KRISHNA H. BAJAJ Vs. SESA INDUSTRIES LTD.

JUDGEMENT

(1.) The matter was heard at length at the admission stage, as the contesting parties are all appearing in the matter through their Advocates. Learned Asst. Solicitor General is appearing for respondent No. 2 and so far as Registrar of Companies is concerned, in the original proceedings, he has filed an affidavit on behalf of the Regional Director and it was agreed by both sides that the matter can be decided finally at the stage of admission itself. As regards respondent No. 4, for the first time when an order was passed on 24.12.2008, the Official Liquidator had appeared and his appearance is shown in that order. However, since there was some error in the name of Official Liquidator, the same was corrected as Shri Sanjay Kumar Gupta in the next order dated 31.12.2008. Accordingly, the matter was heard finally and a formal order of admission is passed. Admit. Respective Advocates waive service for the concerned respondents. The Appeal is now being disposed off by this Judgment.

(2.) This appeal is directed against the Judgment and Order dated 18.12.2008 delivered in Company Petition Nos. 9 and 10 of 2006. The Sesa Industries Limited (SIL) submitted a company petition for sanctioning a scheme of amalgamation between the petitioner Company i.e. Transferor Company and the Transferee Company i.e. Sesa Goa Limited (SGL) which was incorporated on 25.6.1965 as a private limited company, and subsequently became a public limited company with effect from 16.5.1994. The SIL was incorporated on 17.5.93. The scheme of amalgamation is annexed as Annexure A-6 along with the Company Petition. On behalf of the present appellant, objections were lodged before the learned Company Judge opposing the scheme of amalgamation on various grounds and as per various objections taken by the objector before the learned Single Judge, it was prayed on behalf of the objector that the scheme may not be sanctioned. The learned Company Judge, by the impugned Judgment and Order came to the conclusion that there is no substance in the objections raised by the objector. The learned Company Judge found that the objector has a grudge against the companies, particularly SIL for not listing the shares of SIL as initially promised. The learned Company Judge found that there is nothing unfair in the scheme. The learned Company Judge also found that the scheme also gives an exist route to the minority shareholders of SIL to obtain the shares of SGL. The learned Company Judge found that in case the objector is unwilling to continue to be a member of SGL, she is always free to sell the shares and cease to be a member of SGL. The learned Company Judge found that there is nothing unfair in the said scheme, as the scheme is accepted by overwhelming majority of the shareholders of the Company. The learned Company Judge also found that the merger of the subsidiary company with the holding company will benefit the holding company. The learned Company Judge also found that the said sanctioning of the scheme will not, in any way affect the civil or criminal proceedings which may be initiated pursuant to the inspection reports, as well as further progress of criminal complaint filed by the objector. The learned Single Judge, accordingly, allowed the Company Petition by sanctioning the scheme by Judgment and Order dated 18.12.2008.

(3.) Being aggrieved by the said order, the appellant-objector has filed this appeal. The appellant who is appearing as party in person, has challenged the said order of the learned Company Judge on various grounds. It is submitted on behalf of the appellant that the direction given by a Division Bench of this Court in Appeal No. 268/07 vide order dated 25.4.2007 has not been complied with, as the Division Bench has observed in the said order that the Company Judge should take into consideration the reports before passing any final orders in the matter of approving the scheme of amalgamation of two companies for considering the purpose of its relevancy. It is submitted by the party in person that in view of the reports of the Central Government, Ministry of Company Affairs, the Scheme should not have been sanctioned by the learned Single Judge, as it is clear that it is a case of siphoning of funds and because of the same, minority shareholders are affected. It is submitted that as per the reports, both the Companies have committed a fraud and since the scheme is against the public interest, the same is not required to be sanctioned. It is submitted that the proposed scheme is nothing but an operation on the minority shareholders. It is submitted that after amalgamation, the transferor company shall stand dissolved and therefore, no action against the company will be maintainable. It is further submitted that the transferor Company has not disclosed the fact in petition about pending investigation under Section 209A of the Companies Act. It is also submitted that as per the proviso to Section 391 of the Companies Act no order sanctioning any compromise or arrangement shall be made, unless the Court is satisfied that the company or any other person by whom an application has been made under Sub-section (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 requiring the accounts of the company, pendency of any investigation proceedings in relation to the company under Sections 235 to 351. It is submitted that the scheme could not have been sanctioned in view of the fact that the company has not disclosed in the petition pendency of investigation, as the said fact is also required to be disclosed as per the said proviso to Section 391. It is also submitted that since the company has suppressed the fact about the investigation being carried out and there is adverse report against the company, the scheme should not have been sanctioned by the learned Single Judge. It is submitted that the report of the Registrar of Companies, having not been accepted by the learned Company Judge, the learned Company Judge should not have sanctioned the scheme of amalgamation. It is further submitted that the proposed scheme of amalgamation was based on an invalid scheme in view of the fact that the same is in violation of Section 73 of the Companies Act. It is submitted that the shares of SIL though were required to be listed on the Stock Exchanges as per the provisions of the law, as also in terms of the promises given by the petitioning company to its shareholders at the time of initial public offering, have not been listed till the date. It is submitted that the shares of respondent No. 1 Company are not listed on any of the Sock Exchanges in India, nor any application has been made by the said company for getting its shares listed and, in view of the same, there is violation of Section 73 of the Companies Act inasmuch as it was statutorily bound to refund the monies so collected by it from its shareholders along with interest due. It is also submitted that since there is violation of Section 73 of the Companies Act, entire allotment of shares of respondent No. 1 Company is invalid. It is submitted that the proposed scheme was an unconscionable scheme inasmuch as the minority shareholders of the transferor company have been subjected to complete operation by a majority, i.e. by transferee Company. It is also submitted that the entire scheme has been floated with a view to stifle further investigation which is pending against the transferor Company. It is submitted that there is also violation of Section 394(2) of the Companies Act, as appropriate material was not placed in the meeting before the shareholders. It is also submitted that the Regional Director himself has not filed any affidavit, but, on his behalf the Registrar of Companies has filed an affidavit and the Registrar was also acting as an Official Liquidator. It is submitted that the Official Liquidator has also filed an affidavit. The same person could not have filed an affidavit in his capacity as Registrar and in that respect, an affidavit should have been filed by the Regional Director himself, as the Official Liquidator and the Registrar, both are functioning in a different capacity and when their interest is overlapping, the same person could not have filed two affidavits, one in the capacity as the Official Liquidator while the other in the capacity as the Registrar. It is submitted that the financial reports of the Chartered Accounts also do not reflect the correct picture, as the Chartered Account has gone only as per the entries in the Company's Books of Account and as per the Balance Sheet. On the aforesaid grounds, the party in person submitted that the scheme, in question, is not required to be sanctioned and, therefore, order of the learned Company Judge is required to be set aside and this Court may reject the scheme submitted by the Company by not sanctioning the same. The party in person has relied upon the following decisions to substantiate his say.