IN MATTER OF APPROVAL OF SCHEME OF AMALGAMATION BETWEEN ZENITH ELECTRO SYSTEMS PRIVATE LIMITED AND ZENITH TECHNOLOGIES LIMITED ZENITH ELECTRO-SYSTEMS PRIVATE LIMITED Vs. STATE

JUDGEMENT

(1.) Both these petitions are for amalgamation of Zenith Electro System Private Limited with Zenith Technologies Limited under section 391 of the Companies Act. Company Petition No. 32 of 1989 is by the Transferror Company namely. Zenith Electro-System Private Limited, while Company Petition No. 33 of 1989 is by the Transferee Company, namely Zenith Technologies Limited. Meetings of Share-holders and Creditors of both the Companies have been dispensed with in view of the consent letters annexed to the petition. The Official Liquidator's report under section 394(1) has already been filed. There are no objections in that report.

(2.) Mr. Rele learned Counsel for the Central Government has objected to the scheme of amalgamation on the ground that the transferee Company has violated section 372 of the Companies Act. (The amendment to this section has not come into operation so far). Under section 372(2), "the Board of Directors of the investing company shall be entitled to invest in any shares of any other body corporate upto 10% of the subscribed capital of such other body corporate :provided that the aggregate of the investments so made by the Board in all other body corporates shall not exceed 30% of the subscribed capital of the investing Company." The Transferee Company in May 1988 applied for the shares of a Public Limited Company known as Zenith Computers Ltd. The application was for 58,800 shares in Zenith Computers Ltd. The allotment of these shares was made to the transferee company in September 1988. The investment so made by the transferee company far exceeded 30% of its subscribed capital.

(3.) It is however, pointed out by Mr. D.J. Khambatta, learned Counsel for the petitioners that under section 372(14) the provisions of that section are not applicable to a Private Limited Company unless it is a subsidiary of a public Limited Company. In the present case the transferee Company prior to 1-12-1987 was a Private Limited Company. On 1st December, 1987 two thousand shares of the transferee company were allotted to Zenith Computers Ltd. a Public Limited Company. These 2000 shares exceeded 25% of the subscribed capital of the transferee Company. Hence under section 43-A(1) of the Companies Act the transferee company became a deemed Public Limited Company. On 26th August, 1988 the share capital of the transferee Company was increased and a fresh allotment of further equity shares of the transferee company was made. As a result, the total paid up equity share capital of the transferee company substantially increased and the holding of Zenith Computers Limited in the transferee Company was reduced to 10% of the total paid up share capital of the transferee Company. The transferee Company has subsequently obtained a certificate from the Central Government dated 25-8-1989 to the effect that, "the transferee Company having complied with the requirements under section 43-A(4) of the Companies Act 1956, the name of the said Company upon re-conversion is on that day changed to Zenith Technologies Private Limited."