raise his objections. With regard to his reckless allegations, he has tendered apology as aforesaid and appropriate order will hereafter be passed. It has been asserted that although this objector was not entitled to receive copies of the other objections, such copies were also supplied to him. This objector has personally remained present in the meeting and, therefore, there is no question of his alleged grievance with regard to non-receipt of notice, being dealt with. Without repeating the reply to the allegations similarly made in respect of non-supply of valuation reports it has been asserted that the deponent never refused the objector taking out extracts of the report. Referring to the Right Issue made by the company it has been asserted that the total amount received in Right Issue made in 1992-93 has been completely utilised. Therefore, there was no question of returning any money unless the company would resort to capital reduction. It has been asserted that no wrong statement has been made in any of the affidavits. It has further been asserted that Arvind Mills Ltd. (AML) has not been any where in picture as depicted in so far as the scheme of amalgamation is concerned. The voting at the meeting had taken place in accordance with the law and the Chairman had already filed his report as to the outcome thereof. The objector did not find single mistake in respect of the conduct of the meeting. It has been asserted that few shareholders who were present in the meeting holding proxies of the different mem- bers of the companies did cast votes as per the number of proxies they were holding. Hence, there is no question of multiplicity of voting by one person. It has finally been submitted that the objections raised by this objector are baseless, irrelevant and not even worth countering.

Submissions and consideration of the objections :

16. At the outset, it may be noted that since two of the objectors were parties in person, they were heard extensively. Their common objection with regard to sending of notices unless certificate of posting was scrutinised by permitting them inspection of all the books containing particulars of despatch of notices with respective notings of certificate of posting. Even after such a Searching inquiry, they were not able to point out any deliberate attempt made by any of the officers/employees of the transferor-company APL in seeing that some selected shareholders were deliberately prevented from attending the meeting. A faint effort was made by them to show that there was single stamping on the respective pages of the register by the Postal Authorities. This court had an occasion to examine the register even from that angle, but no direct or indirect attempt on the part of either the employees of the transferor-companies or the Postal Authorities could be spelt out. In that view of the matter, it cannot lie in the mouth of the objectors to say that the procedure of convening meeting of the shareholders has not been either duly or properly complied with. Same would be the position with regard to the objector in petitioner AIL, the transferor-company. However, Mr. Mahesh Bhavsar, the learned advocate appearing for that objector commenced his submissions by giving a list of decisions1!rom which he was to make his submissions. Mr. Soparkar, the learned advocate for the petitioner also referred to some decisions. It would, therefore, be necessary to briefly note down legal position in respect of scope of the inquiry concerning granting of sanction to the proposed scheme ofamalgamation.

17. Reference has been made to a decision of the Calcutta High Court in Calcutta Industrial Bank Ltd., In re [1948] 18 Coma Cas. 144. Broadly it has been observed in this case that the scheme must be practical and feasible and what has to be seen is whether requirements of statute have been met with and material facts should be placed before the meeting. The Court might also look to the surrounding circumstances leading to the proposal of the scheme. Reference has then been made to a Blench decision in the case of J.S. Davar v . Shanker Vishnu AIR 1967 Bom 456 [LQ/BomHC/1966/88] reiterating the proposition that the scheme should be reasonable and feasible. It has been observed that the scheme must not be contrary to public interest or commercial morality.

Reliance has also been placed on the decision of the Delhi High Court in the case of Auto Sterling India (P.) Ltd., In re [1977] 47 Comp. Cas. 257. Reference there has been made to the scheme being approved by requisite majority of 3/4th of the secured and unsecured creditors and laying of latest financial position of the company before the creditors. A decision of Punjab and Haryana High Court in the case of MM. Sehgal v. Sehgal Papers; Ltd. [1986] 60 Comp. Cas. 510has been referred to for the purpose of compliance of requirements of section 391(2). In that case a scheme of arrangement was for consideration. It has been observed that conscious act of, required majority of secured creditors should be borne in mind. Reference has then been made to a decision in the case of Bhaskar Stoneware Pipes(P.) Ltd. v. Rajinder Nath Bhaskar [1988] 63 Comp. Cas. 184(Delhi). That was a case in which question was one regarding diversion of funds in the winding up proceedings.

In Union of India v. Ambalal Sarabhai Enterprises Ltd. [1984] 55 Comp. Cas. 623 (Guj.) section 23 of the M.R.T.P. Act was under consideration while pointing out three required conditions for amalgamation, namely, there should be two inter-connected undertakings, they should not be dominant undertaking and they should be producing same goods. Patiala Starch & Chemical Works Ltd. In re [1958] 28 Comp. Cas. 111(Punj.) was the case concerning the shareholders passing resolution having interest in the transferee-company and valuation of assets was not based on disinterested opinion. On facts, therefore, the Punjab High Court did not sanction the Scheme. A single Bench of the Delhi High Court in Union of India v. Asia Udyog (P.) Ltd.. [1974]44 Comp. Cas. 359observed (in the context of tax liability) that the liability of a transferee-company to pay the creditors of the transferor-company would not be a step in aid of the amalgamation, but would be a consequence thereof. In Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd. [1964] 34 Comp. Cas. 405(CA) Board's power to appoint Managing Director and Managing Director's authority to appoint an Architect was under consideration. Following observations appearing in Sussex Brick Co. Ltd, In re [ 1960] 30 Comp. Cas. 536 (Ch. D.) have also been read :

"The matter has been considered m more than one case, and the governing considerations were well stated by Maugham, J. Hoare & Co. Ltd, In re [1933] 150 L.T. 374. Summarising his judgment, it really comes to this : That an applicant, taking advantage of section 209, has, in effect, to show that the scheme is to him unfair, and mat is the yardstick which is accepted and adopted as the criterion which enables a shareholder to get out of the provision of the section…

******

Maugham, J. said:... The other conclusion I draw is this, that again prima facie the Court ought to regard the scheme as a fair one in as much as it seems to me impossible to suppose that the Court, in the absence of very strong grounds, is to be entitled to set up its own view of the fairness of the scheme in opposition to so very large majority of the shareholders who are concerned…'" (p. 537)

In Grierson Oldham & Adams Ltd, In re [1967] 37 Comp. Cas. 357 (Ch. D.) it has been held that the Court is to exercise its discretion while noting fairness to the body of shareholders and not individual. Then there is a decision of the Calcutta High Court in Eita India Ltd., In re [1996] 4 Comp. LJ. 346/10 SCL 35.

It has been observed in this decision that all statutory formalities should be complied with. The Court has to be satisfied that no charge of fraud against valuer is made out. If these requirements are satisfied, the Court must proceed on the basis of the valuation as made.

In my opinion, the legal position with regard to different considerations while dealing with the proceedings of according sanction to a scheme of amalgamation has now been clearly settled. In the first place in Mafatlal Industries Ltd, In re [1995] 84 Comp. Cas. 230 (Guj.) S.D. Shah, J. as he was then, had an occasion to deal with number of questions and considerations while dealing with a scheme of amalgamation. He has observed that while deciding the matter normally scheme of amalgamation has to be sanctioned if mere is approval by required majority in value. The concerned objector must object to the scheme at the meeting. It has also been observed that similarity of activities as amongst the amalgamating companies would be one of the considerations apart from the synergy of operations to be achieved. Dealing with the question of valuation, he has observed that there would be some element of guess work and arbitrariness involved in the valuation. That, however, will not deter according of sanction to the scheme of amalgamation. This decision was carried in O.J. Appeal and the Division Bench of this Court confirmed the same. The decision of the Divisionwench in Mafatlal Industries Ltd., In re [1996] 87 Comp. Cas. 705 (Guj.). Dealing with the broad propositions to be borne in mind the Bench said that without multiplying propositions, to borrow the expressions of Chandrachud, J., in J.S. Davar's case (supra), it is not possible to enumerate exhaustively what material the Court is entitled to take into consideration, but the Court is required to examine each scheme on its merits and in the light of attendant circumstances. The Court has to view totality of scheme and its workability primely from the following points of view :

(i)Whether it satisfies the statutory requirement.

(ii)Whether it satisfies the lest of reasonableness and whether the scheme proposed is in good faith which a man of business would reasonably approve.

There the Bench observed with regard to exchange ratio as under :

"This principle was succinctly seated by the Calcutta High Court in the case of Maknam Investments Ltd., In re [1995] 4 CLJJ 300/[1996] 87 Comp. Cas. 689, 695, that it is a matter for the shareholders to consider commercially whether amalgamation or merger is beneficial or not. The court is really not concerned with the commercial decision of the shareholders until and unless the court feels that the proposed agreement is manifestly unfair or is being proposed unfairly and/or to defraud other shareholders. Whether the merged companies will be ultimately benefited or not, or will be able to economise in the matter of expenses is a matter for the shareholders to consider....

The Court is really not concerned with the exact details of the matter and if the shareholders approved the scheme by the requisite majority, then the Court only looks into the scheme as to find out that it is not manifestly unfair and/or is not intended to defraud or do injustice to other shareholders…The Court does not go into the matter for fixing the exchange ratio in great detail or to sit in appeal over the decision of the Chartered Accountant. If the Chartered Accountant of repute has given the exchange ratio as per valuation made by him and if the same is accepted by the requisite majority of shareholders, the court will only see whether there is any manifest unreasonableness or manifest fraud involved in the matter.

This principle follows the ratio of decision of the Supreme Court in the case of Hindustan Lever Employees' Union v. Hindustan Lever Ltd. [1994] 4 Comp. LJ 267 : [1995]83 Comp. Cas. 30." (p. 787)

The decision was taken before the Hon'ble Supreme Court in Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp. Cas. 792/10 SCL 70. Without detaining any further with the detailed discussion at this stage, it would be appropriate to reproduce what the Supreme Court has said and onwards:

"In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the company court has clearly got earmarked. The following broad contours of such jurisdiction have emerged:

(1) The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by section 391(1)(a) have been held.

(2) That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by section 391(2).

(3) That the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class.

(4) That all necessary material indicated by section 393(1)(a) is placed before the voters at the concerned meetings as contemplated by section 391(1).

(5) That all the requisite material contemplated by the proviso to sub section (2) of section 391 of theis placed before the court by the concerned applicant seeking sanction for such a scheme and the Court gets satisfied about the same.

(6) That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously x-ray the same.

(7)That the company court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same class whom they purported to represent,

(8) That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial tdthe class represented by them for whom the scheme is meant.

(8) Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the court there could be a better scheme for the company and its members or Creditors for whom the scheme is framed. The court cannot refuse to sanction such a scheme on mat ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction.

The aforesaid parameters of the scope and ambit of the jurisdiction of the company court which is called upon to sanction a scheme of compromise and arrangement are not exhaustive but only broadly illustrative of the contours of the court's jurisdiction." (p. 818)

The Supreme Court dealt with the matter in the background of the aforesaid propositions and dismissed the appeal.

Finally reference will be made to the decision of the Larger Bench in the case of Hindustan Lever Employees Union v. Hindustan Lever Ltd. AIR 1995 SC 470 [LQ/SC/1994/1011] /[1994] 2 SCL 157which decision has also been referred to in Miheer H. Mafatlal's case (supra).

18. Keeping before the mental eyes above legal position with regard to granting sanction to the scheme of amalgamation, the objections of the two objectors in person and of the 3rd objector represented by Mr. M.N. Bhavsar might broadly be considered.

19. Before the objections which can be clubbed together are dealt with, it may be noted at the outset that the objector Mr. Hasmukhlal C. Shah read object clause of the transferee-company from the report of the Chartered Accountants. The clause appears at No. 3.4.2 in that report. It would read:

"3.4.2. The objects of the Company as contained in its Memorandum of Association are to inter alia transact or carry on agency business to carry on (sic) of the business of trading and generally dealing in earth and ores of all kinds, including iron ore, ferromanganese, china clay, quarts, Silica, abrasives, minerals, aluminium, aquamarine asbestos, barium materials, bauxite, pipes, Flurospars and mineral substances."

It was, therefore, submitted that the object cause is not such as would cover the business and affairs of the transferor-companies. It was then pointed out by the learned advocate appearing on behalf of the respective companies that mere was an amendment in the object clause of the transferee-company carried out as per the procedure prescribed under the relevant provisions of the. That object clause has been read before this Court and it might be reproduced :

MEMORANDUM OF ASSOCIATION

OF

ARVIND PRODUCTS LTD.

"I The name of the Company is "Arvind Products Limited".

II The Registered Office of the company will be situated in the State of Gujarat.

III The objects for which the Company is established are:

[A] The main objects to be pursued by the company on its corporation:

1. To carry on the business of spinners, weavers, manufacturers, grinners, pressers, packers and balers of cotton, jute, hemp, silk, wool, and any other fibrous material and the business of weaving, manufacturing, bleaching, dyeing, colouring, printing selling" and buying and dealing as principals or agents in any of the above substances and yarn, cloth, linen and other goods and fabrics, whether textile, fabric, knitted or looped and of buying, selling and dealing as principals or agents in cotton and other fibrous materials, yarn, cloth, linen land other goods or merchandises made thereof, and generally to carry on the business of cotton, spinners and doublers, flax, hemp and jute sinners, linen manufacturers, cotton, flax, hemp, jute, silk, wool, yarn and cloth merchants, bleachers and dyers, wool combers, worsted spinners, woollen spinners, worsted stuff manufacturers, makers of vitriol bleaching and dyeing materials, and to purchase, comb, prepare, spin, dye and deal in flax, hemp, jute, wool, cotton, silk and other fibrous substances, transact all manufacturing or curing and preparing processes, and mercantile business that may be necessary or expedient, and to purchase and vend raw materials and manufactured articles.

2 To carry on the business of Manufacturers, Producers, Processors, Spinners, Weavers, Knitters, Combers, Importers, Exporters, Buyers, Sellers of and Dealers in all kinds of Fibers, Yarn and Fabrics whether synthetic, Artificial or Natural viz., Polyester, Polypropylene, Nylon, Acrylic, Polynosic or other synthetic Fibers/Yarns Artificial Silk, Viscose, Rayon or other man made fibers or Yarns, Cotton, Worsted Shoddy, Silk, Jute, Ramie, Hemp, Linen or any other fibrous materials, textile Substances, Allied products, Waste products and Substitutes for all or any of them and to treat and to utilise any waste arising from any such manufacture, production or process and further to carry on the business of ginning, pressing, baling or otherwise packing of Cotton Kapas, yarn waste of all kinds raw-materials, whether Synthetic, Artificial or Natural, Yarn waste, Hemp, Jute, or other Fibrous materials.

3. To carry on the business of manufacturers, exporters, importers, wholesale and retail dealers, as principals or agents of and in men's, women's and children's clothing and wearing apparel, furnishing fabrics and made-ups of every kind, nature and description.

[B] The, objects incidental or ancillary to the attainment of the main object are:

1. To build, construct, alter, maintain, enlarge, pull down, remove or replace, arid to work, manage and control any buildings, offices, factories, mills, shops, machinery, engines, roadways, tramways, railways, branches or sidings, Bridges, reservoirs, water courses wharves, electric works and other works and conveniences which may seem calculated directly or indirectly to advances the interests of the Company, and to join with any other person or company in doing any of these things.

2. To apply for purchase, or otherwise acquire, and protect and renew in any part of the world any patents, rights, trade marks, designs, licences, concessions, and the like, conferring any exclusive or limited right to their use, or any secret or other information as to any invention which may seem capable or being used for any of the purposes of the company, or the acquisition of which may seem calculated directly or indirectly to benefit the company, and to use, exercise develop or grant licences in respect of, or otherwise turn to account the property, rights or information so acquired, and to expend money in experimenting upon, testing or improving of any such patents, inventions or rights.

3. To acquire and undertake the whole or any part of the business, property, and liabilities of any person or company carrying on or proposing to carry on any business which the company is authorised to carry on, or possessed of property suitable for the purposes of the Company, or which can be carried on in conjunction therewith or which is capable of being conducted so as directly or indirectly to benefit the Company.

4. To amalgamate, enter into partnership or into any arrangement for sharing profits, union of interests, co-operation, joint venture or reciprocal concession, or for limiting competition with any person or company carrying on or engaged irk or about to carry on or engage in, any business or transaction which the company is authorised to carry on or engage in or which can be carried on in conjunction therewith or which is capable of being conducted so as directly or indirectly to benefit the Company.

5.( a)To vest any real or personal property, rights or interest acquired by or belonging to the Company in any person or company on behalf of or for the benefit of the Company, and with or without any declared trust in favour of the Company.

(b) To subscribe for, take or otherwise acquire, and hold shares, stock, debentures, or other securities of any other company having object altogether or in part similar to those of the Company, or carrying on any business capable of being conducted so as directly or indirectly to benefit the Company.

6. To invest and deal with the moneys of the Company not immediately required in any manner and to open current, savings, fixed deposit or any other banking Account with any bank and to pay into and draw money from these accounts.

7. To lend and advance money or give credit to such persons or companies and on such terms as may seem expedient, and in particular to customers and others having dealings with the Company, and to guarantee the performance on any contract or obligation and the payment of money of or by any such persons or companies, and generally to give guarantees and indemnities.

8. Subject to sections 58A, 292 arid 293 of the Companies Act and Rules thereunder and directions of Reserve Bank of India, to receive money on deposit or loan and borrow or raise money in such manner as the Company shall think, fit, and in particular by the issue of debenture, or debenture stock (perpetual or otherwise) and to secure the repayment of any money borrowed, raised or owing by mortgage, charge or lien upon all or any of the property or assets of the company both present and future, including its uncalled capital, and also by a similar mortgage, charge or lien to secure and guarantee the performance by the Company or any other person or company of any obligation undertaken by the Company or any other person or company as the case may be. However, the Company shall not carry on any Banking or Insurance Business.

9. To draw, make, accept, endorse, discount, execute, and issue promissory notes, bills of exchange, bills of lading, warrants, debentures, and other negotiable or transferable instruments.

10. To apply for, promote and obtain any act of Parliament, charter, privilege, concession, licence or authorisation of any Government, State or municipality, or other authority for enabling the Company to carry any of its objects into effect or for extending any of the powers of the Company or for effecting any modification of the Company or for any other purposes which may seem expedient, and to oppose any proceedings or applications which may seem calculated directly or indirectly to prejudice the interests of the Company.

11. To sell, lease, mortgage or otherwise dispose of the property, assets or undertaking of the Company or any part thereof for such consideration as the Company may think fit, and in particular for shares, stock debentures, or other securities of any other company whether or not having objects altogether or in part similar to those of the Company.

12. To distribute among the members in specie any property of the Company, or any proceeds of sale or disposal of any property of the Company but so that no distribution amounting to a reduction of capital be made except with the sanction (if any) for the time being required by law.

13. Subject to the provisions of the, to Receive deposits on interest or otherwise and to lend money and negotiate with or without security to such companies, firms or persons and on such conditions as may seem expedient and to guarantee the performance of contracts by any person, companies or firms.

14. To enter into any arrangements with any Government or authorities, supreme municipal, local or otherwise, or any person or company that may seem conducive to the objects of the company or any of them, and to obtain from any such Government authority, person or company any rights, privileges, charters, contracts, licences and concessions which the Company may think fit desirable to obtain and to carry out, exercise and comply therewith.

15. To pay but of the funds of the Company all expenses which the Company may lawfully pay with respect to the formation and registration of the Company or the issue of its capital, including brokerage and commissions for obtaining applications for or taking, placing or underwriting or producing the underwriting of shares, debentures or other securities of the Company.

16. To pay for any rights or property acquired by the Company, and to remunerate any person or company whether by cash payment or by the allotment of shares, debentures or other securities of the Company credited as paid-up in full or in part or otherwise.

17. To establish and maintain or procure the establishment and maintenance of any contributory or non-contributory pension or superannuation funds for the benefit of, and give or procure the giving of donations, gratuities, pensions, allowances or emoluments to any persons who are or were at any time in the employment or service of the Company, or of any company which is a subsidiary of the Company or is allied to or associated with the Company or with any such subsidiary company, or who are or were at any time Directors or Officers of the Company or of any such other Company as aforesaid, and the wives, widows, families and dependents of any such persons, and also establish and subsidies and subscribe to any institutions, associations, clubs or funds calculated to be for the benefit of or to advance the interests and well-being of the Company or of any such other company as aforesaid, and make payments to or towards the insurance of any such person as aforesaid, and do any of the matters aforesaid, either alone or in conjunction with any such other company as aforesaid.

18. To establish or promote or concur in establishing or promoting any company or companies for the purpose of acquiring all or any of the property, rights and liabilities of the Company or for any other purpose which may seem directly or indirectly calculated to benefit the Company and to pay all preliminary expenses of these companies including or any part of the cost and expenses of owners of any business or property acquired by the company and to place or guarantee the placing of, underwrite, subscribe for or otherwise acquire all or any part of the shares, debentures or other securities of any such other company.

(C) Other objects:

1. To carry on all kinds of Agency businesses including that of Clearing Agents, Freight Contractors, Steamer Agents, Forwarding Agents, Licensing Agents and General Brokers.

2. To buy, import, export, sell and generally deal either on cash, deferred payments instalments or hire purchase basis in all plant and machinery, implements, accessories, tools, materials, substances, goods or things of any description including tractors, power tillers, sprayers, dusters, mist blowers, and all types of modern agricultural implements, fertilizers and all types of plant foods, pesticides, insecticides, fungicides, and all types of plant projection chemicals, fishing boats, crafts and trawlers, fishing nets, gadgets cold storages, deep freeze equipment and all types of equipment required for forestry, animal husbandry, poultry, farming, pisciculture, sericulture, agricultural equipments for processing and preserving forest produce, agricultural produce and all other food materials including materials or animal origin, fuel oils, lubricants and such articles allied to the above.

3. To carry on business of manufacturers of and dealers in all kinds of air- conditioning plants, refrigerators, cooling appliances, apparatuses and machinery, and all component parts, accessories, articles and fittings required for that purpose.

4. To promote, establish, improve, develop, administer own and run agro- industries, projects or enterprises or programme for manufacture, processing or production of plant, machinery, implements, accessories, tools, materials, substance goods or things of any description which in the opinion of the Company will help the growth modernisation and preservation of agriculture, horticulture, forestry, pisciculture, sericulture, apiculture, poultry farming and of animal origin or purpose of increasing quality or availability or otherwise of goods and subsidiary foods in all their forms and variations either for export or consumption in their company.

5. To carry on the business of manufacturers of and dealers in chemicals, chemical compounds (organic and inorganic) in all forms, and chemical products of any nature and kind whatsoever, and all by-products and joint products thereof.

6. To carry on business as chemical engineers, analytical chemists, importers, exporters, manufacturers of and dealers in heavy chemicals, acids alkalies, petro-chemicals, chemical compounds, and chemicals of all any kinds (solid liquid and gaseous), drugs, medicines, pharmaceuticals, antibiotics, tennis, tannin extracts, essences, food colours, solvents, plastics of all types, dyestuffs, intermediates, textile auxiliaries, cellophanes, colours, dyes, paints, varnishes, vat and other organic dyestuffs, chemical auxiliaries, disinfectants, insecticides, fungicides, deodrants, biochemical and pharmaceutical, medicinal, sizing, bleaching, phtographical preparations and articles.

7. To carry on in India or abroad the Business of producers, manufacturers, importers, exporters of and dealer in all kinds of paints, distempers, pigments, writing, printing and inks of all other kinds and raw materials used for the preparation of the above, and to carry on the business of manufacturing, fabricating, developing improving, repairing or otherwise dealing in all such machinery, plant, equipment and other related facilities for the production of the aforesaid.

8. To carry on the business of an investment company and to underwrite, sub-underwrite, to invest in, and acquire and hold, sell, buy or otherwise deal in snares, debentures, debentures stocks, bonds, units, obligations and securities issued or guaranteed by Indian or Foreign Governments, State, Dominions, Sovereigns, Municipalities, or Public Authorities or Bodies and shares, stocks, debentures, debenture-stocks, bonds, obligations and securities issued and guaranteed by any company corporation, firm or person whether incorporated or established in India or elsewhere.

9. To act as financial consultants, management consultants, and provide advice, services, consultancy in various fields general administrative, commercial, financial, legal, economic, labour, industrial, public relations, scientific, technical, direct and indirect taxation and other levies, statistical, accountancy, quality control and data processing.

10. To manage investment pools, mutual funds, syndicates in shares, stocks, securities, finance and real estate.

11. To manufacture, buy, sell, export, import, deal in, assemble, fit repair, convert, overhaul, after, maintain and improve all types of electronic components, devices, equipments and appliances, equipments such as television and wireless apparatus including radio receivers and transmitters, tape recorders, broadcast relay and reception equipments phonographs and other equipments used in and or for audio and visual communications, apparatus and equipments including those using electromagnetic waves intended for radio-telegraphic or radio-telephonic communication photocopiers , electronic lighting controls, continuous fan/motor speed controls, continuous flashers and fire alarm systems, digital and other electronic clock, time relays, punch card machines, electromechanical pneumatic controls, computers and automatic calculators, X-ray machines and tubes, surgical, medical and other appliances intended for electro and other therapy treatment and in all types of tapes, magnetic and otherwise, photographic films, projectors and cameras, and capacitors, resistance, condensers, semi-conductors, transistors, rectifiers, integrated and hybrid circuits, relays, pollinate meters, connectors, printed circuits, coils, chokes, transformers, switches, volume controls, plugs, sockets, aerial gears, diodes and allied items intended for and used in electronic devices, and in air-conditioners, refrigerators, washing machines, heaters and cooking ranges and other types of domestic appliances and any type of equipment used in the generation, transmission and receiving of sound, light and electrical impulses and component parts thereof and other materials used in or in connection with electronic and electrical industries.

12. To take part in the information, supervision or control of the business or operations of any company or undertaking and for that purpose to act as an Issue House, Registrars and Share Transfer Agents, Financial Advisers or Technical Consultants and to appoint and remunerate any directors, administrators or accountants or other experts or agents.

13. To manufacture, process, prepare, preserve, can, refine, bottle, buy, sell and deal whether as wholesalers or retailers or as exporters or importers or as principals or agents, in foods, meats, eggs, poultry, vegetables, canned and tinned and processed foods, protein, health and instant foods of all kinds including baby and dietetic foods, cereals, beverages, cordials, tonics, restorative and aerated mineral waters and foodstuffs and consumable provisions of every description for human or animal consumption.

14. To carry on any where in India and/or else where the business of manufacturers, importers and exporters, wholesale and retail dealers of and in men's, women’s and children's clothing and wearing apparel and hosiery goods of every kind nature and description including and hosiery and dealers of all tyres of readymade garments, all dresses made of natural synthetic or blended textiles of all types and of every description.

15. To carry on all or any of the business of dealers and manufacturers of all kinds of carpets, durries, mats, rugs, namdas, blankets, shawls, tweeds, linens, flannels of woolen and worsted materials and of all articles similar to the foregoing or any of them or connected therewith.

16. To carry on the business of manufacturing and compressing all kinds and description of gases for industrial, medicinal for domestic use including oxygen, hydrogen, nitrogen, carbonic acid, acetylene and any other gases or kindred substances, or any compounds thereof by any process, and of selling or applying such gases, substances and compounds or any of them to such purposes as the Company may from time to time think desirable and to manufacture, buy, sell, let on hire and deal in engines, electrodes, transformers, gas cylinders, compressors, welding machines and other apparatus and conveniences which may seem calculated to promote (directly, or indirectly) the consumption of gases.

17. To carry on the business of manufacturing, buying, selling, importing, exporting, distributing of all sorts and categories of Textiles stores, iron and steel, Mill store, Hardware, ferrous and Non-Ferrous metals, Electrical goods and Components, Machinery, Machinery parts, Precision tools and implements and such materials and merchandise incidental thereto or connected therewith.

18. To carry on the business as importers, exporters, manufacturers of and dealers in all kinds of household appliances including refrigerators, dryers, heaters, presses, pressure cookers, ovens, cooking ranges, hot plates, other cooking utensils of all types, containers, buckets, toasters, mixers, washing machines and other electric appliances including radios, televisions, transformers and electric motors of every kind and description.

19. To build, take on lease, purchase or acquire in any manner whatsoever any apartments, houses, flats, bungalows, row houses, rooms & huts or other accommodation for residential use and to let or dispose of the same on any system of instalment payment basis rent, purchase basis or by outright sale whether by private treaty or in any other mode of disposition all or any integral part thereof.

20. To provide long-term finance to any person or persons or cooperative society orassociation of persons or body of individuals either at interest or without and/or with or without any security for construction, purchase, enlarge, or repair of any houses, hats, row houses, bungalows, rooms, huts used for residential purpose either in total or part thereof or to purchase any freehold or leasehold lands, estate or interest in any property to be used for residential purposes.

21. To carry on the business of dealers in machinery and plant of every description and kind and in particular machine, tools and implements, and to repair, alter, convert, recondition, prepare for sale, buy, sell, hire, import, export let out on hire, trade and deal in machine tools and implements, other machinery, plant equipments, articles, apparatus, appliances, component parts, accessories, fittings and things in any stage or degree of manufacture, process or refinement.

22. To manufacture, process, buy, sell, import, export or otherwise deal in all kinds of card board parking, plastic packing, polythene packing, gunny bags, containers, bottles, hollow wares, whether made or leather plastic, H.D.P., L.D.P. polypropylene, plastic P.V.C. and other man-made fibrous material.

23. To carry on the business of manufacturers, importers, exporters and dealers in all kinds and classes of paper board, pulp and all kinds of articles in the manufacture of which in any form paper, board or pulp is used and to purchase or otherwise acquire, settle, improve and cultivate forests, lands, and properties of any tenure whatsoever with a view to producing, cultivating, growing, timber, bamboo or other wood.

24. To purchase or otherwise acquire, manufacture, refine, treat, reduce, distil, blend, purify, pump, store, hold, transport, use experiment with, market, distribute, exchange, supply, sell and otherwise dispose of, import, export, and carry on in all branches the business of refining, blending, processing, storing, transporting, supplying, selling and distributing, consignees and agents for sale, of dealers and refiners of petroleum and chemicals, petro-chemicals and any products by-products and derivates thereof.

25. To carry on the business of manufacturing, acquiring, selling, distributing or otherwise dealing in plastids and resin solutions, solutions, cellulose and celluloid substances and their products and compounds of any description and kind.

26. To design, fabricate, assemble, deal, sell repair, recondition, service, hire, install, maintain, contract all sorts of Plastic Machinery, parts of machinery and instruments.

27. To manufacture and otherwise deal in all kinds of stationery articles, account books, papers, pens, pencils, books, playing and visiting cards, school and office equipment charts, geographical maps, drawing material, mathematical instruments, paper bags and all articles of similar character.

28. To carry on the business of manufacturers, processors, dealers, contractors, agents, suppliers, stockists, representatives, Engineers, Designers, Consultants for any or all of Plastics such as wooven sacks, Monofilament Yarn, Ropes, Twines, Chair cane, Household Articles, Industrial Items and/or Rubber goods including the business of resins and moulding compounds such as ABS, Acetal, Acrylic, Alkyd, Cellulose, Acetate, C.A.B Crosslinked thermoplastics, Epoxy, Melamine, Nylon, Polyamide, Porycarbonate Polyester, Polyethylene Low density & high density, Polyprobylne, polystyrene, polyurethane, P.V.C., U.F., M.F., P.F., C.P.W., D.O.P., Foamed plastics of all kinds, Reinforced Plastics and composites, Plastias Films, sheetings and laminates, Chemicals, Additives, Fillers and reinforcement and all other Plastic materials of all kinds that may be in existence or may be developed in future.

29. To carry on the business of manufacturers, dealers in, exporters and importers of all varieties, kinds and grades of steel, and to carry on and (sic)engineers including (sic) and dealing in steel billets, steel rods, steel rods, steel ingots, steel sheets, steel wires and in all kinds of steel products whether forged, rolled or drawn and consequently to manufacture, sell and deal in all or any or by-products which will be obtained in the process of manufacturing these steel products.

30. To carry on the business of miners, importers and exporters in and dealers in iron ores, chromium ores, magnesite ores, thorium, uranium, asbestos, nickel, copper, lead, tin, bauxite ores and all ferrous and non- ferrous ores of every description and grades whatsoever in any part of the country and to carry on the business of processing, cleaning, melting, forging, grading and machining to convert the ores into marketable metals.

31. To manufacture, deal, import and export pig iron, sponge iron, farrows silicon, ferrochame and other ferrous substances and metals of every description and grades and all kinds and varieties of non-ferrous raw metals such as aluminium, copper, tin, lead and the by-products obtained in processing and manufacturing these raw metals.

32. To buy, sell, transfer, hypothecate, deal in and dispose of any shares, stocks, securities, properties, bonds any Government, local authority bonds & certificates, debenture, whether perpetual or redeemable debenture stocks.

33. To undertake and carry on the business as investment company and in particularly investment and dealing in shares and securities and establishment, promotion and management of mutual funds, and to provide financial advisory and consultancy services.

34. To carry on anywhere in India or abroad the business as importers, exporters, manufacturers of and dealers in all types of synthetic yarn, plant and machinery and chemicals used in production of synthetic yarn.

35. To establish and carry on the business of manufacturing, buying, selling, importing, exporting, letting on hire and otherwise dealing in all kinds of sewing machines cutting, stitching and button holing machines, all kinds of tailoring materials and other similar and analogous materials. 36. To cultivate, grow, produce and deal in any vegetable products and to carry on all or any of the business of foremen, dairymen, milk contractors, diary foremen, millers, surveyors and vendors of milk, cream, cheese, butter, poultry and provisions of all kinds, growers of, and dealers in, corn, hay and straw, seedsmen and to buy, sell and trade in any goods which are usually needed in any of the above businesses or business associated with the foregoing or other interests of the company.

37. To engage in and carry on anywhere in India or abroad the business of warehousing, transporting and carriage of goods and to provide storage and protection of goods against insects, ants, rats, moisture, rain, fire and other natural or man-made calamities.

38. To market products and/or services under established brands and to promote the popularity of such brand and to carry on the business of Merchants, Brokers, Agents, Stockist, Dealers, Sellers, Buyers, Importers and Exporters of all kinds of Hosiery goods whether synthetics, artificial or natural Ready-made garments, Interlinings, Accessories required for garments, Textile Machineries and spare parts, Engineering, Electrical and Electronic goods, Spares, Consumable, Colours, Chemicals, Dyes, Dyes intermediates, Petro-chemicals, Plastics, Packing materials of all kinds and description, their products and by-products or their convertors.

39. To undertake and carry on generally the business as Finance company and in particular Financing of Industrial enterprises, Housing finance, Bills discounting, Factoring, Financing to all kinds and description of Plants, Machineries, Equipments, Household appliances, Office equipments, Furniture, Computers and Vehicles.

40. To act as agents or brokers and as trustees for any person or company and to undertake and perform sub-contracts and to do all or any of the above things in any part of the world, as principals, agents, trustees, contractors and either alone or jointly with others, and, either by or through agents, sub-contractors, trustees or otherwise."

20. It would, therefore, appear that the objector, quite unmindful of the amendment in the aforesaid clause in the Memorandum of Association of the transferee-company, appears to have raised objection with regard to the said clause.

21. The second objection which would merit consideration at this very stage is concerning quite disproportionate capital of the transferee- company so as to take within it the transferor-companies by working as a shell. Here also the same conclusion would ensue in as much as it is clear from the scheme of amalgamation sought to be sanctioned that the capital of the petitioner transferee-company as on 1-1-1999 will stand restructured. Clause 14 will assume importance in this respect. It would read as under:

"( a)Upon the coming into effect of this Scheme, the authorised share capital of the Transferee-Company in terms of its Memorandum and Articles of Association shall stand enhanced and the share capital clause in the Memorandum of Association and the Articles of Association of the transferee-company shall automatically stand amended accordingly and shall read as follows :

"The authorised share capital of the company is Rs. 2,15,00,00,000 (Rupees two hundred fifteen crores) divided into 15,00,00,000 (fifteen crores) Equity Shares of Rs. 10 (Rupees ten) each, and Preference Shares of Rs. 65,00,00,000 (Rupees sixty five crores) with power for the Company to increase or reduce the Share Capital and Preference Share Capital and to attach thereto respectively such preferential, qualified or special rights, privileges and conditions as may be determined by or in accordance with the Articles of Association of the Company for the time being in force, and to vary, modify or abrogate any such rights, privileges and conditions in such manner as may for the time being be permitted by the Companies Act, 1956 or any statutory amendment or modification thereof or provided by the Articles of Association of the Company for the time being in force."

(b) With effect from the Effective Date, the issued and paid-up equity share capital of the transferee-company shall be reorganised by way of variation of rights attached to the existing equity shares of the transferee-company in pursuance of the relevant provisions of the in the following manner :

(i)for every 150 (one hundred and fifty) equity shares held by each shareholder of the transferee-company whose name appears in its register of members on a date to be determined by the Board of Directors of the transferee-company or any committee thereof, shall be issued and allotted (prior to the Record Date) the following quantity of fully paid shares of the transferee-company:

(A)135 (one hundred and thirty five) 13.5% cumulative redeemable preference shares of Rs. 10 each redeem able at par at the end of ten years or earlier at the option of the transferee-company by giving three months notice; and

(B)15 (fifteen) equity shares of Rs. 10 each.

(ii)In the event that any shareholder of the transferee-company becomes entitled to a fraction of a share of a value not less than one-half shares, then such shareholder shall be entitled to one share. In the event that any shareholder of the transferee-company becomes entitled to a fraction of a share of a value less than one-half share, then such shareholder's entitlement shall be ignored and such shareholder shall not be entitled to be issued any share in respect of such fractional entitlement.

(c)Upon the coming into effect of this Scheme the borrowing limits of the transferee-company in terms of section 293(1)(d)of the said Act, shall without further act or deed stand enhanced by an amount being the aggregate liabilities of the transferor-companies which are being transferred to the transferee-company pursuant to the Scheme, such limits being incremental to the existing limits of the transferee-company."

22. Then there is an objection with regard to the existing financial condition of the transferee-company. It has been submitted that the assets are worth Rs. 1,35,00,000 in the form of investments with cash and bank balance and current assets being Rs. 92,000. As against that, there are borrowings of Kb. 1,15,00,000. The profit and loss account would reveal loss of Rs. 5,34,00p as against reserves of Rs. 5 lakhs. From this it has been submitted that the scheme cannot be said to be beneficial to the share holders of the transferor-companies. Reply obviously is that the transferee-company is being used as a shell company and in substance the amalgamation is amongst three transferor-companies. It has been submitted that the stamp duty which will be required to be paid will be to the extent of around Rs.1,60,00,000 over and above the other cost including registration running into around Rs. 50 lakhs. Thus, the cost of amalgamation itself is higher man the figures which have been set out by the objector as stated above. That would clearly provide justification in saying that the transferee-company is used as a shell for amalgamating three transferor-companies in substance. Other salient features/aspects with regard to transferee-company working as a shell company will be dealt with at an appropriate point of time. Suffice it to say that simply from these figures pointed out as, above it cannot be deduced that the scheme is not beneficial to the transferor-companies.

23. Then there is the submission with regard to the interest of AML (Arvind Mills Ltd.) in the transferee-company and/or the other three companies being the transferor-companies. It is not in dispute that the companies in question are Group Companies to which Arvind Mills Ltd., belongs as the prime company. In fact this factor would be a relevant factor in considering the scheme of amalgamation seeing the light of the day in its natural course. Apparent any ulterior motive in proposing the scheme of amalgamation would stand ruled out from that factor. Besides, the shares of the Arvind Mills Ltd., were quoted in the market at much higher price (Rs. 32 per share on 1-10-1998). Even the objector had fairly conceded that the shares of AML have been quoted and the market price has consistently remained around Rs. 30 per share at the relevant point of time. If that is so, the transferor-companies, none of whom had any quotation beyond its face value at any point of time at the relevant period could be said to have been placed at a disadvantage on account of the presence of AML in any of the four companies. All arguments revolving round presence of AML canvassed by tie objectors and on their behalf deserve to be discarded as obviously the presence of AML would be beneficial for the companies sought to be amalgamated. At this very stage the argument that the demand of the product 'Denim' of AML has reduced whereas demand of product 'Gabardian' of APL has increased might be considered. It has been submitted that all will be in the field of business operations and one or the other product might stand to gain at some or the other point of time. That apart, amalgamation would work to the benefit of the respective products as a result of more organised marketing. This is despite the fact that a company court is not concerned with such an internal working of the scheme of amalgamation, as it is settled law that it has to be left to the prudence of required majority of the shareholders.

24. Now it is the time to consider the objections with regard to valuation and report of Chartered Accountants Bansi Mehta & Co. and C.C. Chokshi & Co. At the outset it might be noted that the purpose for valuation would be mainly for fixing exchange ratio as amongst the amalgamating companies. Objector Hasmukhlal has expressed that he would not have any grudge against exchange ratio. He has asserted that he would have grudge against the very amalgamation on account of chances of Arvind Group Management to be in management of the amalgamating companies as a result of the merger. This has been broadly dealt with hereinabove. However, the objector has raised number of objections with regard to valuation report for opposing the scheme not on the ground of the exchange ratio but on the ground of very amalgamation resulting into the change of management. Mr. M.N. Bhavsar, the learned advocate for the other objector, however, when quite deep into the matter of valuation but, again at the outset it might be noted that till this date he has not been able to place on record any other valuer's report or any other Chartered Accountant's report for showing and justifying exchange ratio different from one that has been suggested. There are two reports of the Chartered Accountants, which will have to be taken into consideration. First is the valuation report dated 22-1-1999 and the second is the report dated 9-2-1999. It has been submitted that in the first report there is no mention with regard to detailed valuation report that was to follow. However, it cannot be disputed that the valuation report saw the light of the day prior to the filing of the requisite first company applications and prior to floating the scheme of amalgamation in question to the shareholders and creditors. The main thrust of the submissions of the objector is on lack of ascertainment of market value of fixed assets. It is true that the Chartered Accountants have recited that a report of external valuers or management estimates as regards the realisable value of fixed assets has not been furnished. However, it is also a fact that such a report has not been called for by the Chartered Accountants from the respective companies. Besides, this is not a case of reorganisation or arrangement in a company going into liquidation or taken into liquidation where realisable value of the assets would assume importance. That apart, what the valuers have taken into consideration is the overall financial position/picture of the respective companies under amalgamation. This can be visualised from the report itself. In the forwarding letter dated 9-2-1999 of Chartered Accountants Bansi S. Mehta & Co. and C.C. Chokshi & Co. it has been stated that the report has been based upon the information furnished to them as set out in the report and as per the discussions they had with the concerned officers of the companies. The report runs into 41 pages divided into 10 heads. First head is 'purpose of the report'. Second head is 'sources of information and scope limitation'. Third head is 'company profile'. Fourth head is 'management'. Fifth head is 'shareholding pattern'. Sixth head is 'industry overview'. Seventh head is 'valuation of the shares of the companies' .Eighth head is 'rationale and justification of amalgamation'. Ninth head is 'fair basis of amalgamation' and Tenth head is 'Annexures (A to Q)’. Out of the aforesaid detailed report the objectors have chosen to pick up only absence of basis of valuation of fixed assets. They have not been able to answer the consideration of share return aspect, quotation of shares in the market, book values and other factors which have been dealt with at length by the Chartered Accountants in the report. They have asserted that they have submitted the report on the fair basis of the amalgamation of the four companies which would take effect from 1-10-1998. They have also asserted that upon independent verification of the documents and information appearing at Annexures A to Q and after arriving at the result of their independent individual evaluation they have submitted the report. In respect of the APL, Memorandum and Articles of Associations and annual reports of the company for the past 3 years, unaudited balance sheet and profit and loss account for the last six months ending on 30-9-1998, prospectus of the company, letter of offer dated 7-12-1992, brief history of the company, brief background of the Ankur Textile Division, brief background of the projections, profitability of the projections for the company for the next five years ending on 31-3-2003, outstanding term loan, Shareholding pattern as on 23-9-1998, stock market quotation for equity shares, details of contingent liabilities and staff strength and salary details have been taken into consideration. In respect of ACL first three such documents, shareholding pattern as on 22-9-1998, details of debts as well as term loans, projected profit and loss account and balance sheets for the next six years ending on 31-3-2004, details of assets, staff strength, details investments as on 31-3-1998 and valuation report prepared by I. Section have been taken into consideration. In respect of AIL, first 3 such documents, projected profit and loss account and balance sheets for the next 5 years, repayment schedule with details of security, shareholding pattern as on 1-8-1998 (last record date), details of fixed assets and contingent liabilities as also bad and doubtful debts, outstanding balance as on 31-3-1998 and organisation chart have been taken into consideration, In respect of APRL first 3 documents as also unaudited balance sheet and profit and loss account for the last six months ending on 30-9-1998 have been taken into consideration. The experts have clarified that the report has to be read in totality and not in parts. They have also recited that they did not have any access to the records of the companies for verification of the authenticity of the information furnished to them and their work would not constitute an audit or certification of the past working results of the companies and that the projected working results of the transferor-companies have been used in the valuation exercise carried out by the Chartered Accountants. They have recited that the fair basis of amalgamation has been arrived at as at 1-10-1998 on a consideration of relevant factors and had given their brief report on 22-1-1999 expressing their opinion on the fair and equitable exchange ratio for the amalgamation of the four companies. The shareholding pattern of the four companies has also been considered.

Mr. Bhavsar read before this Court certain aspects of the valuation from the booklet of the Institute of Chartered Accountants. However, while reading the booklet it could not be pointed out as to upon application of the relevant methods/factors as read by Mr. Bhavsar, what would be the exchange ratio. As on today none of the objectors has either placed any contrary valuation opinion or report of any expert suggesting different propositions and different results as also different share exchange ratio.

It would be appropriate at this stage to note what the Apex Court has said in Hindustan Lever Employees' Union's case (supra)and Miheer H. Mafatlal's case (supra), since almost all the objections which have been raised by the three objectors would stand answered by such observations.

In Hindustan Lever Employees' Union's case (supra)the Apex Court has through R.M. Sahai, J. observed in para 3 as under:

"3....The Court's obigation is to be satisfied that valuation was in accordance with law and it was carried out by an independent body. The High Court appears to be correct in its approach that this test was satisfied as even though the Chartered Accountant who performed this function was a director of TOMCO but he did so as a member of renowned firm of Chartered Accountants. His determination was further got checked and approved by two other independent bodies at the instance of shareholders of TOMCO by the High Court and it has been found that the determination did not suffer from any infirmity. The Company Court, therefore, did not commit any error in refusing to interfere with it. May be as argued by the learned counsel for the petitioner that if some other method would have been adopted probably the determination of valuation could have been a bit more in favour of the shareholders. But since admittedly more than 95% of the shareholders who are the best judge of their interest and are better conversant with market trend agreed to the valuation determined it could not be interfered by Courts as, certainly, it is not part of the judicial process to examine entrepreneurial activities to ferret out flaws. The Court is least equipped for such oversights. Nor, indeed, is it a function of the judges in our constitutional scheme. We do not think that the internal management, business activity on institutional operation of public bodies can be subjected to inspection by the Court. To do so, is incompetent and improper and, therefore, out of bounds. Nevertheless, the broad parameters of fairness in administration, bonk fides in action and the fundamental rules of reasonable management of public business, if breached, will become justiciable...." [Emphasis Supplied] (p. 472)

In para 4 it hay been observed that the scheme of amalgamation cannot be fainted on apprehension and speculation as to what might possibly happen in future.

Sen, J. speaking for His Lordship and Hon'ble the Chief Justice of India has observed in paras 29, 30 and 31 as under:

"29. Mr Dholakia, learned counsel appearing for Mr. Jajoo, one of the shareholders of TOMCO, has questioned the justification of the ratio of allotment of shares, 2 shares of HLL in exchange of 15 shares of TOMCO. Accordingko Mr. Dholakia, this ratio is entirely unsatisfactory and unfair to the TOMCO shareholders. It has been contended that the Board of Directors of TOMCO did not explain the Scheme of Amalgamation in the explanatory statement circulated among the shareholders. In particular, how the shark, exchange ratio 15 TOMCO shares to 2 HLL shares-was arrived at, was not stated in the explanatory statement. Instead of circulating the valuation reports, TOMCO informed the shareholders that the reports were available for inspection at the registered office of the company between 11.00 a.m. to 1.00 p.m. on 14 working days. The shareholders were not told that the joint valuer was none other than Mr. Malegam, a Senior Partner of S.B Billimoria & Co., and also a Director of TOMCO, Mr. Malegam could not be Appointed auditor of TOMCO under section 226(3) of the Companies Act, 1956. In that view of the matter, Mr. Malegam should not have been appointed valuer under the Indian Companies Act, 1956.

30. It was next contended that the reasons for the Board accepting certain proposals to make preferential allotment of shares at Rs. 105 per share has not been properly explained. ICICI had given a valuation report stating that this report was only on the basis of the material supplied by HLL and not on the basis of an independent verification. It is also significant that Mr. Malegam was a Director of ICICI. It was also contended that the valuation report was erroneous. A combination of different methods of valuation was adopted, which was clearly against the law laid down by the Supreme Court in the case of CGT v. Smt. Kusumben Mahadevia, 122ITR 38: (AIR 1980 SC 769 [LQ/SC/1979/489] ). If the valuation was done by the net asset method, the exchange ratio should have been 1:2 in favour of TOMCO. Moreover, market value of the shares of the two companies was taken at a point of time when the price of TOMCO shares was the lowest for a period of 27 months. Lastly, it was contended that the preferential allotment of shares to Unilever was part of the Scheme of Amalgamation. The Board should have explained why Rs. 366 was being paid for every HLL share by TOMCO, when Unilever was paying only Rs. 105 per HLL share.

31. We are unable to uphold arm of the above contentions raised by Mr. Dholakia. The overwhelming majority of the shareholders had approved the Scheme at the meeting called for this purpose and had approved the exchange ratio. In fact, a proposal for amendment of the exchange ratio was also rejected by the overwhelming majority of 99% shareholders. There is no reason to presume that the shareholders did not know what they were doing." [Emphasis supplied] (p. 480)

In the above case a counter valuation report was produced for showing a substantiation of the valuation that had been made of the shares of the two companies sought to be amalgamated in that case. After setting out different methods of the valuation and some or all the factors to be taken into consideration, it has been observed in para 43 that in case of amalgamation a combination of all or some of the methods of valuation may be adopted for the purpose of fixation of exchange ratio of the shares of two companies; and with regard to the objection concerning disclosure of material it has been observed in para 57 that a similar question came up for consideration before a Division Bench of Gujarat High Court in the case of Jitendra R. Sukhadia v . Alembic Chemical Works Co. Ltd. [1987] 3 Comp. LJ. 141 and in that case dealing with the amalgamation it was held that the exchange ratio of the shares of the two companies had to be stated along with the notice of the meeting and how this exchange ratio was worked out, however, was not required to be stated in the statement contemplated under section 393(1)(a).

Even with regard to the future interest of consumers (future market condition) the Apex Court has observed in para 77 that 'public interest' which is to be taken into account as an element against approval of amalgamation would hardly include a mere future possibility of merger resulting in a situation Where the interests of the consumer might be adversely affected. The Court has said that no one can envisage what will happen in the long run, but, on such hypothetical question, the scheme cannot be rejected. It has finally been said that the argument that the company has large assets is really meaningless. It has been observed that very many cotton mills and jute mills in India have become sick and are on the verge of liquidation, even though they have large assets.

Dealing with the scope of interference by the company Court in sanction proceedings the Apex Court im Miheer H. Mafatlal's case (supra), speaking through S.B. Majumdar, J. has observed that what has to be kept in view is the limited scope of the jurisdiction of the company Court which is called upon to sanction the scheme of amalgamation as per the provisions of section 391 read with section 393 of the. Such limited scope of inquiry has been categorized in above broad contours of jurisdiction.

Dealing with a separate sub-class of creditors or shareholders it has been observed that unless a separate arm different type of scheme of compro-mise is offered to a sub-class of a class of creditors or shareholders otherwise equally circumscribed by the class, no separate meeting of such sub-class of class of creditors or shareholders is required to be convened. The very Chartered Accountants, namely, C.C. Chokshi & Co., had an occasion to give report in Miheer H. Mafatlal's case (supra)and the Apex Court has observed about the good repute of the said Chartered Account-ants. Following observations of Madras High Court in Kamala Sugar Mills Ltd., In re [1984] 55 Comp. Cas. 308haye been approved saying that not only the expert like C.C. Chokshi & Co. had suggested the ratio but another independent body ICICI Security & Finance Co. Ltd. reached the same conclusion which was conveyed by its letter dated 10-11-1993 to the company approving the entire scheme along with suggested ratio:—

"... Once the exchange ratio of the shares of the transferee-company to be allotted to the shareholders of the transferor-company has been worked out by a recognised firm of Chartered Accountants who are experts in the field of valuation and if no mistake can be pointed out in the said valuation, it is not for the Court to substitute its exchange ratio, especially when the same has been accepted without demur by the overwhelming majority of the shareholders of the two companies or to say that the shareholders in their collective wisdom should not have accepted the said exchange ratio on the ground that it will be detrimental to their interest." (p. 309)

In the present case the objector Mr. Hasmukhlal Shah read his objections as also his written submissions before this Court. Mr. Bhavsar argued the matter for the other objector in the matter of petitioner AIL, the transferor-company, as also read the written submissions. He also read some portion of the booklet of the Institute of Chartered Accountants. However, having considered the submissions in the light of what the Apex Court has said as above and in the light of the report of Chartered Accountants C.C. Chokshi & Co., whose good repute has been acclaimed by the Apex Court and having noted a very salient feature about the absence of any other valuation or exchange ratio pressed for consideration before this Court, the objections and submissions made in respect of the valuation merit rejection thereof." Mr. Bhavs’s submission that the valuation has been worked out by the experts only on the basis of the book values of the assets runs counter to the reading of the report of the Chartered Accountants as a whole. It is true that the market value of the fixed assets has not been considered and could not be considered as ascertainment of such market value would require a detailed investigation of the properties, vis-a-vis, their market values in the context of available sales of the nearby properties at the relevant point of time and so many other factors. That method might not be feasible in a given case and worth not undertaking or following in the matter of scheme of amalgamation in contrast with a matter of scheme of arrangement or compromise. Much has also been said about the financial position of AML (Arvind Mills Ltd.) being stated and considered. This is a far from what is required under the provisions of sections 391 and 393. Besides, failure of merger between AIL and AML on account of withdrawal of petition would hardly have any consequence upon the present petitions for sanction of scheme of amalgamation in question. It has to be noted that post merger transferee-company is not to remain as subsidiary of AML (Arvind Mills Ltd.) bearing in mind the restructuring of the shareholding of the transferee-company as contemplated under the scheme of amalgamation in question. In any case consideration of interest of AML is neither required by any of the provisions of sections 391 and 393 nor would it have any consequence one way or the other on the fairness of the scheme of amalgamation in question. In fact association of AML being the prime company in the group might work to the benefit of amalgamated company. Even that need not hethe consideration for granting sanction to the scheme of amalgamation for the Apex Court has said in Hindustan Lever Employees' Union’s case (supra) that a mere future possibility of merger would not be the criterion in presentee since that would be in any event hypothetical. It would, therefore, be clear that the objections set out by the objectors both in their written objections as well as arguments find answer from what the Apex Court has observed in the aforesaid two decisions at one or the other place

Conclusions

I have gone through the legal position as aforesaid in the context of the objections of the three objectors and their submissions/written arguments and I have also gone through the relevant rules and forms (Rules 32, 33, 69, 78, 79 and 184 of the Company (Court) Rules, 1959 and the relevant Forms Nos. 35139, 40 and 42) and the provisions of sections 391 to 394 of the Companies Act. It would clearly appear that the scheme of amalgamation in question has been approved by a thumping majority, much more than the requisite statutory majority and after following requisite statutory procedures sanction for the same has been sought for, the proposed scheme of amalgamation is not shown to be violative of any of the provisions of law and is also not shown to be contrary to public policy. Interest of the workmen and employees of all the companies is also taken care of. None of the creditors, secured or unsecured, has come forward to object to the scheme of amalgamation in question inspite of public notices. The broad advantages of the scheme of amalgamation in question have been set out in the respective petitions also. The approvals of principal creditors ICICI and IDBI are also placed on record. For the purpose of testing the bona fides of the majority shareholders speaking through the learned advocate appearing for the petitioners a question was asked at the initial stage as to mow the transferee-company would work as a 'shell' company when their equity is so bifurcated as to allot to them 13.5 per cent redeemable preference shares. It was pointed out to the learned advocate that redemption would mean the quitting of the concerned shareholders to that extent meaning thereby there would be weakening of 'shell'. Mr. Soparkar then readily submitted after obtaining the instructions that the suggestion with regard to redeemable preference shares being altered to irredeemable preference shares would be acceptable. That is how the bona fides were tested at that very stage conversely, once again a question was asked to Mr. Soparkar as to when the transferor-companies were giving dividend to the equity shareholders at the rate of 10 per cent p.a., that is to say Re. 1 per share of Rs. 10 each, where would be justification for issuing 13.5% redeemable preference shares to the existing shareholders in transferee-company. Mr. Soparkar here also, after obtaining necessary consent from his clients, submitted before this Court that issuance of 10% redeemable preference shares in place of 13.5% redeemable preference shares would be acceptable to the shareholders of the transferee-company. From this approach on the part of the petitioner transferee-company it would clearly appear that the scheme of amalgamation is not tainted with any ulterior or extraneous motive but appears to be bona fide. Besides, the proposal of issuing 10% redeemable preference shares in place of 13.5% redeemable preference shares has also been accepted. Thus, testing the matter even objectively as aforesaid, I am of the opinion that the scheme of amalgamation in question appears to be quite fair and it deserves to be sanctioned, bearing in mind the basic advantages of the scheme of amalgamation, more particularly when the cloth industry in the State is on the decline. A duly merged company as per the scheme ofamalgamation in question would withstand the global competition particularly when policy of liberalization and lifting of economic barriers is adopted as the State policy. Under such circumstances, survival of smaller units might be difficult, whereas propensity of economic advancement of the amalgamated company might stand augmented. The scheme, therefore, deserves to be sanctioned as per the order that is to follow.

The objector Mr. Hasmukhlal Shah sent a written communication dated 27-9-1999 setting out some subsequent transactions which AML (Arvind Mills Ltd.) had with Asmani Investments Ltd. (its subsidiary) in respect of the shares of transferee-company. Mr. Dipakkumar J. Shah has also sent communication dated 20-9-1999 after sending some post card communications. This Court does not approve of sending communications by the two objectors after the matter was over and fixed for judgment. The petitioner has filed affidavit-in-reply of one Mr. Ramnik Bhimani, its Company Secretary denying the allegations while asserting that such transactions in law cannot be taken into consideration. The deponent has asserted that the transfer of shares has taken place between AML and its subsidiary and for all practical purposes the shares continued to be held by AML and makes no difference on either valuation aspect or the consequent exchange ratio. Such objections subsequently sent deserve to be rejected as aforesaid.

Cost:

Before passing the order, question of cost is required to be taken into consideration. At the initial stage the petitioners agreed for paying cost to the objectors, but it was obvious that objectors might accept the decision of this Court. However, since they have expressed before this Court that they would reserve their right of agitating the matter, the learned advo-cate for the petitioner submitted that their agreement for payment of cost might not be recorded or taken into consideration. Under such circum-stances, question of cost is required to be considered on merits. Ordinarily since the objections are not being accepted and since the prayer for sanction of the scheme of amalgamation in question is required to be granted the objectors would not be entitled to the cost, However, bearing in mind the order passed in Misc. Civil Application Nos. 55 to 58 of 1999 on 10-9-1999, which inter alia indicates that the question of cost in so far as the objectors are concerned will be considered at the time of passing of final order the objectors might be compensated with some cost. The same shall be taken care of accordingly.

In the result, following order is passed:

I.The apology of objector Mr. Dipakkumar J. Shah is hereby accepted.

II.Office is directed to verify in further the objections or applications whenever they are given by parties in person in order that no offending oft contemptuous statements are made therein.

IIIThe scheme of amalgamation in question in so far as the present petitions are concerned is hereby sanctioned and the order in that respect in Form No. 42 shall be drawn subject to the qualification that instead of 13.5% redeemable preference shares to be allotted to the existing shareholders of the petitioner transferee-company 10% redeemable preference shares shall be allotted. Order accordingly with suitable amendments in terms of the scheme of amalgamation in question shall be drawn.

IVAll the petitioners-companies will file copies of this order with the Registrar of Companies within a period of 30 days and the Registrar of Companies shall treat the three transferor-companies as dissolved with effect from the date on which a certified copy of this order is filed with the Registrar.

V.Bearing in mind the order passed in Misc. Civil Application Nos. 55 to 58 of 1999, the petitioner transferee-company is directed to pay cost of Rs. 5,000 to each of the three objectors. However, there shall be no order as to cost so far asthese petitions are concerned, except that the petitioner in each of the four petitions shall bear the cost of these petitions as also the cost of the learned Additional standing counsels appearing on behalf of the Central Government, such cost being quantified at Rs. 2,500 in each of the petitions.

VI.All these petitions shall accordingly stand disposed of.

At this stage Mr. M.N. Bhavsar, the learned advocate appearing for one of the objectors, as also the other objector Mr. Hasmukhlal Shah pray for stay of the aforesaid order. Mr. Soparkar, learned advocate for the petitioners opposes the prayer forstay. He submits that the shareholding of the respective objectors together would not exceed .01 per cent as against the rest of the shareholders, forming thumping majority, having agreed to the scheme of amalgamation. In the circumstances, request of Mr. Bhavsar and other objector is not accepted.