Astorn Research ... vs . .....Respondent(S)

Whether Reporters of Local Papers may be allowed to see the judgment ?

NO 2 To be referred to the Reporter or not ?

NO 3 Whether their Lordships wish to see the fair copy of the judgment ?

NO 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?

NO 5 Whether it is to be circulated to the civil judge ?

NO ========================================================= ASTORN RESEARCH LTD....Petitioner(s) Versus .....Respondent(s) ========================================================= Appearance:

IN COMPANY PETITION NOS.193-197 of 2012 MR SN SOPARKAR, SR.

COUNSEL, MRS SWATI SOPARKAR, ADVOCATE for the Petitioner(s) No. 1 MR M.IQBAL A SHAIKH, ADVOCATE for Respondent(s) No. 1 ________________________________________ MR ZUBIN F BHARDA, ADVOCATE, for Objector in Company Petition Nos.195/2012 & 197/2012 MR BHADRISH S RAJU, ADVOCATE for Objector in Company Petition No.196/2012 ===================================================== CORAM:

HONOURABLE MR.JUSTICE R.M.CHHAYA Date : 02/04/2013 CAV (COMMON) JUDGEMNT These petitions are filed under Sections 391 to 394 of the Companies Act, 1956 (the Act) seeking sanction of scheme of amalgamation proposed to be made between Astron Research Limited, Celestial Biologicals Limited, Intas Pharma Limited, Intas Biopharmaceuticals Limited (i.e. transferor companies petitioners of Company Petition Nos.193-196/12 respectively), with Intas Pharmaceutical Limited (for short IPL ), transferee company of Company Petition No.197/12).

I) FACTS OF PROCEDURE FOLLOWED:

Astron Research Limited (the transferor company of Company Petition No.193/12) filed Company Application No.261 of 2012 before this Court seeking dispensation of the meetings of the equity shareholders and the secured creditors on the basis of their written consent and for further direction to hold meeting of unsecured creditors of the company. This Court (Coram: Abhilasha Kumari, J) vide order dated 31.07.2012 ordered dispensation of the meetings of the equity shareholders and the secured creditors and also directed to hold meeting of unsecured creditors. This Court further directed the company to hold meeting of the unsecured creditors of the company on 07.09.2012 for the purpose of considering and, if thought fit, approving with or without modifications, the proposed scheme of arrangement in the nature of amalgamation of the company with IPL/transferee company, as proposed between the company and its unsecured creditors. It was further directed that at least 21 clear days before the meeting to be held, as aforesaid, a notice be issued to all the unsecured creditors in the prescribed manner and appointed Shri Jainand Vyas, Vice President-Accountants or failing him Shri C.K.Yagnik, Head-Legal of IPL/the transferee company, as the chairman of the aforesaid meeting, which was ordered to be scheduled on 07.09.2012 and in respect of any adjournment(s) thereof. Other directions were also issued by this Court, including directing the chairman to submit report to this Court, the result of the said meeting, within 14 days from the conclusion of the meeting.

It appears from the record that the aforesaid meeting came to be held on 07.09.2012 and an affidavit to that effect has filed by Shri Jainand Vyas alongwith report of the Chairman, which indicates that a resolution resolving the proposed scheme of amalgamation as prayed for it came to be approved by 94.74% majority. It is further indicative from the said report that out of 19 unsecured creditors 18 voted in favour of the resolution approving the scheme of amalgamation, whereas only one unsecured creditor voted against it, which shows that in value 99.27% unsecured creditors have approved the scheme.

Celestial Biologicals Limited (the transferor company - petitioner of Company Petition No.194/12) filed Company Application No.262 of 2012 before this Court seeking dispensation of the meetings of the equity shareholders and the secured creditors on the basis of their written consent and for further direction to hold meeting of the unsecured creditors of the company. This Court (Coram: Abhilasha Kumari, J) vide order dated 31.07.2012 ordered dispensation of the meetings of the equity shareholders and the secured creditors and also directed to hold meeting of the unsecured creditors. This Court further directed the company to hold meeting of the unsecured creditors of the company on 07.09.2012 for the purpose of considering and, if thought fit, approving with or without modifications, the proposed scheme of arrangement in the nature of amalgamation of the company with IPL/transferee company, as proposed between the company and its unsecured creditors. It was further directed that at least 21 clear days before the meeting to be held, as aforesaid, a notice be issued to all the unsecured creditors in the prescribed manner and appointed Shri Jainand Vyas, Vice President-Accountants or failing him Shri C.K.Yagnik, Head-Legal of IPL/the transferee company, as the chairman of the aforesaid meeting, which was ordered to be scheduled on 07.09.2012 and in respect of any adjournment(s) thereof. Other directions were also issued by this Court, including directing the chairman to submit report to this Court, the result of the said meeting, within 14 days from the conclusion of the meeting.

It appears from the record that the aforesaid meeting came to be held on 07.09.2012 and an affidavit to that effect has filed by Shri Jainand Vyas along with report of the chairman, which indicate that a resolution resolving the proposed scheme of amalgamation as prayed for came to be approved unanimously i.e. by 100%.

Intas Pharma Limited (the transferor company of Company Petition No.195/12) filed Company Application No.263 of 2012 before this Court seeking dispensation of the meetings of the equity shareholders and the secured creditors on the basis of their written consent and for further direction to hold meeting of the unsecured creditors of the company. This Court (Coram: Abhilasha Kumari, J) vide order dated 31.07.2012 ordered dispensation of the meetings of the equity shareholders and the secured creditors and also directed to hold meeting of the unsecured creditors. This Court further directed the company to hold meeting of the unsecured creditors of the company on 07.09.2012 for the purpose of considering and, if thought fit, approving with or without modifications, the proposed scheme of arrangement in the nature of amalgamation of the company with IPL/transferee company, as proposed between the company and its unsecured creditors. It was further directed that at least 21 clear days before the meeting to be held, as aforesaid, a notice be issued to all the unsecured creditors in the prescribed manner and appointed Shri Jainand Vyas, Vice President-Accountants or failing him Shri C.K.Yagnik, Head-Legal of IPL/the transferee company, as the chairman of the aforesaid meeting, which was ordered to be scheduled on 07.09.2012 and in respect of any adjournment(s) thereof. Other directions were also issued by this Court, including directing the chairman to submit report to this Court, the result of the said meeting, within 14 days from the conclusion of the meeting.

It appears from the record that the aforesaid meeting came to be held on 07.09.2012 and an affidavit to that effect has filed by Shri Jainand Vyas along with report of the chairman, which indicate that a resolution resolving the proposed scheme of amalgamation as prayed for it came to be approved by 91.67% majority. It is further indicative from the said report that out of 12 unsecured creditors 11 voted in favour of the resolution, approving the scheme of amalgamation, whereas only one unsecured creditor voted against it, which shows that in value 92% unsecured creditors have approved the scheme.

Intas Biopharmaceuticals Limited (the transferor company of Company Petition No.196/12) filed Company Application No.264 of 2012 before this Court seeking dispensation of the meetings of the equity shareholders and the secured creditors on the basis of their written consent and for further direction to hold meeting of the unsecured creditors of the company. This Court (Coram: Abhilasha Kumari, J) vide order dated 31.07.2012 ordered dispensation of the meeting of the equity shareholders and the secured creditors and also directed to hold meeting of the unsecured creditors. This Court further directed the company to hold meeting of the unsecured creditors of the company on 07.09.2012 for the purpose of considering and, if thought fit, approving with or without modifications, the proposed scheme of arrangement in the nature of amalgamation of the company with IPL/transferee company, as proposed between the company and its unsecured creditors. It was further directed that at least 21 clear days before the meeting to be held, as aforesaid, a notice be issued to all the unsecured creditors in the prescribed manner and appointed Shri Jainand Vyas, Vice President-Accountants or failing him Shri C.K.Yagnik, Head-Legal of IPL/the transferee company, as the chairman of the aforesaid meeting, which was ordered to be scheduled on 07.09.2012 and in respect of any adjournment(s) thereof. Other directions were also issued by this Court, including directing the chairman to submit report to this Court, the result of the said meeting, within 14 days from the conclusion of the meeting.

It appears from the record that the aforesaid meeting came to be held on 07.09.2012 and an affidavit to that effect has filed by Shri Jainand Vyas along with report of the chairman, which indicates that a resolution resolving the proposed scheme of amalgamation as prayed for came to be approved unanimously i.e. 100%.

IPL (the transferee company of Company Petition No.197 of 2012) filed Company Petition No.265 of 2012 before this Court seeking dispensation of the meetings of the equity shareholders and the secured creditors on the ground that consent of all of them were obtained and further that it being a transferee company meeting of the unsecured creditors is not necessary. This Court (Coram: Abhilasha Kumari, J) vide order dated 31.07.2012 ordered dispensation of the meetings of the equity shareholders and the secured creditors and further held that it being a transferee company meeting of the unsecured creditors is not necessary to be held and the same was dispensed with.

DETAILS OF THE PRESENT PETITIONS:

As noted hereinabove, Company Petition Nos.193-196 of 2012 are filed by the transferor companies for sanctioning of the scheme of amalgamation with the transferee company/IPL of Company Petition No.197 of 2012. This Court (Coram: Abhilasha Kumari, J) vide orders dated 25.09.2012 admitted all five petitions, after considering the report of the chairman in each case and directed that the notice of admission be advertised in English daily newspaper Indian Express and Gujarati daily newspaper Sandesh , both in Ahmedabad editions. That notice to the Central Government, through the Regional Director, Department of Corporate Affairs (in all petitions) as well as notice to the Official Liquidator (in Company Petition Nos.193-196 of 2012) were ordered. While admitting the petitions this Court dispensed with publication of the notice in the Government Gazette. It appears from the affidavits of publication filed in each petition that pursuant to the aforesaid orders dated 25.09.2012 the advertisements came to be published, as directed above, on 06.10.2012 and even copies thereof are annexed with the affidavits.

III) RESPONSE OF THE CENTRAL GOVERNMENT, THROUGH REGIONAL DIRECTOR:

Upon notice being served upon the Central Government, Mr.M. Iqbal A. Shaikh, learned Senior Central Government Counsel, appears in these petitions and a common affidavit dated 06.11.2012 has been tendered by one Shri Kashmir Lal Kamboj, Regional Director, North-Western Region, Ministry of Corporate Affairs, (which is part of record of Company Petition No.193/2012), whereby several observations are made.

An observation is raised to the effect that as per Clause 11 of the Scheme accounting entries/adjustments are to be made in the books of accounts of the transferee company/IPL as a consequence of the scheme of amalgamation. It is further pointed out that Clause 11(a) of the Scheme ensures compliance of requirements of AS-14 as notified by the Government of India. However, subsequent Clause 11(b)(iii) is not in accordance with the requirements of AS-14. It is further pointed out that by the said clause the difference between the net assets of the transferor companies and the value of the shares to be issued by the transferee company to the members of the transferor companies is proposed to be written off against the general reserve and if there is deficit, the same is proposed to be treated as free reserve in the books of the transferee company. It is also observed that even as per Clause 11(e) of the Scheme provides authorization to the Board of Directors of the transferee company in consultation with the auditors, to account any of these balances in any manner whatsoever, as may be deemed fit. It is therefore contended that the transferee company should be directed to comply with the requirements of AS-14 strictly while recording the entries of amalgamation in its book. Thus, the first observation made by the Regional Director relates to the accounting treatment to be followed by the transferee company.

It is further observed that M.P. Advisors has filed Company Petition No.61 of 2011 against one of the transferor companies i.e. Intas Biopharmaceuticals Limited (for short IBPL ) (of Company Petition No.196 of 2012) before this Court for winding up and since the grievances of said M/s. M.P. Advisors was sub judice it has been advised by the office of the Regional Director to move this Court for listing of their matter so that their grievance can be heard by this Court.

It is further observed that one Shri Mani Swaminathan Iyer has also informed the Regional Director as regards termination of Employees Stock Option Plan/Scheme (ESOP) and has raised further grievances. Regional Director has asked M.P.Advisors and Shri Iyer to move this Court and raise their objections in the present petitions. Regional Director has further observed that the Registrar of Companies, Ahmedabad (Guj.) (RoC) has submitted report dated 31.10.2012 and as per the said report, no complaint and/or representation have been received against the petitioner companies, except a complaint from Commissioner of Food & Drug Control Administration, Gandhinagar against one of the transferor companies i.e. Celestial Biologicals Limited (i.e. the petitioner of Company Petition No.194 of 2012). It is averred by Regional Director that no prima facie violation of the provisions of the Act has been noticed against any of the petitioner companies. However, it is submitted that the transferee company may be directed to undertake responsibility of any consequences on the basis of further finding in the matter, if any, of other law, which is observed in respect of the said transferor company-Celestial Biologicals Limited. The Regional Director has clearly observed that there is no other objection to the proposed scheme of amalgamation of the petitioner transferor companies with the transferee company viz. IPL and it is clearly opined that the scheme does not prima facie appear to be prejudicial to the interest of the shareholders of the petitioner companies and public at large.

In response to the aforesaid, IPL/the transferee company has filed a common additional affidavit, (which is part of record of Company Petition No.193/2012) and has dealt with the observations made by the Regional Director. It is stated that as per Clause 23 of the aforesaid AS-14, the company is authorized to prescribe under the scheme itself, a specific treatment to be given to its reserves after the amalgamation of the companies. It is stated that Section 211(3B) of the Act also provides that if the practice adopted for such accounting entry, varies from the said standard, necessary disclosure should be made in the financial statements. It is further stated that Clause 11(e) of the scheme provides only for a contingency and authorizes the Board of Directors to deal with such exceptional situation of deviation from the accounting Standard AS-14. It is also stated that IPL undertakes to abide by the directions that may be issued by this Court with regard to the said disclosure to be made in the financial statements of the transferee company after the scheme is sanctioned.

It is also stated that as regards the second and the third observations of the Regional Director, in case if any parties desire to object the scheme, such parties can present their objections before this Court.

IV) RESPONSE OF THE OFFICIAL LIQUIDATOR:

The Official Liquidator has filed separate reports to the notices issued by this Court in Company Petition Nos.193-196/2012 i.e. all the four transferor companies.

It appears from the aforesaid reports that in view of the directions issued by this Court vide separate orders dated 25.09.2012 in case of the transferor companies, the Official Liquidator has appointed Chartered Accountants, M/s. D.C.Parikh & Co. (C.A.) for carrying out the investigation work. Reliance is also placed upon the report of the C.A. dated 25.10.2012, which is also annexed with the report of the Official Liquidator. The Official Liquidator has considered the said report of the C.A. and has expressed that the C.A. has submitted his report after proper verification of the books of accounts maintained by the transferor companies as well as the audit report for the years 2010-11 and 2011-12 and has also examined the scheme. It is also observed that the C.A. has opined that the companies are not sick industrial companies within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985 and it has been categorically stated that the affairs of the companies have not been conducted in a manner prejudicial to the interest of its members or the large public interest. It is further stated that the companies may be directed by this Court to preserve their books of accounts, papers and records and not to dispose off the record without prior permission of the Central Government in compliance to the provisions of Section 396A of the Act.

V) Objections filed by one company viz. Unimark Remedies Limited in Company Petition Nos.195 of 2012 and 197 of 2012:

It may be noted that Unimark Remedies Limited (URL) initially filed objections to sanctioning of the scheme in Company Petition Nos.195/2012 and 197/2012 (filed by Intas Pharma Limited & Intas Pharmasutical Ltd.) to the effect that the said company is an unsecured creditor of Intas Pharma Limited. It may be noted that the said objections relate to the method of the meeting of the unsecured creditors of Intas Pharma Limited not being held in proper manner. It is further alleged that the objector was not permitted to speak in the meeting and has challenged the proceedings of the report.

Intas Pharma Limited (the transferor company) has filed an additional affidavit in Company Petition No.195 of 2012 and has denied the allegations raised by the objector/URL.

URL has raised objections in its capacity as one of the unsecured creditors, which is dealt with by the transferee company/IPL. However, the said objector has filed an additional affidavit dated 23.01.2013 in Company Petition Nos.195/2012 and 197/2012 and has withdrawn the said objections.

URL has filed objections in Company Petition No.197 of 2012 as a creditor of the said company in its capacity as unsecured creditor by filing affidavit dated 19.12.2012, which have been dealt with by IPL by filing an additional affidavit dated 10.01.2013. Thereafter URL has filed further affidavit dated 23.01.2013 withdrawing the said objections and has stated on oath that URL and has declared before this Court on oath that URL has no objection. Mr.Bharda, learned advocate for the objector/URL (in Company Petition Nos.195/12 and 197/12) has submitted that URL has withdrawn the objections.

OBJECTIONS FILED BY SHRI MANI SWAMINATHAN IYER IN COMPANY PETITION NO.196 OF 2012 I.E. PETITION FILED BY INTAS BIOPHARMACEUTICALS LIMITED/IBPL (THE TRANSFEROR COMPANY).

It may be noted that the objector/ Shri Iyer filed Civil Application No.370 of 2012 before this Court for being joined as party in Company Petition No.196 of 2012 wherein this Court vide order dated 14.12.2012 passed the following order:

1. Mr.

Bhadresh Raju, learned Advocate for the applicant on instructions does not press these applications without prejudice to the rights of the applicant to take appropriate recourse which is available in law in relation to the subject matter of each of the Company Petition including the right to file the objection, if any. Permission granted. It is, however, made clear that this Court has not expressed any opinion on merits of the Scheme as the same is an independent issue.

2. With this observation the applications are disposed of as not pressed.

After the aforesaid order, the objector/ Shri Iyer has filed an affidavit of objections dated 19.12.2012 in Company Petition No.196 of 2012 (filed by Intas Biopharmaceuticals Limited/IBPL) wherein it is stated that the objections are filed in his capacity as shareholder, creditor and also in public interest against the proposed scheme of arrangement in the nature of amalgamation by the transferor company/IBPL by way of this petition. It is stated that he was promoter, co-founder and director of several group companies of INTAS since its inception. It is also stated that the objector has strong objection to the amalgamation scheme as the same would result into destruction of the larger importance of the research and product development work and would adversely affect the larger interest of the citizens, interest of the dedicated team of scientists and knowledge workers and their years of toil in addition to the general value destruction. It is also stated that Dr.Urmish Chudgar, Managing Director of IBPL had given express commitment that he would maintain the independent status of IBPL and protect the interest of the company as well as the personal interest of the objector and of all other employees and the public interest. Details of his shareholding in the group companies of INTAS as on 31.03.2010 is given and has also given details of the statement of IBPL whereby the objector has received three cheques amounting to Rs.1 crore in September 2011. It is also alleged that the scheme is detrimental to the interest of the employees of IBPL as the stock option is given a go-by and has further raised objections to the effect that the scheme in question is against the public interest and it has been alleged that the scheme is only for personal enrichment of the promoters of INTAS group and, therefore, the objector/Shri Iyer has objected to the scheme.

IBPL has filed a detailed affidavit threadbare dealing with the objections raised by Shri Iyer.

Heard Mr.S.N.Soparkar, learned Senior Counsel, with Ms.Swati S. Soparkar, learned advocate for the petitioners, and Mr.Bhadresh Raju, learned Counsel for the objector/Shri Iyer. Both learned Counsel were also permitted to file their written submissions as regards the objections raised, which are also forming part of the record.

VII) REGARDING OBSERVATIONS OF REGIONAL DIRECTOR:

Considering the first observation made by the Regional Director as regards the accounting system, it may be observed that Section 211(3B) of the Act stipulates that the petitioner is required to make certain disclosures when the accounting system proposed is not in consonance with the AS-14. If the practice adopted for such accounting entry, varies from the said standard, necessary disclosure would be made in the financial statements.

This Court while dealing with the requirements of AS-14 in the case of Gallops Realty Private Limited Vs. State, 2009 (150) CC 596 has observed thus:

Having heard Mr.S.N.Soparkar, learned Senior Advocate with Mrs Swati Soparkar, learned advocate for the petitioner and Mr.Harin P. Raval, learned Asstt. Solicitor General, appearing for the Regional Director and having considered the additional affidavit filed by the Directors of the Companies, the Court is of the view that the observation made by the Regional Director with regard to the Accounting Treatment proposed to be given in the books of the resulting Company under Clause 8.1.3 of the proposed scheme has been taken care of and proper explanation has been rendered by the Company. As rightly pointed out by Mr.Soparkar that the said observation is not in consonance with the Accounting Principles in general and Accounting Standard, AS-14 in particular. The plain reading of the Accounting Standard, AS-14 makes it very clear that the same is applicable only in case of amalgamation and not in the case of demerger as envisaged in the present scheme. This view is supported by the decision of Allahbad High Court in the case of Jagran TV (P.) Ltd., In re, reported in (2009)90 SCL 138 (All.), wherein it is held that with regard to Accounting Standard-14 a statement was given in Delhi High Court that since the transferor company will merge into transferee-company, the Accounting Standard-14 will be followed. In the case before the Allahbad High Court there is no amalgamation but demerger of the business of the petitioner company with the transferee-company. Here in the present case, there is no amalgamation and it is merely a demerger of the business of the petitioner company with the resulting company. Even otherwise, the petitioner has shown its willingness to treat the difference which may arise as a result of the value of the shares issued by the resulting company being less than the net value of the assets being transferred, can also be treated as Share Premium Account and requested the Court to modify the scheme to that extent and the words 'General Reserve' be replaced with 'Share Premium Reserve' in Clause 8.1.3. However, this is not required and hence no direction for modification of the scheme is issued.

The Court further derives support from the decision of Hon ble Supreme Court in the case of Bhagwati Developers Vs. Peerless General Finance & Investment Co. and others, reported in (2005) 5 Comp LJ 377 (Raj.), wherein the Court was concerned with the question of bonus shares issued out of revaluation reserves. In this context, it was observed that Section 205 of the Companies Act, 1956 provides that dividend could only be paid out of profits. The proviso to Sub-section (3) of Section 205 permits capitalization of profits on reserve of a company for the purpose of issuing fully paid up shares or paying up any money for the time being unpaid on any shares held by the members of the Company. Thus, the Companies Act clearly and specifically permits utilisation of reserve arising out of revaluation of assets for purpose of issuing fully paid up bonus shares.

Reference is also made to the decision of Rajasthan High Court in the case of Sutlej Industries Ltd., In Re. reported in (2007) 135 Company Cases 394 (Raj.) wherein similar objection was raised by the Regional Director, The objection was raised to the effect that since surplus arising out of the scheme of arrangement i.e. arrangement/amalgamation reserve is of capital nature and cannot be considered as general reserve as the same (general reserve) is free for distribution to the shareholders of a Company in the form of dividend/bonus shares, whereas 'arrangement/amalgamation reserve' cannot be utilised for distribution to the shareholders. While dealing with this contention the Court held that such a clause in the scheme was not objected to by the shareholders and the meeting of shareholders unanimously approved the scheme of arrangement. The Court did not see any good reason to exclude such a clause from the scheme and broadly found the scheme to be fair, reasonable, according to law and in the interest of shareholders. There is no reason to make any departure from this view.

In view of the aforesaid, more particularly in view of the common additional affidavit filed by the transferee company, (which is part of record of Company Petition No.193/2012) the transferee company shall make the said disclosure in the first financial statement of the transferee company, after the scheme is sanctioned as undertaken by the transferee company. In view of that, therefore, the first observation made by the Regional Director does not survive.

So far as the second and the third observations are concerned, it may be noted that Company Petition No.61 of 2012 filed by M.P.Advisor against IBPL has been disposed of by this Court vide judgment and order dated 05.07.2012, whereas the third observation is concerned, the objections filed by Shri Iyer are dealt with hereinafter.

Considering all the facts and circumstances of the case and taking into account the affidavits and reply affidavits thus, the observations made by the Regional Director do not survive.

VIII) OBJECTIONS RAISED BY THE OBJECTOR/SHRI IYER:

The objector/Shri Iyer has raised objections (in Company Petition No.196 of 2012) which can be divided into three different limbs: (i) in his capacity as shareholder; (ii) in his capacity as creditor; AND (iii) on the ground that the scheme is against the public interest.

The objector/Shri Iyer has alleged that the promoters and the concerned professionals of IBPL and INTAS group have misused the corporate shelter and has urged the court to lift the corporate veil. It is alleged that the scheme is for personal enrichment and profiteering through misusing the single window clearance mechanism for structuring and restructuring various entities. It is also alleged that the attempt on the part of IBPL is to take undue benefits provided by statutory authorities for various research and developmental initiatives. It is further alleged that the proposed scheme is only with an intention to raise public money which would otherwise have not been available. It is also alleged that about 75% of the senior management and scientific staff of the IBPL have resigned, which has caused major setback to the important product development programmes partly funded by the public through tax breaks, grants, sift loans, etc. It is further submitted that demerging and merging the entities within a span of five years is a waste of the valuable time of this Court as well as the same is against the public interest and the interest of the stock holders of IBPL. It is submitted that the action of IBPL have been attempted to be pushed through in a hurried, haphazard and furtive manner whereby it is alleged that the objector as well as various other stock option holders have not given consent to the proposed scheme. It is submitted that IBPL has never informed the objector as well as the other stock option holders of the amalgamating company about the proposed scheme. It is further submitted that ESOP scheme has been malafidely and unilaterally revoked by IBPL and such action of IBPL is against the interest of the stock option holders and not in the interest of the stock holder of IBPL. It is also submitted that IBPL has misrepresented the important fact regarding the transfer of shares held by the objector without paying him the full consideration and that his consent has never been sought for the proposed scheme. It is also submitted that the certificates provided by the concerned C.A. are mis-representation and are mala fide attempt to deprive the objector and the other stock option holders of their legal rights. It is further submitted that IBPL has made an entire mockery of the mandatory requirement of holding a meeting of the shareholders by mis-representating the important facts before this Court.

It may be noted that in response to the objections so filed by the objector/Shri Iyer, Mr.Jayesh Shah, Chief Officer of IPL and Authorized Signatory of IBPL has filed an additional affidavit dated 17.01.2013 (in Company Petition No.196 of 2012) and have denied the allegations leveled by the objector. It is stated that the contentions and claims of the objector are false, frivolous and baseless and the allegations about suppression of material facts are unfounded, untenable either in law or in fact. Preliminary objection was raised with regard to the locus standi of the objector to file any objections. It is categorically asserted that the objector is neither a shareholder, as per the register maintained by the company, nor he is a creditor.

It is submitted that the contention of the objector that he was one of the promoter directors of IBPL for December 2005 to July 2010 is specifically denied by IBPL. IBPL has further stated that it is true that the objector held 2000 shares of IBPL. It is stated by IBPL that the said 2000 shares were purchased by Mrs. Parul U. Chudgar for consideration of Rs.9,72,000/- and those shares are transferred in the name of Mrs. Parul U. Chudgar during August, 2011. IBPL has also annexed a cheque dated 31.12.2011, drawn in favour of the objector for Rs.9,72,000/- as well as the share transfer form, which is signed by the objector, which reveals that the objector held 2000 shares with distinctive number from 48001 to 50000 and that the same has been transferred in the name of Mrs. Parul U. Chudgar for consideration of Rs.9,72,000/-. IBPL has also annexed extract of minutes of the meeting of the Board of Directors of IBPL held on 02.08.2011 whereby the Board of Directors of the IBPL has approved the transfer of shares originally held by the objector in favour of Mrs. Parul U. Chudgar as the transferee. IBPL has further stated that the objector claims his right on the ground that the shares of IBPL had vested in him by way of ESOP Scheme and it is submitted that the said scheme was purely voluntary and discretionary in nature and the same itself did not confer any legal right in favour of any employee. It is further stated by IBPL that no legal right has accrued in favour of the objector as an employee of IBPL and even otherwise unless and until the actual shares have been issued to the employees under ESOP Scheme, rights in capacity of shareholders do not come into existence and, therefore, it is submitted that the objector has no right and interest in IBPL as shareholder under the ESOP Scheme 2007.

It is further submitted by IBPL that holdings of the objector even in other group companies have been transferred in the names of holding companies or promoters or have been transferred to another name of the said company and it is further submitted that as on date the objector does not hold any shares of IBPL directly or indirectly and, therefore, it is submitted that the objector is not a shareholder of IBPL. IBPL has annexed a chart showing the holdings of the objector in IBPL as well as any other group companies in order to show that the objector has no share holding in the companies which are part of the present scheme.

IBPL has also denied the fact that the objector is its creditor. It is submitted that subsequent to the resignation of the objector as director of the company, a consultancy agreement came to be executed between IBPL and the objector in the month of July 2011 with validity period of two years. It is further submitted that as such the objector has raised invoices for the services rendered by the objector upto 31.07.2012 for Rs.46.5 lacs which, as submitted by IBPL, has been paid off to the objector. It is further submitted that the objector, after the said payment, has raised two additional invoices for the period when no consultancy was rendered by the objector and, therefore, it is submitted that the objector is not even the creditor of IBPL.

It is further denied that IBPL had entered into settlement or understanding with the objector. It is further submitted that IBPL is not liable or any understanding entered into between individuals in their individual capacity. It is submitted that as per the copies of correspondence placed on record by the objector it cannot be inferred that any commitments have been made by IPBL. It is further averred that the amount received by the objector has been made to him by Dr.Umrish Chundgar and/or Mrs.Parul U. Chudgar in their personal capacity and has not made by IBPL and that IBPL is in no way connected with the same.

It is contended that the objector is neither a shareholder nor a creditor of IBPL and, therefore, he has no right to object the proposed scheme of amalgamation. It is pointed out that the C.A. appointed by the Official Liquidator, after going through the books of accounts of all the transferor companies, has found nothing objectionable to the scheme in view of the public interest. It is further pointed out that even the Regional Director has confirmed that neither his office nor the office of the Registrar of Companies has found the conduct of any of the petitioner companies to be against the public interest. It is submitted by IBPL that the total income of the transferee company during last financial year ended on 31.03.2012 was more than Rs.2600 crores and the net profit was Rs.440 crores. It is submitted that the built up reserves are more than Rs.1200 crores and, therefore, it is submitted that the company is highly profit making and fast growing company. It is further submitted by IBPL that all the transferor companies are also profit making companies and, therefore, under both circumstances before and after the scheme the transferee company has substantial positive net worth. It is therefore submitted that the rights of the creditors of any of the companies are not in any way going to be adversely affected by the proposed scheme of amalgamation.

IBPL has further denied all the contentions raised by the objector and has more particularly denied the contention raised by the objector in Paragraph No.23 in the affidavit. It is submitted that there is no reason or ground for raising the corporate veil in order to safeguard the personal interest of an ex-employee. It is further denied that there is misuse of corporate shelter by the promoters and the concerned professionals of INTAS group for personal enrichment and profiteering through misusing the mechanism of restructuring of entities. It is also denied that any of the group companies have taken any undue benefits provided by the statutory authorities for various research and development initiatives. It is further contended that on the contrary the proposed scheme of amalgamation would result into consolidation of all activities under one entity and the same shall help to achieve synergic benefits. It is also contended that the resignation of staff members as well as some members of senior management is a matter of routine and the same has not effected the product development programmes of IBPL. It is also contended that the company has been progressively developing new products and in fact has increased its turnover over the years. It is also denied that strategic decisions taken by the management of the group companies is not in the interest of the company and its stake holders and it is further denied that the same is not in public interest.

IBPL has further contended that ESOP Scheme 2007 has already been terminated and no rights were ever vested in any employees and none of the employees have any rights or say in approval of the scheme and as such the employees have no locus standi as far as the same is concerned. It is further submitted that therefore there is no question of intimating anybody about the proposed scheme. It is further denied that the ESOP Scheme was mala fidely and unilaterally revoked. It is also contended that the said issue is not relevant for consideration of the proposed scheme. It is further contended that there is no mis-representation of important facts about the transfer of shares of the said objector has been made by IBPL in the present proceedings. It is further contended that if the objector is aggrieved he can seek resolution through appropriate legal remedy. It is further denied that there is any mis-representation or mala fide attempt on the part of IBPL with regard to the certificates provided by the C.A. It is also denied that the IBPL has made any mockery of the mandatory requirements in seeking dispensation of the meeting of the equity shareholders.

It is further alleged that even though the objector claims that he is espousing the cause of all the employees and other stock option holders, no other persons has come forward with any objections to the scheme, despite public notices for the meetings of the creditors convened under the directions of this Court or even in response to the public notice for hearing of these petitions. It is further contended that the objections filed by the objector are false, frivolous and baseless and not relevant to the present scheme of amalgamation and the objections therefore deserve to be dismissed and the proposed scheme of arrangement deserves to be sanctioned in the interest of stock holders such as shareholders, secured creditors and unsecured creditors as well as public at large.

The objector has also filed a further affidavit along with documents in the form of Form-23, special resolution passed by the petitioner-Company at its Annual General Meeting (AGM) held on 28.09.2007, along with explanatory statement pursuant to the provisions of Section 173(2) of the Act and the Draft Red Herring Prospectus of the transferee company/IPL.

Mr.Bhadresh Raju, learned Counsel appearing for the objector/Shri Iyer, raised certain objections which are part of the affidavit filed by the objector and has also filed written submissions dealing with the contentions raised by IBPL. It is contended that as per the consultancy agreement dated 01.07.2010 entered into between IBPL and the objector, more particularly Clause-4 thereof, IBPL was liable to pay entire amount of Rs.50 lacs to the objector and, therefore, it was contended that as IBPL has averred in Paragraph No.7 of its additional affidavit it has paid only Rs.46.50, which is not fully paid as claimed by the objector and that the objector is still creditor of IBPL.

It was contended that as per the chart incorporated in the affidavit of objection of the objector (at Page 108), the objector has stated his share holding in INTAS group companies as on 31.03.2010. It was admitted by the learned counsel for the objector that the fact that 2000 shares had been purchased by Mrs.Parul U. Chudgar on 11.07.2011 for consideration of Rs.9,72,000/- and those shares were transferred in the name of Mrs. Parul U. Chudgar during August, 2011. However, it was contended that as per list (at Annexure-E of the affidavit page 214) some of the shares held by the objector were transferred without any consideration and, therefore, there exists remaining interest of the objector in those shares. It has also been admitted that as per the share transfer form (at Page 243 annexed with the additional affidavit) 100 shares held by the objector of a company viz. Cytas Research Limited has been transferred for total consideration of Rs.52,75,000/- i.e. at Rs.5,275/- per share. It was further contended that out of total 79,24,733 shares of IBPL, Cytas Research Limited holds 11,31,848 shares and, therefore, the value of 1000 shares of the said company would be Rs.1,10,01,562/- which is far more than the amount mentioned in the said share transfer form and admittedly what is paid to the objector by IBPL. Relying upon the share transfer form it was contended that the same is duly signed by the Managing Director and the secretary of IBPL as witness of the said transfer forms and, therefore, the contention raised by IBPL that such transfer was in individual capacity of Dr.Urmish Chudgar is false.

It was therefore contended that in view of the above, the contentions of IBPL that the claims raised by the objector are baseless and are between two individuals in their individual capacity is clearly falsified and it clearly indicates a different kind of larger overall settlement between the objector and IBPL, which is consistent with the payments made to the objector, including the payment made to the objector and IBPL has no answer to the payment received by the objector, which supports the contention of the objector that the objector continued to be a shareholder of IBPL on account of non-payment of dues towards shares held by the objector. It is further contended that the objector has received a total of 13,440 stock options of IBPL since inception of the ESOP Scheme and the same had vested in favour of the objector before the date of his resignation.

It was contended that the stock options are granted to the employees as an incentive for both past performance as well as for future expectations and as noticed and highlighted by IBPL itself, are one of the main ways to attract and retain talent in cut throat industry. It was therefore contended that it is in the interest of stock option holders, including the objector, to ensure that IBPL gets the highest possible valuation for itself and is allowed to be listed on a recognized stock exchange at the highest possible price leading to the realization of value for the hard work and efforts of the employees/stock option holders over the years. However, it was contended that the ESOP scheme did not permit to unilaterally revoke the same and it was alleged that such an action was mala fide and against the benefit of the objector as stock option holder. It was further submitted that the Draft Red Herring Prospectus of IPL/transferee company dated 25.03.2011 speaks of future continued growth of the transferee company, which is the primary reason for any investor to invest in the company s share. It was further reiterated that the ESOP Scheme was mala fidely and unilaterally terminated on 02.08.2011 wherein the Board of Directors of IBPL consisted of only family members of Chudgar family where the only one outsider is Shri Sanjiv D. Kaul, who was appointed on 02.08.2011 itself through the investment made by Chrys Capital in the IPL/transferee company. It was further submitted that the entire share holding of IBPL is held by either Chudgar family or entities owned, controlled and operated by the same family.

It was further contended that the transferee company paid all private investors, including TATA and Kotak at a very significantly higher price. It was therefore contended that the proposed scheme is against the interest of the stock option holders, who do not have any corresponding stack in the transferee company like the shareholders of IBPL and is against the interest of those who rely only on the intrinsic value of IBPL to recover their efforts and sweat s worth. It was further contended that it is all the more necessary to pierce the corporate veil and to understand in what manner after having demerged IBPL from IPL/the transferee company only a couple of years ago can IBPL sought to be merged with the transferee company/IPL at a significantly lower price than the price at which other independently held shares of IBPL have been bought out. It was further contended that IBPL mala fidely and unilaterally revoked ESOP Scheme, which was for the benefit of the employees of IBPL, which in fact has led to resignation of large number of employees of IBPL.

It was also submitted that IBPL has dealt with the objections raised by the objector in different manner, which clearly highlights mala fide of IBPL and the inconsistent reasons for the sanction of the present scheme. Lastly it was contended that IBPL and the transferee company/IPL operate in entirely different spheres and areas, as is also brought out from the Draft Red Herring Prospectus of the transferee company/IPL and, therefore, the reasons assigned for proposing of the scheme are not applicable. It was therefore contended that the objections filed by the objector deserve to be upheld and the petitions deserve to be dismissed.

Mr.S.N.Soparkar, learned Senior Counsel for the petitioners, contended that the objector/Shri Iyer is neither a creditor nor a shareholder of the company and, therefore, he has no locus standi to file such objections. It was pointed out that the objector claims that he is a creditor on the basis of the fact that two bills of consultancy raised by the objector for Rs.1,50,000/- each, as pointed out earlier, relate to the period for which the objector had rendered no consultancy service. It was therefore contended that no such amount was payable. Relying upon the notices addressed by the objector dated 02.06.2012 and 20.08.2012 it was contended that the consultancy services of the objector came to be discontinued after June 2012 on account of several differences with the company. Further relying upon the judgments reported in the case of Emco Limited, (2004) 3 Comp. LJ 411 (Bom.) as well as Mahalaxmi Cotton Mills Ltd., A.I.R. 1950 Calcutta 399, it was contended that a disputed creditor is not a creditor for the scheme proceedings. It was further contended that even if it is assumed that the objector is a creditor of IBPL and that all his claims are genuine then also, the scheme stipulates that all the liabilities of IBPL gets transferred to the transferee company/IPL and the transferee company becomes liable to pay the dues of the objector and in such an event the creditor would have a right of ensuring that his liability will be fulfilled. It was further contended that considering the net worth as well as profit earned in the last financial year even if the claim of the objector is held to be genuine by an appropriate forum, the transferee company/IPL will be in a position to satisfy such a claim. It was therefore submitted that the objections raised by the objector in his capacity as creditor are baseless since he is not a creditor of IBPL and hence, he has no locus standi in the present proceedings.

Similarly it was also contended that the objector is not a shareholder and, therefore, he has no locus standi to file the present objections. It was further submitted it is an admitted fact that the objector s name is not entered into the Register of members of any of the petitioner companies. It was submitted that a person cannot automatically becomes a member unless his name is registered in the Register. Relying upon the ratio laid down by the Bombay High Court in the case of Sant Chemicals Private Limited Vs. Aviat Chemicals Private Limited, 1993 (3) Bom. CR 454 it was specifically pointed out that the objector claims to be a shareholder of INTAS Group by citing shareholding as on 31.03.2010, which is immaterial and misleading for the purpose of the present scheme.

It was submitted that in fact during hearing the learned counsel for the objector has specifically admitted that as on date the objector is not a shareholder of any company involved in the amalgamation scheme, in spite of which such a contrary stand has been taken by the objector. It was also submitted that in fact the documents on record disclose the fact that the objector has transferred all his shares of IBPL, Cytus Research Limited and Oncology Services India Limited to Mrs.Parul U. Chudgar. It was further submitted that in the other three companies viz. Celestial Biologicals Limited, ATMRF and Indus Biotherapeutics Limited the objector was a merely a joint holder of shares, which have also been transferred on 11.07.2011. It was submitted that these shares were transferred for NIL consideration because the objector was only a joint shareholder and not the ultimate beneficiary of the shares.

It was further submitted that the contention raised by the objector to the effect that the shares belong to the objector were undersold is completely false and misconceived. It was pointed out by the objector himself that he has executed the share transfer forms, which were never objected and it is not even the case of the objector that he executed such forms under coercion or duress. It was submitted that the said transfer is not between IBPL or the said company and the objector but it is a matter between the purchaser and seller of the shares to which IBPL is never a party. Additionally, it was submitted that even if it is presumed that the claim of the objector regarding his share holding is presumed to be genuine, then also this is not a correct form to adjudicate such claim. It was submitted that the present petitions relate to sanction of a scheme and in such proceedings the court will not decide the shareholding of IBPL as the same is statutorily not required to be decided.

It was further submitted that the objections as regards termination of ESOP Scheme is misconceived and the same is liable to be rejected. It was submitted that the petitioner companies are unlisted companies and, therefore, the SEBI guidelines are not applicable to them. Under such circumstances the ESOP Scheme was merely operational and contractual in nature. It was submitted that the Board of Directors of the company has terminated the ESOP Scheme much before proposing the scheme of arrangement came to be proposed. It was vehemently submitted that termination of the scheme has not been challenged by the objector before any forum and such issue cannot be considered in the present proceedings which relate to sanction of a scheme. Referring to Clause 8.1 of the said ESOP Scheme it was contended that even according to the scheme the rights get converted into shares only when the company goes for public issue and only then the objector can get voting right. It was submitted that it is an admitted position that in the present case the company has not gone for public issue and, therefore, no right has accrued in favour of the objector and in absence of such, reliance on the ESOP Scheme for exercising right of the objector is thoroughly misconceived. Relying upon the ratio laid down by the Apex Court in the case of National Organic Chemicals Industries Limited Vs. Miheer H. Mafatlal, 2004 (121) CC 519, it was contended that the issue pertaining to the shareholding cannot be gone into while sanctioning of a scheme under Section 391 of the Act.

It was submitted that as such the scheme has been approved by the requisite statutory majority of shareholders and the creditors of the companies and, therefore, the scheme requires to be sanctioned by this Court. It was submitted that even if it is assumed that the objector is a shareholder, his alleged holding would be infinitely tiny, and not even 0.01% to be able to stall the scheme proceedings. It was submitted that even if the objector had a valid voting right and had he voted against the scheme, then also the scheme is approved by the requisite majority. It was contended that the objections of the objector are not bona fide and the same are preferred with ulterior motive for extorting money from IBPL or its management. Attention was invited of this Court to the emails dated 05.05.2011, 10.05.2011 as well as 22.05.2011 and it was submitted that the objector had addressed several emails to Dr.Urmish Chudgar and by email dated 05.05.2011 it is clearly evident that the objector entered into settlement with Dr.Chudgar. It was submitted that as such the gist of the settlement agreement was communicated to the objector vide emails dated 01.06.2011 and 30.06.2011. It was submitted that pursuant to the said agreement all shares were transferred on 04.07.2011 and thereafter the objector addressed email dated 10.09.2011 to his lawyer for withdrawal of notice officially.

It was submitted that after the said settlement the objector herein did not raise any grievance till June 2012. However, the objector again raised grievance by sending notices, after IBPL floated this scheme. It was further submitted that even otherwise the objections raised by the objector are frivolous and baseless. It was submitted that the objections raised by the objector are extensively based on the ESOP Scheme, which are totally misconceived and the same is beyond the present controversy and that the objector fails to appreciate that the ESOP Scheme stood cancelled. It was also submitted that the objector has failed to appreciate the fundamental difference between the preference shares and the equity shares and the difference between the valuation of such shares. It was submitted that the objector has as such sold the shares voluntarily for a consideration and, therefore, now it is not open for the objector to raise any objection that the shares were undersold with which the petitioner companies are not connected with as the said transaction is between one shareholder to another. It was submitted that the objections raised regarding valuation of shares is purely a matter of commercial wisdom and when the shareholders of any of these companies have not raised any objections with regard to valuation, the objector, who is not a shareholder has no locus standi to raise that objections and there is nothing on record to suggest that the valuation was not fair or reasonable. Relying upon the case of Miheer H. Mafatlal Vs. Mafatlal Industries Ltd., (1997) 1 S.C.C. 579, it was contended that when the shareholders agreed to the valuation, which is based on the report of C.A. then the same cannot be challenged in the scheme proceedings.

It was further submitted that there is no statutory or other prohibition on amalgamation of the companies with different objects and, therefore, in absence of such statutory or other prohibition it is not open for the objector to object the scheme on such ground and it is for the shareholder to decide with which company the company should merge. Relying upon the ratio laid down by this Court in the case of Core Health Care Limited Vs. Nirma Ltd., [2007] 138 CC 204, it was submitted that the said was a classic example of merger of two companies with different objects one being a pharmaceutical company and another being a company manufacturing soaps and detergent powder. It was further submitted that IBPL has made no default in the matter of material disclosure as provided under Sections 391(2) and 393 of the Act. It was submitted that petitioners have to make a disclosure of the latest financial position of the company, the latest auditor s report on the accounts of the company, pendency of any investigation proceedings in relation to the company under Sections 235 to 251 of the Act and like. It was submitted that IBPL has furnished all material facts.

Relying upon the ratio of decision of this Court rendered vide order dated 22.06.2012 in the case of Dwarka Prasad Agarwal & Brothers Vs. Writers and Publishers Limited & Anr.

in Misc. Civil Application No.172 of 2011, it was contended that all material facts have been disclosed by IBPL and the allegation that IBPL ought to have disclosed cancellation of the ESOP Scheme is without any basis whatsoever.

It was submitted that similar arguments of the objector that the scheme is not in public interest is baseless, misconceived and the same are based on the ESOP scheme. It was submitted that the said scheme was a matter between the employees of the company and the company and not for the general public. It was further submitted that the employees cannot be generalized with public because there is a contractual relation between the employees and the company and that no allegation of public interest is involved. It was further submitted that the transferee company/IPL is financially very healthy and is capable of taking care of any alleged liability, even if it is presumed that any such disputed liability would arise. It was also contended that the objections raised by the objector to the effect that IBPL is run by a family and hence different parameters should be adopted while sanctioning the scheme, is completely baseless. It was submitted that there is no provisions that while sanctioning the scheme under Section 391 of the Act different parameters are required to be adopted when the scheme involves family run companies.

Reminding the role of this Court while sanctioning the scheme it was submitted that the scheme under Section 391 of the Act is supervisory. Relying upon the ratio laid down by this Court in the case of Core Health Care Limited (supra) it was submitted that the objector has no ground to persuade this Court to withhold the sanctioning of the scheme as proposed and it was submitted that the objections require to be rejected with exemplary costs.

Reliance was also placed by the learned Senior Counsel for the petitioners on the following decisions :

(i) SIEL Limited, (2004) 122 CC 536 (Del);

(ii) Hindalco Industries Limited, (2009) 151 CC 446 (Bom.);

(iii) Reliance Communications Ltd., Com.Petition No.487/09, rendered on 18.07.2009 (Bom.)

(iv) Sant Chemicals Private Limited Vs. Aviat Chemicals Private Limited, (1993) 3 Bom CR 454.

IX) CONCLUSIONS OF THE OBJECTIONS:

Considering the objections raised by the objector it would be appropriate to deal with them in context to the status on the basis of which the objections are raised.

As observed earlier, the objector claims to be the shareholder of IBPL. The said fact is denied by IBPL in its additional affidavit, as dealt with earlier. In order to examine this aspect it would be appropriate to refer to the chart, which is annexed as Annexure-E to the additional affidavit filed by IBPL. The said chart records detailing of the shares held by the objector in different companies. It would be evident from the said chart that the companies at Sr. Nos.7-8 are not part of this scheme and, therefore, the same does not require any consideration in these proceedings. As far as Sr. Nos.1-6 are concerned, the objector did hold shares in the companies which are part of the present scheme. However, it is an admitted position that the said shares stand transferred in the name of its purchaser on 02.08.2011. The said fact is supported by the share transfer forms, which are duly signed by the objector, the photocopy of the cheque which is received by the objector as well as the subsequent requisite forms, which were submitted before the Registrar of Companies. On reading these documents it transpires that the objector is not the shareholder either of the transferor companies or the transferee company related to the scheme under consideration.

In addition to this, relying upon the ESOP Scheme 2007, more particularly Clauses 6-7 thereof the objector has contended that he is a shareholder. It is borne out from the record that the ESOP Scheme has been terminated by IBPL on 02.08.2011. It may be noted that even if it has been considered that such a scheme exists as on date, as per the said scheme vested option in case of a person who has resigned like the objector can be exercised from the date of listing of the shares of the company on a recognized stock exchange and the time limit so prescribed in the said terminated scheme was within one month from the date of listing. Firstly, such a scheme does not exist and the shares of IBPL are admittedly not listed and, therefore, by no stretch of imagination, it cannot be presumed that the ESOP Scheme is in existence and that the objector is a shareholder.

In view of the foregoing, the name of the objector does not register in the Register of shares in any of the companies (at Annexure-E) and the companies which are part of the present scheme. It may be noted that during course of hearing learned counsel for the objector has not been able to point out that the objector is a shareholder of any of the petitioner Companies.

Considering the facts of the present case and the ratio laid down by the Bombay High Court as well as Delhi High Court in the judgments referred to above, the objector is not a shareholder of any of the companies and, therefore, he has no locus to raise any objections on the ground that he is a shareholder.

Considering the second limb of the objection wherein the objector asserts that he is a creditor of the company, if examined the objector asserts that in lieu of the consultancy dated 01.07.2010 even if the said agreement is terminated before the time the objector is entitled to Rs.3,00,000/- for the months of August-September, 2012, which has not been paid by IBPL. The said contention raised by the objector is disputed by IBPL. It is stated by IBPL that the consultancy agreement came to be terminated and, therefore, in the months of August-September, 2012 no consultancy was derived from the objector and, therefore, he is not entitled to Rs.3,00,000/- for the said months. Considering this aspect the case of the objector that he is a creditor is disputed. Even if it is presumed that the objector is a creditor of IBPL it has rightly been contended by IBPL that the same would be even less than 0.01% and even if the objector would have objected to the scheme the same would not have affected the majority view and voice of the creditors, who have approved the scheme.

In addition to this, the scheme also further provides that liability of the transferor companies shall stand transferred to the transferee company. It may also be noticed that the claim raised by the objector is a disputed claim and unless such a dispute or liability are crystallized and settled in appropriate court or forum in appropriate proceedings, the scheme cannot be held or stopped or delayed as decided by the Bombay High Court in the case reported in Emco Limited, (supra). Further the objector has not brought on record any material to show that IBPL has admitted that Rs.3,00,000/- is payable nor the objector has initiated any proceedings for recovery of such an amount.

It may further be noted that in response to the public notice of admission, the objector has claimed to be the objector on the basis of the fact that he is a promoter and shareholder of IBPL as well as Celestial Biologicals Limited in his capacity as substantial stock option holder of ESOP Scheme 2007 that the fact that he is a creditor on the basis of two disputed bills is not mentioned in it and such an objection has been taken for the first time before this Court.

Relying upon the decision of Calcutta High Court in the case of Mahalaxmi Cotton Mills Ltd. (supra), IBPL has contended that the objector is not even a creditor as his name does not appear in the book as the said two bills, on the basis of which the objector claims to be the creditor, are disputed. In the said judgment it has been held as under:

11. I am of opinion that for the purpose of this application, the creditors whose names appear in the books of the company should be considered as creditors and their votes would taken into account. The creditors whose names do not appear in the books of the company should not be considered as creditors unless they can show prima, facie on this application to the satisfaction of the Court that they are creditors.

The objector has also contended that IBPL has disposed of shares at a higher value, whereas the objector has been paid less amount. Such a question is not essential to be considered while considering the scheme for approval of the scheme under Section 391 of the Act. In addition to that, the record indicates that the shares of IBPL as well as the other companies were sold to a private person and not to IBPL. The record further reveals that in case of transfer of shares in Celestial Biologicals Limited, ATMRF and Indus Biotherapeutics Ltd. the shares were in the joint names and, therefore, name of the objector has been deleted. Apart from the fact that such transfer of shares is executed wherein the objector has signed transfer forms and the same has been recorded even before the Registrar of Companies the validity of transferors cannot be gone into in the present proceedings. The Apex Court in the case of National Organic Chemicals Industries Limited (supra) has observed thus:

7. ... ... ... There was no statutory need to have decided this issue while dealing with the application for approval of the scheme under section 391 of the Companies Act, indeed, that issue did not arise before the company court. That apart basic principles of natural justice are violated by the courts below in deciding an issue against the appellant in proceedings to which the appellant was not even party. By this finding, the appellant's right to hold shares in the MIL gets affected and even the question of violation of the terms of injunction on facts of this case, was not a matter before these forums. Therefore, we are of the considered opinion that the findings given by the company court as affirmed by the appellate court as to the violation of the injunction order also as to the validity of the transfer and the title of the appellant over the shares held by it in the MIL being findings which are made beyond the jurisdiction of the courts below, we have no hesitation in setting aside these findings. This issue as to the violation of injunction order or any other issue pertaining to the validity of title of the shares transferred in favour of the appellant by MIL is a matter if at all, to be decided by the city civil court in the pending suits if it arises for consideration. Therefore, we allow this appeal, set aside the findings impugned in this appeal.

Therefore the objections raised on this ground also deserve to be negatived.

As noted hereinabove, right from the stage of the public notice of admission of these matters the objector has asserted his right of the stock option which were available to him under the ESOP Scheme, 2007. It is borne out from the record that the said scheme is terminated by IBPL as per the resolution passed in the meeting of its Board of Directors on 02.08.2011 and, therefore, the said scheme does not exist as on date. It may be noted that the record reveals that after passing of the resolution the objector has settled the issue with IBPL and did not raise any objection. In addition to this, whether the ESOP Scheme 2007 has been rightly terminated by IBPL or not is not necessary to be decided while dealing with approval of the scheme under Section 391 of the Act. It is also a matter of fact that except the objector no other employees of IBPL has come forward even to object the scheme of amalgamation under consideration in these petitions. It is also a matter of record that such termination has not even been challenged by the objector before any appropriate forum and, therefore, the objector cannot be permitted to raise such an issue while considering the present petitions, which is for approval of the scheme of amalgamation. The objector has also raised an objection to the effect that IBPL and the transferee company operate in two different areas and, therefore, requires to be rejected. As held by this Court in the case of Core Health Care Limited (supra) there is no statutory bar or prohibition for amalgamation of companies with different objects.

In addition to this, as enumerated above, the objector has raised objection to the effect that the proposed scheme is not in the public interest and against the interest of stock holders and it is also further contended that the scheme is mala fide. The objector has also contended that certain disclosures are not made by IBPL, more particularly relating to the ESOP Scheme. On consideration of the documents on record, stand of the authorities viz. Regional Director and the Official Liquidator, it transpires that the Official Liquidator on examination of the record and on the basis of the report submitted by C.A., has opined that the scheme is not prejudicial to the public at large and that the companies are not engaged in any activities which is prejudicial to the public interest. In view of the above, it cannot be said that the scheme under consideration is mala fide in any manner. Both the authorities have not only examined the record of the companies, which are part of the scheme, but the Official Liquidator has also got it examined by C.A.

In view of the foregoing therefore the objector has no locus standi to raise objections on the basis that he is shareholder. Similarly, the status of the objector as a creditor is also not only doubtful but is a disputed and even if it is presumed, as observed earlier, it is less than even minimal for which the objector has other remedy under law and, therefore, on such ground the scheme cannot be halted.

It appears from the record that the objector was part of IBPL and he has resigned and has signed the share transfer forms, as stated above, and has received money on such transfer of shares in favour of the purchaser and having expected everything and even having withdrawn the legal notice on 10.09.2011 have filed these objections in the month of June 2012. Even the allegation to the effect that the petitioner companies are run by one family and, therefore, different parameters should be adopted, requires to be rejected outright as Sections 391-394 of the Act provides for complete procedure and there are no different parameters when the scheme involves family run companies. Reliance placed on the ESOP Scheme to object the scheme is also baseless, while considering the scope and ambit of Sections 391-394 of the Act as it is a contract between the employer and employees and the employees may have right to challenge termination in different proceedings before different forum and that cannot be a ground to disapprove the scheme of amalgamation and, therefore, the objections raised by the objector deserve to be negatived.

It would be advantageous to refer to the judgment of the Apex Court in the case of Miheer H. Mafatlal (supra) wherein it has been considered the limited scope and jurisdiction of the Court, which is called upon to sanction the scheme of amalgamation as per the provisions of Section 391 read with Section 393 of the Act. Referring to the provisions of Sections 391-393 of the Act the Apex Court has observed thus:

The relevant provisions of the Companies Act, 1956 are found in Chapter V of Part VI dealing with 'Arbitration, Compromises, Arrangements and Reconstructions'. In the present proceedings we will be concerned with Sections 391 and 393 of the Act. The relevant provisions thereof read as under:

"391.

(1) Where a compromise or arrangement is proposed-

(a) between a company and its creditors or any class of them; or

(b) between a company and its members or any class of them;

the Court may, on the application of the company or of any creditors or member of the company or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs.

If a majority in number representing three fourths in value of the creditors, or class of creditors, or members, or class of members, as the case may be, present and voting either in person or, where proxies are allowed under the rules made under Sec. 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company:

Provided that no order sanctioning any compromise or arrangement shall be made by the Court unless the Court is satisfied that the company or any other person by whom an application has been made under sub-sec. (1) has disclosed to the Court, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under Sec.s 235 to 251, and the like.

393. (1) Where a meeting of creditors or any class or creditors, or of members, or any class of members, is called under Sec. 391,-

(a) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect; and in particular, stating any material interests of the directors, managing director, managing agent, secretaries and treasurers or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interests, of the compromise or arrangement, if, and in so far as, it is different from the effect on the like interests of other persons; and

(b) in every notice calling the meeting which is given by advertisement, there shall be included either such a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain of such a statement as aforesaid".

The aforesaid provisions of the Act show that compromise or arrangement can be proposed between a company and its creditors or any class of them, or between a company and its members or any class of them. Such a compromise would also take in its sweep any scheme of amalgamation / merger of one company with another. When such a scheme is put forward by a company for the sanction of the Court in the first instance the Court has to direct holding of meetings of creditors or class of creditors, or members or class of members who are concerned with such a scheme and once the majority in number representing three fourths in value of creditors of class of creditors, or members or class of members, as the case may be, present or voting either in person or by proxy at such a meeting accord their approval to any compromise or arrangement thus put to vote, and once such compromise is sanctioned by the Court, it would be binding to all creditors or class of creditors, or members or class of members, as the case may be, which would also necessarily mean that even to dissenting creditors or class of creditors or dissenting members or class of members such sanctioned scheme would remain binding. Before sanctioning such a scheme even though approved by a majority of the concerned creditors or members the Court has to be satisfied that the company or any other person moving such an application for sanction under sub-sec. (2) of Sec. 391 has disclosed all the relevant matters mentioned in the proviso to sub-sec. (2) of that Section. So far as the meetings of the creditors or members, or their respective classes for whom the Scheme is proposed are concerned, it is enjoined by Sec. 391 (1)(a) that the requisite information as contemplated by the said provision is also required to be placed for consideration of the concerned voters so that the parties concerned before whom the scheme is placed for voting can take an informed and objective decision whether to vote for the scheme or against it. On a conjoint reading of the relevant provisions of Sections 391 and 393 it becomes at once clear that the Company Court which is called upon to sanction such a scheme has not merely to go by the ipse dixit of the majority of the shareholders or creditors or their respective classes who might have voted in favour of the scheme by requisite majority but the Court has to consider the pros and cons of the scheme with a view to finding out whether the scheme is fair, just and reasonable and is not contrary to any provisions of law and it does not violate any public policy. This is implicit in the very concept of compromise or arrangement which is required to receive the imprimatur of a Court of law. No Court of law would ever countenance any scheme of compromise or arrangement arrived at between the parties and which might be supported by the requisite majority if the Court finds that it is an unconscionable or an illegal scheme or is otherwise unfair or unjust to the class of shareholders or creditors for whom it is meant. Consequently it cannot be said that a Company Court before whom an application is moved for sanctioning such a scheme which might have got the requisite majority support of the creditors or members or any class of them for whom the scheme is mooted by the concerned company, has to act merely as a rubber stamp and must almost automatically put its seal of approval on such a scheme. It is trite to say that once the scheme gets sanctioned by the Court it would bind even the dissenting minority shareholders or creditors. Therefore, the fairness of the scheme qua them also has to be kept in view by the Company Court while putting its seal of approval on the concerned scheme placed for its sanction. It is, of course, true that so far as the Company Court is concerned as per the statutory provisions of Sections 391 and 393 of the Act the question of voidability of the scheme will have to be judged subject to the rider that a scheme sanctioned by majority will remain binding to a dissenting minority of creditors or members, as the case may be, even though they have not consented to such a scheme and to that extent absence of their consent will have no effect on the scheme. It can be postulated that even incase of such a Scheme of Compromise and Arrangement put up for sanction of a Company Court it will have to be seen whether the proposed scheme is lawful and just and fair to the whole class of creditors or members including the dissenting minority to whom it is offered for approval and which has been approved by such class of persons with requisite majority vote.

29. However further question remains whether the Court has jurisdiction like an appellate authority to minutely scrutinise the scheme and to arrive at an independent conclusion whether the scheme should be permitted to go through or not when the majority of the creditors or members or their respective classes have approved the scheme as required by Sec. 391 sub-sec. (2). On this aspect the nature of compromise or arrangement between the company and the creditors and members has to be kept in view. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the Court. The Court certainly would not act as a Court of appeal and sit in judgement over the informed view of the concerned parties to the compromise as the same would be in the realm of corporate and commercial wisdom of the concerned parties. The Court his neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the Scheme by the requisite majority. Consequently the Company Court's jurisdiction to that extent is peripheral and supervisory and not appellant. The Court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. The supervisory jurisdiction of the Company Court can also be culled out from the provisions of Sec. 392 of the Act which reads as under:

"392.(1) Where a High Court makes an order under Sec. 391 sanctioning a compromise or an arrangement in respect of a company, it-

(a) shall have power to supervise the carrying out of the compromise or arrangement; and

(b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.

If the Court aforesaid is satisfied that a compromise jor arrangement sanctioned under Sec. 391 cannot be worked satisfactorily with or without modification, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under Sec. 433 of this Act.

The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act under Sec. 153 of the Indian Companies Act, 1913 (7 of 1913), sanctioning a compromise or an arrangement."

Of course this Section deals with post-sanction supervision. But the said provision itself clearly earmarks the field in which the sanction of the Court operates. It is obvious that the supervisor cannot ever be treated as the author or a policy maker. Consequently the propriety and the merits of the compromise or arrangement have to be judged by the parties who as sui juris with their open eyes and fully informed about the pros and cons of the Scheme arrive at their own reasoned Judgement and agree to be bound by such compromise or arrangement. The Court cannot, therefore, undertake the exercise of scrutinising the scheme placed for its sanction with a view to finding out whether a better scheme could have been adopted by the parties. This exercise remains only for the parties and is in the realm of commercial democracy permeating the activities of the concerned creditors and members of the company who in their best commercial and economic interest by majority agree to give signal to such a compromise or arrangement. The aforesaid statutory scheme which is clearly discernible from the relevant provisions of the Act, as seen above, has been subjected to a series of decisions of different High Court and this Court as well as by the Courts in England which had also occasion to consider schemes under pari materia English Company Law. We will briefly refer to the relevant decisions on the point. But before we do so we may also usefully refer to the observations found in the oft-quoted passage in Bucklay on the Companies Act, 14th Edition. They are as under:

"In exercising its power of sanction the Court will see, first that the provisions of the statute have been complied with, secondly, that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interest adverse to those of the class whom they purport to represent, and thirdly, that the arrangement is such as an intelligent and honest man, a member of the class concerned and acting in respect of this interest, might reasonably approve.

The Court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting, but at the same time, the Court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considering the matter with a view to the interest of the class which it is empowered to bind, or some bolt is found in the Scheme."

In the case of Re. Alabama, New Orleans Texas and Pacific Junction Railway Company, reported in (1891) 1 Chancery Division 213 the relevant observations regarding the power and jurisdiction of the Company Court which is called upon the sanction a scheme of arrangement of compromise between the company and its creditors or shareholders were made by Lindley, L.J. as under: "What the Court has to do is to see, first of all, that the provisions of that statute have been complied with; and, secondly, that the minority has been action bona fide. The Court also has to see that the minority is not being overridden by a majority having interests of its own clashing with those of the minority whom they seek to coerce. Further than that, the Court has to look at the scheme and see whether it is one as to which persons acting honestly, and viewing the scheme laid before them in the interests of those whom they represent, take a view which can reasonably be taken by businessmen. The Court must look at the scheme, and see whether the Act has been complied with, whether the majority are acting bona fide, and whether they are coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and then see whether the scheme is a reasonable one or whether there is any reasonable objection to it, or such an objection to it as that any reasonable man might say that he could not approve it."

To the similar effect were the observations of Fry, L.J., which read as under:

"The next enquiry is -under what circumstances is the Court to sanction a resolution which has been passed approving of a compromise or arrangement? I shall not attempt to define what elements may enter into the consideration of the Court beyond this, that I do not doubt for a moment that the Court is bound to ascertain that all the conditions required by the statute have been complied with; it is bound to be satisfied that the proposal was made in good faith; and, further, it must be satisfied that the proposal was at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such a member, might approve of it. What other circumstances the Court may take into consideration I will not attempt to forecast."

In Anglo-Continental Supply Co. Ltd., Re,(1992) 2 Ch.723, Ashbury, J., a century later reiterated the very same propositions as under:

"Before giving its sanction to a scheme of arrangement the Court will see firstly that the provisions of the statute have been complied with; secondly that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and, thirdly, that the arrangement is such as a man of business would reasonably approve."

Learned single Judge of the Calcutta High Court in the case of Re, Mankam Investments Ltd.,(1995) 4 Comp LJ 330 (Cal.) relying on a catena of decisions of the English Courts and Indian High Courts observed as under on the power and jurisdiction of the Company Court which is called upon to sanction a scheme of merger and amalgamation of companies:

"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 merger is manifestly unfair or is being proposed unfairly and/or to defraud these other shareholders. Whether the merged companies will be ultimately benefited or will be able to economies in the matter of expenses is a matter for the shareholders to consider. If three companies are amalgamated, certainly, there will be some economies in the matter of maintaining accounts, filing of returns and various other matters. However, 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 the other shareholders."

We may also in this connection profitably refer to the Judgement of this Court in the case of Hindustan Lever Employees' Union V/s. Hindustan Lever Ltd. 1995 Supp (1) SCC 499:(1994 AIR(SCW) 4701) wherein a Bench of three learned Judges speaking through Sen, J. on behalf of himself and Venkatachaliah, and with which decision Sahai, J., concurred. Sahai, J., in his concurring Judgement in the aforesaid case has made the following pertinent observations in the connection in paras 3 and 6 of the Report:

"But what was lost sight of was that the jurisdiction of the Court in sanctioning a claim of merger is not to ascertain with mathematical accuracy if the determination satisfied the arithmetical test. A Company Court does not exercise an appellate jurisdiction. ....

Sec.

394 casts an obligation on the Court to be satisfied that the scheme for amalgamation or merger was not contrary to public interest. The basic principle of such satisfaction is none other than the broad and general principles inherent in any compromise or settlement entered between parties that it should not be unfair or contrary to public policy or unconscionable. In amalgamation of companies, the Courts have evolved, the principle "prudent business management test" or that the scheme should not be a device to evade law. But when the Court is concerned with a scheme of merger with a subsidiary of a foreign company then test is not whether the scheme shall result in maximising profits of the shareholders or whether the interest of employees was protected but it has to ensure that merger shall not result in impeding promotion of industry or shall obstruct growth of national economy. Liberalised economic policy is to achieve this goal. The merger, therefore, should not be contrary to this objective. Reliance on English decisions Hoare & Co. Ltd., Re, 1933 All ER Rep 105, Ch. D. and Bugle Press Ltd., Re., 1961 Ch 270, that the power of the Court is to be satisfied only whether the provisions of the Act have been complied with or that the class or classes were fully represented and the arrangement was such as a man of business would reasonably approve between two private companies may be correct and may normally be adhered to but when the merger is with a subsidiary of a foreign company then economic interest of the country may have to be given precedence. The jurisdiction of the Court in this regard is comprehensive."

Sen J., speaking for himself and Venkatachaliah, also towed the line indicated by Sahai, J., about the jurisdiction of the Company Court while sanctioning the scheme and made the following pertinent observations in paragraph 84 at page 528 of the Report:

"An argument was also made that as a result of the amalgamation, a large share of the market will be captured by HLL. But there is nothing unlawful or illegal about this. The Court will decline to sanction a scheme of merger, if any tax fraud or any other illegality is involved. But that is not the case here. A company may, on its own, grow up to capture a large share of the market. But unless it is shown that there is some illegality of fraud involved in the scheme, the Court cannot decline to sanction a scheme, of amalgamation. It has to be borne in mind that this proposal of amalgamation arose out of a sharp decline in the business of TOMCO. Dr.Dhavan has argued that TOMCO is not yet a sick Company. That may be right, but TOMCO at this rate will become a sick Company, unless something can be done to improve its performance. In the last two years, it has sold its investments and other properties. If this proposal of amalgamation is not sanctioned, the consequence for TOMCO may be very serious. The shareholders, the employees, the creditors will all suffer. The argument that the Company has large assets is really meaningless. 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. The Scheme has been sanctioned almost unanimously by the shareholders, debenture-holders, secured creditors, unsecured creditors and preference shareholders of both the Companies. There must exist very strong reasons for withholding sanction to such a scheme. Withholding of sanction may turn out to be disastrous for 60,000 shareholders of TOMCO and also a large number of its employees."

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:

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

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

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.

That all necessary material indicated by Sec. 393 (1)(a) is placed before the voters at the concerned meetings as contemplated by Sec. 391, sub-sec. (1).

That all the requisite material contemplated by the proviso to sub-sec. (2) of Sec. 391 of the Act is placed before the Court by the concerned applicant seeking sanction for such a scheme and the Court gets satisfied about the same.

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.

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 of the same class whom they purported to represent.

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 to the class represented by them for whom the scheme is meant.

Once the aforesaid broad parameters about the requirement 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 would 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 that 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.

Following the ratio laid down by the Apex Court in the case of Miheer H. Mafatlal (supra) this Court in the case of Core Health Care Limited (supra) has held that in the proceedings under Sections 391-394 of the Act this Court does not have jurisdiction to sit in judgment over the commercial wisdom of the parties of the scheme but has supervisory role and (in Paragraph No.68) has observed thus:

68. From this judgment, it would be clear that in the scheme proceedings, the court does not sit in judgment over the commercial wisdom of the parties to the scheme, the court has supervisory role in the matter of sanction of the scheme, the court is not required to find out as to whether a better scheme could have been adopted by the parties and unless the court finds that the action of majority is manifestly unfair and fraud is involved in the scheme, the court cannot reject the scheme.

The objector has also pointed out that the IBPL has not disclosed that the ESOP Scheme 2007 has been terminated. At the outset it is clarified that the said is a scheme between the employer and the employees, which is not challenged by any employees, including the objector. Considering the aspect of the fact of such non-disclosure of fact, this Court in the case of Dwarka Prasad Agarwal & Brothers (supra) has observed thus:

[8.15] On considering Sections 391 to 394 of the Act, 1956, it appears to the Court that while submitting the Scheme under Section 391(1) of the Act, 1956, the only statutory requirement by the Company would be to disclose the material facts relating to the companies latest financial position; latest auditors report on the accounts of Company and the pendency of any investigation proceedings in relation to the Company under Sections 235 to 351 and the like. Therefore, while submitting the Scheme under Section 391(1) of the Act, 1956, the Company who submits the Scheme is not obliged and/or required to disclose any other facts other than as required under Section 391(2) of the Act, 1956 or under Section 393(1) & (2) of the Act, 1956. Therefore, as such it cannot be said that by not disclosing the order passed by the Hon'ble Supreme Court dated 07.07.2003 or other litigations mentioned in para 4(a) of the application, while submitting the Scheme of Arrangement, there has been any suppression, much less material suppression and/or non-disclosure of the facts which were statutorily required to be disclosed. It is to be noted that and it appears that most of the litigations mentioned in para 4(a) of the application as such were disposed of and/or withdrawn as on the date of proceedings under Sections 391-394 of the Act, 1956. Be that as it may, it appears to the Court that when all the relevant materials which were required to be disclosed statutorily have been disclosed, by not disclosing the order passed by the Hon'ble Supreme Court dated 07.07.2003 and/or the other litigations mentioned in para 4(a) of the application, there has been no suppression and/or non-disclosure of the facts which are statutorily required to be disclosed and therefore also, on the aforesaid ground the order passed by this Court sanctioning the Scheme is not vitiated and/or the same is not required to be recalled and/or modified as prayed by the applicant.

[8.16] Now, so far as the words and the like at the end of proviso to Section 391(2) of the Act, 1956, the decision of the Hon'ble Supreme Court in the case of Express Hotels Pvt. Ltd. is required to be referred to. As held by the Hon'ble Supreme Court in the said decision, the expression and the like required to be considered ejusdm generis.

Therefore, the word and the like at the end of proviso to Section 391(2) of the Act, 1956 is required to be considered along with earlier requirements as mentioned in the said provision.

[8.17] Even otherwise as stated hereinabove while submitting the Scheme / compromise under Section 391 of the Act, 1956, Company or any other person by whom an application has been made is required to give full particulars as mentioned in Section 391(2) of the Act, 1956 and required to furnish particulars to the creditor or any class of creditors or the members of any class of members the particulars mentioned in Section 393 of the Act, 1956 (at the time when the meeting is called under Section 391 of the Act, 1956). If any of the particulars mentioned in Section 391 of the Act, 1956 or under Section 393 of the Act, 1956 are not furnished and/or full particulars / disclosures are not given and/or some material facts related to the disclosures to be made under Section 391(2) of the Act, 1956 or under Section 393 of the Act, 1956 are withheld and/or suppressed and the Scheme is got sanctioned then and then only it can be said that the order is vitiated by not disclosing the full particulars as required. Therefore, it appears to the Court that for non-disclosure of the particulars other than the required under Section 391(2) and Section 393 of the Act, 1956, it cannot be said that the Company and/or the applicant has withheld the material facts which will affect sanctioning of the Scheme / arrangement. At this stage, the decision of the Hon'ble Supreme Court in the case of Miheer H. Mafatlal v. Mafatlal Industries Ltd. reported in (1997) 1 SCC 579 is required to be referred to. In the said decision, while examining the scope and ambit of jurisdiction of the Company Court, the Hon'ble Supreme Court has culled out following broad contours of such jurisdiction:

(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.

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 the Act is 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 to the class represented by them for whom the scheme is meant.

(9) 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 that ground as it would otherwise amount to the court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction.

Considering the aforesaid facts and circumstances and the aforesaid decision, it cannot be said that by not disclosing various litigations enumerated in para 4(a) of the present application and/or non-disclosing the decision of the Hon'ble Supreme Court dated 07.07.2003, there has been a material suppression which will affect sanctioning of the Scheme.

[8.18] The another question will arise whether on the aforesaid ground the Scheme can be modified in exercise of powers under Section 392 of the Act, 1956? As discussed hereinabove, the powers under Section 392 of the Act, 1956 can be exercised only for proper working of the Scheme and the powers under Section 392 of the Act, 1956 cannot be said to be akin to the review jurisdiction i.e. under Order 47 Rule 1 of the CPC. To modify the Scheme which is already sanctioned under Section 391 of the Act, 1956, for proper implementation and working and to supervise the Scheme for implementation and working as provided under Section 392 of the Act, 1956 and to modify the Scheme meaning thereby to recall the order of sanctioning the Scheme on the ground of non-disclosure meaning thereby to review the order of sanctioning the scheme would be different. It appears to the Court that even in a case it has been found that particulars/materials which were statutorily required under Section 391(2) of the Act, 1956 were not disclosed and the Scheme was got sanctioned, in that case also the same can be reviewed and/or recalled only while exercising the review jurisdiction under Order 47 Rule 1 of the CPC and not while exercising powers under Section 392 of the Act, 19546. As stated hereinabove and at the cost of repetition it is observed that as stated by the learned counsel appearing on behalf of the applicant, the present application is only under Section 392 of the Act, 1956 and not under Order 47 Rule 1 of the CPC.

In the facts of the case therefore non-disclosure of the fact that ESOP Scheme 2007 is terminated by IBPL cannot be termed as non-disclosure of particular required under Sections 391-393 of the Act and, therefore, such objection raised by the objector cannot be sustained.

The objections raised by Shri Iyer do not inspire any confidence. The said objector is not even a shareholder, as discussed hereinabove and, therefore, as such has no right to file any objections in his capacity as a shareholder.

So far as challenge to discontinuation of the scheme is concerned, the same would not fall within the scope and ambit of Sections 391-394 of the Act, if the said objector has any right it can be challenged before an appropriate forum in appropriate proceedings. As observed hereinabove, even if the status of the objector as a creditor is examined, which is denied by the petitioner in view of the fact that the Regional Director has clearly opined subject to only one technical observation as regards accounting system that there is no complaint under the Act received against any of the petitioner companies i.e. both the transferor companies and the transferee company and considering the fact that the Official Liquidator has also opined that the affairs of the transferor companies are not carried out in any prejudicial manner, this Court is of the opinion that the objector, who is an ex-employee, has come forward to raise the objections for his personal interest rather than public interest. Considering all these facts and circumstances of the case and taking into account all the affidavits and reply affidavits and submissions made during course of hearing the present scheme of arrangement is in the interest of all stock holders i.e. shareholders, creditors as well as in the public interest and the same deserves to be approved and the same is hereby sanctioned.

ORDER The petitions are accordingly allowed and the sanction is granted to the scheme of arrangement (at ANNEXURE-C to the petitions). Prayers in terms of Paragraph No.21(a) (of Company Petition Nos.193-196/2012) and prayer at Paragraph No.16(a) (of Company Petition No.197/2012) are granted.

The petitioner companies shall pay the fees of Mr.M. Iqbal A. Shaikh, learned Senior Central Government Counsel, which are quantified at Rs.7,500/- per petition. All the four transferor companies shall also pay Rs.7,500/- per petition to the office of the Official Liquidator.

Registry to place a copy of this order in connected matters.

Sd/-

[R.M.CHHAYA, J ] *** Bhavesh* Page 76 of 76