The central legal point established in the judgment is that the court's approval of a scheme of amalgamation under Sections 391(2) and 394 of the Companies Act 1956 is contingent upon the fairness, reasonableness, and compliance with the law of the scheme of arrangement.

Shiv Kumar Sharma, J.-This petition under Sections 391(2) and 394 of the Companies Act 1956 (in short Act of 1956) seeking approval of the scheme of amalgamation between Skipper Electricals (India) Limited (hereinafter referred to as the Transferor Company (Company No. 1) with SEIL Powergears Limited (hereinafter referred to as the Transferee Company (Company No. 2).

2. The transferor company was incorporated on 23.05.1989 under the provisions of Companies Act, 1956 as a private limited company and converted into a public limited company vide special resolution dated 28.06.1994. Fresh certificate of incorporation dated 210.1994 was issued by Assistant Registrar of Companies NCT of Delhi and Haryana. The authorised share capital of the transferor company is Rs. 10,00,000/-(Rupees ten lacs) divided into 10,000/-(ten thousand) equity shares of Rs. 100/-each. The issued, subscribed and paid up share capital of the transferor company is Rs. 5,00,000/-(Rupees five lacs) divided into 5,000/-(five thousand) equity shares of Rs. 100/-each fully paid up.

3. The transferor company is presently engaged in the business of manufacturing substation and transformer equipment. Accounts of the company have been audited and finalised on 31.03.2005.

4. Subsequent to the date of audit 890 equity shares of Rs. 100/-each of the transferor company have been allotted in the name of Shri Jitender Sachdeva, as such paid up share capital presently is 5,00,000/-(Rupees five lacs). There is no substantial change in the financial, position of the transferor company.

5. The transferee company SEIL Powergears Limited was incorporated on 24.02.1995 under the provisions of Companies Act, 1956 as a company limited by shares. The authorised share capital of the transferee company is Rs. 1,25,00,000/-(Rupees One crore twenty five lacs) divided into 12,50,000/-(twelve lacs fifty thousand) equity shares of Rs. 10 each. The issued, subscribed and paid up share capital of the transferee company is Rs. 1,22,51,330/-(Rupees One crore twenty two lacs fifty one thousand three hundred thirty) divided into Rs. 12,25,133/-(twelve lacs twenty five thousand one hundred thirty three) equity shares of Rs. 10/-each fully paid up.

.6. The transferee company is presently engaged in the business of manufacturing substation material such as power destination transformer and current and potential transformers. Accounts of the company have been audited and finalised on 31.03.2005. Subsequent to the date of audit there is no substantial change in the financial position of the transferee company.

.7. The circumstances and/ or reasons necessitating the scheme of amalgamation are:-

.(i) Both the transferor company and transferee company are group companies, as part of restructuring and reorganization within the group. It is proposed to consolidate the business of the companies as provided in the proposed scheme.

.(ii) Both the companies are engaged in similar business i.e., manufacturing of substation and transformer equipment and have complementary product range and common customers. For the purpose of better efficient and economical management, control and running of their business and for further development and growth of the business of companies the scheme of amalgamation is proposed.

.(iii) The scheme will enable the pooling of the resources of the transferor and transferee companies to their common advantage.

.(iv) The scheme will result in greater economies of scale, reduction in overheads and other expenses and better and moral productive utilization of various resources.

.(v) Thescheme will contribute in furthering and fulfilling the objects of the companies and lead to the optimum growth and development of the business of the amalgamated company.

.(vi) The combined operation will offer possibilities of business synergy owing to economics of scale, integrated operations and reduction in costs. The business can be conveniently and advantageously combined together.

.(vii) T