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TMI Blog2002 (2) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act, 1956 ( the Act ). In Company Petition No. 1096 of 2001 the transferor-company seeks approval and sanction of the scheme. 2. In Company Petition No. 1097 of 2001, the transferee-company seeks approval of the scheme of the merger and amalgamation of the transferor-company into it. 3. The transferor-company has a paid up capital of only Rs. 700 and it is a wholly owned subsidiary of the transferee-company. The transferor-company was incorporated on 5-5-2000 and certificate of commencement of business was granted to it on 7-6-2000. The transferor-company, however, had not commenced commercial operations till the end of the accounting year 2000-01, ending 31-3-2001. A statement has been made in the directors report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at effect. Accordingly, scheme was modified and the modified scheme has been submitted for approval of this Court under section 391. 7. Notices of the two petitions were issued in Economic Times and Maharashtra Times, both dated 17-12-2001 and affidavits of publication have been filed. Notices of the petition were also issued to the Regional Director and the Official Liquidator. 8. The Regional Director appears through Shri C.J. Joy, Panel Counsel Shri Joy states that the Regional Director has no objection for approval of the scheme. 9. Shri B.I. Meena, Official Liquidator is present in person who submits his report dated 17-1-2002. In the said report, the Official Liquidator has certified that affairs of the transferor-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s against loans of over Rs. 127 crores. However, the asset side of the balance sheet also shows assets of similar value and the loans appear to have been utilised for the purpose of acquisition of assets including fixed assets and current assets. In fact, the transferor-company had not even commenced the operation till the year ending 31-3-2001 and, therefore, the profit and loss account was also not drawn. Merely because the company has borrowed money for the purpose of acquisition of assets, it cannot be said that the substratum of the company is lost. Assuming without admitting that the substratum of the transferor-company is lost, the creditors of the transferor-company cannot object to the sanctioning of the scheme on the said ground b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atest financial position at the date of the hearing of the petition and not as on 31-3-2001. In response, Shri Tulzapurkar referred to and relied upon an earlier unreported judgment of this Court (Coram : S.S. Nijjar, J) in Blue Star Ltd., In re [2000] 24 SCL 300. Shri Tulzapurkar further submitted that this judgment has subsequently been affirmed by the Division Bench of this Court. 13. After referring to the judgment of the Gujarat High Court in Navjivan Mills Co. Ltd., In re [1972] 42 Comp. Cas. 265 and judgment of the Delhi High Court in Bhagwan Singh Sons (P.) Ltd. v. Kalawati [1986] 60 Comp. Cas. 94 and of another judgment of the Gujarat High Court in Maneckchowk Ahmedabad Mfg. Co. Ltd., In re [1970] 40 Comp. Cas. 81 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of the submission of latest auditor s report contained in the proviso of sub-section (2) of section 391, in my opinion, would mean the latest auditor s report for the period for which the accounts are audited or ought to have been got audited by the company. In the case of listed companies (whose shares are listed on a stock exchange) a limited audit for every period of half-year may be compulsory and in future it may become necessary even quarterly. In such cases, auditor s report for latest half-year ending/ quarter ending would be necessary. Of course, in a given case, the Court is not powerless to ask the further details of the latest financial position as on the date of the hearing of the petition or as on the date as near to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel appearing on behalf of the objecting creditors of the transferee-company submitted that the scheme should not be granted because large amounts of about Rs. 19 lakhs is due to the Modi Entertainment network. She further submits that unless the dues of objecting creditors are paid to them, the scheme should not be sanctioned. In my opinion, this is not an obligatory requirement. Of course, in a given case the Court may direct payment, or direct that creditors or any class of them should be paid their dues or be sufficiently secured, before the Court sanctions the scheme. But it must be remembered that a scheme under section 391 is not a tool in the hands of a creditor to recover money or to coerce the company to pay. The objecting credito ..... X X X X Extracts X X X X X X X X Extracts X X X X
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