IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA Company Petition No.1 of 2009. Date of decision: 07.12.2009. In the matter of: Kasinka India Private Limited. … … …Petitioner No.1-Transferor Company Greka Precision Tools & Dies Private Limited. ... … … …Petitioner No.2-Transferor Company Versus Biodeal Pharmaceuticals Private Limited. … … …Transferee Company. Coram The Hon’ble Mr.Justice Dev Darshan Sud,J. Whether approved for reporting ?1 No. For the Petitioner(s): Mr.Pankaj Sharma, Advocate. For Official Liquidator: Mr.Sanjeev Kuthiala, Advocate. For the Registrar of: Mr.Sandeep Sharma, Assistant the Companies: Solicitor General of India. Dev Darshan Sud,J. This petition has been instituted under Sections 391/394 of the Companies Act, 1956 (hereinafter referred to as the `Act’) by Kasinka India Private Limited and Greka Precesion Tools & Dies Private Limited (Transferor Companies) with Biodeal Pharmaceutical Private Limited (Transferee Company). 1 Whether the reporters of Local Papers may be allowed to see the judgement? Yes. 2 It is pleaded that the Transferor and Transferee Companies have obtained consent letters of all the share holders and secured and unsecured creditors approving the Scheme of Amalgamation. Prior to the filing of the present petition, this Court in Company Petition No.15 of 2008 granted exemption for holding the meeting(s) of the equity share holders and secured and unsecured creditors. The petition was disposed of by order dated 8th April, 2009 in the following terms:- “In my view, the interest of the share holders and the creditors has been adequately protected and I am satisfied from the material on record that the prayer of the petitioners requires to be granted. It is accordingly directed that:- (a) The meeting of the equity shareholders of the transferor and transferee companies to consider and approve the Scheme of amalgamation is dispensed with. (b) The meeting of the unsecured creditors and secured creditors is also dispensed with considering that there is a consent of merger on behalf of the said secured and unsecured creditors to the Scheme; (c) As a consequence of the two directions being issued, it is also directed that there will be 3 no need to issue publication of notices in the newspapers etc. (d) Permission is accorded to the transferee company to move for sanctioning of the Scheme of Amalgamation, within a statutory period. The petition is disposed of accordingly.” This petition has been filed for approval of the Scheme of Amalgamation which has been submitted as Annexure-P4 to this petition. Notices were issued to the Official Liquidator and the Regional Director of the Companies in terms of Section 394A of the Companies Act. The Regional Director, Northern Region, Ministry of Corporate Affairs, has no objection the Scheme, but states in his affidavit that the petitioners should file an undertaking that they shall comply with the accounting standards as prescribed under Accounting Standard 14 i.e. `Accounting for Amalgamation’ governed by the Companies (Accounting Standards) Rules, 2006 issued under the Act. There is no serious objection to the Scheme being allowed by the Official Liquidator who has filed his affidavit along with the report of Rajeev Sood & Company, Chartered Accountants. The basic purpose of the “Scheme of Amalgamation” of the Companies is that:- (i) “they are closely held and managed by family members; 4 (ii) they have common share holders and common Directors; (iii) they are situated at the same place; (iv) the factories/works are also at the same place; (v) the transferor companies hold 6.5 acres of idle land which would give an opportunity of expansion to the transferee company; (vi) the transferee company which has got two wings of pharmaceuticals and engineering shall be able to expand further; (vii) the consolidation of business would enable the companies to optimize their synergies; and (viii) it shall lad to further expansion and growth which shall be in the interest of the company and its share holders.” It is also pleaded that the merger of all the companies would entail better economic utilization of the resources of the Companies. The jurisdiction of this Court under Sections 391 and 394 of the Act has been adjudicated by the Supreme Court in Hindustan Lever Employees’ Union vs. Hindustan Lever Ltd. and Others, 1995 Supp (1) SCC 499, holding:- “3. But what was lost sight of was that the jurisdiction of the Court in sanctioning a claim of merger is not to ascertain with mathematical accuracy if the determination satisfied the arithmetical test. A company court does not exercise an appellate 5 jurisdiction. It exercises a jurisdiction founded on fairness…. … … … … 5. Section 394 casts an obligation on the court to be satisfied that the scheme for amalgamation or merger was not contrary to public interest. The basic principle of such satisfaction is none other than the broad and general principles inherent in any compromise or settlement entered between parties that it should not be unfair or contrary to public policy or unconscionable.” One other judgment reiterating the jurisdiction of the Company Court, namely; Hindustan Lever and Another vs. State of Maharashtra and Another, (2004)9 SCC 438 may be considered. The Supreme Court reaffirms the early principles holding:- “11. While exercising its power in sanctioning a scheme of agreement, the court has to examine as to whether the provisions of the statute have been complied with. Once the court finds that the parameters set out in section 394 of the companies Act have been met then the court would have no further jurisdiction to sit in appeal over the commercial wisdom of the class of persons who with 6 their eyes open give their approval, even if, in the view of the court better scheme could have been framed. This aspect was examined in detail by this Court in Miheer h. Mafatlal v. Mafatlal Industries Ltd….. 12. Two broad principles underlying a scheme of amalgamation which have been brought out in this judgment are: 1. That the order passed by the court amalgamating the company is based on a compromise or arrangement arrived at between the parties; and 2. That the jurisdiction of the company court while sanctioning the scheme is supervisory only, i.e., to observe that the procedure set out in the Act is met and complied with and that the proposed scheme of compromise or arrangement is not violative of any provision of law, unconscionable or contrary to public policy. The court is not to exercise the appellate jurisdiction and examine the commercial wisdom of the compromise or arrangement arrived at between the parties. The role of the court is that of an umpire in a game to see that the teams 7 play their role as per rules and do not overstep the limits. Subject to that how best the game is to be played is left to the players and not to the umpire. Both these principles indicate that there is no adjudication by the court on the merits as such.” From the Scheme Annexure P-4 as also from the report of the Official Liquidator and Director, I do not find there is anything prejudicial to the interest of the shareholders and the secured and unsecured creditors whose meeting has already been dispensed with and who consented to the Amalgamation in terms of what is contained in Annexure P-4. The Scheme does not defeat the provisions of any law or is prejudicial to the interest of the creditors or shareholders of the Company and is not against public policy. In these circumstances, this petition is allowed. The Scheme at Annexure P-4 is approved subject to the condition imposed by the Regional Director, Northern Region, Ministry of Corporate Affairs. The Company shall pay a sum of Rs.25,000/- to the Official Liquidator assesses for the fee and expenses of the Chartered Accountant for submitting his report and Rs.25,000/- for fee and expenses of the counsel appearing for the Official Liquidator. December 7, 2009 (Dev Darshan Sud) (aks) Judge.