( 1 ) THIS is a petition under section 394 read with section 391 Indian Companies Act 1956 (No. 1 of 1956) for amalgamating two textile Mills. The petitioner is The Sidhpur Mills Company Ltd. having its registered office at Sidhpur District Mehsana in the State of Gujarat (hereinafter referred to as `the Sidhpur Company ). The petition is opposed by one of the Directors of the Company the partners of the firm of the Managing Agents and some shareholders of the Company.

( 2 ) THE Sidhpur Company was incorporated in about 1921 and on the 1st of April 1959 the authorised capital of the company was Rs. 75 lacs divided in to 50 0 ordinary shares of Rs. 100/each and 25 0 preference shares of Rs. 100/each and its issued subscribed and paid up capital was Rs. 15 9 0 divided into 15 96 ordinary shares of Rs. 100/each. On 1/08/1959 M/s. Maganlal (hereinafter referred to in this managing agents of the company. The firm consisted of eight partners five of whom were Ravindra Surendra Bipinchandra Hareshchandra and Krishnakumar all sons of one Maganlal (hereinafter referred to in this judgment as `the five brothers ). The other three partners were Babulal Chunilal Dineshchandra Chimanlal and Chandrakant Amratlal. The last three are the cousins of the five brothers. On 1/04/1959 the five brothers held 2 86 ordinary shares in the Sidhpur Company which roughly is 13. 57% of the total share capital of the company and the other three partners who are opposing the present petition held 2 384 shares which roughly is 15. 75% of the total share capital. On 1/04/1959 the Sidhpur Company was principally manufacturing cloth and yarn of coarse and medium counts though recently machinery for manufacturing fine and superfine goods had come to be installed.

( 3 ) THE Sidhpur company is to be amalgamated with The Raghuvanshi Mills Ltd. having its head office at Bombay (hereinafter called `the Bombay company ). It was incorporated in 1923. The premises of this company were destroyed in a fire in 1944. New machinery was installed there after. Thus the plant and machinery of the Bombay company is more recent and that of the Sidhpur company is comparatively speaking older. However the evidence is that the latter has been kept in a more or less efficient condition. On 1/04/1959 the authorised capital of the Bombay company was Rs. 40 lacs divided into 40 0 ordinary shares and the issued. subscribed and paid up capital of the company was also the same. The managing agents of this company on the aforesaid date were Ravindra Maganlal and Co. Private Limited. The entire shareholding of this private company is held by the five brothers.

( 4 ) ON 1/04/1959 the five brothers held 27 50 shares in the Bombay company roughly constituting 67. 63% of its total share capital and the other three partners of Maganlal Prabhudas and Co. held 5 934 shares roughly constituting 14. 83% of the share capital. On the 1st of April 1959 Shri Ratilal Nathalal was the Chairman of the Sidhpur company. In paragraph 14 of his affidavit dated 21/06/1960 he has given the background in which the scheme of amalgamation for which sanction is asked for in the present petition was formulated and approved by the directors of the two companies. He deposes that though the Sidhpur company was in existence for the last 30 years its working results used to give cause for anxiety to the directions inasmuch as the company was unable to make sufficient profits even to earn its depreciation. He further deposes that a crisis took place in 1953 in the textile industry and in the wake of the crisis a radical change took place in the demand of the consuming public. The public demanded yarn and cloth of finer counts instead of coarse and medium counts. He further deposes that although this was so the Sidhpur company was not able to alter its set-up by reason of its capital structure and the shortage of finances. Mr. Ratilal further deposes that a precipitous fall took place in the price of cotton