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TMI Blog1994 (4) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... been taken out for holding the meetings of the creditors and the shareholders of the two companies and as no such notice was served at that stage, the present petition, filed after the receipt of the reports of the chairman concerned of the result of the said meetings, is not maintainable. In arguments counsel for the Central Government has not pressed this plea and rightly so because if we peruse the provisions of the statute as well as the Companies (Court) Rules it would become self-evident that notice is not required to be issued to the Central Government for taking out judges summons. Section 391(1) does not contemplate issuance of any notice to the Central Government before getting the scheme of arrangement or amalgamation approved in a meeting of the shareholders and the creditors. Rule 11 of the Companies (Court) Rules, 1959, requires, inter alia , filing of a petition under section 391(2) for seeking sanctioning of a compromise or arrangement. Under this rule, the matters which have to be brought before the company judge contemplate filing of a petition. Rule 11( b ), however, lays down that all other applications under the Act or under these rules shall be made for a jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Electro Carbonium P. Ltd., In re and Electric Materials Co. P. Ltd., In re [1979] 49 Comp Cas 825 (Kar). So, I hold that a joint petition is maintainable by the transferor and the transferee companies. Learned counsel for the Central Government has vehemently argued that keeping in view the facts and circumstances and the terms of the proposed scheme of arrangement it would be self-evident that the scheme is not in public interest and has been so framed as to avoid payment of Government revenue in the shape of stamp duty, registration charges as the real intent and purport of the scheme is to transfer very valuable immovable assets of the transferor company to the transferee company. On the other hand, learned counsel for the petitioner has contended that the scheme has been approved unanimously by the shareholders and the creditors of the two companies in separate meetings and two of the shareholders of the transferor company are still shareholders of the transferee company and the transferor company has various businesses and had achieved lot of economic progress and has become unwieldy, and thus, the scheme proposes to transfer the international merchandising divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 10 each and the sole purpose for which this company is incorporated is to take over the export division of the transferor company. There are only two shareholders of the transferee company, one of them Inder Mohan Puri is also one of the shareholders of the transferor company. In para. 2 of the scheme, it is mentioned that all the assets in schedule I to this scheme shall stand transferred to the transferee company and so also the liabilities mentioned in schedule II. It is also recorded therein that rights, privileges, powers, permits, licences obtained, trade marks and import quotas and telephones and telexes shall also stand transferred to the transferee company. In the scheme there is no reference to transfer of any export business of the transferor company to the transferee company ; rather in para. 12 it is mentioned that all employees of the transferor company shall become the employees of the transferee company on the same terms and conditions on which they have been working with the transferor company. Here again it is not mentioned how many employees are working with the transferor company and out of which how many employees are functioning in such export business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o consideration the representation made by the Government before passing any order on the proposed scheme of amalgamation. This would enable the Central Government to study the proposal and raise objection thereto as it thinks fit in the light of the facts and information available with it and also place before the court the facts which may not have been disclosed by those who appear before the court so that the interests of the investing public at large may be fully taken into account by the court before passing the order. In the said case, the Central Government has raised objections to the proposed scheme of amalgamation on one of the grounds, inter alia , that the Industries Development and Regulation Board should be made a party as the scheme is in violation of the provisions of the Industries Development and Regulation Act. The court held that it is not necessary to make any other party as a party in the scheme of the provisions of the Companies Act and the Companies (Court) Rules. I do not understand how anything said in this judgment is of any help in deciding the present matter. He has then referred to a Division Bench judgment of the Calcutta High Court in New Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court which laid down that the lawful ways of avoiding the tax liability could always be adopted by the parties concerned. It is only the evasion of tax which would bring about the interference of the court. It depends on the facts of each case to decide whether a particular scheme is a bona fide one and is not in violation of any public interest. In the aforesaid case, in view of the facts appearing in the case, it was quite clear that the transferor company was dealing with two kinds of businesses and one kind of business was completely being transferred to the transferee company and incidentally an immovable property pertaining to that particular property business was also sought to be transferred to the transferee company. So, in that situation the court held that it was a bona fide scheme and the mere fact that certain taxes would stand avoided would not mean that the scheme was against any public interest. Learned counsel for the Central Government, however, has referred to certain observations of the Supreme Court in McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148, 160 ; [1985] 3 SCR 791. It was laid down by the Supreme Court that : "... the proper way to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was sought to be achieved through creation of the transferor company and why it was being dissolved by merging it with another company. It was held that if the only purpose appears to be to acquire a certain capital asset through the intermediary of the transferor company created for that very purpose to meet the requirement of law, and in the process to defeat tax liability which would otherwise arise, it could not be said that the affairs of the transferor company sought to be amalgamated, created for the sole purpose of facilitating transfer of the capital asset through its medium, have not been carried on in a manner prejudicial to the public interest. The public interest looms large in this background and the machinery of judicial process is sought to be utilised for defeating public interest and the court would not lend its assistance to defeat the public interest and, therefore, the court would not sanction such a scheme. Similarly, in W.A. Beardsell and Co. P. Ltd., In re and Mettur Industries Ltd., In re [1968] 38 Comp Cas 197 , the Madras High Court also held that amalgamation means within the scope of the decision of the body of shareholders. Such a decision if mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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