THE HONOURABLE SRI JUSTICE B.SESHASAYANA REDDY C.P.NOs.151 and 152 OF 2011 Dated: 31-10-2011. C.P.NO.151 OF 2011 BETWEEN: M/S.GALACTIC BRUSH PRIVATE LTD AND M/S.TRIKONA TECHNOLOGIES PRIVATE LTD C.P.NO.152 OF 2011 BETWEEN: M/S.TRIKONA TECHNOLOGIES PRIVATE LTD AND M/S.GALACTIC BRUSH PRIVATE LTD THE HONOURABLE SRI JUSTICE B.SESHASAYANA REDDY C.P.NOs.151 and 152 OF 2011 COMMON ORDER: 1. These two Company Petitions are filed under section 391 and 394 of the Companies Act, 1956 seeking sanction of the scheme of amalgamation. 2. M/s.Galactic Brush Private Limited (hereinafter referred to as the ‘transferer’ company) is the petitioner in C.P.No.151 of 2011 and M/s.Trikona Technologies Private Limited (hereinafter referred to as the ‘transferee’ company) is the petitioner in C.P.No.152 of 2011. The transferer company was incorporated in the State of Andhra Pradesh vide Certificate of Incorporation bearing Corporate Identity No.U92140AP2007PTC054703 issued by the Registrar of Companies, Andhra Pradesh, Hyderabad on 3.7.2007. The authorized share capital of the transferer company is Rs.60,00,000/- divided into 6,00,000 equity shares of Rs.10/- each. The issue subscribed and paid up capital is Rs.55,26,000/- divided into 5,52,600 paid up equity shares of Rs.10/- each. 3. The objectives of the transferer company as set out in the Memorandum of Association are to carry out business of distributors, marketers, agents, traders, representatives, auctioneers, buyers, sellers, importers, exporters, stockiests, procurers and dealers in all kinds of handicrafts, antiques, paintings, philanthropic items and artistic pieces of all kinds and also to deal in equipment and other materials capable of being used or required for the business of the company etc. 4. The authorized share capital of the transferee company is Rs.1,00,000/- divided into 10,000 equity shares of Rs.10/- each. The transferee company has received an amount of Rs.1,16,24,280/- as share application money. The objectives of the transferee company as set out in the Memorandum of Understanding are to carry on business of software development and services, software tools, application development or turnkey convergent technologies, integration software services/products, internet strategies and consulting related software development either as products or on turnkey basis, electronic business/ commerce and software solution services, information technology etc. 5. The main objectives of the proposed merger of the transferer company with the transferee company are set out in para 8 of the respective petitions. The Board of Directors of the transferer and transferee companies at their respective meeting convened on 10-6-2011 have approved the proposed scheme of amalgamation of transferer company with the transferee company. The share holders of the transferer and transferee company have placed on record in their notorised affidavit giving consent for the proposed scheme of amalgamation. The meeting of the share holders of the transferer and transferee company came to be disposed with by this court as per common order in C.A.No.765 and 766 of 2011 dated 5.7.2011. Hence, these applications seeking the prayer stated supra. 6. These applications came to be admitted on 10-8-2011. The petitioners were directed to take out publication in Business Standard, English daily newspaper, Hyderabad edition and Andhra Jyothi, telugu daily newspaper, Hyderabad edition. The petitioners were also directed to take out notice to the Regional Director, Department of Company Affairs, Hyderabad and the Registrar of Companies, Hyderabad and also to the Official Liquidator. The Regional Director, South Eastern Region placed on record his common affidavit. The objection raised by the Regional Director in his affidavit with regard to the proposed scheme of amalgamation is that the authorized share capital of the transferee company is required to be increased in compliance of the provisions of Section 97 of the Companies Act, 1956. The Official Liquidator placed on record his report stating that the affairs of the transferer company do not appear to have been conducted in a manner prejudicial in the interest of its members or to the public interest. 7. Heard learned counsel appearing for the petitioners and learned Assistant Solicitor General appearing for the Regional Director, South Eastern Region and learned counsel appearing for the Official Liquidator. 8. The only objection taken by the Regional Director, South Eastern Region is that the transferee company has to follow the procedure contemplated under section 97 of the Companies Act, 1956 for increasing the authorized share capital. It is contended by learned counsel appearing for the petitioners that the very filing of the copy of the scheme with the Registrar of Companies constitute compliance of Section 97 of the Companies Act, 1956. In support of his submissions reliance has been placed on the decision of the Madras High Court in THE REGIONAL DIRECTOR, MINISTRY OF COMPANY AFFAIRS AND THE REGISTRAR OF COMPANIES v. CIVIN PLASTICS AND CHEMICALS (P) LIMITED[1], M/s LAUREL AROMATICS PRIVATE LIMITED v. CONTRACT POINT IMPEX (INDIA) PRIVATE LIMITED[2] and the decision of this Court in SABOO LEASING PRIVATE LIMITED[3]. Para 10 of the 3rd decision is to be noted and it is thus: “ 10. The present scheme of arrangement or amalgamation if it is sanctioned by this Court, the certified copy of the order of this court is required to be filed before the Registrar within 30 days from the date of the order under Sub-section (3) of Section 394 of the Companies Act, for the purpose of its registration. The object behind such intimation, which is required under law either under Section 95 or under Section 97 or under Section 394(3) of the Companies Act, appears to be one and the same. Again the default in not filing certified copy of the order of this court before the Registrar within 30 days entails penal consequences. Well, when the certified copy of the order sanctioning the scheme by this court is required to be filed before the Registrar for the purpose of its registration, there is no reason as to why it shall not be treated as notice to the Registrar as envisaged under Sections 95 and 97 of the Companies Act. Inasmuch as, as discussed hereinabove, the object being the same, the necessary changes that are required to be made in the concerned register by the Registrar of Companies can be effected after receiving the certified copy of the order of this court sanctioning the scheme. The sanction of the scheme by this court has its own effect. It is not a mere act of the parties individually and volitionally. The scheme upon being sanctioned by this court, it becomes operational by virtue of the orders passed by this court. In other words, by operation of law, such changes would come into effect. Therefore, it has statutory genesis and statutory character, but not mere individual acts of the companies. In that view of the matter, no separate notice informing the Registrar under Section 95 or 97 of the Companies Act need be given, unlike the other cases which do not require the sanctions of the court, in my considered view, inasmuch as the scheme is required to be sanctioned by this court and such sanction is required to be registered with the Registrar of Companies by filing the certified copy of the order of this court. Therefore, I am of the considered view that there has been no infraction of the provisions of Section 95 or Section 97, as the case may be, in any manner. I am reinforced in my above view by the judgment of a learned single Judge of this court in C.P.Nos.149 and 150 of 2001 dated January 4, 2002. The learned single judge of this court extracted a passage from the judgment of the Delhi High Court in Telesound India Ltd., In re (1983) 53 Comp Cas 926 upon which reliance has been placed. The same passage may be profitably extracted hereunder, thus (page 942): “ Amalgamation of a company with another or an amalgamation of two companies to form a third is brought about by two parallel schemes of arrangements entered into between one company and its members and the other company and its members and the two separate arrangements bind all the members of the companies and the companies when sanctioned by the court. Amalgamation is, therefore, an absorption of one company into another or merger of both to form a third, which is not a mere act of the two companies or their members but is brought about by virtue of a statutory instrument and to that extent has statutory genesis and character, and to that extent it is distinguishable from a mere bilateral arrangement to merge or join in a common endeavour, an undertaking or enterprise.” In view of the above referred to decision, the objection taken by the Regional Director, South Eastern Region does not hold good. 9. From the material on record, the scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. None of the parties concerned have come forward to oppose the scheme. The proposed scheme of amalgamation does not effect the employees of the Transferor Company in any manner and they would continue to enjoy the same benefits as they used to before the proposed amalgamation. In the facts and circumstances, I do not see any impediment in granting sanction to the scheme of amalgamation as proposed, since all the requisite statutory compliances have been fulfilled. The transferor company shall stand dissolved without going through the process of winding up w.e.f. 1.4.2010. 10. The parties to the scheme of amalgamation or other persons interested shall be at liberty to apply to this Court for any directions that may be necessary in regard to the working of the scheme of amalgamation; and Transferor Company shall pay a sum of Rs.5,000/- (Rupees five thousand only) each to the Regional Director, South Eastern Region, Department of Company Affairs and the Official Liquidator attached to this Court towards the costs of this petition. 11. The Transferor company do file with the Registrar of Companies an authenticated copy of this order and the scheme within 30 days from this date. 12. Accordingly, these Company Petitions are allowed. ( B.SESHASAYANA REDDY, J ) DT: 31ST October, 2011. tnb THE HONOURABLE SRI JUSTICE B.SESHASAYANA REDDY C.P.NOS.151 & 152 OF 2011 DATE: 31-10-2011 [1] (2008) 141 COMP.CASES 475 (MADRAS) [2] CP.NOS.85 AND 86 OF 2010, DT: 5.8.2010 [3] (2006) 4 COMP CASES 553 (AP)