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TMI Blog2013 (2) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... nt stayed subject to the assurance of the appellants that they would not suppress the orders of this Court passed in these proceedings in case any subsequent scheme was brought. The order of restraint passed by His Lordship restraining the appellants from moving an identical application for five years, is set aside. The appellants would however be obliged to state in detail, the sequence of events resulting in disposal of this appeal and would annex all orders in the present proceeding passed by the learned single Judge as well as by the Division Bench from time to time. The Central Government’s objection was consistent. The Central Government made queries. They did have the expertise to verify answer to such query. They were within their right to insist upon clarification being made on the issues raised by them. It is true, the Court should either allow a scheme of amalgamation or reject the same, if not satisfied. Such question however, may not be germane herein as the appellants did not proceed further. They withdrew the scheme. The learned Judge directed investigation at a stage as when the appellants were proceeding with their scheme. Thus once the investigation was directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one came forward to object to the said scheme being propounded. In course of time there was change of determination and another learned Judge took up the said application for hearing on January 4, 2012 when His Lordship gave direction for filing affidavits. Central Government filed affidavit. They stated, the valuation report deciding the share exchange ratio was window dressed. The shares issued at a premium were unusual. The objection raised by the Central Government is quoted below: It is to submit that this office vide letter No.RD/T/16596/391/L/11/3139 3140 dated 05.12.2011 has sought information about share holding pattern, Valuation Report of shares for exchange ratio, shares issued at premium and other matters as required for filing affidavit before the Hon ble Court in this matter. As per the Balance Sheet as at 31-03.2011 of the transferor company I and II enclosed with the petition it is found that the Share Premium Amount has been shown as Rs.1276.76 lacs and Rs.1567.80 lacs respectively. However, the transferor company I and II have not submitted any information in respect of shares issued at premium (as sought in Point No.2 of this office letter) along with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the answer given. The learned Judge passed orders asking the appellants to respond to the query made by the Central Government. The matter appeared before His Lordship ultimately on July 2, 2012 when the learned counsel appearing for the appellants insisted that the share premium so objected by the Central Government was nothing but an exercise conducted in usual course of business and in accordance with the provisions of the Companies Act, 1956. His Lordship was not satisfied. His Lordship directed investigation to be conducted by Directorate of Revenue Intelligence. The appellants preferred an appeal before us questioning the authority and propriety and competence of the learned Judge giving such direction. The appellant argued before us, it was for the Court either to sanction or reject the proposed scheme of amalgamation. The Company Judge was not competent enough to direct Central Government to carry on investigation and that too, by a named agency. We heard the parties and disposed of the appeal vide judgment and order dated August 14, 2012 appearing at pages 587-600 of the paper book. Our view as expressed in the said decision would be as follows: In our view, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n should not be influenced by the observation made by His Lordship in the judgment and order impugned. We finally heard the appeal on January 3, 2013 when upon conclusion of hearing we reserved the judgment. Mr. S.B. Mookherjee, learned senior counsel appearing for the appellants filed a written Note of Argument (although not asked for). It seems, Mr. Mookherjee felt aggrieved, as according to him, his arguments made before this Bench in the earlier appeal were not properly dealt with and answered. Since we heard Mr. Mookherjee in detail and meticulously took down notes we need not deliberate on the written note so filed by him, in fact, as a matter of practice, we discourage filing of written Notes of Argument. Mr. Mookherjee contended as follows : i) As per Section 391, the learned Company Judge was competent to consider the scheme of amalgamation and the objections, if any, filed on behalf of the Central Government and/or any shareholder, creditor, contributory or any person interested in the affairs of the company. Upon such consideration, the learned Judge would be free to sanction the said scheme of amalgamation with or without modification or reject the same. His Lor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to the list of shareholders appearing at page 257 to 260 and contended, each one of them, by separate letter of consent, approved the scheme. He also referred to paragraph 13 of the petition where the appellants categorically contended, no proceeding was pending under Sections 235 to 251 of the Companies Act 1956 against any of the appellants. He also referred to the queries made by the Assistant Director and the reply given by the appellants clarifying each and every issue that was raised by the Central Government. He referred to the Income Tax Assessment Order to show, appellants were regularly paying income tax and no adverse order was passed against any one of them by Income Tax Authority. Commenting on the order of restraint, Mr. Mookherjee drew our attention to Section 41(b) of the Specific Relief Act, 1963 and contended, no litigant could be restrained from initiating any proceeding in accordance with law. Hence, the order of the learned Judge debarring the appellants to apply for sanction for scheme of amalgamation for five years, was contrary to the provisions of law. While summing up, Mr. Mookherjee raised an embarrassing issue. According to him, on the ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra, Mr. Bhashkar Prasad Banerjee, learned counsel appearing for the Central Government drew our attention to the affidavits filed by the Central Government and contended, Central Government found the share exchange ratio unusual and made queries that were not properly answered. According to him, the companies without issuing shares with premium could have increased their authorized capital. In case of each of the appellants the share capital was nominal whereas shares were issued with high premium that were totally disproportionate with the authorized capital. According to him, in case of increase of share capital the Central Government would be entitled to appropriate duty that was evaded through issuance of shares with premium value. He also referred to the query made by the Central Government and contended, only one company replied to the query, the others did not. The replies, the Central Government got, were also insufficient. He justified the order of investigation so directed by the learned single Judge. He was, however, unable to assist this Court as to what had transpired in the investigation that was directed by His Lordship at the initial stage and permitted to be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. To take up the second issue first, in our view, the learned Judge was not perhaps correct to name any agency that would be in excess of the power conferred under Section 237. Directorate of Revenue Intelligence is a limb of the Central Government. When the Court would form an opinion that an investigation ought to have been carried out, the Central Government would be free to choose the enquiry agency to be entrusted for the said job. To that extent, the earlier direction faulted and we corrected it by our earlier decision rendered in the former appeal. If we dissect the judgment and order impugned we would find four issues that would be offending the appellants :- i) For the petition, although dismissed as not pressed, rupees seventeen thousand cost was imposed. ii) The appellants were restrained from making any such application for five years. iii) Despite dismissal of the petition investigation was continued. iv) The order was directed to be treated as an order under Section 237. ANSWERS TO THE ISSUE i) COST Learned Judge directed payment of cost of rupees seventeen thousand. From the orders discussed above, we would find that the matter appeared from time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our Court in the case of Patrakola Tea Company Limited (Supra). He relied on paragraph 8 to 10 wherein the learned single Judge discussed the scope and ambit of Section 237. We would however, refer to paragraph 35 of the said decision wherein the learned single Judge, upon considering the materials available on record, came to a definite conclusion that the evidence available was not strong enough to direct an investigation. His Lordship observed that in case there was any stronger evidence His Lordship might have been inclined to direct an enquiry. Similarly, in the Apex Court decision in the case of Needle Industries (India) Ltd. (Supra), the Apex Court in paragraph 49 considered the discretion of the Court being exercised on appropriate material. The Apex Court observed that an illegal act may not be sufficient for interference unless a bundle of facts would indicate a mala fide intention that would lead justifiably to the conclusion that illegality was being carried on amounting to oppression. He also referred to another Apex Court decision in the case of Dale Carrington Investment Private Limited (Supra) wherein the Apex Court in paragraph 36 observed, it is settled law t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We fully agree with Mr. Mookherjee. The Company Court should only declare that an investigation should be carried out by the Central Government. The learned Judge did so in the other way by observing, the order should be treated as an order under Section 237 meaning thereby, the Central Government would have to act within the scope and ambit of the said provision that would permit them to carry on investigation through any agency of their choice. We abundantly make it clear, the judgment and order impugned would not preclude the Central Government from appointing any agency of their choice to continue with the investigation. On the issue of material, we feel, such issue is no more available to the appellants in view of our decision in the former appeal. The appeal succeeds in part. The judgment and order impugned is affirmed with the following modifications:- i) The cost of rupees seventeen thousand would be paid within two weeks from date. Rupees eight thousand five hundred should be paid to the Central Government whereas the balance sum of rupees eight thousand five hundred be paid to the State Legal Service Authority, West Bengal. ii) The order of restraint passed by His ..... X X X X Extracts X X X X X X X X Extracts X X X X
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