Walvis Flour Mills Co. Pvt. Ltd., In Re.

G.D. Kamat J.

This petition seeks sanction under sections 391 to 394 of the Companies Act, 1956, for a scheme of amalgamation of five companies. The petitioner - company is styled as Walvis Flour Mills Co. Pvt. Ltd. It may be made clear at this stage itself that Prosperity Holdings Private Limited., Messrs. As ales Private Limited, Messrs. Resourceful Investments Private Limited and Messrs. Invaluable Investments Private Limited have been already amalgamated with Messrs. Sir Mathuradas Vissanji Foundation as transferee company by virtue of the order dated June 11, 1992, by a learned single judge at Bombay, in Company Private Limited, could not join in that petition at Bombay, in Company Petition No. 708 of 1991, connected with Company Application No. 347 of 1991. The fifth company, namely, Messrs. Walvis Flour Mills Company Private Limited, could not join in that petition at Bombay because that company has its registered office situated within the State of Goa and, therefore, this petition is limited to Messrs. Walvis Flour Mills Company Private Limited.

This aspect of the matter is also reflected in the judgment delivered by the learned single judge dated June 11, 1992. Individual notices to the creditors were dispensed with by the order made by this court on January 20, 1992, and it was directed that the petition be fixed for hearing on March 6, 1992.

After due compliance with the orders and service to the Registrar of Companies, Goa, and the Regional Director of Company Affairs, Bombay, the matter came up on board. The scheme for amalgamation has been opposed by Shri R. Aghoramurthy, Regional Director of Company Affairs, having his office at Bombay. The gravamen of the objection appears to be that the companies sought to be brought within the scheme for amalgamation are trading companies carrying on commercial activities whereas the transferee company is a charitable institution incorporated u/s 25 of the Companies Act and its main object is restricted to providing for charities and not doing any commercial activities. It has been, therefore, contended that if the commercial trading companies are amalgamated with the transferee company, the very character of the transferee company will be lost and that would in terms violate the terms and conditions of the licence granted under the relevant provisions of the Companies Act.

Shri Cooper, learned counsel appearing for the petitioner company, contended that the same Regional Director had raised similar objection by an affidavit on record in Company Petition No. 708 of 1991 disposed of by the learned single judge on June 11, 1992, in respect of this very scheme for amalgamation and, that being so, the question of denying any sanction in the present case cannot arise. According to him, the only reason for instituting the present petition was that Messrs. Walvis Flour Mills Company Private Limited had its registered office within the State of Goa. He relies upon the judgment of the company court dated June 11, 1992, and says that in any event this court being a co-ordinate court is bound to follow the judgment more particularly because similar objections raised by the Regional Director were overruled.

Shri Khandeparkar, learned counsel opposing this petition, mentions that as it is the Department is contemplating to prefer an appeal against the order dated June 11, 1992, sanctioning the scheme of amalgamation. In any case, according to him, this court ought not to follow the judgment in the other case at Bombay, because certain vital aspects in the matter had not been considered. According to him, the judgment delivered by the learned single judge is upon concession made by the counsel for the petitioner company that on transfer the transferee company would stick to the memorandum. Secondly, he points out that the companies sought to be brought within the scheme for amalgamation were having objects different from the transferee company. Having regard to different objects between the two sets of companies, it was contended that it would amount to an illegality. Therefore, the present petition be rejected and/or sanction be not given.

He relies on the decision of Coimbatore Cotton Mills Ltd. and Lakshmi Mills Co. Ltd., In re [1980] 50 Comp Cas 623. According to him, it has been clearly laid down in this authority that the court should normally be satisfied of four factors before granting any scheme for amalgamation. Referring to factor No. 3, according to him, while exercising discretion under sections 391 and 394 of the Companies Act, the court is not acting as a rubber stamp and that it is the duty of the court to see that the scheme as a whole is to be adjudged as a reasonable one having regard to the general conditions, background and the object of the scheme. He now urges that inasmuch as the order dated June 11, 1992, in the earlier cited company case at Bombay has not considered whether the amalgamation would lead to unfair unity it is necessary for this court to consider this aspect of the matter and, in the fitness of things, reject the sanction.

The learned single judge, while disposing of the case relating to the scheme for amalgamation of four companies earlier referred to, held that objections raised by the Regional Director, Bombay, are misconceived and unfounded and that too by assigning reasons and after having looked into a few authorities as mentioned therein, reached the conclusion that the objections raised cannot be sustained. The question as to there being no provision for amalgamation in the objects clause of the memorandum of association we also considered and it was held that even in the absence thereof, sanction can be obtained from the court for a scheme of amalgamation and that such scheme can yet be granted provided the court is satisfied about the reasonableness of the scheme. In my view, there can be no doubt that if the transferee company does not carry on business strictly in accordance with the terms of its memorandum of association and/or the terms of the licence issued by the Government under the relevant provisions of the Companies Act, such a contravention can be taken care of and needless to say it is open to the authorities under the Companies Act to take appropriate action including the revocation of the licence. Once I come to this position, I find no difficulty in sanctioning the scheme as prayed for. The transferee company is directed to file an undertaking that it shall carry on its activities strictly in accordance with the terms of its own memorandum of association.

In addition to this I would say that there is no point in denying sanction in this case as on similar objections the scheme for amalgamation of the four other companies with the transferee company has already been sanctioned by a co-ordinate court at Bombay and it will not be in consonance that this curt should frustrate the scheme in relation to one company, namely, Messrs. Walvis Flour Mills Company Private Limited, merely because the present petition had to be filed in Goa where that company has its registered office. This being so, the petition is allowed and the rule accordingly made absolute