2011 Supreme(SC) 149

2011 (1) Supreme 705
SUPREME COURT OF INDIA
D.K. Jain and H.L. Dattu, JJ.
Sesa Industries Ltd. — Appellant
versus
Krishna H. Bajaj & Ors. — Respondents
Civil Appeal Nos. 1430-1431 of 2011
(Arising out of S.L.P (C) Nos. 8497-8498 of 2009)
Decided on : 7-2-2011

IMPORTANT POINTS
Existence of proceedings under Section 209A must be disclosed to the share holders in terms of the proviso to Section 391(2).
Official Liquidator is obliged to incorporate contents of inspection report (u/s 209A) in his affidavit before the Company Judge. However, failure to do so will not effect sanctioning a scheme of amalgamation.

Headnote:(a) Companies Act, 1956 – Sections 391 and 394 – The court considering a scheme of amalgamation would not act as a court of appeal and sit in judgment over the informed view of the concerned parties to the scheme – Yet the Court cannot approve the scheme of amalgamation merely because majority of the shareholders have voted in favour of the scheme – The scheme has to be fair, just and reasonable to the concerned members and not contrary to any law or public policy. (Para 34)

        1995 Supp (1) SCC 499; (1986) 3 SCC 156 – Relied upon

        [2003] 46 SCL 38 (Guj); [2005] 125 Comp Cas 297 (Bom); [2007] 138 Comp Cas 204 (Guj) – Referred

        (b) Companies Act, 1956 – Sections 391 and 394 – Principles for exercising jurisdiction to sanction amalgamation culled out. (Paras 35 and 36)

        (1997) 1 SCC 579 – Relied upon

        (c) Companies Act, 1956 – Section 209A – Inspection under Section 209A may not strictly be in the nature of an investigation – However, it may lay the foundation for the purpose of investigations under Sections 235 and 237 of the Act. (Para 37)

        (d) Companies Act, 1956 – Section 392(1) – Existence of proceedings under Section 209A must be disclosed to the share holders in terms of the proviso to Section 391(2). (Para 37)

        1951 SCR 277; AIR 1968 SC 615 – Relied upon

        [1977] 47 Comp Cas 597; [2000] 101 Comp Cas 343 (Bom); [1996] 22 CLA 200 (Bom) – Referred

        (e) Companies Act, 1956 – Section 394(1), second Proviso – Official liquidator is not required to determine relevancy or otherwise of inspection report u/s 209A – He is, however, obliged to incorporate contents thereof in his affidavit before the Company Judge. (Para 38)

        [1976] 46 Comp Cas 639 (Kar); [1998] 93 Comp Cas 646 (Mad); [1977] 47 Comp Cas 802 (Cal); [1994] 81 Comp Cas 38 (Ker) – Referred

        (f) Companies Act, 1956 – Section 394 – When the Company Judge sanctioned the scheme of amalgamation after considering all necessary materials including inspection report u/s 209A, failure of the Official liquidator to incorporate the same in his affidavit became irrelevant. (Para 41)

        (1986) 1 SCC 264; (2003) 113 Comp Cas 273; (2008) 142 Comp Cas 410 (Cal); (2004) 121 Comp Cas 523; [1977] 47 Comp Cas 597; [1996] 22 CLA 200 (Bom); (2007) 8 SCC 559; A.I.R. 1967 Bom. 456; [1948] 18 Comp Cas 144; A.I.R. 1940 Mad 139 – Referred

        (g) Companies Act, 1956 – Section 235 – Investigation u/s 235 initiated on a complaint after sanction of the scheme of amalgamation will have no bearing on the same. (Para 41)

        (2005) 5 SCC 294; [2006] 129 Comp Cas 471 (Guj); [2006] 132 Comp Cas 548 (All) – Referred

       Facts of the case:

        1. SGL, originally incorporated as a private limited company, became a public company. The appellant company, Sesa Industries Ltd., was incorporated as a subsidiary of SGL with the latter holding 88.85% of the shares in the former.

        2. On 26th July, 2005, a resolution was passed by the Board of Directors of SIL to amalgamate SIL with SGL, effective from 1st April, 2005. In pursuance thereof, on 12th January, 2006, SIL and SGL filed respective company applications seeking the Court’s permission to convene a general body meeting.

        3. Respondent No. 1 herein, holder of 0.29% of the shares in SIL, filed an affidavit on 18th January, 2006 intervening in the afore-mentioned company petitions.

        4. On 8th May, 2006, the shareholders of SIL and SGL, by 99% majority, approved the scheme of amalgamation, and respondent No.1 was the sole shareholder who objected to the said scheme.

        5. SIL and SGL both filed petitions in the High Court for according approval to the amalgamation scheme.

        6. The learned Company Judge sanctioned the scheme of amalgamation between SGL and SIL.

        7. The Division Bench set aside the order of the learned Single Judge and revoked the sanction to the amalgamation scheme.

       Finding of the Court:

        The Division Bench of the High Court erred in reversing the judgment of the Company Judge.