IN RE: SATYAM COMPUTER SERVICES LTD. Vs. STATE

JUDGEMENT

(1.) The petition was filed with regard to the amalgamation of Satyam Computer Services Limited with other Companies. The several unsecured creditors have filed objection applications with regard to the scheme of amalgamation. When the matter has been taken up, Sri Venkatesh Dhond, the learned Senior Counsel representing Sri C. Tulasi Krishna, the learned counsel for the objectors has raised a preliminary objection that the report of the Official Liquidator is not in accordance with Section 394 of the Companies Act, 1956 (for short 'the Act') since the report does not disclose that the affairs of the company have not been conducted in a manner prejudicial to the interest of the members or public interest. Consequently, according to him, in the absence of such a report, the further proceedings or in order of dissolution of the transferor company can not be proceeded with. In fact he has relied upon the order of this Court on 07.02.2012 whereunder on the same complaint made by the objectors, this Court directed the Official Liquidator to verify the truth or otherwise of the allegations with regard to the accounting system, adopted by the company after the present management came into picture. The Official Liquidator was further directed to scrutinize the books and records of the Chartered Accountants. Consequent to these directions, the Official Liquidator has filed a second report on 26.02.2013. The said report of the Official Liquidator shows that he has been enclosing the opinion of the Chartered Accountant and as already pointed out by the objectors, it does not contain his opinion about performance of the affairs of the Company. Therefore, according to the learned counsel for the objectors, the further proceedings can not be taken up. Evidently, in case of this nature, when the assistance of the auditors was given and when the Official Liquidator does not defer it shall be treated as part of his report and opinion.

(2.) The learned counsel for the objectors has relied upon a decision reported in SESA Industries Limited v. Krishna H. Bajaj and Others whereunder the provisions of Sections 391 and 394 of the Act have been considered. In that case, Supreme Court was not inclined to accept the report of the Official Liquidator and ultimately upheld the order of the Company Court on the ground that irrespective of the report of the Official Liquidator, the Court has material available with it and passed the order of the amalgamation and restored the order of the Company Court. The importance of the report of the Official Liquidator has been dealt with in para 35 of the judgment in page 234 and ultimately, Supreme Court held that Section 394 of the Act casts an obligation on the Court to be satisfied that the scheme of amalgamation or merger is not prejudicial to the interest of its members or to public interest. In fact, the proviso to Section 394 of the Act does not say that the opinion or report of the Official Liquidator is final and binding. The essential need is only a progressive assessment of the affairs of the Company. It is only a step in aid and not an end at all.

(3.) Therefore, the paramount consideration which has to be considered by the Court is whether the scheme, if approved, will be beneficial to the members or the public. In the instant case, evidently, though the reports of the Official Liquidator and also the Regional Director on behalf of the Company Board are designedly silent about the requirement under Section 394 of the Act, the reasons being known to both the parties on record because of the flurging of the accounts and also mismanagement of the accounts of the Company by the previous Directors, which is a matter of investigation by the several Investigating Agencies and also serious criminal proceedings.