Judgment:
Vikramajit Sen, J.
1. These petitions have been filed under Sections 391(2) and 394 of the Companies Act, praying for sanction to be accorded to the Scheme of Amalgamation of LG Electronics System India Limited (Transferor Company) with LG Electronics India Private Limited (Transferee Company).
2. The Registered Offices of the Transferor and the Transferee Companies are situated at New Delhi, within the territorial jurisdiction of this Court.
3. The Scheme of Amalgamation is to amalgamate two subsidiaries of the parent company, namely, M/s L.G. Electronics Inc., a company registered in South Korea. The objects and salient features of the Scheme and the circumstances necessitating the amalgamation of the companies have been explained in the petitions. I find no reason to disagree with the expectations of the Petitioner Companies.
4. The Balance Sheets of both the Transferor and the Transferee Companies have been placed on record together with Resolutions of their respective Board of Directors approving the proposed Scheme of Amalgamation.
5. It has also been submitted that there are no investigations or proceedings pending against any of the above said Petitioner Companies under Sections 235 to 251 of the Companies Act.
6. Vide Orders of this Court dated 31.7.2002 passed in the Company Application No. 135/2002, the separate Meetings of the Equity Shareholders, Secured and Unsecured Creditors of both the Transferor and the Transferee Company were directed to be convened. The said Meetings were duly convened on 4.9.2002. Learned counsel for the Petitioners reiterates that all the Shareholders, Secured and Unsecured Creditors of both the Transferor and the Transferee Companies present at the Meeting have unanimously approved the Scheme of Amalgamation.
7. By Orders dated 17.9.2002, in addition to the issuance of notices to the Regional Director and Official Liquidator, citation was also ordered to be published in 'Indian Express' (English) and 'Jansatta' (Hindi) These have been duly carried, out. In spite of the advertisement of the notice of these petitions in the newspapers, no one has filed any Objection to the grant of sanction to the Scheme. There has also been no appearance before the Court, with the exception of Kaveri Telecomes Ltd. to oppose the prayers contained in the petitions, or to the said Scheme of Amalgamation.
8. Objections at the threshold has been taken by Mr. Joshi learned counsel who appears for Kaveri Telecomes Ltd., the petitioning creditor against the M/s L.G. Electronics System India Ltd. In CP No. 342/2002. The present proceedings are for the amalgamation of the said Company with M/s L.G. Electronics System India Pvt. Ltd. On facts it has been contended on behalf of the M/s Kaveri Telecomes Ltd. that notice of the 'first motion' was not given to the said Company and it has, thereforee, been deprived of an opportunity to Show-cause against the proposed amalgamation even on that stage. In those proceedings I had appointed Mr. Kailash Vasudev, Sr. Advocate as the Chairman and Mr. Angad Singh as the Alternate Chairman in the Meeting of the Shareholders and the Creditors of the Transferor and Transferee companies which was held on. In response to the allegation that no notice of those proceedings has been received, my attention has been drawn to the dispatch of the notice Under Post Certificate on the instructions of the Chairman. The Postal Certificate is available on page 344 of that petition which forms part of the Report of the Chairman. Although it is vehemently contended by Mr. Joshi, on instructions from Mr. Shiv Kumar Reddy, Chief Executive and Director of Kaveri Telecomes Ltd. that notice has not been received, and I am not inclined to accept this submission. It will also be pertinent to record that the objection as to non-service was not raised in the previous hearing on 7.11.2002, in the winding-up petition bearing CP No. 342/2002.
9. The contention of Mr. Joshi is that Kaveri Telecomes Ltd. as a creditor of L.G. Electronics System India Ltd. is entitled to receive notice of the first motion from the Court. It is further contended that there should have been a specific mention in the petition itself in detail, of the name of all the creditors as well as the extent to which the company was indebted to them. Support is sought from Rule 67, 69(5), 73, 75 and 83 of the Companies (Court) Rules, 1959 and Form-33 thereof. Rule 67 stipulates that an application under Section 391 shall be by Judge's summons supported by an affidavit. Rule 69 directs that upon the hearing of the summons the Judge shall give such direction as he may think necessary in respect of sundry matters including the aspect of determining the values of the creditors and/or the members, or the creditors or members of any class as the case may be, whose meeting have to be held. In my view this is exactly what is done when the Court considers it fit and appropriate to appoint a Chairman of such meetings. A perusal of the Report of the Chairman is made by the Court and necessary orders and thereafter passed. None of the provisions of this Rule, thereforee, mandate that full details of all the creditors should be given in the petition/application under Section 391 itself. The ends of justice and the Interest of such creditors are duly safeguarded inasmuch as the Chairman of the Meeting is enjoined to issue notices to all the creditors. As has already been mentioned above this exercise was duly fulfilled by the Chairman. If there is any doubt remaining on this question it is affirmately dispelled on a reading of Rule 73 which obligates the Chairman appointed for the Meeting to issue notices to the creditors and/ or members, or to the creditors or members of any class, as the case may be. Rule 83 merely articulates what is to be done at the hearing of the summons and needs no further discussion. Rule 75 is referred to with vehemence by Mr. Joshi as his request for a copy of the proposed Scheme, even at the expense of his client, was not acceded to. Normally, such a conduct by the Transferor and Transferee Companies would immediately invite suspicion in the mind of the Judge, and may even lead to the rejection of the proposed Scheme on this short ground. However, in view of the deposit of the entire claim of Kaveri Telecomes Ltd. this Rule is out of context in these proceedings. A perusal of Form No. 33 also does not support the contention of Mr. Joshi that a Court notice must issue to each and every creditor either in the first motion or in the second motion. This controversy was raised in an effort of establish that the Transferor and Transferee company had acted in a mala fide manner in these proceedings, and, thereforee, Kaveri Telecomes Ltd. should be given full opportunity to object to the proposed Scheme of Amalgamation.
10. As will be clear hereinafter, in the Meeting of the Creditors on 4.9.2002 100% of the Creditors present at the Meeting had approved the Scheme of Amalgamation.
11. In CP No. 342/2002, the winding-up petition filed by Kaveri Telecomes Ltd., the following Orders were passed on November 7, 2002:
'Learned counsel for the respondent seeks four weeks time to file its Reply in opposition to the petition, which is granted. Rejoinder be filed by the Petitioner within two weeks thereafter. On instructions received from Mr. Neeraj Goel, Sr. Manager (Finance), it is stated by learned counsel for the Respondent that, without prejudice to the rights and contentions of the Respondent Company, a sum of Rs. 3,09,98,364/- (Rupees Three Crores Nine Lacs Ninety Eight Thousand Three Hundred and Sixty Four only) shall be deposited with the Registrar-General of this Court within ten days from today. It is his submission that the petitioner's intention is to embarrass the Respondent Company in the proposed amalgamation between the respondent and the LG Electronics India (P) Ltd. The deposit be made as per the undertaking of counsel for the Respondent.
Learned counsel for the petitioner, however, submits that the petitioner has received no notice of the impending Amalgamation Scheme.
Upon the abovementioned deposits being made by the Respondent Company, it is ordered that the Petitioner shall have no right to appear and object to the proposed Scheme of Amalgamation.
Renotify for 13th December, 2002.
12. The contention of Mr. Joshi is that even after the deposit of the sum of Rs. 3,09,98,364/-, his client namely Kaveri Telecomes Ltd. should be heard by the Court in opposition to the proposed scheme. I find that my previous Order was explicit. Upon L.G. Electronics System India Ltd. depositing the said sum, no need or justification remained for hearing the petitioning-creditor, Kaveri Telecomes Ltd., any further as it did not remain a Creditor of L.G. Electronics System India Limited any longer. The object of holding Meeting of Creditors is to ascertain whether the sums payable to them by the Transferor or Transferee companies may be jeopardised in any manner by the Court giving its sanction to the proposed Scheme of Amalgamation. Once that amount is secured, as has been done in CP No. 342/2002, all that remains is for a determination of the existence and extent of liability. In my considered opinion, the erstwhile creditor loses locus standi to participate any further in a matter which does not affect his interest. It is for this reason that I had ordered that upon the above deposit being made the petitioning creditor, namely, Kaveri Telecomes shall have no right to appear and object to the proposed Scheme of Amalgamation. This objection is, thereforee, overruled.
13. Apart from these legal and technical objections no other reason has been disclosed either by Mr. Joshi or any other creditor against the proposed Scheme of Amalgamation.
14. The Regional Director has recorded that it has no objection to the proposed Scheme of Amalgamation being sanctioned by the Court.
15. On behalf of the Official Liquidator the objection that has been voiced is that approval of the Income Tax Authorities, if necessary, should be obtained. Mr. Abhimanyu Mahajan points out that by virtue of Section 72A of the Income Tax Act, accumulated losses by the unabsorbed depreciation of the amalgamating company shall be deemed to be its loss, and allowance for depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of this Act relating to set off and carry forward of loss for allowance for depreciation shall apply accordingly. Based on this it is contended that no approval is required. Nonetheless, if approval is at any stage found to be necessary, the Transferee company undertakes to take requisite steps in this direction. In respect of second objection raised on behalf of the Official Liquidator, it is similarly contended that although no approval appears to be necessary, since both the transferor and Transferee Company are the subsidiaries of the same parent Corporation, clearance/approval will be taken if found necessary at any subsequent stage.
16. In the circumstances narrated above, and having regard to the averments in the petitions and the materials placed on record, and since the Objections raised by the Petitioning-Creditor against M/s. L.G. Electronics System India Limited in CP No. 342/2002 and the Official Liquidator have been overruled, and since the Regional Direction has stated that he has no Objection to the Scheme being sanctioned by the Court, and since on one has appeared in person to oppose the Scheme of Amalgamation, I am satisfied that the prayers in the petitions deserve to be allowed. I do not find any legal impediment to the grant of the sanction to the Scheme of Amalgamation. Hence the sanction is hereby granted to the above mentioned Scheme of Amalgamation under Sections 391 to 394 of the Companies Act, 1956. Consequent to the amalgamation of the Companies, which will be deemed to have taken effect from the appointed date, the Transferor Company, having amalgamated with the Transferee Company shall stand dissolved without the process of winding up.
17. Petition stands disposed of in the above terms.