Co.Pet. 9/2010 BEFORE HON’BLE MR. JUSTICE AMITAVA ROY Heard Mr. Devashis Baruah, learned Counsel for the Petitioner Co mpany. Also heard Mr. Randeep Sharma, the learned A.S.G.I 1. This is a petition under sections 391, 393 and 394 of the Companies Act 1956 for obtaining sanction of this Hon’ble Court to a Scheme of Amalgamation of Apeejay Tea Limited, the Transferor Company with Apeejay Surendra Corporate Ser vices Private Limited, being the Transferee Company whereby the assets and under takings of the Transferor Company and all the properties, rights and claims what soever together with all rights and obligations relating thereto is to be transf erred to and vested in the Transferee Company on the terms and conditions fully stated in the said Scheme of Amalgamation, a copy whereof is annexed hereto and marked as Annexure - A 2. By an order of this Court dated 29/09/2010, and on perusal of the petiti on for confirming the Scheme of Amalgamation in Form No.40, this petition was fi xed for hearing on 04/11/2010 and notices were ordered to be advertised in daili es The Assam Tribune and Asomiya Pratidin , Guwahati, not less than ten da s before the date fixed for hearing and notices were also directed to be served on the Central Government through the Regional Director, Eastern Region, Departm ent of Company Affairs, Kolkata, the Registrar of Companies, Shillong and the Of ficial Liquidator not less than 14 clear days before the date fixed for hearing, as required under Section 394A of the Companies Act read with Form No. 6 in the Companies (Court) Rules, 1959. 3. The learned counsel appearing for the Petitioner states that all the afo resaid directions have been faithfully complied with and the notices have been s erved on all the parties. An Affidavit of Service has also been filed on 04/11/2 010 to the said effect. 4. The Central Government through the Regional Director, Eastern Region, De partment of Company Affairs, Kolkata had filed an Affidavit incorporating variou s observations on the Scheme with a prayer to direct the Petitioner to make suit able amendments to the Scheme of Amalgamation. The observations made in the said affidavit are as follows. (i). That the accounting entries/adjustments to be made as a consequence of t he Scheme of Amalgamation, are to be made as per Accounting Standard - 14 notifi ed by the Central Government under Section 211(3A) of the Companies Act, 1956. (ii). That after the amalgamation of the Transferor Company with the Transfere e Company, the number of shareholders of the Transferee Company will be more tha n 50 which is in contravention of Section 3(1)(iii)(b) of the Companies Act, 195 6. (iii). That prosecutions for violation of Section 211 and Section 211(3A) of th e Companies Act, 1956 have been launched against the Officers in default of the Petitioner Company vide Case No. 40/2010 and 62/2010 and prosecution for violati on of Section 297 of the Companies Act, 1956 has been launched against the Petit ioner Company and its Officers in default vide Case No. 192/2010 and the said pr osecutions are still pending before the Hon’ble Court of the Chief Judicial Magi strate , Shillong. (iv). That the fractional entitlement of the shareholders of the Transferor Co mpany is not less than @ Rs 60131/- per equity share. 5. The Petitioner Company through its Company Secretary had filed a Rejoind er to the said Affidavit wherein the Petitioner Company had agreed to the follow ing. (i). To make the disclosures in the Accounts as per Accounting Standard - 14. (ii). To convert the Transferee Company into a Public Limited Company, subject to receipt of all requisite approvals and in that respect with the assertion th at the Transferee Company has already pursued the said process of conversion. (iii). To ensure that the fractional entitlement of the shareholders of the Tra nsferor Company shall not be less than Rs. 60,131/- (Rupees Sixty Thousand One H undred and Thirty One) only per share. As regards the pendency of the prosecutions for violation of Section 211 and Sec tion 211(3A) of the Companies Act, 1956 and prosecution for violation of Section 297 of the Companies Act, 1956 which are pending before the Learned Chief Judic ial Magistrate, Shillong it has been stated that the Chief Judicial Magistrate, Shillong before whom the said Cases have been filed is yet to take cognizance in respect to the said cases. 6. The Official Liquidator has submitted its report by its communication da ted 23/11/2010 referring to the report submitted by the Auditor M/s. Amit O.P. S harma and Co., Chartered Accountants, Shillong, to the effect that the petitione r Company has maintained proper books of accounts and has followed the mercantil e system of Accounting considered to be a sound system and universally accepted method of accounting. Reference has also been made of the observation of the Aud itor on a scrutiny of the books and accounts of the Company to the effect that i t has complied with section 209 of the Companies Act, 1956, relating to maintena nce of proper books of Accounts records and vouchers and that its affairs had be en conducted within the ambit of this Act. The Official Liquidator in his report, on an analysis of the report of the Audit or has expressed its opinion that the affairs of the petitioner Company have not been conducted in a manner prejudicial to the interest of its members or the pu blic. In making this observation, however, the Official Liquidator has referred to a Secured Term Loan of Rs. 382,256/- availed by the petitioner Company and al so an outstanding unsecured loan of Rs. 411,759/- as on 31/3/2009 from Banks as well as some inter corporate loan repayable on demand. The above notwithstanding , the Official Liquidator has not raised any objection to the petitioner Company ’s prayer for approval of the scheme of amalgamation and has left the issue to t his Court to be decided on merits. 7. Mr. Randeep Sharma, the learned counsel A.S.G.I appearing for the Compan y Law Board has accordingly submitted that the petition for Amalgamation have be en examined in detail by the Regional Director, Eastern Region, Department of Co mpany Affairs, Kolkata and the Central Government had laid the aforementioned ob servations. Mr. Sharma, on instructions, has further submitted that the observat ion vis-à-vis the prosecutions in the Court of the Chief Judicial Magistrate, Sh illong, is not being insisted upon against the prayer for approval of the scheme of amalgamation involved. 8. Mr. Devashis Baruah, learned Counsel for the Petitioner Company submits that the Petitioner Company does not wish to contest the observations made by th e Central Government and seeks sanction of the Scheme with modifications as sugg ested by the Central Government in its affidavit which has been agreed to by the Petitioner Company in its Rejoinder. As regards the pendency of the prosecution s for violation of Section 211 and Section 211(3A) of the Companies Act, 1956 an d prosecution for violation of Section 297 of the Companies Act, 1956 which are pending before the Learned Chief Judicial Magistrate, Shillong, he submits that upon enquiry it revealed that the learned Chief Judicial Magistrate, Shillong is yet to take cognizance of the said cases. Apart from that he submits that Claus e 6 of the Scheme of Amalgamation squarely covers the situations. Qua the aspect of prosecutions, Mr. Baruah, with reference to the decision of the Apex Court i n Jamuna Singh and others versus Bhadai Shah, AIR 1964 SC 1541 and Devauapalli L akshmi Narayana Reddy and others versus V. Narayana Reddy and others, AIR 1976 S C 1672 has urged that in absence of any cognizance of the alleged offences, no p rosecution relatable thereto can be construed to have been instituted and that t herefore the observation made on behalf of the Regional Director, Eastern Region , Department of Company Affairs, Kolkata, in this regard is of no significance w hat so ever. 9. After hearing the learned Counsel for the parties and on a consideration of the materials on record, it appears that the scheme of amalgamation has been prepared bonafide and there is no bar whatsoever to the grant of approval/sanct ion to the Scheme of Amalgamation as prayed for, it is considered expedient that the prayer for approval/sanction of the Scheme of Amalgamation be granted. The Scheme is sanctioned in terms of prayer (a) of the petition with the modificatio n that; (i). The disclosures in the Accounts would be made as per Accounting Standard - 14 as notified by the Central Government. (ii). The Transferee Company would take steps if not already taken, to convert it into a Public Limited Company, subject to receipt of all requisite approvals . (iii). The Transferee Company should ensure that the fractional entitlement of the shareholders of the Transferor Company shall not be less than Rs. 60,131/- ( Rupees Sixty Thousand One Hundred and Thirty One) only per share. (iv) In view of the proposition laid down by the Apex Court in Jamuna Singh a nd others versus Bhadai Shah, supra, and Devauapalli Lakshmi Narayana Reddy and others versus V. Narayana Reddy and others, supra, the prosecutions in the Court of the Chief Judicial Magistrate, Shillong, presently are construed to be nones t and, therefore, are not liable to be taken note of in the process of the appro val of the scheme of the amalgamation. There will also be orders in terms of prayers (b) (c) (d) (e) (f) (g) and (h) of the petition. 10. Let the Registrar General draw up necessary orders in Form No. 42 under the Companies (Court) Rules 1956. The case is disposed of with the above orders.