ORDER
Kumar, J
1. Company Petition No. 40/2003 is filed by Comat Infoscribe Pvt. Ltd., and Co.P. No. 42/2003 is filed by Bangalore Cyberspace Pvt. Ltd., which are transferor companies and Co.P.No. 41/2003 is filed by Comat Technologies Pvt. Ltd., which is the transferee company. These three petitions are filed by these companies seeking sanction of the scheme of amalgamation proposed by them where under two transferor companies are amalgamated with the transferee company. Therefore, ultimately Court has to decide whether the scheme proposed by these three companies require to be sanctioned or not. Therefore all these company petitions are taken up for consideration together and disposed of by this common order.
2. In the scheme Bangalore Cyberspace Private Limited is referred to as first transferor company. The said company was incorporated on 21st March 2000 under the Companies Act 1956 with its registered office at No. 66, 11th Main, Malleswaram, Bangalore - 560 003. The authorized capital of the first transferor company is 1,00,000 equity shares of Rs. 10-00 each amounting to 10,00,000-00 and the issued, subscribed and paid up capital is 110 equity shares of Rs. 10-00 each amounting to Rs. 1100-00. The first transferor company was incorporated to carry on business of delivery, comprehensive capsules of information in bilingual form in an easily accessible and user friendly form in all spheres of activities and provision of convenience services like utility payments, travel and tourism books and other business as clearly set out in the memorandum of association. The first transferor company and Comat Infoscribe Pvt. Ltd., the second transferor company formulated a scheme of amalgamation as per Annexure-G under which they proposed to amalgamate with Comat Technologies Pvt. Ltd., the transferee company as both these transferor companies are 100% subsidiaries of the transferee companies. On account of amalgamation no shares are proposed to be issued to the shareholders of the transferor companies No. 1 and 2 in terms of the scheme of amalgamation. The Board of Directors of the first transferor Company approved the said scheme of amalgamation and thereafter filed an application before this Court in C.A.No. 59/2003 seeking leave of the Court to convene a meeting of the shareholders and creditors of the company to consider the said scheme of amalgamation and to grant approval. Accordingly this Court by order dated 21st January 2003 allowed the application and directed convening of the meeting of the equity shareholders and creditors of the company. Accordingly meeting notice was served on all the equity shareholders and creditors with a copy of the scheme of amalgamation and the statement required under Section 393 of the Companies Act 1956. Notice of the meeting was also advertised in the newspaper as directed by the Court on 22nd February 2003. A meeting of the creditors of the first transferor company was held at its registered office and the said meeting was attended personally by one creditor being transferee company. The total amount due to the said creditor was Rs. 1,03,97,577-28 representing 100% of the total debt of the first transferor company. There were no other creditors in the said meeting. Resolution was passed unanimously approving the scheme of amalgamation. On 22.2.2003 a meeting of the equity shareholders was also held and the said meeting was attended by two equity share holders holding the entire 1100 issued shares of the first transferor company. A resolution approving the scheme of amalgamation was passed unanimously. No shareholder voted against the said resolution. Thereafter the Chairman of the meeting as per the directions of this Court submitted his report informing the Court that the scheme of amalgamation has been approved unanimously by the creditors and equity share holders of the company in the meeting held as per the order of the Court. It is thereafter Company Petition No. 42/2003 is filed by the first transferor company seeking sanction of the scheme of amalgamation.
3. Similarly the second transferor company was incorporated on 14th September 1998 under the Companies Act 1956 having its registered office at No. 88, III cross, IX Main Saraswathipuram, Mysore 570 009. The authorized capital of the second transferor company is 30,00,000 equity shares of Rs. 10-00 each amounting to Rs. 3,00,00,000-00, and the issued, subscribed and paid up capital is 15,98,200 equity shares of Rs. 10-00 each amounting to Rs 1,59,82,000-00. The main object of the second transferor company is to carry on a 100% export oriented business of Data processing and information analysis for the Medical industry, Data processing for the other industries, Medical Transcription, General Transcription, software design and other business as clearly set out in the memorandum of association. The first transferor company and the second transferor company formulated a scheme of amalgamation as per Annexure-G under which they proposed to amalgamate with Comat Technologies Pvt. Ltd., the transferee company as both these transferor companies are 100% subsidiaries of the transferee companies. On account of amalgamation no shares are proposed to be issued to the shareholders of the transferor companies No. 1 and 2 in terms of the scheme of amalgamation. The Board of Directors of the second transferor company approved the said scheme of amalgamation and thereafter filed an application before this Court in C.A.No. 60/2003 seeking leave of the Court to convene a meeting of the shareholders and creditors of the company to consider the said scheme of amalgamation and to grant approval. Accordingly this Court by order dated 21st January 2003 allowed the application and directed convening of the meeting of the equity shareholders and creditors of the company. Accordingly meeting notice was served on all the equity shareholders and creditors with a copy of the scheme of amalgamation and the statement required under Section 393 of the Companies Act 1956. Notice of the meeting was also advertised in the newspaper as directed by the Court. A meeting of the creditors of the second transferor company was held at its registered office and the said meeting was attended personally by four creditors. The total amount due to the said creditor was Rs. 40,02,849-00 representing 95.23% of the total debt of the second transferor company. There were no other creditors in the said meeting. Resolution was passed unanimously approving the scheme of amalgamation. On 21.2.2003 a meeting of the equity shareholders was also held and the said meeting was attended by two equity share holders holding the entire 15,98,200 issued shares of the second transferor company. A resolution approving the scheme of amalgamation was passed unanimously. No shareholder voted against the said resolution. Thereafter the Chairman of the meeting as per the directions of this Court submitted his report informing the Court that the scheme of amalgamation has been approved unanimously by the creditors and equity share holders of the company in the meeting held as per the order of the Court. It is thereafter the second transferor company has filed Co.P.No. 42/2003 seeking sanction of the scheme of amalgamation.
4. The transferee company was originally incorporated on 22nd March 1996 under the Companies Act 1956 under the name and style 'Comat Data Services Pvt. Ltd'. Which name was subsequently changed to Comat Technologies Pvt. Ltd. With effect from 10.8.1998, with its registered office at Comat House No. 602/A, 18th Cross Sadashivanagar, Bangalore 560080. The authorized capital is 15,00,000 equity shares of Rs. 10-00 each amounting to Rs. 1,50,00,000/-and the issued, subscribed and paid up capital is 10,72,500/- equity shares of Rs. 10-00 each amounting to Rs. l,07,25,00000. The main object of the transferee company is to offer services in the areas of electronic data processing including processing date in various textual and images formats, formatting process as per various standards and environments, to act as designers and developers of software for various applications and platforms and other business as clearly set out in the articles of association. The transferee company formulated a scheme of amalgamation as per Annexure-G under which the first and second transferor companies proposed to amalgamate with Comat Technologies Pvt. Ltd., the transferee company. As both the transferor companies are 100% subsidiaries of the transferee company, no shares are proposed to be issued to the shareholders of the first and second transferor companies in terms of the scheme of amalgamation. The Board of Directors of the transferee company approved the said scheme of amalgamation and thereafter filed an application before this Court in C.A.No. 55/2003 seeking leave of the Court to convene a meeting of the shareholders and creditors of the company to consider the said scheme of amalgamation and to grant approval. Accordingly this Court by order dated 21st January 2003 allowed the application and directed convening of the meeting of the equity shareholders and creditors of the company. Accordingly meeting notice was served on all the equity shareholders and creditors with a copy of the scheme of amalgamation and the statement required under Section 393 of the Companies Act 1956. Notice of the meeting was also advertised in the newspaper as directed by the Court. A meeting of the creditors of the transferee company was held at its registered office and the said meeting was attended personally by nine creditors and six creditors by proxy. The total amount due to the said creditors was Rs. 1,25,97,465-00 representing 64.79% of the total debt of the transferee company. There were no other creditors in the said meeting.
Resolution was passed unanimously approving the scheme of amalgamation. On 22.2.2003 a meeting of the equity shareholders was also held and the said meeting was attended personally by six equity share holders and three shareholders by proxy holding the 8,24,000 issued shares of the transferee company. A resolution approving the scheme of amalgamation was passed unanimously. No share holder voted against the said resolution. Thereafter the Chairman of the meeting as per the directions of this Court submitted his report informing the Court that the scheme of amalgamation has been approved unanimously by the creditors and equity share holders of the company in the meeting held as per the order of the Court. It is thereafter Co.P.No. 41/03 was filed before this Court seeking sanctioning of the scheme of amalgamation.
5. Ail these three petitions were listed before this Court for admission. After admitting the petitions on 7.3.2003 in Co.P.Nos. 40/ 2003 and 42/2003 notices were ordered to the Official Liquidator as well as to the Regional Director, Department of Company Affairs, Chennai, whereas, in transferee company petition No. 41/2003 notice was ordered to the Regional Director, Department of Company Affairs, Chennai. In all these three petitions advertisement was issued in one edition of The Hindu and in one edition of Kannada Prabha. Accordingly, petitioners have taken out paper publication. In pursuance of the notice issued the Official Liquidator entered appearance and filed application for appointment of a Chartered Accountant to look into the accounts of the two transferor companies. By order dated 4.4.2003 M/s. Varadaraju and Associates were appointed as Chartered Accountant to look into the affairs of the company and submit the report within four weeks. After submission of the said report by the Chartered Accountant to the effect that the affaire of the company has not been conducted in the manner prejudicial to the interest of the share holders and creditors and the public, the Official Liquidator has submitted his report stating that he has no objection for grant of sanction prayed for. However, the Regional Director, Department of Company affairs, Chennai, brought to the notice of the Court two facts which he requires the Court to consider before passing any orders in these petitions. The first point made out was that the second transferor company has collected share application money to the tune of Rs. 4,25,000-00 as per the company's balance sheet as at 31.3.2002 but the scheme is silent about the treatment of the same upon amalgamation. The second point made out was Clause 15(g) of the scheme provides that the balance in share premium account in the books of the transferee company shall stand reduced to Rs. 3,45,50,813-00 after adjusting the amount as specified in Clause 4 of the scheme. As per Clause 17 of the scheme the transferee company shall make an application/petition under Section 100 and under Sections 391 to 394 of the Companies Act. However, no such application/ petition under Section 100 read with Section 78 for reduction of the share premium account of the transferee company has been filed before this Court.
6. Learned Counsel for the petitioners submits in so far as first point made out by the Registrar of Companies is concerned that as per the terms of the scheme of amalgamation the entire share application money to the tune of Rs. 4,25,000-00 which is standing to the credit of the second transferor company stands transferred to the account of the transferee company and the transferee company henceforth will be liable to answer the claim of those persons who have contributed the money and the said money which was in the credit of the second transferor company stands credited in the transferee company. Therefore, I do not find any legal impediment for according sanction on that score.
7. In so far as second point is concerned, the question for consideration is when reduction of share premium account forms part of the scheme of amalgamation is it necessary for the company to follow the procedure prescribed under Section 100 of the Act separately in separate proceedings before seeking for amalgamation of the scheme.
8. In this context, the learned Counsel appearing for the petitioner brought to my notice the various provisions of the Companies Act, in particular, Rule 85 which specifically provides for compromise or arrangement involving reduction of capital and contended that in view of the aforesaid specific provision there is no necessity to initiate separate proceedings for reduction of share premium account and thereafter to approach the Company Court for sanction of the scheme of amalgamation. If procedure prescribed under the Act and Rules are followed both in respect of reduction of share premium account as well as scheme of amalgamation it would satisfy the requirement of law and there is no legal prohibition or impediment for according sanction of the scheme of amalgamation which includes reduction of share premium account. In that connection he has brought to my notice the judgment of the Gujarat High Court in the case of MANECKCHOWK AND AHMEDABAD MFG. CO. LTD. Com Cases Vol. 40 Page 819 the judgment of the Andhra Pradesh High Court in the case of G.V.K. HOTELS LTD Comp. Cases Vol. 88, P.596; and in the case of RAASI CEMENT LTD. 2000(3) ComP.L.J. 213 The Gujarat and Andhra Pradesh High Courts have taken a view that the scheme of amalgamation and reduction of share capital could be approved simultaneously when the scheme of reduction of share capital is a part of the scheme of amalgamation proposed by the companies. In order to appreciate these contentions it is necessary to have a look at the various provisions of the Companies (Court) Rules.
9. Rule 85 of the Company (Court Rules) 1959 provides for Compromise or arrangement involving reduction of capital, which reads as under:
Where a proposed compromise or arrangement involves a reduction of capital of the company, the procedure prescribed by the Act and these rules relating to the reduction of capital, and the requirements of the Act and these rules in relation thereto, shall be complied with, before the compromise or arrangement so far as it relates to reduction of capital, is sanctioned.
Therefore the aforesaid provision makes it abundantly clear that before a scheme of amalgamation is sanctioned by Court where reduction of share capital is part of amalgamation the procedure prescribed by the Act and the Rules shall be complied with. Section 100 of the Act provides for reduction of the share capital. It provides that a special resolution for reduction of share capital has to be passed before steps are taken for reduction of share capital. Section 100 of the Act reads as under:
Special Resolution for reduction of share capital - (1) Subject to confirmation by the Court, a company limited by shares or a company limited by guarantee and having a share capital, may, if so authorized by its articles, by special resolution, reduce its share capital in any way; and in particular and without prejudice to the generality of the foregoing power, may -
(a) extinguish or reduce the liability on any of its shares in respect of share capital not paid up;
(b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid up share capital which is lost, or is unrepresented by available assets; or
(c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid up share capital which is in excess of the wants of the company;
and may if and so far as is necessary alter its memorandum by reducing the amount of its share capital and of its shares accordingly.
(2) A special resolution under this Section is in this Act referred to as 'a resolution for reducing share capital'.
Corresponding Rule which governs this reduction of share capital is contained in Rule 47 which deals with procedure on hearing of summons. It reads as under:
Upon the hearing of the summons, if the Judge is satisfied that the proposed reduction does not involve either diminution of liability in respect of unpaid share capital or payment to any shareholder of any paid up share capital and does not think fit to direct that the procedure prescribed in Section 101(2) shall apply, he shall fix a. date for hearing of the petition and give such directions as he may think fit as to the advertisement of the petition. The petition shall be posted for hearing on the date fixed, and upon the hearing thereof, the Judge may confirm the reduction on such terms and conditions as he may think fit.
Sub-section (2)of Section 101 deals with the case where proposed reduction of share capital involves either the diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid up share capital, and in any other case if the Court so directs, the procedure prescribed therein shall be followed. In other words, a list of creditors has to be settled and notice of this reduction of share capital has to be given to them personally and also by public notice so that they can object to the same and it is only thereafter appropriate orders could be passed after considering such objection. Yet another provision which is required to be noticed in this context is Section 78 which deals with application of premiums received on issue of shares which reads as under:
Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called 'the share premium account' and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the share premium account were paid up snare capital of the company.
Sub-section (2) of Section 78 provides for application of share premium account as stipulated therein and if the share premium account is not utilized in the aforesaid manner and utilized for any particular purpose then procedure prescribed under Section 100 for reduction of share capital has to be followed. In the instant case the transferee company is seeking reduction of its security premium account. As the said amount is not utilized for one of the purpose mentioned in Section 78 it is necessary for the transferee company to follow the procedure under Section 100 and thereafter seek appropriate orders.
10. In the first place Article 9 of the Articles of Association of the transferee company provides for reduction of share capital. Therefore Section 100 of the Act is applicable to the transferee company. Clause 4(a) of the Scheme of amalgamation provides that on and from the appointed date the balance standing in the share premium account shall get adjusted and reduced by an amount not exceeding Rs. 21,67,187 by writing down the book value of computers, furniture and fixtures, office equipments and intangibles as on 31 March 2002. The said reduction of share premium account shall be effected as an integral part of the Scheme itself as the same does not involve either diminution of liability in respect of unpaid share capital or payment to any shareholder of any paid up share capital and the order of the Court sanctioning the scheme shall also be deemed to be an order under Section 102 of the Act confirming the reduction. As per Clause 15(g) of the scheme of amalgamation after writing down as aforesaid a sum of Rs. 21, 67,187-00 the share premium account would stand reduced to Rs. 3, 45,50,813-00. As the said reduction do not amount to diminution of the liability in respect of unpaid share capital or payment of any paid up share capital the question of settling the list of creditors, issuing notice to them would not arise. All that the law expects is to fix a date for hearing of the petition and giving such direction regarding advertisement of the petition. In these petitions, this Court had already ordered for advertisement of the petition. That would satisfy the requirement of Rule 47. In the meeting convened in pursuance of the orders passed by this Court the shareholders and creditors of the company have participated in the meeting and in the resolutions which is approved by them there is a specific reference to the reduction in the share capital and unanimously both shareholders of the company and creditors of the company have approved the resolution approving for reduction in the share capital. Thus the requirement of law as contemplated in Rule 85 read with Rule 47 and Sections 100 and 78 are complied with. In this regard it is useful to refer to the judgments relied on by the learned Counsel for the petitioners.
11. In MANECKCHOWK AND AHMEDABAD MFG. CO. LTD. case, the question before the Gujarat High Court was when sanction was sought for reorganisation of the share capital of the company which included reduction of share capital whether it was permissible to have reduction of share capital and sanctioning of the scheme of re-organization simultaneously. After discussing the law on the point it was held as under:
That takes me to the last attack under the head 'reorganization of share capital', namely, that the scheme envisages reduction of share capital and that cannot be done without following the procedure as prescribed in Section 100 onwards of the Companies Act, even if it be done as part of the scheme. I have already pointed out above that reorganization of the share capital can be carried out as a part of a scheme of compromise and arrangement under Section 391 without following the whole gamut of the procedure prescribed for the same in other parts of the Companies Act. However, Rule 85 makes a special departure in case of reduction of share capital when it is to be carried out as part of the scheme of compromise and arrangement. Rule 85 which I have already referred to earlier, provides that when reduction of share capital is to be effected as part of a scheme of compromise and arrangement, procedure prescribed for the same in the Companies Act and Rules should be carried out as stated earlier. This provision is made for very good reasons. It unmistakably indicates that reorganization of share capital can be brought about as part of the scheme of compromise and arrangement. But even if it is to be done as part of the scheme of compromise and arrangement this special provision in Rule 85 enjoins a duty to carry out the procedure contained in Section 100 onwards of the Companies Act. Ordinarily, reduction of share capital affects members of the company and it can be brought about by a compromise or arrangement between the company and its members ignoring the creditors. Now, if reduction of share capital involves repayment of a part of paid up capital or extinguish or reduce the liability on any of the shares in respect of unpaid share capital it would adversely affect the creditors. Yet the creditors would have no voice in the matter. If the procedure as provided in Section 100 onwards has got to be carried out the Court could not sanction reduction of share capital unless the creditors are heard and provision is made for the creditors who object to the reduction. However, if the reduction of share capital does not involve either diminution of liability in respect of unpaid share capital or payment to any shareholder of any paid up capital, the Court can sanction the same without reference to the creditors. The creditors in such a case would not even be entitled to object to the proposed reduction as provided in Section 102. In the instant case, admittedly, the reduction of share capital is by way of cancellation of share capital, which is lost or is unrepresented by available assets. In such a case, creditors, even in a reduction simpliciter, are not entitled to object and it makes no difference if reduction is brought about by following the procedure prescribed in Section 100 onwards or by way of a scheme of compromise and arrangement. Thus, if it can be done in a given set of circumstances as part of a scheme of compromise and arrangement, it has been properly done in this case and while sanctioning the scheme ipso facto the reduction of share capital ought to be confirmed.
In the case of NOVOPAN INDIA LIMITED the Andhra Pradesh High Court while dealing with the scheme of amalgamation where reduction of share capital was also involved after following the aforesaid judgment has held as under:
(xvii) There is nothing objectionable in the company proposing a scheme of compromise and arrangement and simultaneously proposing reduction of share capital and both can be considered and approved simultaneously.
(xviii) Where the scheme of compromise and arrangement comprises within its ambit reduction of share capital, the procedure for reduction must be gone through but if it is shown that the procedure prescribed under Section 100 onwards has been carried out simultaneously while submitting scheme for approval of the creditors and members, the Court can, while sanctioning the scheme, sanction reduction of share capital. The important thing to find out would be whether the procedure for reduction of share capital wherever it is mandatory has been strictly carried out and wherever it is directory has been substantially complied with.
(xxv) The essential requirement of Section 393(1)(a) is that the creditors and members who are to assemble in the meeting should have advance information of the proposed scheme of compromise and arrangement and its effect on their interest as members and creditors. If the whole of the proposed scheme was annexed to the notice, anyone having a bare perusal of the scheme would be able to find out what was intended to be done by the scheme of compromise and arrangement and what would be its effect on his interest as creditor or member of the company and the first part of Clause (a) of Section 393(1) will be fully complied with.
(xxvi) In respect of the latter part of Clause (a), it must be stated that the material interest of the director and managing director in their capacity as such or as a creditor or a member of the company will have to be stated in the statement; but the effect of the scheme on their interest will have to be disclosed to the extent that effect differs from the effect on the like interest of other creditor and member that would be made by the scheme. If there is no difference, it is not essential that the effect of the scheme on the interest of the director and managing director and others need be set out in the statement. Rule 85 of the Companies (Court) Rules, 1959 provides where a proposed compromise or arrangement involves a reduction of capital of the company, the procedure prescribed by the Act and these rule relating to the reduction of capital, and the requirements of the Act and these rules in relation thereto, shall be complied with before the compromise or arrangement so far as it relates to reduction of capital, is sanctioned.
Rule 47 of the Rules provides that, upon the hearing of the summons, if the Judge is satisfied that the proposed reduction does not involve either diminution of liability in respect of unpaid share capital or payment to any shareholder of any paid up share capital and does not think fit to direct that the procedure prescribed in Section 101(2) shall apply, he shall fix a date for hearing of the petition and give such directions as he may think fit as to the advertisement of the petition.
Again in RAASI CEMENT LIMITED case the Andhra Pradesh High Court relying on the aforesaid two judgments has held as under:
From a perusal of the record, it appears that the requisite statutory procedure has been substantially complied with, that the scheme of arrangement and the reduction of share capital and restructure of RCL have been duly approved by the over whelming majority votes of the equity shareholders, that the secured creditors have given their consent for the proposed arrangement and reduction of share capital as their integrity has been preserved. The majority decision of the concerned class, appears to be just and fair to the class as a whole. It does not appear that the proposed scheme of arrangement, reconstruction of RCL and the reduction of share capital are violative of any provisions of law and it does not appear contrary to public policy. The whole scheme of arrangement appears to be just, fair and reasonable from the point of view of a prudent man of business. I see no impediment in confirming the resolution of RCL regarding the scheme of arrangement in question, the restructuring of RCL and the reduction of its share capital. Therefore, the application deserves to be allowed.
12. In view of the aforesaid legal position there is no prohibition or legal impediment for reduction of share capital being a part of the scheme of amalgamation. It is permissible as is clear from Rule 85 of the Rules. All that is required to be done is the procedure prescribed for reduction of share capital is to be complied with. Firstly it is to be seen whether the articles of association provides for such reduction of share capital. Once it provides for the same the next thing to be seen is whether such reduction of share capital involves diminution of liability in respect of unpaid share capital or payment to any shareholder or any paid up share capital if it involves the same then the procedure prescribed under Sub-section (2) of Section 100 has to be followed. If not a date may be fixed for hearing of the petition and advertisement of the petition would satisfy the legal requirements. If the said reduction of share capital is of security premium account and the purpose of the said reduction is not what is stipulated under Section 78, again law requires the procedure to be followed under Section 100 which is provided for in so far as reduction of share capital is concerned. It is to be noticed here the two persons whose interest are going to be affected in so far a reduction of share capital is concerned are shareholders and creditors of the company. When once the reduction in share capital does not involve the diminution of liability in respect of unpaid share capital or payment of any shareholder to any paid up share capital the question of their interest being affected is not there. Even otherwise, in a petition under Section 391 a meeting is called for of the shareholders and creditors of the company. Therefore the scheme of amalgamation along with notice a draft copy of the scheme of amalgamation as mandatory requirement is sent to each shareholder and creditor of the company who on going through the same will have a clear picture of the terms of the scheme of amalgamation. They have a right to participate in the said meeting and vote for or against the resolution. Therefore, transparency is achieved in this process. Therefore the procedure prescribed under Section 100 of the Act is substantially complied with. That is what Rule 85 provides for. This provision is made for very good reasons. Thus reduction of share capital can be brought about as part of Scheme of compromise, arrangement or amalgamation. Once shareholder and creditors of the company by a statutory majority approve the scheme of amalgamation and in the said scheme of amalgamation is not opposed to public policy and when the auditor has given a report stating that the affairs of the company have not been conducted in a manner prejudicial to the interests of the members or public interest the scheme which includes reduction of shares requires to be approved. However, further procedure prescribed under Section 100 in so far as share capital is to be followed in addition to the procedure to be followed after sanctioning of the scheme.
13. In the instant case, the facts set out above clearly demonstrates that the petitioners have complied with the requirement of Sections 78, 100 read with Rules 85 and 47 of the Rules. They have also complied with the provisions of Section 391 of the Act. The scheme of amalgamation has been approved by the shareholders and creditors of the company by requisite statutory majority. The auditor appointed by this Court has submitted a report stating that the affairs of the company have not been conducted in a manner prejudicial to the interests of the members or public, shareholders or creditors of the company. As can be seen from the terms of the scheme of amalgamation it is not opposed to public policy or it is not contravening any provision of law. The terms of the scheme of amalgamation clearly shows that both transferor companies are 100% subsidiary companies and owned by transferee company. Therefore with the amalgamation of these two companies with the transferee company the question of issuing any share certificates in favour of the shareholders of the transferee company would not arise. In that view of the matter the interest of the shareholders are taken care of. Clause 15(a) of the scheme specifically provides for the interest of the employees under which all the employees of the transferor companies would become the employees of the transferee company on terms and conditions which are not less favourable to that of the transferor company. No worker or union has appeared before this Court in pursuance of public notice issued to oppose the scheme of amalgamation. Therefore, it is obvious that the interest of the workers has been taken care of under the scheme of amalgamation as all the liabilities of the transferor companies stand transferred to the transferee company from the appointed date and the transferee company would be liable to answer all the claims. The interest of the creditors is also taken care of. No share holder or creditor or any other person has appeared before this Court to oppose the Scheme of amalgamation in pursuance of the public notice. Therefore the scheme is sanctioned as prayed for.
13. The Scheme as originally framed expire on 31st December 2003 and it also provides for extension of the said scheme by agreement between the parties. The said period stipulated in the scheme has already expired. An agreement entered into by the parties is filed before Court. Under the circumstances, notwithstanding the fact that original period has been expired, in view of the agreement entered into between the parties which is reduced into writing the scheme proposed by the petitioners are sanctioned. I am of the view that there is no legal impediment for according sanction sought for by the petitioner for the scheme of amalgamation which includes reduction of share capital. Hence I pass the following order.
That the reduction of the share premium account of Comat Technologies Private Limited resolved ,on and effected by a Special Resolution passed in General Meeting of the said company held on 22.2.2003 which resolution was in the words and figures following:
'(a) On this Scheme coming into effect, on and from the Appointed date the balance standing in the Share Premium Account of CTPL shall get adjusted and reduced by an amount not exceeding Rs. 21,67,187 by writing down the book value of computers, furniture & fixtures, office equipments and intangibles as on 31st March 2002.
(b) The writeoff not exceeding Rs. 21,67,187 shall be deemed to be an adjustment in accordance with and for all purposes relating to the provisions of this Act.
(c) The application and reduction of Share Premium Account, as per this clause, shall be effected as an integral part of the Scheme itself as the same does not involve either diminution of liability in respect of unpaid share capital or payment to any shareholder of any paid up share capital and the Order of the Court sanctioning the Scheme shall also be deemed to be an order u/s 102 of the Act confirming the reduction' be and the same and is hereby confirmed.
2) That the minutes set forth in the schedule hereto be and is hereby approved.
3) That a certified copy of this order including the minutes as approved be delivered to the Registrar of Companies with 21 days from the date of receipt of this order.
4)That the notice of the Registration by the Registrar of Companies of this order and the said minutes be published once each in one edition of 'The Hindu' and 'Kannada Prabha' newspapers within 14 days of the Registration aforesaid.
5) The addition of words 'and reduced' after the name of the petitioner company pursuant to Section 102(2)(a) of the Act is dispensed with.
6)The Scheme of Amalgamation as per Annexure - G whereby Bangalore Cyberspace Private Limited (Transferor Company No. 1) and Comat Infoscribe Private Limited (Transferor Company No. 2) amalgamate with Comat Technologies Private Limited (Transferee Company) is hereby sanctioned and the same is binding on the shareholders and creditors of the transferor companies and transferee company.
7. The Transferor companies have been ordered to be dissolved without there being an order of winding up.
8) Office is directed to draw decree is Form No. 42.
SCHEDULE
'On this Scheme coming into effect, on and from the Appointed date the balance standing in the Share Premium Account of CTPL shall get adjusted and reduced by an amount not exceeding Rs. 21,67,187 by writing down the book value of computers, furniture & fixtures, office equipments and intangibles as on 31st March 2002'.