Case: 63 MOONS TECHNOLOGIES LTD (FORMERLY KNOWN AS FINANCIAL TECHNOLOGIES INDIA LTD) Vs. UNION OF INDIA

should be heard by the Council before it proceeds to record its finding. Section 22-A of the Act entitles a member to prefer an appeal to the High Court against an order of the Council imposing a penalty under Section 21(4) of the Act. It is pointed out that no limitation has been imposed on the scope of the appeal, and that an appellant is entitled to urge before the High Court every ground which was available to him before the Council. Any insufficiency, it is said, can be cured by resort to such appeal. Learned counsel apparently has in mind the view taken in some cases that an appeal provides an adequate remedy for a defect in procedure during the original proceeding. Some of those cases as mentioned in Sir William Wades erudite and classic work on Administrative Law (5 th Edn.). But as that learned author observes (at p. 487), in principle there ought to be an observance of natural justice equally at both stages , and if natural justice is violated at the first stage, the right of appeal is not so much a true right of appeal as a corrected initial hearing: instead of fair trial followed by appeal, the procedure is reduced to unfair trial followed by fair trial.And he makes reference to the observations of Megarry, J. in Leary v. National Union of Vehicle Builders [(1971) 1 Ch. 34, 49]. Treating with another aspect of the point, that learned Judge said: If one accepts the contention that a defect of natural justice in the trial body can be cured by the presence of natural justice in the appellate body, this has the result of depriving the member of his right of appeal from the expelling body. If the rules and the law combine to give the member the right to a fair trial and the right of appeal, why should he be told that he ought to be satisfied with an unjust trial and a fair appeal? Even if the appeal is treated as a hearing de novo, the member is being stripped of his right to appeal to another body from the effective decision to expel him. I cannot think that natural justice is satisfied by a process whereby an unfair trial, though not resulting in a valid expulsion, will nevertheless have the effect of depriving the member of his right of appeal when a valid decision to expel him is subsequently made. Such a deprivation would be a powerful result to be achieved by what in law is a mere nullity; and it is no mere triviality that might be justified on the ground that natural justice does not mean perfect justice. As a general rule, at all events, I hold that a failure of natural justice in the trial body cannot be cured by a sufficiency of natural justice in an appellate body.The view taken by Megarry, J. was followed by the Ontario High Court in Canada in Re Cardinal and Board of Commissioners of Police of City of Cornwall, [(1974) 42 D.L.R. (3d) 323]. The Supreme Court of New Zealand was similarly inclined in Wislang v. Medical Practitioners Disciplinary Committee, [(1974) 1 N.Z.L.R. 29] and so was the Court of Appeal of New Zealand in Reid v. Rowley [(1977) 2 N.Z.L.R. 472]. (at pp. 1065-1066) This judgment was the subject matter of comment in Union Carbide Corporation v. Union of India, [1991] Supp (1) SCR 251, where this Court held, following the judgment in Charan Lal Sahu v. Union of India, (1990) 1 SCC 613 , that non-compliance with the obligation to issue notices to persons effected by the Bhopal gas leak did not, for this reason alone, vitiate the settlement that was entered into with Union Carbide by the Government on their behalf. This Court, in passing, commented that the principle laid down in Leary v. National Union of Vehicle Builders, [1971] Ch. 34 might perhaps be too broad a generalisation, except in cases involving public interest. This was an observation made in answer to an argument by Shri Shanti Bhushan, stating that a defect of natural justice always goes to the root of the matter. Ultimately, given the fact that the settlement fund was held to be sufficient to meet the needs of just compensation to the victims of the Bhopal gas leak tragedy, it was held that the grievance on the score of not hearing the victims first would not really survive. However, what is of fundamental importance is the fact that in the present situation, a clear statutory right is given to every member or creditor who shall be entitled to an assessment of compensation, first by the prescribed authority and then, a right of appeal to the Appellate Tribunal. In such cases, therefore, the orders of non-assessment by the prescribed authority can more appropriately be challenged in judicial review proceedings, in which the High Court, acting under Article 226 of the Constitution of India can, if an infraction of Section 396(3) is found, send the matter back to the prescribed authority to determine compensation after which the right of appeal under sub- section (3A) of Section 396 would then follow. In fact, in Writ Petition 2743 of 2014, which challenged both the draft order and the final order of amalgamation, the appellant took out a chamber summons for amendment of its writ petition to challenge the order of assessment of compensation, dated 01.04.2015, which amendment was allowed vide order dated 16.02.2016. The order of non-assessment of compensation has thus been challenged by FTIL in proceedings under Article 226 of the Constitution of India. Even otherwise, this is a case where there is complete non-application of mind by the authority assessing compensation to the rights and interests which the shareholders and creditors of FTIL have and which are referred to in Section 396(3) of the Act. This being the case, it is clear that Section 396(3) has not been followed either in letter or in spirit.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]23. There is no doubt whatsoever that Section 396 cannot be challenged on the ground of Article 14 or Article 19, given Article 31A of the Constitution of India. However, this does not mean that Section 396 must be construed in such a fashion that it would lead to arbitrary or unreasonable results.26. In the present case, this judgment has no direct application except to say that Article 31A also constitutes a grave encroachment on fundamental rights, and must be construed strictly. The expression used in Article 31A is law, for which, one is to see the definition contained in Article 13(3). Law in Article 13(3) certainly includes order. The only question is whether this would include an administrative order as well27. It is clear, on a reading of Article 13(3), that the expression law, as defined in Article 13(3)(a), includes an Ordinance, rule, regulation, notification, and custom or usage having in the territory of India the force of law. Obviously, therefore, when the expression order is used, it would take colour from Ordinance, rule, regulation, notification, which are all legislative in nature, and not administrative. Even custom or usage having the force of law refers to general rules of conduct, as opposed to administrative orders passed on the facts of a given case. Construing Article 31A in the light of Article 13(3)(a), it is clear that the order referred to, can therefore, only be a legislative order. Examples of legislative orders are of the kind dealt with in Prag Ice & Oil Mills (supra) and Union of India and Anr. v. Cynamide India Ltd. and Anr., (1987) 2 SCC 720 [ Cynamide India], namely, orders passed under statutes which are in the nature of subordinate legislation, which deal generally with a whole class of persons who are governed by the same in which general rules of conduct are laid down28. This brings us to what is the nature of the order of the Central Government that is passed under Section 396. It has been argued on behalf of the Union of India, relying upon a number of judgments, that the nature of the order passed under Section 396 is that of delegated legislation. This being the case, it would, therefore, get immunity from challenge on the ground of Articles 14 and 19 of the Constitution of India, as it would then amount to a law within the meaning of Article 31A read with Article 13(3)(b)The fact that orders made by the Central Government for removing difficulties as contemplated under sub-clause (10) are also to be placed before the two Houses of Parliament makes it abundantly clear that the placing of the scheme before the two Houses is not a relevant test for making the scheme-framing process legislative. We accordingly hold that there is no force in the contention of Mr Salve that the process being legislative, rules of natural justice were not applicable. The fact that, under Section 396(5), the Central Government order has to be laid before the Houses of Parliament also does not detract from the fact that this order is administrative and not legislative in character. Applying these judgments to the Central Governments order passed under Section 396, it is clear that the order directly impacts the rights and liabilities of the companies, their shareholders and creditors, sought to be amalgamated under the order. Such order is not an order in general which applies to all such companies, but only to the particular companies sought to be amalgamated. There is no general rule of conduct, without reference to the particular case that is laid down by such an order. The Central Government order, ultimately, makes a specific direction qua two specific companies which are to be amalgamated. It is clear that such an order is not in the nature of legislation or delegated legislationSince Section 396(5) of the Companies Act is a provision akin to the provision considered in the case of K.I. Shephard (supra), the ratio of K.I. Shephard (supra) squarely applies. The judgment in New Bank of India Employees Union (supra), therefore, is of no assistance, given the statutory provision in the present case31. Learned Senior Advocates on behalf of the respondents then cited the judgment in Quarry Owners Association v. State of Bihar and Ors., (2000) 8 SCC 655. This judgment, in paragraphs 45 and 55, held that even a simple laying of an order before Parliament is a mandatory condition to be observed, and ordered that the particular order in that case be laid before the legislature as it had not so been laid earlier. This judgment again has nothing to do with whether, on account of laying before the legislature, an order is administrative or legislative in nature. This judgment also, therefore, does not carry us very much further32. Learned Senior Advocates on behalf of the respondents then cited a passage from J.K. (Bombay) (P) Ltd. (supra), and paragraph 23 in particular, in which this Court observed that an order made under Section 391 of the Companies Act has statutory force. The fact that a similar order made under Section 396 may also have statutory force again does not answer the precise question before us, namely, as to whether such orders having statutory force are administrative or legislative in nature. This observation again does not carry the matter very much further33. The order passed under Section 396 is qua particular companies and does not lay down any general rule of conduct by itself, but in fact, follows the general rule of conduct laid down by Section 396. Thus, the Central Government order, made under Section 396, must conform to the fundamental rights guaranteed by Articles 14 and 19(1)(g) of the Constitution of India. This Court has held in a catena of decisions that it is the substance of what is effected that counts when it comes to infraction of a fundamental right, and not the form.34. Various pre-requisites contained in the said Section must first be satisfied before the Section can be said to operate. First and foremost, the Central Government has to be satisfied, meaning thereby, that it must, on certain objective facts, come to a conclusion that amalgamation between two or more companies is necessary. This can only be done if the Central Government finds it essential, i.e., necessary to do so. Also, this can only be done in public interest (the Section originally contained the expression national interest. By Amendment Act 65 of 1960, national interest was substituted by public interest)What is important from the Notes on Clauses is the fact that it is only occasionally that cases arise where an amalgamation in national interest is clearly a necessity. It is made clear that the reason for Section 396 is that the observance of the usual procedure prescribed by the existing Act (namely, that contained in Sections 391 to 394) in such cases will lead to prolonged delays, which will be detrimental to national interest. The fact that the procedure contained in Sections 394 and 395 need not be carried out is made clear in the non-obstante clause contained in Section 396(1)36. Section 396(3), (3A), and (4) are also important. A condition precedent to the passing of an order by the Central Government under this Section is that every member or creditor of each of the companies before amalgamation shall have, as nearly as may be, the same interest in or rights against the company resulting from the amalgamation as he had in the erstwhile company either as a member or a creditor, and if this is not so, such member or creditor shall be entitled to compensation which is to be assessed by such authority as may be prescribed. From the order of such assessment, an appeal is provided by sub-section (3A). What is important is the mandatory language contained in sub-section (4), which states that no order shall be made under the Section unless the time for preferring an appeal under sub-section (3A) has expired, or where any such appeal has been preferred, the appeal has been finally disposed of. This makes it clear that unless an order of compensation is first made under sub- section (3), and an appeal therefrom has either not been filed or has been disposed of, no order of amalgamation can be made. Another condition precedent is an inbuilt provision for natural justice, namely, that a proposed draft order has first been sent to each of the companies concerned. The companies may then send suggestions or objections to the Central Government, which the Central Government must first consider before passing the final order. Such objections and suggestions can also be sent from any class of shareholders of either of the companies, or from any creditors or class of creditors of either of the companies.These observations were made in the context of an argument that differential treatment was accorded to the State Trading Corporation vis-à-vis private importers in that the customs duty for the State Trading Corporation had been reduced by notification under Section 25(2) of the Customs Act, 1962. What is important to note is that judicial review consisted of examining whether the reasons which prompted the Government to pass the exemption orders could be said to be irrelevant or unreasonable. If so, the orders would be struck down in exercise of judicial review42. Thus, at the very least, it is clear that the Central Governments satisfaction must be as to the conditions precedent mentioned in the Section as correctly understood in law, and must be based on facts that have been gathered by the Central Government to show that the conditions precedent exist when the order of the Central Government is made. There must be facts on which a reasonable body of persons properly instructed in law may hold that it is essential in public interest to amalgamate two or more companies. The formation of satisfaction cannot be on irrelevant or imaginary grounds, as that would vitiate the exercise of power44. In J. Jayalalitha v. Union of India, (1999) 5 SCC 138 , this Court dealt with an argument that there is no guideline contained in Section 3(1) of the Prevention of Corruption Act, 1988, when the Section empowers the Government to appoint as many Special Judges as may be necessary. It was stated that this word has a precise meaning and means what is indispensable, needful or essential [see paragraph 14]. It is thus clear that the Central Governments mind has to be applied to whether a compulsory amalgamation under Section 396 is indispensably necessary, important in the highest degree, and whether such amalgamation is both basic and necessary45. The third pre-requisite of Section 396 is that the Central Government must apply its mind when compulsorily amalgamating two or more companies in the public interest. Public interest is an expression which is wide and amorphous and takes colour from the context in which it is used. However, like the expression public purpose, what is important to be noted is that public interest is the general interest of the community, as distinguished from the private interest of an individual [see State of Bihar v. Maharajadhiraja Sir Kameshwar Singh of Darbhanga and Ors., [1952] 3 SCR 889 at pp. 1073-1075]54. In the context of compulsory amalgamation of two or more companies, the expression public interest would mean the welfare of the public or the interest of society as a whole, as contrasted with the selfish interest of a group of private individuals. Thus, public interest may have regard to the interest of production of goods or services essential to the nation so that they may contribute to the nations welfare and progress, and in so doing, may also provide much needed employment. Public interest in this context would, therefore, mean the combining of resources of two or more companies so as to impact production and consumption of goods and services and employment of persons relatable thereto for the general benefit of the community. Conversely, any action that impedes promotion of industry or obstructs growth which is in national or public interest would run counter to public interest as mentioned in this SectionThe report then goes on to say that there was no documentation in relation to warehouse activities for long term trades indicating that such contracts were not secured by warehouse stocks. The warehouses were customer managed warehouses and the underlying collateral were not in custody of NSEL. NSEL did not have control over these warehouses and Grant Thornton was denied access to number of warehouses. The Warehouse Development and Regulatory Authority had in fact rejected NSELs application for registration of its warehouses way back on 16.05.2011. Notwithstanding such rejection, NSELs website represented that its warehouses were registered with the Authority. No verification or due diligence was ever undertaken by NSEL to ensure compliance by its members of the conditions outlined in its rules and byelaws even though in terms of NSEL byelaws, warehouse receipt issued by NSEL were meant to evidence a commodity being held in an approved warehouse. NSEL did not insist upon deposit of commodities in the warehouses prior to executing sale transactions. Instead NSEL resorted to issuing Delivery Allocation Reports (DAR) representing to genuine investors that each transaction was delivery based and backed at the time of sale by the required quantity of commodities in its warehousesBased on the Grant Thornton report and the FMC order, the draft amalgamation order dated 21.10.2014 then relied on the same facts, as did the final assessment order. The final amalgamation order also refers to an investigation under Section 209A into the affairs of NSEL which led to infractions of Sections 211, 217 and 292A of the Companies Act. These are compoundable offences which have, in fact, been compounded by orders dated 03.03.2016 and 31.05.2016 by the concerned authority55.3. We have seen that neither FTIL nor NSEL has denied the fact that paired contracts in commodities were going on, and by April to July, 2013, 99% (and excluding E-series contracts), at least 46% of the turnover of NSEL was made up of such paired contracts. There is no doubt that such paired contracts were, in fact, financing transactions which were distinct from sale and purchase transactions in commodities and were, thus, in breach of both the exemptions granted to NSEL, and the FCRA. We have also seen that NSEL throughout kept representing that it was, in fact, a commodity exchange dealing with spot deliveries. Apart from the Grant Thornton report and the FMC order, we have also seen that Shri Jignesh Shah, on 10.07.2013, made representations to the DCA and the FMC, in which he stated that NSEL had full stock as collateral; 10-20% of open position as margin money; and that the stock currently held in NSELs 120 warehouses was valued at INR 6000 crore, all of which turned out to be incorrect. Further, there is no doubt whatsoever that in July, 2013, as a result of NSEL stopping trading on its exchange, a payment crisis of approximately INR 5600 crore arose. The further question that remains is whether, given these facts, the conditions precedent for the applicability of Section 396 were followed56. When it comes to whether the Central Governments satisfaction as to whether it was essential to amalgamate the aforesaid companies, what must be borne in mind is that NSEL had itself offered a settlement scheme to pay back the persons who have allegedly been. It was found that this scheme could not really take off, as a result of which, large amounts continued to be owed to such persons. That this was the real concern of the FMC is clear from a letter dated 18.08.2014 addressed by the FMC to the Secretary, Ministry of Corporate Affairs.This letter would show that the immediate reason for amalgamation, according to the FMC, and which was faithfully carried out by Government, is that NSEL, as a corporate entity, seems financially and physically incapable of effecting any substantial recovery from defaulting members. This was the emergency situation according to the FMC, which should lead to an order of amalgamation of the holding and subsidiary companies so that the holding companys financial resources could be used to pursue proceedings by which monies owed to the alleged duped investors/traders could be recovered56.2. What concerned the FMC in August 2014 has, by the date of the final amalgamation order, been largely redressed without amalgamation. The emergency situation of 2013 which, even according to the Central Government, required the emergent step of compulsory amalgamation has, by the time of the passing of the Central Government order, disappeared. Thus, the raison dêtre for applying Section 396 of the Companies Act has, by the passage of time, itself disappeared. In fact, as on today, decrees/awards worth INR 3365 crore have been obtained against the defaulters, with INR 835.88 crore crystallised by the committee set up by the High Court, pending acceptance by the High Court, even without using the financial resources of FTIL as an amalgamated company. What is, therefore, important to note is that what was emergent, and therefore, essential, even according to the FMC and the Government in 2013- 2014, has been largely redressed in 2016, by the time the amalgamation order was made. Also, the Central Government order does not apply its mind to the essentiality aspect of Section 396 at all. In fact, in several places, it refers to essential public interest as if essential goes with public interest instead of being a separate and distinct condition precedent to the exercise of power under Section 396. On facts, therefore, it is clear that the essentiality test, which is the condition precedent to the applicable to Section 396, cannot be said to have been satisfied58. The High Court comment on the aforesaid affidavit is not correct. The affidavit proceeds on the footing that since the activities of NSEL have come to a grinding halt, FTIL would help NSEL to effect recoveries from defaulters. The affidavit nowhere states that there is no problem in the functioning of NSEL, or that NSEL has or does not have the necessary wherewithal to effect recovery from defaulters. Even in the hearing before us, FTIL has submitted an affidavit-cum- undertaking dated 11.04.2019, stating that it will continue to infuse funds into NSEL so that recovery of dues from defaulters does not, in any manner, get stymied. We take this affidavit and undertaking on record, and hold FTIL to this undertaking made before this Court59.2. It is important to note that the first and second grounds mentioned by the High Court are not contained in the draft order of amalgamation. Had they been so contained, objections and suggestions would have been made by all stakeholders, which the Central Government would then have been bound to consider before passing the final order. However, it was argued on behalf of the respondents that the first and second grounds are, in reality, inferences drawn from facts which are already stated in the order and these inferences do not need to be stated in the draft order. We are afraid that this argument is incorrect inasmuch as grounds contained in reasons (a) and (b) are important grounds which have a vital bearing on the amalgamation in question. If these grounds were contained in the draft order, there is no doubt that the shareholders and creditors of FTIL, and FTIL itself would have had an opportunity to comment on the same. For example, the business realities of the case are facts known to FTIL; and NSEL, being FTILs alter ego, is the subject matter of dispute in various suits that have been filed and are pending adjudication. FTIL could have responded giving reasons as to why NSEL is not its alter ego. Also, whether the amalgamation is, in fact, to restore or safeguard public confidence in forward contracts and exchanges is a subject matter on which FTIL, its shareholders and creditors, could have commented. Equally, whether NSELs exchange was an essential and integral part of the Indian economy and financial system, and whether this defunct business could be consolidated so as to impact the economy are all matters for comment by FTIL and its shareholders and creditors. For all these reasons, we cannot accede to the respondents arguments on this score. On this ground alone, even assuming that these two grounds obtained and can be culled out from the final order, not being contained in the draft order, the said grounds would be in breach of Section 396(3) and (4), and therefore, cannot be looked at to support the orderIt will be noticed that the objection raised in paragraph 7.2.1 is that Section 396 can be used in the case of Government companies alone, whereas the answer given is that this cannot be so, given the business realities of the case and the FMC order of 17.12.2013 which throw ample light to the grave shattering of public confidence and the purpose of establishing Commodity Exchange has been defeated . First and foremost, what is important to notice is that the business realities of the case are what is contained in the recommendations of the FMC. We have seen that these recommendations are in the form of a letter dated 18.08.2014, in which the business reality is the fact that dues of INR 5600 crore have to be paid, and that NSEL does not have the wherewithal to do so. Thus, its parent companys financial resources ought to be used to effect such payment. This business reality, therefore, speaks only of the private interest of the investors/traders who have been allegedly duped (which fact will only be established in suits filed by them in 2014), and nothing beyond (which would show some vestige of public interest). Equally, the grave shattering of public confidence and purpose of establishing commodity exchanges having been defeated, according to the Central Government, is a gloss on the FMC order dated 17.12.2013. If this were so, one would have expected a resuscitation or revival of the commodities exchange of NSEL, which could have been achieved by takeover of its management. It is difficult to imagine that grave shattering of public confidence by the permanent shutting down of the commodities exchange of the NSEL would be remedied only by facilitating the paying of dues to certain allegedly duped investors/traders, which fact will be proved or disproved in suits filed by them which are pending adjudication in the Bombay High Court. In any case, this reason is wholly irrelevant as an answer to the objection raised by FTIL which, as we have seen, is an objection stating that the Section applies to Government companies alone. Also, had FTIL made no such objection, no such answer would have been forthcoming. As far as paragraphs 7.2.6 and 7.2.8 of the order are concerned, what is admitted in the order itself, is that there is no adjudication on the fraud in the facts of the present case, and thus, not an exercise of lifting of the corporate veil of the pre-amalgamation companies. The amalgamation order contradicts itself by then stating that NSEL is the alter ego of FTIL, and thus, the two companies are practically one entity. In any event, these paragraphs do not indicate as to how the alter ego argument impacts public interest. For all these reasons, therefore, neither reason (a) nor reason (b) ought to detain us any further. Reason (c) is, therefore, the only reason that really remains, as is contained in the letter of 18.08.2014 by the FMC to the Central Government. We have already seen that this reason, by itself, is the protection of the private interest of a group of investors/traders, as distinct from public interest59.4. It is important to note that under Section 396(4)(b), the Central Government may, after considering suggestions and objections from the stakeholders mentioned, make modifications in the draft order as may seem to it desirable in the light of such suggestions and objections. No modification has been made in the body of the Central Government order as finally made. If the Central Government had actually considered that each of these three reasons impact public interest, it would have explicitly said so after suggestions and objections were made by the various stakeholders. The fact that the Central Government has not amended the body of the final order is of great significance – it is only the original reasons given in the draft order that continue as such in the final order which, as we have seen, are not in furtherance of public interest at all. Reasons (a) and (b), part of which is culled out from answers to objections and suggestions given in the final order, is only given separately by the Central Government after the amalgamation order to show that the principles of natural justice as laid down by sub-section (4) of Section 396 have, in fact, been followed. This becomes clear from paragraphs 6.3 and 7 of the final order, which read as follows:6.3. The Central Government received in writing and through email various objections / suggestions from various classes of stakeholders including the shareholders, creditors, and all other interested parties claiming that monies are recoverable from the proceedings arising out of the business of the dissolved company7. Dealing with objections, suggestions and submissions of FTIL, NSEL and other parties – The Parties herein have made various objections, suggestions and submissions on the proposed amalgamation u/s. 396 of the Act on the order dated 21- 10-2014 in Draft form issued by the Central Government. The said objections, suggestions and submissions were made during the course of hearing and written submissions (physically and electronically) received by the Central Government on various dates. The said objections, suggestions and submissions made by each of the parties are dealt in the manner herein under59.5. So far, we have gone by the Central Government order as it stands. The Bombay High Court, in stating reasons (a), (b), and (c) as grounds of public interest, has gone much further than even the answer given to the objections that are contained in the order itself. Restoring/safeguarding public confidence in forward contracts and exchanges, which are an integral and essential part of the Indian economy and financial system, by consolidating the businesses of NSEL and FTIL, is not contained in the answer given to objections in the order. First and foremost, restoring public confidence is no part of the order. What is mentioned is only the fact that public confidence has been shattered, as is reflected by the FMC order dated 17.12.2013. Secondly, the entire expression, which are an integral and essential part of Indian economy and financial system, by consolidating the businesses of NSEL and FTIL is no part even of this answer given, but a gloss given by the High Court itself relatable to this answer. Similarly, when it comes to reason (b), giving effect to business realities of the case contained in the answer to objections does not contain by consolidating the businesses of FTIL and NSEL, nor does it contain and preventing FTIL from distancing itself from NSEL, which is, even otherwise, its alter ego . On the contrary, the High Court itself mentions, in paragraph 355, that this is also not a case where the Central Government has, in fact, lifted the corporate veil, despite the alleged non-existence of the circumstances justifying lifting of such corporate veil , and further, this is not a case where the Central Government has lifted the corporate veil and sought to apportion any liability upon either NSEL or FTIL . For all these reasons, we find that no reasonable body of persons properly instructed in law could possibly arrive at the conclusion that the impugned order has been made in public interest60. The learned Senior Advocates appearing on behalf of the respondents has placed great reliance on the judgment in Ganesh Bank (supra). In this judgment, the Appellant Bank was amalgamated with Federal Bank under Section 45 of the Banking Regulation Act, 1949. Federal Bank was selected from out of several other banks by the Reserve Bank of India as its offer to amalgamate with the Appellant Bank was unconditional, Federal Bank undertaking to make full payment to depositorsThus, two features of Ganesh Bank (supra) distinguish the said case from the facts of the present case. First, that under Section 45 of the Banking Regulation Act, the interest of the depositors is to be looked at; and it was this reason that led to the amalgamation. Secondly, this Court found that after exploring other options, the only option left was that of amalgamation62. In point of fact, the contrast between Section 45(4) of the Banking Regulation Act and Section 396 of the Companies Act becomes important. Under Section 45(4)(b) and (c) of the Banking Regulation Act, the satisfaction of the Reserve Bank of India for preparing a scheme of amalgamation can be in the interest of the depositors of a particular bank or in order to secure the proper management of a particular banking company. This must be contrasted with clauses (a) and (d) of Section 45(4), which speak of public interest and the interest of the banking system of the country as a whole. This judgment, on facts, merged a financially weak bank with a financially strong bank in the interest of the depositors of the financially weak bank. It is important to note that the business of the two merged entities is the same, as also Federal Banks (i.e., the strong banks) willingness to merge, being an unconditional offer to merge because it felt that post merger, it could have a significant presence in western Maharashtra and the Belgaum area of Karnataka, and could augment its credit disbursal to the agricultural sector. Also, since the interest of depositors is a separate head, based upon which the Reserve Bank of India may amalgamate two banking companies, it is clear that this reason alone will not go to public interest, which is a separate head contained in Section 45(4). It is in this context that the observation contained in paragraph 44 is made, namely:44. Under Section 45 of the Act, the primary consideration is public interest. There is an underlying object of acting swiftly and decisively to protect the interests of depositors and ensure public confidence in the banking system. The emergent situation which warrants action with expedition cannot be lost sight of while deciding the legality of the actionAs we have already seen, the emergent situation which obtained in 2013 was no longer there in 2016 when the final order of amalgamation was passed in the present case63. Valiant attempts have been made by counsel in the High Court as well as counsel in this Court to support the order on grounds which are outside the order, stating that such grounds make it clear that in any case, the Government order has been made in public interest.We are of the view that it is the Central Government that has to be satisfied that its order is in public interest and such satisfaction must, therefore, be of the Central Government itself and must, therefore, appear from the order itself. All these valiant attempts made to sustain such order must be rejectedIt will be seen that there is no broad proposition that the case of Mohinder Singh Gill (supra) will not apply where larger public interest is involved. It is only subsequent materials, i.e., materials in the form of facts that have taken place after the order in question is passed, that can be looked at in the larger public interest, in order to support an administrative order. To the same effect is the judgment in PRP Exports and Ors. v. Chief Secretary, Government of Tamil Nadu and Ors., (2014) 13 SCC 692 [ at paragraph 8]. It is nobodys case that there are any materials or facts subsequent to the passing of the final order of the Central Government that have impacted the public interest, and which, therefore, need to be looked at. On facts, therefore, the two judgments cited on behalf of the respondents have no application. Thus, it is clear that no reasonable body of persons properly instructed in law could possibly hold, on the facts of this case, that compulsory amalgamation between FTIL and NSEL would be in public interest65. Section 396(3) speaks of a shareholders or a creditors interest in or rights against the company resulting from an amalgamation order. Such interest in or rights against obviously refers to real and substantive rights, as opposed to rights that are only in form. A shareholder or creditor gets effected by an amalgamation order if the value of his share gets depleted as a result of the amalgamation and if dividends that have been paid to him are likely to come down as a result of the amalgamation. Likewise, a creditor of a solvent company is directly effected by an amalgamation by which the amount loaned by such creditor becomes, as a result of the amalgamation, less likely to be paid back in time, than if the amalgamation did not take place. Such rights and interests of members and creditors are substantive rights which, when effected by the amalgamation, lead to compensation having to be paid. Every shareholder of a company and indeed, every creditor of a company, is concerned only with the economic value of his share or the loan granted to a company, as the case may be. The moment the share value, in real terms, is likely to dip, and/or loans granted are likely not to be repaid in time or at all as a result of an amalgamation, such members or creditors of the amalgamating company are equally entitled to be compensated for this economic loss as are the members and creditors of the amalgamated company, depending on the facts of each case. A reasonable construction must be given to Section 396. Also, the suggested construction by the respondents, as has been accepted by the impugned judgment, operates harshly and ridiculously, and being opposed to justice and reason, cannot possibly be adopted by this Court. It is clear that Section 396(3) refers to the economic loss that is to be borne by shareholders and members of both companies66. Thus, it is clear from a reading of Section 396(3), (3A), and (4) (aa) that every member or creditor of each of the companies before amalgamation shall have, as nearly as may be, the same interest in or rights against the company resulting from the amalgamation as he had in the original company. To the extent to which the interest or rights of such member or creditor are less than his interest or rights against the original company, post amalgamation, he shall be entitled to compensation which is to be assessed. Post assessment, if such member or creditor is aggrieved, he may prefer an appeal to the appellate authority under sub-section (3A). Under sub-section (4)(aa), no order of amalgamation can be made unless the time for preferring an appeal under sub-section (3A) has expired, or where any such appeal has been preferred, the appeal has been finally disposed ofOn the facts of the present case, we are directly concerned with points (iii) and (vii). It has been argued that the profits of the company post- amalgamation will obviously come down, and dividends payable to shareholders will consequently either come down or be wiped out if the low net worth of NSEL is taken into account post amalgamation, together with potential liabilities of the amalgamated company, which may have to be paid in the near future. Secondly, if the amalgamated company is wound up, the amount that is payable to the shareholders post-amalgamation will be much less, if at all anything is to be paid, than pre-amalgamationWhat is clear from the various methods of valuation of shares, when it comes to such valuation qua the transferor and transferee company, is that the market value method is one method in which shares can be valued so that their equivalent can then be provided for in the amalgamated company. This would be nothing other than what those shares were worth in the market on a particular day or an average taken within a certain period. What is important to note is that the market value of shares is market value of shares reflective of their economic value, being an interest measured by a sum of money, is not something that is completely alien to determining the rights of or interest of a shareholder in the transferor or transferee company, as the case may be72. In fact, the Government order dated 12.02.2016 itself reflects the net worth of NSEL as INR 8.86 crore from its balance sheet dated 31.03.2015, despite its capital being INR 60 crore, inasmuch as the total reserve and surplus is a negative figure of INR 51.54 crore. As against this, FTILs balance sheet, as on 31.03.2015, discloses that for the same year, FTILs net worth is INR 2779.94 crore. Also, FTIL has been paying dividends to its shareholders ranging from 1000% to 250% for the years 2007-2008 till 2015-2016. On the other hand, NSEL has never paid a single dividend ever since its inception. Post amalgamation, therefore, dividend payable to the shareholders of FTIL is bound to come down. Correspondingly, the marketable value of such shares will also fallFrom the Directors Report and consolidated financial statements of NSEL, it becomes clear that the company may be exposed to liabilities in case of any adverse outcome in any of the proceedings that may be pending, as a result of which, it may have to pay back the whole or some part of the INR 5600 crore owed to the alleged investors/traders by the 24 defaulters who are members of NSEL. This would certainly impact the economic value of shares held in FTIL as this is one factor that would, post amalgamation, depress the market value of shares held by such shareholder, and would also impact the dividend payable on such shares post amalgamation74. The impugned judgment has also held that no material was produced before the Court to show that share prices would in fact plummet post-amalgamation. This is despite the fact that the impugned judgment itself refers to the fact that since the publication of the draft order on 21.10.2014, the share value which was INR 211.10, dropped to INR 174.55 ten days later. The Division Bench then goes on to state that it is not possible to hold that any case of serious erosion in economic value has at all been made out, inasmuch as by 21.10.2014, when the draft order of amalgamation was made available to companies, the news of collapse of NSELs exchange was already in public domain. This is wholly incorrect for the reason that the news of collapse took place in July, 2014, i.e., over two months before the publication of the draft order. It is well known that the stock market is extremely sensitive to the slightest event that may render a company less profitable. Over two months is too long a period to relate a share value of INR 211.10 drastically falling to INR 174.55. On the other hand, it is obvious that the publication of the draft order on 21.10.2014 had the impact of the share price reducing by a substantial amount, ten days later. In fact, a reference to the share prices of NSEL furnished by the learned Additional Solicitor General makes it clear that the moment the final amalgamation order dated 12.02.2016 was publicised, the share price fell from INR 89.90 on 12.02.2016 to INR 73.90 on 24.02.2016 and further to INR 73.10 on 29.02.2016. Incidentally, the High Court realised this, and finally incorrectly concludes, there is thus substantial compliance with the provisions of Section 396(3). Given the fact that the assessment order dated 01.04.2015 did not provide any compensation to either the shareholders or creditors of FTIL for the economic loss caused by the amalgamation in breach of Section 396(3), it is clear that an important condition precedent to the passing of the final amalgamation order was not met. On this ground also, therefore, the final amalgamation order has to be held to be ultra vires Section 396 of the Companies Act, and, being arbitrary and unreasonable, violative of Article 14 of the Constitution of India75. However, the learned Senior Advocates for the respondents have argued that an order of nil compensation is equally an order that is passed under Section 396(3) which could have been appealed against but was not appealed against.For this reason, therefore, it is not correct to state that the condition precedent mentioned in Section 396(4)(aa) has not been fulfilled. It will be noticed that the language used in the appeal provision, i.e. Section 396(3A), is any person aggrieved by any assessment of compensation made by the prescribed authority under sub-section (3) may…… appeal to the Tribunal, and thereupon the assessment of the compensation shall be made by the Tribunal. The pre-requisites for the application of sub- section (3A) are that a person first be aggrieved by an assessment of compensation made by the prescribed authority. Where no assessment of compensation whatsoever is made by the prescribed authority (and on the facts here, the prescribed authority has not, in fact, stated that for the reasons given by it, compensation awarded to FTIL, its shareholders and creditors is nil), no person can be aggrieved by an order which does not assess any compensation, which may be interfered with by the Appellate Tribunal which must then assess the compensation for itself. The statute clearly entitles such shareholders and creditors to have compensation assessed first by the prescribed authority and then by the appellate authority.This judgment was the subject matter of comment in Union Carbide Corporation v. Union of India, [1991] Supp (1) SCR 251, where this Court held, following the judgment in Charan Lal Sahu v. Union of India, (1990) 1 SCC 613 , that non-compliance with the obligation to issue notices to persons effected by the Bhopal gas leak did not, for this reason alone, vitiate the settlement that was entered into with Union Carbide by the Government on their behalf. This Court, in passing, commented that the principle laid down in Leary v. National Union of Vehicle Builders, [1971] Ch. 34 might perhaps be too broad a generalisation, except in cases involving public interest. This was an observation made in answer to an argument by Shri Shanti Bhushan, stating that a defect of natural justice always goes to the root of the matter. Ultimately, given the fact that the settlement fund was held to be sufficient to meet the needs of just compensation to the victims of the Bhopal gas leak tragedy, it was held that the grievance on the score of not hearing the victims first would not really survive. However, what is of fundamental importance is the fact that in the present situation, a clear statutory right is given to every member or creditor who shall be entitled to an assessment of compensation, first by the prescribed authority and then, a right of appeal to the Appellate Tribunal. In such cases, therefore, the orders of non-assessment by the prescribed authority can more appropriately be challenged in judicial review proceedings, in which the High Court, acting under Article 226 of the Constitution of India can, if an infraction of Section 396(3) is found, send the matter back to the prescribed authority to determine compensation after which the right of appeal under sub- section (3A) of Section 396 would then follow. In fact, in Writ Petition 2743 of 2014, which challenged both the draft order and the final order of amalgamation, the appellant took out a chamber summons for amendment of its writ petition to challenge the order of assessment of compensation, dated 01.04.2015, which amendment was allowed vide order dated 16.02.2016. The order of non-assessment of compensation has thus been challenged by FTIL in proceedings under Article 226 of the Constitution of India. Even otherwise, this is a case where there is complete non-application of mind by the authority assessing compensation to the rights and interests which the shareholders and creditors of FTIL have and which are referred to in Section 396(3) of the Act. This being the case, it is clear that Section 396(3) has not been followed either in letter or in spirit.