1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO.220 OF 2008 WITH COMPANY APPLICATION NO.18 OF 2008 Lifeline Drugs and Intermediates Pvt.Ltd. .. Petitioner WITH COMPANY PETITION NO.221 OF 2008 WITH COMPANY APPLICATION NO.19 OF 2008 Alliance Laboratories Pvt.Ltd. .. Petitioner WITH COMPANY PETITION NO.222 OF 2008 WITH COMPANY APPLICATION NO.20 OF 2008 Kemp Laboratories Pvt.Ltd. .. Petitioner WITH COMPANY PETITION NO.223 OF 2008 WITH COMPANY APPLICATION NO.21 OF 2008 Lifeline Industries Ltd. .. Petitioner Mr.Virag Tulzapurkar, Senior Advocate with Ms.Alpana Ghone i/b. Rajesh Shah & Co. for petitioner Mr.S.Ramakantha, Dy.O.L. present 2 Mr.C.J.Joy i/b. S.K.Mohapatra for R.D. CORAM : S.C.DHARMADHIKARI, J. DATE : 10th July 2008 P.C. . These company petitions seek sanction to the scheme of amalgamation of Lifeline Drugs & Intermediates Pvt.Ltd. and Alliance Laboratories Pvt.Ltd. and Kemp Laboratories Pvt.Ltd. with Lifeline Industries Ltd. 2. It is stated that the powers of this Court to sanction the scheme available under section 391 to 394 have been invoked on the basis that the transferor company and the transferee company are engaged in the manufacture and marketing of drugs. The combined operations by these companies would offer better business opportunities, economise the cost so also enable utilisation of fixed assets. Their production 3 capacity will also be consolidated thereby improving the asset base. The amalgamation will connect all activities and enable Centralised Accounting and Financial and Managerial and Operational system resulting in better coordination. In such circumstances, it was resolved that the first, second and third transferor companies would amalgamate with the petitioner in Company petition No.223 of 2008. 3. The financial position and relevant details pertaining to the transferor and transferee companies have been set out. The salient features of the scheme have also been mentioned. Copy of the scheme has been annexed together with copies of the audited accounts. It is stated that statutory compliance has been made. In para 24 of the petition filed by the transferee company it is stated that the meetings, save and except those of the equity shareholders were dispensed with. An order 4 passed on 11th January 2008 is relied upon. Thereafter, notice of meetings were individually sent to the equity shareholders and in the petition of the transferee company, it is mentioned that the meeting was duly convened, the Chairman Mr.Prakash Rawal reported result of the meeting to the Court. All equity shareholders, present and voting, have given their consent to the scheme. It is approved unanimously. Thereafter all declarations have been set out on oath. In paras 32 and 35 of the petition filed by the transferee company, this is what is stated:- "32. The scheme does not in any way violate, override or circumscribe any provisions of the Companies Act, 1956 and the Rules, Regulations and guidelines made under the said Act." "35. No investigation proceedings 5 against the petitioner company under section 235 to 251 of the Companies Act, 1956 or the like are pending." 4. In these circumstances, Mr.Tulzapurkar, learned Senior Counsel for petitioner submits that there is no impediment in this Court exercising its powers to sanction the scheme. Further, he has invited my attention to the report of the O.L. and the affidavit of the R.D. In his submission, R.D. relies upon the comments and remarks of Registrar of Companies to whom the scheme was forwarded for scrutiny and verification. In para 6 of the affidavit filed by the R.D. in the petition of transferee company, this is what is stated:- "6. Deponent further submit that it has been observed from balance sheet as at 31/3/2007 and Auditors Report on accounts of the transferee company that 6 there is a prima facie violation of section 295 of the Companies Act by the company and its directors because loans/advances have been given by the company to related parties of directors without previous approval of the Central Government in that behalf. Further the transferee company has entered into contracts specified in section 297 of the Act without obtaining the approval of the Central Government. The Registrar of Companies, Mumbai has been directed to take necessary penal action against the Transferee Company and its directors. Since above contraventions being the material facts of the affairs of the company and also effect the Corporate Governance of the public limited companies, the matter is submitted before this Hon’ble High Court for kind information." 7 5. Mr.Tulzapurkar has taken me through sections 283, 290, 292 and 297 of the Companies Act so also section 621-A thereof to contend that the Directors’ act and omission is fully admitted as is clear from the Additional affidavit filed on 3rd June 2008. The company has pointed out that the concerned director so also the company was unaware of the legal position for want of proper legal assistance. Therefore, the transaction as also the violation is admitted and an application would be made and is in fact being made to the appropriate authority for compounding the alleged act of omission and commission. Without prejudice, he submits that if the act has penal consequences and the ROC or the R.D. proceeds to launch criminal proceedings in appropriate and competent court, the director of the company would defend the same or even seek appropriate relief therein, but pending of the same can by no stretch of imagination be said to 8 be constituting a bar for this Court to exercise its powers under section 391 to 394 of the Companies Act. In his submission, the proviso to sub-section 391, which speaks for investigation under section 235 and 251 of the Companies Act against the company and the like would not take in its import the proceedings pursuant to the violation alleged under section 295 and 297 of the Act. He submits that in any event, this Court must issue appropriate clarification so as not to prejudice the pending proceedings and subject to the same, the sanction can be granted. That is how, according to Mr.Tulzapurkar, the affidavit of R.D.proceeds. He does not urge that the scheme is prejudicial to the interest of creditors/ shareholders and the public. Relying upon a decision of a learned Single Judge of Gujarat High Court in the case of Reliance Petroleum, In re, reported in Vol.119 Company Cases 566 and a Division Bench decision of this Court in Appeal No.164 of 2003 in C.P.No.1116 of 9 2002 dated 13th March 2003, reported in 2005 Vol.125 Company Cases 297 (Zee Telefilms Ltd., In re), Mr.Tulzapurkar submits that the scheme be sanctioned. 6. The O.L. has contended that there is no objection to the scheme being sanctioned, as the affairs of the transferor companies have not been carried out in contravention to the interest of public so also that of the shareholders and creditors. 7. Mr.Joy appearing for R.D. would urge that this is a material fact which ought to have been informed to the equity shareholders of the transferee company and the same being with held from them would mean that the scheme does not deserve to be sanctioned. His contention is that the act is that of the Director of the company and is, therefore, not saved by section 290 of the Act. In any event, he submits that the 10 violation of the relevant provisions being admitted this is a fit case where in addition to the Director vacating office, penal proceedings should be launched against the company and the Director. 8. As far as the submission of Mr.Joy is concerned, it is fairly conceded by him that the stand now taken orally is not placed on affidavit by the R.D. The clarificatory statement of the Director is only with regard to the act of the Director of the company mentioned in para 6. Therefore, whether this is a material fact with regard to the affairs of the company and the same being suppressed, the scheme does not deserve to be sanctioned, is a plea which cannot be entertained without any basis or foundation being laid pertaining thereto in the affidavit. Such oral objection in the peculiar facts of this case cannot be entertained. 11 9. I have reproduced the contents of para 32 and 35 of the petition which state that no investigation proceedings against the petitioner/transferee company under section 235 and 251 of the Companies Act are pending. This statement is not found to be false or incorrect. Further, the scheme itself is not violative, overriding or circumventing any provisions of the Companies Act, the statement in para 32 is also not controverted. 10. The only objection raised is with regard to the violations for which the directors of company are liable. They can be proceeded against before competent authorities or courts. If, their acts involve penal consequences, even then, mere sanction to the scheme of amalgamation would not prevent R.D. or ROC from prosecuting the director and the company in a criminal court for their acts of omission and commission set out in para 6 of his affidavit. All such 12 proceedings, if launched can go on and without prejudice to the same, the scheme can be sanctioned. That aspect is not seriously disputed. In such circumstances, clarifying the matter as has been done by the Division Bench, the scheme can be sanctioned. It is clarified that mere sanction of the scheme would not mean that this Court has expressed any opinion as far as merits of the rival contentions. The competent authority or the court is at liberty to consider them and pass such orders as are permissible in law. It is settled law that no amount of sanction or consent would affect the criminal proceedings and offences which are committed must be taken to their logical end and guilty can be brought to book. The consent or sanction does not mean that the competent court’s authority, power and jurisdiction to punish the guilty is in any way taken away. That cannot be overridden nor adversely affected. In such circumstances, while clarifying that sanction to 13 the scheme will not affect the proceedings against the transferee company and its directors for the violation of the act/rules, so also, the consequences for their acts of omission and commission flowing therefrom, the scheme of amalgamation is sanctioned. 11. The company petition Nos.220 to 222 of 2008 are, therefore, made absolute in terms of prayer clauses (a) to (j) and Company Petition No.223 of 2008 is made absolute in terms of prayer clauses (a) to (k). 12. Petitioner company to lodge a copy of this order and the scheme with the concerned Superintendent of Stamps for the purposes of adjudication of stamp duty payable, if any, on the same within 30 days of obtaining the certified copy and/or an authenticated copy of the order. 14 13. The petitioner companies to pay cost of Rs.5000/- each to the R.D. Petitioner in C.P.220 to 222/08 to pay cost of Rs.5000/- to O.L. Costs to be paid within 30 days from today. 14. Filing and issuance of drawn up order is dispensed with. All authorities concerned to act on a copy of this order along with scheme duly authenticated by the Company Registrar, High Court, Bombay. (S.C.Dharmadhikari, J)