Desai, J.
1. For the reasons to be declared hereafter, we hereby dismiss all the four appeals with no order as to costs.
2. At this stage, the appellants of appeals Nos. 13, 14 and 18 applied for leave under art. 133 of the Constitution today. We do not think that any substantial question of law of public importance is involved and that too required to be decided by the Supreme Court in this group of appeals. The oral leave is, therefore, rejected. Thereafter, oral motion was made for continuing the status quo today for a period of about a month. Mr. B. R. Shah, the learned advocate for the transferee-company, enumerated before us the various difficulties standing in their way. We appreciate the contention and, therefore, order that the copy of the reasons shall be made available to these three appellants as early as possible, but not later than 6th August, 1983, and the interim relief shall continue to operate only up to 31st August, 1983, but no further. A copy to be applied for urgently by those who have applied for interim relief to continue, the certified copies to be given to those appellants on the top most priority basis.
3. On 30th July, 1983, we passed the following order :
'For the reasons to be declared hereafter, we hereby dismiss all the four appeals with no order as to costs.'
4. Now, we proceed to state the reasons for dismissing these four appeals.
5. These four appeals arise out of the decision rendered by the learned single judge (R. C. Mankad J.) in Company Petition No. 182/82, connected with Company Application No. 127/82, whereby the learned judge granted sanction to the scheme of amalgamation of the two companies, viz., Ambalal Sarabhai Enterprises Ltd. (hereinafter referred to as 'the transferee-company'), with Standard Pharmaceuticals Ltd. (hereinafter referred to as 'the transferor-company'), with effect from 1st April, 1980, overruling the objections raised by the Union of India, Commissioner of Income-tax, Narendra Shodhan, a shareholder of the transferee-company and Albright Morarji Pandit & Co. Ltd., a creditor. Before going to the contentions raised before us, it will be proper to state briefly the facts leading to the filing of these four appeals. The transferee-company-Ambalal Sarabhai Enterprises was incorporated on June 27, 1977, as a private company limited by shares under the Companies Act, 1956, and was converted into a public company with effect from December 30, 1980. The registered office of the said company is situated at Baroda. It has authorised share capital of Rs. 26 crores divided into 2 crores 60 lakhs equity shares of Rs. 10 each and the issued, subscribed and paid up share capital of the said company is Rs. 18,81,90,240 divided into 1,88,19,024 equity shares of Rs. 10 each. The said company is engaged in multifarious activities, such as manufacture and sale of chemicals, basic drugs, formulations, synthetic detergents and soaps, dyestuffs, chemicals and pharmaceutical machinery, toilet preparations, fine chemicals, vitamins, machinery and equipment, electronic instruments, computers, etc.
6. The transferor-company, viz., Standard Pharmaceuticals Ltd., was incorporated on March 7, 1934, under the provisions of the Indian Companies Act, 1913, as a company limited by shares and is an existing company within the meaning of the Companies Act, 1956. The authorised capital of the said company is Rs. 1,30,00,000 divided into 10 lakhs shares of Rs. 10 each, 36,000 deferred shares of Re. 1 each, 15,350 redeemable cumulative preference shares of Rs. 100 and 14,300 cumulative preference shares of Rs. 100 each. The issued, subscribed and paid up capital of the said company is Rs. 99,50,580 divided into 9,56,408 equity shares of Rs. 10 each, 35,000 deferred shares of Re. 1 each and 3,515 8.6% cumulative preference shares of Rs. 100 each. The object for which this company was established as set out in its memorandum and articles of association is to carry on the business of chemists, druggists, dry-salters, oil and colour man importers and manufactures of and dealers in pharmaceuticals, medical, chemical, industrial and other preparations and articles and compounds, cements, oils, pigments and varnishes, drugs, makers of and dealers in proprietary articles of all kinds of chemical, surgical, scientific and mechanical apparatus, instruments, appliances and materials. The principal business of the said company is manufacture and sale of bulk drugs, chemicals and formulations. The said company is having its registered office at Calcutta.
7. The transferor-company holds industrial licences for manufacture of bulk - antibiotics - erythromyein and ampicillin - and has received Government approval for expansion of its capacity for manufacture of bulk penicillin. These development schemes of the company were established to involve additional investment of Rs. 6.5 crores which the transferor company (SPL) was unable to raise or provide for. The said company, therefore, approached the transferee-company (ASE). It is the case of these two companies that on an overall consideration of the various aspects, the directors of both the transferee-company and the transferor company reached a decision that amalgamation of the transferor-company with the transferor-company would not only facilitate the implementation of the projects which the transferor-company had on hand but would attain substantial growth and development of both the companies. The board of directors of both the companies, therefore, formulated a scheme of amalgamation (hereinafter referred to as 'the scheme'), which is at annexure A to the original petition.
8. The transferee-company took out a judges summons in Company Petition No. 127/82, under s. 391(1) of the Companies Act for obtaining directions for convening a general meeting of its equity shareholders on August 14, 1982, at its registered office at Baroda for the purpose of considering and if though fit, approve, with or without modifications, the arrangement and/or compromise embodied in the scheme at annexure A. Mr. M. M. Raval, an officer of this High Court, was appointed as a chairman of the said meeting. The meeting of the equity shareholders of the transferee-company was duly convened and held under his chairmanship. The said meeting was attended by 560 equity shareholders in person and by proxy, and the total number of their shares is 80,95,501 and the total value thereof is Rs. 8,09,010. At this meeting, modification of the scheme was proposed and, after discussion, the scheme was modified and approved unanimously by the equity shareholders who were present at the aforesaid meeting. The chairman of the said meeting submitted his report dated September 18, 1982, stating to the effect that the scheme with modifications proposed at the meeting was unanimously approved by the equity shareholders who had attended the meetings. The scheme with the modification approved at the meeting is at annexure B. The report of the chairman of the meeting reveals that the requisite statutory majority of the equity shareholders has approved this scheme as per annexure B.
9. After the receipt of the report of the chairman of the meeting, the transferee-company filed Petition No. 182/82, under s. 391(2) of the Companies Act for an order sanctioning the scheme of arrangement for amalgamation of the two companies and for making consequential orders as envisaged by s. 394. While admitting the petition, S. B. Majumdar J. gave directions for advertising the petition in the newspapers and the Government Gazette and for serving a notice on the Central Govt. though the Regional Director, Company Law Board, Western Region, Bombay, as required under s. 394A of the Companies Act.
10. In response to the notice issued as aforesaid, the Central Govt. filed appearance and opposed this petition. One Narendra Shodhan (hereinafter referred to as Mr. Shodhan) had appeared personally to oppose this petition. He also filed written objections dated December 9, 1982. Mr. Shodhan did not remain present when the petition was taken up for hearing the learned company judge although the date of hearing was fixed in his presence. The petition was opposed by Albright Morarji & Pandit Ltd., which claims to the creditor of the transferee-company. No affidavit-in-reply was filed on behalf of the said company in the said petition. The said company relied upon the affidavit of its secretary filed in Company Petition No. 174/82, which was also filed by the transferee-company. When the petition was being heard, almost at the fag and of the hearing, the Commissioner of Income-tax, Gujarat (Central), took out judge's summons seeking leave to oppose the petition.
11. No affidavit was filed on behalf of the Central Govt. The learned counsel, appearing for the Central Govt., contested the petition on the ground that as Part A of Chap. III of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as 'the Act'), applied to the transferee and transferor-companies, the court could not accord its sanction to the scheme of amalgamation of the transferor-company with the transferee-company unless the same had been approved by Central Govt. as provided in s. 23 of the Act.
12. The learned counsel, appearing for Albright Morarji & Pandit Ltd., opposing the petition, submitted that Rs. 31,32,018.14 were due to the said company from the transferee-company and since the transferee-company failed to discharge its duty, it was constrained to file a suit in the High Court of Bombay for recovery of the same. He also adopted the arguments advanced by the learned counsel for the Central Govt. and further submitted that since the creditors of the transferee-company were likely to be affected by the scheme of amalgamation, the court should not accord its sanction before the scheme was considered by the creditors of the transferee-company at a meeting convened for that purpose.
13. The main objection of Mr. Shodhan was that the ratio in which shares of the transferor-company were to be exchanged for the shares of the transferee-company was provided in the scheme, annexure-B, was not fair to the shareholders of the transferee-company. He, in his written objections, referred to what was described as the historical background of merger of some other companies with the transferee-company and urged that a large amount was paid by way of goodwill when those companies merged with the transferee-company and that was done to benefit members belonging to one family. According to Mr. Shodhan, the scheme was not fair just and equitable and prudent and it was not in the interest of the transferee-company or the public interest.
14. The Commissioner of Income-tax, Central, has no objection to the amalgamation of the transferor-company with the transferee-company as such. His only objection was with regard to the date from which the amalgamation was to become effective under the scheme as modified. It was submitted on behalf of the Commissioner of Income-tax that as a result of the change in the date, viz., from 1st July, 1981, to 1st April, 1980, the transferee-company would be able to claim a set-off of the carried forward loss and unabsorbed depreciation allowance of the transferor-company. The Commissioner of Income-tax in substance contended that the Revenue would suffer loss to the extent of Rs. 60 lakhs if the date of amalgamation was allowed to be changed from 1st July, 1981 to 1st April, 1980.
15. The learned company judge, R. C. Mankad J., who heard these petitions, after considering the relevant provisions of the Companies Act and the Monopolies and Restrictive Trade Practices Act, and the submission made before him, overruled the objections raised by the Central Govt. the Commissioner of Income-tax, Mr. Shodhan and Albright Morarji & Pandit Ltd. and allowed the petitions holding that no ground existed to withhold sanction to the scheme of amalgamation as per the modified scheme, annexure-B. Being dissatisfied with the said order passed by the learned company judge, these four appeals have been filed.
16. O.J. Appeal No. 12/83 is filed by the Central Govt., O.J. Appeal No. 13/83 is filed by the Commissioner of Income-tax, O.J. Appeal No. 14/83 is filed by Mr. Shodhan, while O.J. Appeal No. 18/83 is filed by Albright Morarji & Pandit Ltd.
17. The same contentions which were raised before the learned company judge by the learned counsel on behalf of the Central Govt., Commissioner of Income-tax and Albright Morarji & Pandit Ltd., were raised before us also. Mr. Shodhan, who did not appear before the learned company judge at the time of hearing, appeared before us and raised several contentions is support of his objections.
18. The learned counsel, Mr. S. N. Shelat, who appeared on behalf of the Commissioner of Income-tax in O.J. Appeal No. 13/83, contended, relying upon some decisions, that the court was not bound to accept the scheme and that the court always took into the question whether the proposed amalgamation was in the public interest or not. He also contended that if the change of date appeared to be for defeating income-tax, the court should refuse to sanction the scheme. He contended that the main purpose in shifting the date from July 1, 1981, to April 1, 1980, was to take advantage of the carry forward loss for the purpose of income-tax and that would deprive the Central Govt. of income-tax to the tune of Rs. 60 lakhs, and, therefore, the scheme should not be sanctioned.
19. The learned Advocate General, who appeared on behalf of Albright Morarji & Pandit Ltd., supported the contentions raised by Mr. Shelat. He further contended that though it was not obligatory to call a meeting of creditors, it was desirable that a meeting of creditors of the transferee-company, which was taking over the assets and liabilities of the transferor-company was called to have their say, he contended that even though the court could direct such a meeting to be called if the company had not thought it fit to do so. Mr. Shodhan, who appeared in person, also appears to be supporting the contentions raised by Mr. Shelat and the learned Advocate General, Mr. Shodhan, also raised some other contentions which will be referred to hereafter a little later. The learned counsel, Mr. B. R. Shah, who appeared for the transferee-company in all the four appeals, contended that there was no substance in the contentions raised by the appellants. He contended that if the scheme was not approved, then the Central Govt. was not likely to gain anything because the transferor-Company would be entitled to the benefit of carry forward loss. He also contended that the transferor-company since its incorporation in the year 1934 had made profits every year and that 1980-81 was the only maiden year of loss and that was also on account of the delay on the part of the Central Govt. in fixing prices. He contended that the transferor-company had made profits in the subsequent years and that would show that even without amalgamation, the transferor-company would have been entitled to the benefit of carry forward loss. He contended that there was no substance in the contention that this amalgamation and the change in the date were merely for the purpose of getting benefit of the carry forward loss. He contended that the main object was to utilise the licences, which were in favour of the transferor-company, and that the benefit of carry forward loss was only an incidental one. He contended that it must be borne in mind that the transferee-company was taking over assets as well as liabilities of the transferor-company and that way, carry forward loss, as provided by the I.T. Act, was only an incidental one. He contended that, on the contrary, amalgamation of the two companies was in public interest because the transferee-company, by utilising import licences, would be able to manufacture life saving drugs and thereby reduce the import of these drugs resulting in the saving of a substantial amount of foreign exchange. He contended that the transferor-company was not in a position to raise the funds for implementing the project, so as to utilise the import licences, while the transferee-company was in a position to do so and, therefore, this amalgamation was sought for and that was the main object and not any other ulterior or oblique motive as contended by the appellants. The learned counsel, Mr. B. R. Shah, appearing for the Central Government, relied upon the provisions of s. 23 of the MRTP Act and urged that these two companies were 'undertakings' within the meaning of s. 2(v) of the MRTP Act and, hence, the amalgamation could not be sanctioned by the court unless the scheme for amalgamation had been approved by the Central Govt. as required by s. 23(1) of the said Act. He relied upon a judgment of this High Court and urged that prior permission of the Central Govt. was required if the two companies were not producing the same goods. He contended that if the two companies were producing the same goods, then s. 23(3) of the MRTP Act did not come into play, and in that case, the scheme for amalgamation had got to be approved by the Central Govt. In reply to this contention of Mr. Shah, the learned counsel for the transferee-company, contended that looking to the plain words of s. 23(3) of the MRTP Act, this submission, on behalf of the counsel for the Central Govt., could not be accepted. He drew our attention to s. 23(9) of the said Act which specifically used the phrase 'if both such undertakings produce the same goods' and urged that the same principle which governed the merger and amalgamation under s. 23(1) would also govern the acquisition of one undertaking by another and, hence, the words 'as are not dominant undertakings and as produce the same goods' would mean 'as are not dominant undertakings and which produce the same goods' and not 'as are not dominant undertakings and which do not produce the same goods' as contended by the learned counsel for the Central Govt. and as held by the learned single judge of our High Court in one of the decision relied upon by the learned counsel for the Central Govt.
20. So far as the contentions raised by Mr. Shodhan are concerned, we will go to them later on, after considering the contentions raised on behalf of the Income-tax Department and the Central Govt.
21. It would appear from the above contentions raised before us that the objection raised on behalf of the Commissioner of the Income-tax is against the change in the date from which the amalgamation has to become effective and so far as the Central Govt. is concerned, the only ground on which the prayer sanctioning the scheme of amalgamation is opposed has been that the scheme of amalgamation in question falls within the purview of s. 23(1) of the MRTP Act, and, as such, before the transferee-company could approach this court for obtaining sanction to the scheme, the said company ought to have made a necessary application to the Central Govt. for sanction of the scheme and prior approval of the Central Govt. to the scheme is necessary. On the other hand, the contention raised by the transferee-company in this regard is that the scheme of amalgamation in question squarely falls within the exceptions which are provided in sub-s. (3) of s. 23, and, as such, no prior approval of the Central Govt. to it is necessary, and it is open to this court to accord its sanction to the scheme under s. 394 of the Companies Act. If the contention raised by the Central Govt. is acceptable, then the question of according sanction to the scheme under s. 394 at this stage would not survive and, therefore, before dealing with the scheme on merits and objections raised by the Commissioner of Income-tax and Mr. Shodhan, it would be proper to deal with the aforesaid contention raised on behalf of the Central Govt. The only question, which arises for our consideration is whether the scheme in question falls within the exception provided in s. 23(3) of the MRTP Act or not.
22. Before we proceed to consider the question about the proper scope and ambit of sub-s. (3) of s. 23 of the MRTP Act, it would be desirable to set out the relevant provisions of the said Act, which would have a bearing on the question at issue. The MRTP Act, as its preamble indicates, was enacted with certain objects, viz., to provide that the operation of economic power to the common detriment, for the control of monopolies, for the prohibition of monopolistic and restrictive trade practices and for matters connected therewith or incidental thereto. Chapter III which has the caption 'Concentration of Economic Power' is divided into three parts, viz., Part A comprises ss. 20 to 26; Part B comprises s. 27; Part C has three sections, viz., ss. 28 to 30, and all these sections in Chapter III have been directed to achiever the objective of preventing concentration of economic power to the common detriment by putting restriction on mergers, amalgamations, and taking over of certain undertakings to which Part A of Chapter III would apply. The expression 'undertaking' is defined in s. 2(v) as follows :
''undertaking' means an undertaking which is engaged in the production, supply, distribution or control of goods of any description or the provision of service of any kind.'
23. Section 2(d) defines 'dominant undertaking'. The material part of the definition reads as follows :
''dominant undertaking' means an undertaking which either by itself or along with interconnected undertakings, -
(i) produces, supplies, distributes or otherwise controls not less than one-third of the total goods of any description that are produced, supplied or distributed in India or any substantial part thereof.'
24. Definition of 'Interconnected undertakings' is contained in section 2(g) which so far as is relevant for our purpose reads as follows :
''Interconnected undertakings' means two or more undertakings which are interconnected with each other in any of the following manner, viz. :- ...
(iii) where the undertakings are owned by bodies corporate, -
(a) if one manages the other, or
(b) if one is a subsidiary of the other, or ....'
25. Section 20 of the Act provides as to which undertakings Part A applies. There is no dispute that Part A of the Act, which comprises ss. 20 to 26 is applicable to the transferee-company (ASE) and transferor-company (SPL) and, hence, it is not necessary to reproduce s. 20. Section 23 deals with merger, amalgamation and take-over. Sub-section (1), (2) and (3) of s. 23 and also sub-s. (9) of s. 23, which are relevant for our purpose, read as under :
23(1) Notwithstanding anything contained in any other law for the time being in force, -
(a) no scheme of merger or amalgamation of an undertaking to which this Part applies with any other undertaking;
(b) no scheme of merger or amalgamation of two or more undertakings which would have the effect of bringing into existence an under-taking to which clause (a) or clause (b) of section 20 would apply;
shall be sanctioned by any court or be recognised for any purpose or be given effect to unless the scheme for such merger or amalgamation has been approved by the Central Government under this Act.
(2) If any undertaking to which this Part applies frames a scheme of merger or amalgamation with any other undertaking, or a scheme of merger or amalgamation is proposed between two or more undertakings, and, if as a result of such merger or amalgamation, an undertaking would come into existence two which clause (a) or clause (b) of section 20 would apply, it shall, before taking any action to give effect to the proposed scheme, make an application to the Central Government in the prescribed form with a copy of the scheme annexed thereto, for the approval of the scheme.
(3) Nothing in sub-section (1) or sub-section (2) shall apply to the scheme of merger or amalgamation of such interconnected undertakings, as are not dominant undertakings as produce the same goods ...
(9) Nothing in sub-section (4) shall apply to the acquisition by an undertaking which is not a dominant undertaking, if both such undertakings produce the same goods :
Provided that nothing in this sub-section shall apply, if as a result of such acquisition an undertaking comes into existence to which clause (a) or clause (b) of section 20 would apply'.
26. In the light of the aforesaid provisions, we have to consider whether the scheme of amalgamation satisfies the requirements of sub-s. (3) of s. 23 or not. It is not in dispute that the transferor-company and the transferee-company are undertakings to which Part A of Chapter III of the Act applies. In view of this undisputed position, any scheme of amalgamation of these two undertakings would require prior approval of the Central Govt. under sub-s. (1) of s. 23 of the Act and under sub-s. (2) of s. 23, it would be obligatory upon the transferee-company to make a necessary application to the Central Govt. in the prescribed form for approval of the scheme by the Central Govt., unless the conditions laid down in sub-s. (3) of s. 23 of the Act are satisfied in the present case. It is not disputed that if the conditions laid down in sub-s. (3) of s. 23 of the Act are satisfied, no approval or permission of the Central Govt. would be necessary. In order that the proposed scheme of amalgamation should fall within the exception contained in sub-s. (3) of s. 23, three conditions are required to be satisfied :- (a) that the scheme of merger or amalgamation must relate to two interconnected undertakings; (b) that such interconnected undertakings should not be dominant undertakings; and (c) that these undertakings should be such as produce the same goods. It is not disputed in the present case that conditions as stated above at (a) and (b) are satisfied. The question is whether the third condition is satisfied in the present case or not. So far as the third condition is concerned, there is a controversy whether the undertakings in question should produce the same goods or different goods so as to attract the provisions of sub-s. (3) of s. 23 of the Act. The learned counsel, Mr. B. R. Shah, who appeared for the Central Govt. contended before us, relying upon the decision of this court In re Kril Standard Products Pvt. Ltd. [1976] 46 Comp Cas 203, that the benefit of s. 23(3) can be availed of only if the two interconnected undertakings are not producing the same goods. In the case of Kril Standard Products Pvt. Ltd., one of the question which was considered was whether the two undertakings which were sought to be merged, fell within the exception carved out of by sub-s. (3) of s. 23 of the MRTP Act. As in the present case, first two conditions of sub-s. (3) were satisfied in that case also. The controversy centred round the third conditions which was required to be satisfied. It is pertinent to note that it was contended on behalf of the Central Govt. in that case that the third conditions which was required to be satisfied was that both the undertakings must produce the same goods, while on the other hand, it was submitted on behalf of the petitioner in that case that the third condition required that the undertakings must not be producing the same goods. It was not in dispute in that case that the transferor-company and the transferee-company were not producing the same goods. Mr. Shah relied on the following observations made by D. A. Desai J. (as he then was), who rendered the decision (pp. 223-224) :
'On a plain grammatical meaning of the language employed in sub-s. (3) it appears that the third condition must be that both the undertakings must not be producing the same goods. The word 'not' need not have been used twice over. The expression 'as are not dominant undertakings and as produce the same goods' would, on a plain grammatical reading of the language employed in the expression, mean that none of the undertakings is a dominant undertaking and undertakings sought to be amalgamated are not producing the same goods ....
If the last condition were to mean that they must be producing the same goods, then it is quite possible that on amalgamation, a composite unit may become a dominant undertaking. The exception sought to be carved out would lose all meaning. The Legislature never wanted to allow more and more dominant undertakings to come into existence by merger or amalgamation. Therefore, the Legislature permitted the scheme of merger or amalgamation in respect of undertaking, none of which is a dominant undertaking and a composite undertaking would not become a dominant undertaking. The last condition can only be satisfied if the undertakings sought to be amalgamated are not producing the same goods. If they are producing the same goods, the composite undertaking may as well become a dominant undertaking and by the very exception what is sought to be prohibited by the substantive section would be achieved. Therefore, both from the point of view of plain grammatical meaning of the language employed in sub-section (3) as well as the object sought to be achieved by the provision contained in Part A of Chapter III, the meaning that can be assigned to the expression 'as are not dominant undertakings and as produce the same goods' would be that none of the undertakings sought to be amalgamated is a dominant undertaking, and they are not producing the same goods. In order, therefore, to attract sub-section (3), three conditions which must be satisfied are that : (i) the scheme of amalgamation is in respect of inter-connected undertakings; (ii) that none of them is a dominant undertaking; and (iii) the undertakings sought to be amalgamated are not producing the same goods. If these three conditions are satisfied, sub-section (3) will be attracted.'
27. As pointed out by the learned author, Mr. A.M. Chakraborti, in his book MRTP, A Compendium, the rationale behind the provision contained in sub-s. (3) of s. 23 of the MRTP Act is that the act of merger or amalgamation of such undertakings, do not in any case add to concentration of economic power. If the two undertakings produce the same goods and are also interconnected, their combined production is taken into account to determine whether both or either of them is a dominant undertaking as defined in sub-s. 2(d) of the Act. Looking to the definition of 'dominant undertaking', the undertakings would become dominant undertakings, if they produce, supply, distribute or otherwise control not less than 1/3rd of the total goods of any description produced, supplied or distributed in India or any substantial part thereof. In view of this, merger or amalgamation of two interconnected undertakings, which are not dominant ones, would in no circumstance bring into existence a composite undertaking. It seems that the attention of D. A. Desai was not drawn to this aspect and that is why he seems to have taken the view that for claiming exemption under s. 23(3), the two undertakings must not be producing the same goods. This is clear from the observations made by D. A. Desai J. that if the two undertakings were producing the same goods, then it is quite possible that on amalgamation, a composite unit may become a dominant undertaking and that exception sought to be carried out would lose all meaning. As pointed out by us a little earlier no interconnected undertakings can claim exemption under s. 23(3) if they come within the definition of 'dominant undertakings' and, hence, there can be no fear that the market power which may already be enjoyed by those two undertakings together would increase by the act of merger and hence, there is no reason to insist on Central Govt. approval to a scheme involving amalgamation of merger of two such undertakings, which are producing the same goods. In our opinion, it appears that the third condition must be that both the undertakings must be producing the same goods. Therefore, we respectfully disagree with view taken by D. A. Desai J. The learned company judge, R. C. Mankad J., sitting as a single judge, has observed that he would be bound by the decision of another single judge, but in his opinion, the view expressed by D. A. Desai J. was obiter and, therefore, the learned single judge held that he was not bound by the view expressed by D. A. Desai J. The learned single judge observed that the observations made by D. A. Desai J. were not necessary for the decision rendered by him because D. A. Desai J. took the view in the case of In re Kril Standard Products Pvt. Ltd. [1976] 46 Comp Cas 203, that s. 23(a) or s. 23(b) of the MRTP Act did not apply to either of the two undertakings for the amalgamation of which the scheme was under his consideration, and, hence, the question whether the scheme of amalgamation of these two undertakings fell within the purview of s. 23(3) did not arise. The learned single judge held that it was not necessary for the court to decide in that case whether the exemption carved out in sub-s. (3) of s. 23 was attracted in that case. We, sitting as a Division Bench, are free to take a different view from the one expressed by D. A. Desai J., even if the view expressed by D. A. Desai J. was not obiter. In view of this, we do not propose to go into the question whether the view expressed by D. A. Desai J. was obiter, though we are inclined to say that, prima facie, the learned single judge was right in saying that the observations made by D. A. Desai J. were obiter. We may mention here that leaving aside the question whether the view expressed by D. A. Desai J. can be said to be obiter or not, the said view is entitled to a great weight, though not binding on us. We are, however, inclined to say with great respect to D. A. Desai J., that we are not inclined accept the view expressed by him so far as the interpretation of sub-s. (3) of s. 23 of the Act is concerned. We are inclined to agree with the view taken by the learned single judge on this point. The learned single judge has given cogent reasons for taking a different view. We may mention here that sub-s. (3) of s. 23 carves out an exception in respect of the scheme of merger or amalgamation, while sub-s. (9) carves out an exception in case of acquisition or purchase covered by sub-s. (4). Both sub-ss. (3) and (9) deal with the same subject, viz., exemption, with the difference that sub-s. (3) is attracted in case of merger or amalgamation, while sub-s. (9) is attracted in case of acquisition or purchase. Provision for exemption contained in both these sub-sections is, however, similar. The exemption contemplated in sub-s. (9) follows the same principles as are applicable to the scheme of merger or amalgamation under sub-s. (3). The proviso to sub-s. (9) is only clarificatory inasmuch as the same principle as is embodied in sub-s. (3) is sought to be followed by incorporating this proviso. The purpose behind enacting s. 23(1) and (2) on the one hand and s. 23(4) on the other, appears to be the same. The principle, which governs exemption as provided by sub-s. (3) of s. 23, must also govern the exemption as provided by sub-s. (9) of s. 23. When we read the two sub-sections in juxtaposition, the position that emerges is this that so far as merger or amalgamation is concerned, the interconnected undertakings should not be dominant undertakings, while so far as acquisition is concerned, neither of the two companies should be a dominant undertaking. So far as other conditions are concerned, the words used in sub-s. (3) are 'and as produce the same goods', while in sub-s. (9), the words used are 'if both such undertakings produce the same goods'. The wording of sub-s. (9) of s. 23 leaves no doubt whatsoever that the two undertakings in question should be producing the same goods. The intention of the Legislature is crystal clear from the words used in sub-s. (9). This shows that in case of acquisition, both the undertakings should be producing the same goods. If it is so, it is difficult to read sub-s. (3) of s. 23 as laying down that the two undertakings in question should not be producing the same goods. It appears to us that the provisions of sub-s. (9) of s. 23 of the Act, which clearly go to show that the two undertakings must be producing the same goods for claiming exemption under the said sub-section, were not brought to the notice of D. A. Desai J., and that is why, he took the view that these two undertakings should not be producing the same goods, if they wanted to claim exemption under s. 23(3) of the Act. There does not appear to be any reason why the Legislature should have provided in sub-s. (9) that both the undertakings must be producing the same goods, while it should have provided in sub-s. (3) by using a different phraseology that the undertakings should not be producing the same goods. We feel that if this position was brought to the notice of D. A. Desai J. he would not have interpreted sub-s. (3) of s. 23 as laying down that the undertakings should not be producing the same goods.
28. The view taken by D. A. Desai J. in the case of In re Kril Standard Products Pvt. Ltd. : (1974)0GLR810 , does not appear to get support from any other decision of any other High Court or even of this High Court. On the contrary, it appears that the Madras and Bombay High Courts have taken the same view, which the learned single judge, R. C. Mankad J., was inclined to take and with whom, we are inclined to agree. In the case of In re Coimbatore Cotton Mills Ltd. [1980] 50 Comp Cas 623 (Mad), one of the question which arose before Padmanabhan J. was whether the scheme of amalgamation of two companies, which was under his consideration, was exempted under sub-s. (3) of s. 23 of the MRTP Act. Padmanabhan J. disagreed with the view taken by D. A. Desai J. referred to above and held that on a plain grammatical meaning of the language employed in sub-s. (3) of s. 23 of the MRTP Act, in order to attract the applicability of the said provision, the companies which were to be amalgamated, should produce the same goods.
29. In Tata Iron & Steel Co. Ltd. , the interpretation of the words 'as produced the same goods' in s. 23(3) of the MRTP Act, came up for consideration, and Tulzapurkar J. (as he then was), speaking for the Division Bench of the Bombay High Court, held that to attract the provision of sub-s. (3) of s. 2, the two undertakings should be such as produce the same goods. He took the view that if the two undertakings in question were interconnected undertakings, then exemption as provided in sub-s. (3) of s. 23 can be claimed while seeking amalgamation or merger of the said undertaking.
30. In view of the discussion made above, we are inclined to agree with the view taken by the learned company judge, R. C. Mankad J., that one of the three conditions required for attracting the provision of sub-s. (3) of s. 23 is that two undertakings must be producing the same goods. We may again mention here, even at the cost of repetition, that with great respect to the learned single judge, D. A. Desai (as he then was), we are not inclined to agree with the view taken by him in the case of In re Kril Standard products Pvt. Ltd. : (1974)0GLR810 , so far as this aspect of the matter is concerned.
31. The question is whether the two undertakings in the present case can be said to be producing the same goods as required by sub-s. (3) of s. 23 of the Act. The learned counsel for the Central Govt. contended before the learned company judge and also before us that even if it was held that for the purpose of claiming exemption under s. 23(3) of the Act, the undertakings must be producing the same goods, then also, it could not be said in the present case that the transferee and the transferor-companies were producing the same goods, and therefore, also, they were not entitled to claim exemption under sub-s. (3) of s. 23 of the Act. The learned company judge, R. C. Mankad, has dealt with this aspect in detail at pages 30 to 37 of his judgment and come to the conclusion that the two undertakings can be said to be producing the same goods as contemplated by the provisions of s. 23(3) of the Act. Now, there is no dispute that the transferee-company manufactures goods as enumerated in the annual report for the year 1980-81 of the transferee-company. It is clear from the said report that besides manufacture of drugs, chemicals and formulations, the transferee-company was engaged in the manufacture and sale of detergent soaps, dyestuffs, chemicals and pharmaceutical machinery, toilet preparations and electronic goods such as computers, while the transferor-company was mainly engaged in the manufacture and sale of bulk drugs, chemicals and formulations. It was urged by the learned standing counsel for the Central Govt. that these two companies could not be said to be producing the same goods. He contended that both the companies must produce the same goods item by item and only then it can be said that they are producing the same goods so as to claim exemption as contemplated by sub-s. (3) of s. 23 of the Act. Mr. Shah relied upon a decision of the Calcutta High Court, Regional Director, Company Law Board, Eastern Region v. Hindusthan General Electrical Corporation (Appeal No. 171/82 arising out of Company Application No. 274/82 and Company Petition No. 75/82, decided on September 13, 1982, [1984] 55 Comp Cas 557), a copy whereof is placed on record. The question which arose for consideration of the Division Bench of the Calcutta High Court in that case was whether the third condition laid down in sub-s. (3) of s. 23 of the MRTP Act would be satisfied, if only some out of a number of goods produced by the two companies, whose merger or amalgamation is sought, are common. The Calcutta High Court, on an interpretation of sub-s. (3) of s. 23 of the Act, held that those undertakings which do not produce the same goods will not be able to avail themselves of exemption granted by the said provision. The Division Bench then proceeded to consider the question whether the provisions of sub-s. (3) of s. 23 applied to a case where both the undertakings were engaged in the production of a number of goods some of which were in common. While answering this question, the Division Bench observed (at p. 563 of 55 Comp Cas) : 'The object of the Act seems very clear. The object is that the exemption will not be available to undertakings which do not produce the same goods. If that be the object, there is no reason to hold that the statute will permit merger or amalgamation of two undertakings which produce entirely different and dissimilar goods to merge only because there is one common item of the production. This appears to run against the object of the provisions contained in Chapter III under the heading 'Concentration of economic power''. While taking this view, the Division Bench disagreed with the view taken by Padmanabhan J. in Coimbatore Cotton Mills Ltd. [1980] 50 Comp Cas 623 (Mad). After referring to the decision of the Bombay High Court in In re Tata Iron & Steel Co. Ltd. , the Division Bench of the Calcutta High Court observed that the question which arose before it did not arise before the Madras High Court.
32. The learned company judge found himself unable to agree with the view taken by the Calcutta High Court for the reasons given by him and we are in agreement with him so far as this aspect is concerned. It is difficult to read the expression 'same goods' in the manner in which it has been read by the Calcutta High Court. If the view taken by the Calcutta High Court is correct, both the undertakings, whose merger or amalgamation is sought, must produce same goods item by item and if one of the items is not the same, provisions of sub-s. (3) of s. 23 of the Act would not be attracted. In the present case, it is not in dispute that both the transferor and transferee-companies manufacture drugs and medicines. It is also not in dispute that so far as the transferee-company is concerned, it also manufactures other items. However, so far as drugs and medicines are concerned, it must be held that both the companies are manufacturing the same goods. In order to find out whether exemption under sub-s. (3) of s. 23 is available, the question which one has to ask to self is : Are the companies whose merger or amalgamation is sought producing the same goods If the answer to this question is in the affirmative, exemption should be available provided the other conditions laid down in the said provisions are satisfied. The transferee as well as transferor-companies are producing drugs and medicines and, therefore, it must be held that they are producing the same goods. It cannot be said that they are not producing the same goods merely because in addition to these goods, the transferee-company is also producing some other goods. The construction place on the expression 'same goods' by the Calcutta High Court is a very narrow construction, which is not warranted or justified having regard to the context in which the expression is used. In construing sub-s. (3) of s. 23, we have to bear in mind the overall scheme of the MRTP Act and the definition of 'dominant undertaking' given in s. 2(d) of the MRTP Act; even a single common item of production out of many different item produced by interconnected undertakings can bring them within the definition of 'dominant undertaking', provided production of such item represents more than one-fourth of the total production of such item in India. It is keeping in view the definition of dominant undertaking', that dominant undertakings are excluded from the purview of exemption provided in sub-s. (3) of s. 23. The expression 'same goods' used in s. 23(3) has also to be construed bearing in mind the definition of 'dominant undertaking'. In order to attract the application of s. 23(3) what is required is that the interconnected undertakings must produce the same goods, i.e. goods of same description, it is not material whether besides the goods of same description, these undertakings or one of them produce other goods. We, therefore, do not find any substance in Mr. Shah's contentions that the two undertakings must produce the same goods item to item, and only then, they can claim exemption as provided by sub-s. (3) of s. 23 of the Act. It will be worthwhile referring to the relevant provisions of the Monopolies and Restrictive Trade Practices (Classification of Goods) Rules, 1971. Rule 2 of the said Rules lays down :
'2. (1) For the purposes of Chapter III of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969), goods shall be classified in the manner specified in the Schedule to these rules.
(2) For making the classification referred to in sub-rule (1), -
(i) goods falling within a group specified in the Schedule, and not falling within any sub-group or item, shall be classified as goods of one description;
(ii) where any goods falling within a group, also fall within a sub-group, goods falling within that sub-group shall be classified as goods of one description;
(iii) where goods falling within any sub-group, also fall within any item specified under that sub-group, goods falling within that item shall be classified as goods of one description'.
33. Group 313 specified in the Schedule describes drugs and medicines, and sub-groups thereunder are as under :
'313.1. Analgesics, antipyretics and anaesthetics.
313.2. Antihistaminics.
313.3. Antihbiotics.
313.4. Halogenated oxy-quinolines.
313.5. Immunological agents (sera, vaccines, etc.)
313.6. Other products of animal origin.
313.7. Phyto-chemicals.
313.8. Sulpha drugs.
313.9 Vitamins.
313.10. Other chemothera peutic agents.'
34. It was not disputed that the goods to which Mr. Shah drew our attention with reference to the annual report, fell under group 313 and sub-group enumerated therein and, therefore, as provided in rule 2, the goods shall be classified as goods of the same description. In other words, the goods produced by both the transferor and transferee-companies are the same. We are, therefore, inclined to hold agreeing with the learned single judge that it is not necessary that the two companies should produce the same goods, item by item, as contended by the learned counsel for the Central Govt. We, therefore, hold that the third condition is also satisfied so as to enable the transferee as well as transferor-companies to claim exemption.
35. This takes us to the question of consideration of the scheme on merits. But before going to the merits of the scheme, the question is whether once it is shown to the court to whom the scheme under s. 391(2) is presented for according sanction to the scheme of amalgamation, that the requisite statutory formalities have been duly carried out, has the court no option or jurisdiction to reject the scheme or has it merely to rubber stamp the scheme This question is no more res integra and can be said to have been fairly concluded by two decisions of our High Court. The first decision is the case of Bank of Baroda Ltd. v. Mahindra Ugine Steel Co. Ltd. , while the other is In re Wood Polymer Ltd. and Bengal Hotels P. Ltd., In re [1977] 47 Comp Cas 597 (Guj). P. D. Desai J. (as he then was), while deciding the case of Bank of Baroda Ltd. v. Mahindra Ugine Steel Co. Ltd. [1976] 46 Comp Cas 227, observed at pages 244-245 as follows :
'In view of the foregoing discussion it appears to me that the court cannot abdicate its duty to scrutinise the scheme with vigilance and act as a mere rubber stamp simple because the statutory majority has approved it and there is no opposition to the scheme in the court. So much weight cannot be attached to the views of the statutory majority as to require the court to mechanically put its imprimatur on the scheme. The court is not bound to treat the scheme as a fait accompli and to accord sanction merely upon a casual look at it. It must still scrutinise the scheme to find out whether it is a reasonable arrangement which can by reasonable people conversant with the subject be regarded as beneficial to those who are likely to be affected by it. In the pursuit of such inquiry, the court is not tied down by any rigid principles or strait-jacket formulas and no enumeration contained in judicial decisions of the factors which can be taken into account, howsoever precise, can be treated as exhaustive so as to limit the scope of the inquiry which, having regard to varying circumstances, might differ from case to case. The burden lies on the petitioner-company to show that the scheme of amalgamation is fair, reasonable, workable and such that a man of business would reasonably approve. The court would, of course, take into account the fact that it has been approved by a big majority vote, but it would not shirk its duty to scrutinise the scheme, especially when it involves amalgamation of large companies in which many interests are at stake.'
36. Referring to the above observations made by P. D. Desai J., D. A. Desai J. observed as follows in the case of Wood Polymer Ltd., In re and Bengal Hotels P. Ltd., In re [1977] 47 Comp Cas 597 (Guj) :
'Viewed from a slightly different angle, it would appear that power of such amplitude as is discernible from the provisions contained in section 391(2) is conferred on the court to achieve some definite purpose or object. It is more often said that sections 391 to 396 constitute a complete code and the provisions are in a way derogatory to the law of contract. To illustrate, when compromise or arrangement is offered to a class of creditors and/or a class of members of the company, and if the offer is accepted by a statutory majority, and the court accords sanction to it, it would be binding on the dissenting minority. The result that can be achieved by the scheme can as well be achieved by compromise being offered to each member forming a class or each creditor forming a class, but in that event, it would be binding on those who become a party to the agreement and the dissenting minority would not be bound by it. When a compromise or arrangement is offered to a class, and is accepted by a statutory majority of that class, when sanctioned by the court, it would be binding on the dissenting minority. Now, when the court exercises the power conferred upon it by section 391(2) for sanctioning the scheme of compromise or arrangement, the court by its act is imposing the scheme on dissenting members of that class. Before taking such an action, it would be open to the court to examine the scheme in proper perspective in its various manifestations and ramifications before imposing it on unwilling or dissenting members of the class. That being the position in law, the court obviously would have a discretion either to sanction or to refuse to sanction the scheme. It cannot, therefore, be said that merely because statutory formalities are duly carried out, the court has no option but to sanction the scheme. In other words, the court at that stage is not merely reduced to a rubber stamp.'
37. Section 396 of the Companies Act itself provides that the Central Govt. has to be satisfied that it is essential in the public interest that two or more companies should amalgamate and only then such amalgamation can be directed or sanctioned. The same test may apply when the court is called upon to consider such a question. The amalgamation must accordingly fulfil some felt need, some purpose, some object and that must have some co-relation with the public interest. If the only purpose discernible behind amalgamation is defeating certain tax and prior to the amalgamation a situation is brought about by creating a paper company and transferring an asset to such company which can, without further consequence, be amalgamated with another company to whom the capital asset was to be transferred so that, on amalgamation, it can pass on to the amalgamated company, it would distinctly appear that the provision for such a scheme of amalgamation was utilised for the avowed object of defeating tax. It was observed that the court is charged with a duty, before if finally permits dissolution of the transferor-company by dissolving it without winding up, to ascertain whether its affairs have been carried on not only in a manner not prejudicial to its members but even in public interest. The expression 'public interest' must takes its colour and content from the context in which it is used. The context in which the expression 'public interest' is used should permit the court to find out why the transferor-company came into existence, what object was sought to be achieved through creation of the transferor-company and why it is not being dissolved by merging it with another company. That is the colour and content of the expression 'public interest' as used in s. 394(1), second proviso. In the present case, we are not concerned with the second proviso to s. 394(1). However, it is not disputed that if the proposed amalgamation of two companies (transferor and transferee-companies) is not in public interest, the court has power to refuse to sanction the scheme of amalgamation.
38. The learned counsel for the Commissioner of Income-tax drew our attention to the two decisions of the Gujarat High Court, which we have already referred to earlier, and also relied upon a decision of the Bombay High Court in In re Sakamari Steel & Alloys Ltd. [1981] 51 Comp Cas 266. We have already discussed the two Gujarat decisions, which lay down that if the proposed amalgamation of two companies is not in public interest, the court has power to refuse to accord sanction to the scheme of amalgamation. The learned judge of the Bombay High Court has also relied upon the decision of the Gujarat High Court in the case of Bank of Baroda Ltd. v. Mahindra Ugine Steel Co. Ltd. [1976] 46 Comp Cas 227. The ratio of this decision is that the court has power to refuse to accord sanction if the proposed amalgamation or merger is not in public interest. It is conceded on behalf of the transferee as well as transferor-companies that the court can examine the scheme of amalgamation, and if it appears that it is not in public interest to accord sanction, it can refuse the same. The concept of 'public interest' has been elaborately dealt with by D. A. Desai J. in Wood Polymer [1977] 47 Comp Cas 597 (Guj). In view of this, we have to proceed to consider whether the amalgamation, in the present case, is in public interest or not.
39. The transferor-company holds industrial licences for manufacture of bulk antibiotics - erythromycin and ampicillin - and has received Government approval for the expansion of its capacity for manufacture of bulk penicillin. These bulk drugs, erythromycin, ampicillin and penicillin, for which the transferor-company holds industrial licences, are essential life saving drugs widely used in medical practice in India. Most of the requirements of the country for erythromycin and ampicillin are imported at present and hardly any local manufacture has been established. ., a subsidiary of the transferee-company. The history as to how these shares came to be owned by Subhanpura Containers Ltd. is as follows :
40. Synbiotics Ltd. was incorporated in 1960 in order to take up manufacture of bulk antibiotics. Two major shareholders of Synbiotics were E. R. Squibb & Sons of New York (hereinafter referred to as 'Squibb') and Karamchand Premchand Private Ltd. They decided that Synbiotics should hold that shares of the transferor-company from 1961-62 onwards. In due course, the shareholding of Synbiotics in the transferor-company came to 76%. On the Synbiotics itself, the shareholding of Squibb ultimately came to 40%. On the other hand, consequent upon the transfer of various undertakings to the transferee-company, the transferee-company came to hold 60% shares in Synbiotics. As such through Synbiotics, Squibb was having a shareholding of 30% in the transferor-company and the transferee-company was having 45%. As pointed out above, the transferor-company was holding licence for manufacture of erythromycin and ampicillin, but it did not have the funds in the estimated amount of Rs. 6 crores required for the manufacture of erythromycin and ampicillin. Squibb was not interested in these new drugs to be manufactured in India. It is stated that after two years of negotiations, Squibb was prevailed upon to agree to transfer its entire shareholding of Synbiotics in the transferor-company to the transferee-company. This understanding with Squibb as collaborator in Synbiotics was to be executed in two stages. The first stage was that the shareholding of Synbiotics in the transferor-company was to be transferred to the subsidiary of Synbiotics, viz., Subhanpura Containers Ltd., and thereafter the shares of Subhanpura Containers Ltd. were to be transferred to the transferee-company. This arrangement was worked out in agreement with the foreign equity participators, viz., Squibb, whose approval was necessary for such steps being taken as per the articles of association of Synbiotics Ltd. In accordance with this understanding, the board of directors of Synbiotics Ltd., which included the representatives of Squibb, agreed to disinvest in the transferor-company at the price of Rs. 7.80 per equity share and Rs. 0.75 per deferred share. This price was worked out on the basis of the market value of the said shares as on July 1, 1981. We mention this fact because according to the transferee-company, when the scheme of amalgamation was first framed (annexure-A) dated July, 1981, was fixed as the date with effect from which amalgamation was to come into force, because the market value of the shares of the transferor-company on that date was taken as the basis for transfer of shareholding of Squibb as aforesaid. It would appear from the facts stated above, that 76% shares of the transferor-company are controlled or owned by the transferee-company. In other words, if the scheme of amalgamation is approved, the transferee-company will be required to pay the price of the shares of the transferor-company only to the extent of 24%.
41. From the above facts, which are stated in the affidavits filed on behalf of the transferee-company and which are not controverted, there does not seem to be any ulterior or oblique motive in bringing about the amalgamation of the transferee-company with the transferor-company.
42. The main reason for amalgamation is to take advantage of the licence granted in favour of the transferor-company for the manufacture of erythromycin and ampicillin. This is evident from the scheme of amalgamation which, amongst other things, provides that with effect from April 1, 1980, the entire business and undertaking of the transferor-company including all its properties, movable or immovable, and assets of whatsoever nature, such as industrial and other licences, and quota rights, trade marks and other industrial property, rights or tenancy rights and all other interest, rights or powers of every kind, nature and description whatsoever but excluding formulation division transferred and assigned by the transferor-company to Opec Innovations Ltd. which is a fully owned subsidiary of the transferor-company shall be and stand transferred to and vested in the transferee-company. As stated in the further affidavit of Mr. P. N. Shah, director of the transferee-company, dated May 3, 1983, which is also not controverted, that there is substantial future for the manufacture of erythromycin and ampicillin which are two basic drugs and for which the transferor-company holds industrial licences. It is stated that demand for these products far exceeds the present supply as also the anticipated supply in the next 5 years. It is stated that the total production of ampicillin in the organised sector in the country was in the vicinity of 8.37 tons in 1979-80 which increased to 23.56 tons and 43.86 tons in 1980-81 and 1981-82. During the same period, that is, from 1979-80 to 1981-82, imports were as under :
1979-80 54.82 M. Tons.1980-81 74.44 M.T.1981-82 50.05 M.T.
43. It is further stated that demand for ampicillin for the period 1982-83 onwards as reflected in the Indian Pharmaceutical Guide, 1982, published by Pamposh Publications, which is universally accepted as an authoritative guide on the pharmaceutical industry in the country, is 120 tons, leaving a gap of more than 70 tons per annum. This would show that there is a shortfall of nearly 70 tons per annum of ampicillin. The licensed capacity of the transferor-company for ampicillin is only 5 tons per annum which would indicate that there is an assured market for this product. So far as erythromycin is concerned, it is stated that the total production of erythromycin in the organised sector in the country was in the vicinity of 23.05 tons in 1979-80 which increased to 25.01 tons and 22.52 tons in 1980-81 and 1981-82. During the same period, i.e., from 1979-80 to 1981-82, imports were as under :
1979-80 5,358.5 Kg.1980-81 1,686.6 Kg.1981-82 290 Kg.
44. As against this, demand for erythromycin for the period 1982-83 onwards as reflected in the Indian Pharmaceutical Guide, 1982, published by Pamposh Publications, is 80 tons leaving a gap of more than 50 tons per annum. Thus, even today, there is shortfall of nearly 50 tons per annum of erythromycin. The licensed capacity of the transferor-company for erythromycin is only 6 tons per annum which would, therefore, indicate that there is an assured market for this product as well. There is, therefore, satisfactory material on record to hold that the main object for bringing about amalgamation of the two companies is to manufacture ampicillin and erythromycin which are vital drugs. If these products are manufactured in India, to the extent they are manufactured, import of these drugs would be reduced resulting in saving of foreign exchange. Therefore, from that point of view, the amalgamation of the two companies appears to be in the public interest. Further, the arrangement is such that a man of business would reasonably approve, subject, of course, to the contentions regarding the change of date from which the amalgamation is to become effective and the exchange ratio of shares of the transferor-company.
45. Under the original scheme of amalgamation (annexure-A), the amalgamation was to take effect from July 1, 1981. Under the modified scheme of amalgamation (annexure-B), the amalgamation is to take effect from April 1, 1980. It is submitted on behalf of the Commissioner of Income-tax, Gujarat (Central) (hereinafter referred to as 'the Commissioner'), that this shifting of date has been done with the object of depriving the Revenue of Rs. 60 lakhs which would be payable by way of tax by the transferee-company. Mr. S. N. Shelat, learned counsel appearing for the Commissioner, stated that the Commissioner had no objection to the scheme of amalgamation as such if it was to take effect from July 1, 1981, the date which was originally fixed. It is submitted that in the assessment year 1981-82 (accounting year 1980-81), the transferor-company had suffered loss to the extent of Rs. 98,31,454. If amalgamation takes effect from April 1, 1980, this loss suffered by the transferor-company will be treated as loss of the transferee-company and, as a result, the transferee-company would save tax to the extent of Rs. 60 lakhs. On the other hand, if the date with effect from which the amalgamation is to take effect is not allowed to be changed, in other words, if the amalgamation takes effect from July 1, 1981, then the question of carry forward of the loss of Rs. 98,32,454 would not arise since the transferor-company would cease to exist and the successor-company, namely, the transferee-company, would not be able to claim benefit of adjustment of this loss against its income. It is in the background of these facts, it is contended on behalf of the Commissioner that shifting of the date with effect from which the amalgamation is to come into force is against the public interest. It is not disputed that 1980-81 (assessment year 1981-82) was the only year in which the transferor-company had suffered loss since the time it came into existence in 1931. It is submitted on behalf of the transferee-company that loss which the transferor-company suffered in 1980-81 (assessment year 1981-82) was not Rs. 98,31,454 as alleged on behalf of the Commissioner, but it was Rs. 94,77,745. It is submitted that this loss was incurred on account of the delay on the part of the Central Govt. in sanctioning the remunerative prices of the drugs manufactured by the transferor-company. After the Government sanctioned the price, the transferor-company made a profit of Rs. 32 lakhs in the course of its operation for the last 9 months of the financial year 1981-82, after set off of the loss of Rs. 41 lakhs which was made in the first three months in that very financial year. In the year 1982-83, as per the present estimate, the transferor-company is likely to make a profit of around Rs. 45 lakhs. It is therefore, submitted that even without the scheme of amalgamation being sanctioned, the transferor-company itself would have been able to set off the past losses in the period of these two years. It would, therefore, appear that even without amalgamation of the transferor-company with transferee-company, the loss which the transferor-company suffered in the year 1980-81 would have been set off against the profit made in the subsequent year. Therefore, if the amalgamation does not take place as proposed, the Revenue is not going to gain anything. It appears to us that it was not with the purpose or object of evading tax or reducing tax liability that the date from which the amalgamation is to become effective has been changed or shifted. The original date which was fixed was July 1, 1981, because, according to the transferee-company, the market value of the shares of the transferor-company as on that date was taken as the basis for transferring the shares held by Squibb to the subsidiary of the transferee-company. However, when the scheme was placed for consideration before the shareholders of the transferor-company, they suggested shifting of the date from July 1, 1981, to April 1, 1980, so that the maiden loss which the transferor-company suffered in the year 1980-81 was not considered for the purpose of determining the fair market value of their shares. The transferee-company, as pointed out above, controls 76% shares of the transferor-company and, therefore, the fact that the transferor-company has suffered loss in the year 1980-81 would have been known to the transferee-company as with the services of the tax experts available to it, the transferee-company would also know that if July 1, 1981, is fixed as the date with effect from which the amalgamation is to take effect, it would not get the benefit of setting off of the aforesaid loss suffered by the transferor-company. However, in spite of this known legal position, the date of July 1, 1981, was originally fixed. It was only on account of the modifications suggested by the shareholders of the transferor-company that it was duly agreed to shift the date with effect from which the amalgamation was to become effective from July 1, 1981, to April 1, 1980. There was no oblique or ulterior motive in shifting the date. As pointed out above, the transferor-company is in existence since last many decades. It was not brought into existence with some ulterior purpose or for the purpose of evading tax. It is true that incidentally as a result of the shifting of the date, the transferee-company would get the advantage of setting off of the loss suffered by the transferor-company as this loss would be treated as loss of the transferee-company but that can hardly be considered to be a good or sufficient ground for refusing to sanction the modified scheme (annexure-B). As held by the Supreme Court in CIT v. A. Raman & Co. [1968] 67 ITR 11 (SC), avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the I.T. Act. Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may lawfully be circumvented. In our opinion, it is open to the transferor-company and the transferee-company to shift the date so that the arrangement which is found to be mutually satisfactory and reasonable is evolved.
46. In the case of Wood Polymer [1977] 47 Comp Cas 597 (Guj), the only purpose discernible behind the amalgamation was to defeat capital gains tax and prior to the amalgamation, a situation was brought about by creating a paper company and transferring an asset to such company which can, without further consequence, be amalgamated with another company to whom the capital asset was to be transferred so that, on amalgamation, it could pass on to the amalgamated company, it would distinctly appear that the provision for such a scheme of amalgamation was utilised for the avowed object of defeating tax. Such is not the situation here. The purpose for which amalgamation is proposed, is not to defeat tax. In any case, as pointed out above, if the amalgamation as proposed is not sanctioned, the loss suffered by the transferor-company would be carried forward and would be adjusted against profits which it has made in the subsequent years. We, therefore, do not agree with the submission made on behalf of the Commissioner that as a result of shifting of date, public interest would suffer.
47. Mr. Shodhan contended that the decision to advance the date appears to have been taken earlier before amendment was suggested at the meeting held on August 7, 1982, which is evident from the letter of the chartered accountants dated August 2, 1982 (page 151 of the paper-book). Mr. Shodhan is right on this point. It appears that the directors had taken a decision to advance the date to April 1, 1980, prior to August 2, 1982. This shows that the amendment may have been proposed by some shareholder or shareholders at the meeting at the instance of some of the directors. But that does not necessarily indicate any oblique motive behind advancing the date. When the transferee-company is taking over liabilities along with assets of the transferor-company, there is nothing wrong if the transferee-company evolves a scheme so as to take as much advantage as possible as may be permissible according to law. We cannot infer oblique motive from this.
48. This takes us to the question whether the exchange ratios of the shares of the transferor-company is not fair to shareholders of the transferee-company as contended by Mr. Shodhan. In this connection, it is pointed out that under the amalgamation scheme as originally framed for 100 equity shares of Rs. 10 each of the transferor-company, 14 equity shares of the transferee-company of Rs. 10 each and five redeemable bonds of Rs. 100 each carrying interest at 10.5% were to be given by the transferee-company. The bonds were redeemable in three equal instalments commencing from July 1, 1983. In the same way, for 1,000 deferred shares of Re. 1 each of the transferor-company, 14 equity shares of the transferee-company and five bonds as aforesaid were to be given by the transferee-company. A shareholder of preference shares of Rs. 100 each of the transferor-company was required to be given bonds as aforesaid. However, as a result of the modification of the scheme of amalgamation, exchange ratio is altered as follows. For 100 equity shares of the transferor-company, the transferee-company has to give 20 equity shares and 8 bonds of Rs. 100 each carrying interest at the rate of 15%. Bonds are to mature on July 1, 1987. Similarly, for 1,000 deferred shares of Re. 1 each of the transferor-company, the transferee-company has to give 20 equity shares and 8 bonds as aforesaid and for one preference share of the transferor-company, the transferee-company has to give one bond as aforesaid. It is submitted that the exchange ratios is unfair to the shareholders of the transferee-company. Now, it appears that the exchange ratio was determined by M/s. S. V. Ghatalia & Co. Bombay, chartered accountants (hereinafter referred to as 'the valuers'). Their first report is dated February 2, 1982. This report was on the basis that the effective date of amalgamation was to be July 1, 1981. The valuers worked out the fair market value of the shares of the transferor-company by two recognised methods, namely, (1) break-up method, and (ii) yield method. By break-up method, the value of the equity shares of the transferor-company was worked out at Rs. 5,01 while by the yield method, it was worked out at Rs. 2.45. The average of the two was taken at Rs. 3.73. The value of tax benefit on account of carry forward of losses to be added to the value of each equity share was worked out at Rs. 4.08 per share. Thus, the fair market value of the share of the transferor-company as on July 1, 1981, was taken to be Rs. 7.80. It may be recalled that it is at this market value that Squibb transferred its shares to the subsidiary company of the transferee-company. The details of working are given in the annexures to the report of the valuers. The fair market value of the equity share of Rs. 10 of the transferee-company as on July 1, 1981, was determined at 20.15. It was on the basis of the fair market value of the shares of the transferor-company and the transferee-company as aforesaid that the exchange ratio was worked out as already stated above. By the second report dated August 2, 1982, the valuers determined the exchange ratio on the basis that the amalgamation was to become effective from April 1, 1980. The valuers followed the same two methods, namely, break-up method and yield method, in determining the value of the shares of both the companies. On that basis, the fair market value of the equity shares of the transferor-company was worked out at Rs. 12 per equity share and that of the transferee-company at Rs. 20.15 and, on that basis, the exchange ratio of the equity shares and deferred shares of the transferor-company was worked out. While determining the value of the equity shares of the transferor-company on yield method, the valuers took into account the loss suffered by the transferor-company in the year 1980-81. Discounting factor at 60% on account of the pricing policy was taken into account for adjustments. It is pointed out on behalf of the transferee-company that if the discounting factor of 60% was not taken into account, the fair market value of the equity shares of the transferor-company would work out to Rs. 16.50 as against the value of Rs. 12 adopted by the valuers. There is nothing on record, nor is any factor pointed out, which would indicate that the determination of the fair market value of the shares of the two companies by the valuers is not proper. The value is made in accordance with the recognised methods of valuation. There is absolutely no reason to discard the fair market value determined by the valuers. In this connection, it is important to remember that 76% of the shares of the transferor-company are held or controlled by the transferee-company. Therefore, the exchange ratio would be material only so far as 24% of the shareholding of the transferor-company is concerned. As a result of the change in the exchange ratio due to shifting of date from July 1, 1981, to April 1, 1980, the transferee-company is required to pay only Rs. 8 lakhs more to the 24% shareholders of the transferor-company. As against this additional payment of Rs. 8 lakhs, it will save at least 54 lakhs in tax on account of the adjustment of the carry forward loss of the transferor-company. In addition, as pointed in annexure-H to the affidavit of the directors of the transferee-company, there would be net surplus of assets to the tune of Rs. 86.93 lakhs, which would vest in the transferee-company on amalgamation. This figure is worked out on the basis of bond value of assets of the transferor-company. The net value of the assets which would vest in the transferee-company works out to Rs. 170.67 from which Rs. 83.74 lakhs are to be deducted towards the cost of shares of the transferor-company, which are to be surrendered for cancellation and the face value of the shares and bonds to be issued to the shareholders of the transferor-company. Thus, a net surplus of the assets is worked out at Rs. 86.93 lakhs. It is submitted that the above figures are worked out on the basis of the book value, but if the figures were to be worked out on the basis of the market value of the assets, the net surplus would be much more. Dr. R. K. Mehta, director of the transferee-company, has in his affidavit dated May 2, 1983, stated on the basis of the valuer's report that the market value of the assets of the transferor-company which will vest in the transferee-company will be around Rs. 4.85 crores. If the date is not shifted, the transferee-company would not get the benefit of carry forward loss of more than Rs. 27 lakhs. Therefore, it has nothing to gain by adhering to the original date of July 1, 1981. Therefore, there does not seem to be any justification in the objection raised by Mr. Shodhan that shifting of the date is prejudicial to the interest of the shareholders of the transferee-company. In our opinion, the exchange ratio does not seem to be unfair or unreasonable so far as the share-holders of the transferee-company are concerned.
49. Mr. Shodhan contended that some independent expert should be appointed for fixing the exchange ratio. As discussed above, the exchange ratio has been fixed in accordance with the recognised method of valuation which appears to be quite fair. In view of this, we do not find any substance in the contention of Mr. Shodhan that the exchange ratio is required to be refixed by appointing some other experts. Hence, we reject this contention raised by Mr. Shodhan.
50. Mr. Shodhan contended that the statutory requirements had not been satisfied in the present case. He contended that the notice of amalgamation which was issued in the present case, indicated the proposed date of amalgamation as 1st July, 1981, and that date was advanced to 1st April, 1980, at the meeting, which was not according to law, and, therefore, the scheme incorporating the amendment could be (not ?) sanctioned. He relied upon a decision of the Chancery Division In re Moorgate Mercantile Holdings Ltd. [1980] 1 All ER 40; [1980] 1 WLR 227. At the first sight, one may be inclined to say that this decision supports the contention raised by Mr. Shodhan. But on carefully going through this decision, it appears there is no substance in the contention raised by Mr. Shodhan. In that case, a special resolution was proposed to be passed to the effect that 'the share premium account of the company amounting to pounds 1,356,900.48 be cancelled', while at the meeting, amendment was proposed and, ultimately, the resolution was passed reducing the share premium account of the company amounting to pounds 1,356,900.48 to pounds 321.17. The court held that the requirements of s. 141(2) of the Companies Act were not complied with and the court ultimately refused to approve the action. Section 141(2) of the Act is reproduced at page 44 of the Report. The corresponding provision in the Companies Act, 1956, is s. 189. It appears that it pertains to a special resolution. It is specifically observed by the learned judge at p. 54 of [1980] 1 All ER & p. 242 of [1980] 1 WLR as follows :
'I would emphasise that these propositions are directed solely to special resolutions. Very different considerations may apply in the case of ordinary resolutions, in relation to which the criteria of permissible amendments suggested by counsel for the company could well be very relevant.'
51. This shows that this decision has been rendered keeping in mind that the questions was with regard to the validity of a special resolution and not an ordinary resolution. Here, we are not concerned with a special resolution. We are concerned in the present case with a resolution passed at a meeting convened in pursuance of the directions given by this court under s. 391 of the Companies Act. Looking to the provisions of s. 183, which deal with ordinary and special resolutions and s. 391(2), which deals with a resolution to be passed for merger or amalgamation, the resolution to be passed at such a meeting cannot be said to be a special resolution. The notice, in the present case, which will be found at page 61 of the paper book clearly indicates the possibility of modification being proposed and approved at the proposed meeting. It is true that if law does not permit any such modification, then any such mention in the notice will not validate the resolution. But as we observed a little earlier, this was not a meeting for passing special resolution and, hence, the ratio of the decision cited by Mr. Shodhan will not apply to the present case.
52. Mr. Shodhan then urged that the action of the shareholders at the meeting was not bona fide and it showed that they did not act properly and it also disclosed non-application of mind. He contended that the minutes of the meeting did not show that there was any discussion at the meeting and that even it appears that the resolution was taken as read. There does not appear to be any substance in this submission of Mr. Shodhan. The report of the chairman of the meeting will be found at page 50 of the paper book. It will appear from what is stated at page 52 that the executive chairman of the transferee company explained the scheme of amalgamation and outlined the salient features thereof to the shareholders at the meeting. It also reveals that the executive vice chairman and director of the transferor-company also explained the scheme of amalgamation to the shareholders present at the meeting. It also reveals that the executive vice-chairman informed the shareholders present at the meeting that the transferor-company had on 7th August, 1982, passed a resolution approving the scheme of amalgamation. It shows that at the said meeting, modification was sought to advance the date from 1st July, 1981, to 1st April, 1980. Page 55 of the report of the chairman shows that a shareholder of the transferee-company suggested some amendments, one of them being advancing the date from 1st July, 1981, to 1st April, 1980. It also shows that some other amendments including change of exchange ratio were proposed by the said shareholder and approved at the said meeting. It appears from what is stated at page 51 that with the consent of those who were present, the notice, the scheme of amalgamation and the explanatory statement annexed thereto, were taken to have been read at the meeting. There is this no substance in this contention of Mr. Shodhan.
53. Mr. Shodhan contended that mycetin products had no good future in this country and, therefore, amalgamation of the transferor-company with the transferee-company with the main object of expansion of the project of manufacturing these products was not in the interest of the shareholders of the transferee-company. He drew our attention to the fact that there was decrease in the import and suggested that this showed that there was decrease in the use of such products. This contention of Mr. Shodhan is not supported by any material. On the contrary, Indian Pharmaceutical Guide, 1982, published by Pamposh Publication, shows that there was demand for erythromycin to the extent of 20 tons leaving a gap of more than 50 tons per annum so far as the year 1982-83 is concerned. It is, therefore, difficult to accept the contention of Mr. Shodhan that the decrease in the import indicates that the demand has decreased.
54. Mr. Shodhan also contended that the transferor-company has sustained a loss to the extent of Rs. 98 lakhs during the period from April 1, 1980, to March 31, 1981, and Rs. 40 lakhs during the period from April 1, 1981, to March 30, 1982, and thereby, the total loss was Rs. 1.39 crores. He contended that as against this, there was only liked to be a saving of only Rs. 60 lakhs on account of the carry forward loss and, that way, it was not fair to the shareholders of the transferee-company. Mr. Shodhan forgets, while putting forward this contention, that the transferor-company has made profit during the subsequent years. We cannot take the loss only and that too of a short period and ignore the future profits while considering whether it was fair to the shareholders of the transferee-company or not.
55. Mr. Shodhan also contended that the financial position of the two companies was not disclosed to the shareholders and that there was no full and frank disclosure of all the details to the shareholders and, therefore, also, the scheme should not be approved. In this connection, we may point out that necessary details are given in the notice of the proposed meeting and the explanatory statement attached therewith. The affidavit of Mr. P. N. Shah, director of transferee-company, will be found at page 25 onwards in the paper-book. It shows that there was correspondence between Mr. Shodhan and the transferee-company before the meeting. What is stated at page 95 of the paper-book (para 4 of the affidavit) shows that the director, Mr. Shah, had requested Mr. Shodhan to come to the office of the company for oral discussion when all the problems which were troubling him could be resolved and clarification could be given on the basis of the records which would be readily available at the company's office. But Mr. Shodhan did not accept this offer and insisted that a director of the company should meet him at his residence with all the data, details and information required by him. This exhibited a novel method of asserting the shareholder's right over the management as rightly pointed out by the director in his affidavit. Hence, this contention of Mr. Shodhan is without any substance.
56. Mr. Shodhan contended that Squibb (E. R. Squibb & Sons of New York), one of the major shareholders of Synbiotics, which, in turn, had a shareholding to the tune of 76% in the transferor-company was not interested in these new drugs to be manufactured in India, which shows that the idea of amalgamation of the transferor-company with the transferee-company for having this project implemented was not profitable and, therefore, also the scheme should not be sanctioned. It is difficult to accept this contention of Mr. Shodhan. It is difficult to say that simply because Squibb was not interested in this project, it must necessarily not be profitable. We have discussed in the beginning at pages 41 to 43 as to under what circumstances Squibb was prevailed upon to agree to transfer its entire shareholding of Synbiotics in the transferor-company to the transferee-company. Hence, we reject this contention of Mr. Shodhan.
57. Mr. Shodhan also contended that formulation division of the transferor-company was not being merged with the transferee-company but was kept as a separate entity and that showed that the scheme as proposed was not in the interest of the transferee-company. He drew our attention to the report of the transferor-company for the period ending 31st March, 1982 (page 277 of the paper-book), and urged that the figures therein indicated turnover of Rs. 408.9 lakhs so far as bulk drugs and antibiotics drugs are concerned, while it indicated turnover of Rs. 3.90 crores so far as the formulation division was concerned. He urged that merger of the transferor-company excluding the formulation division showed that this amalgamation was not in the interest of the shareholders of the transferee-company. Now, while advancing this argument, Mr. Shodhan forgets one important factor and it is this that the formulation division belong to one Opec Innovation Ltd., which is a wholly owned subsidiary company of the transferor-company, and on merger, the said Opec Innovation Ltd. will also become a wholly owned subsidiary company of the transferee-company. In view of this, the benefits which would accrue to their subsidiary company would also go to the transferee-company. Mr. Shodhan urged that Opec Innovation Ltd. would remain a separate identity even though it would be a wholly owned subsidiary company of the transferee-company and that the transferee-company would have only a share in the dividends of the said Opec Innovation Ltd., and would have no other right in that company. There appears to be some substance in the contention of Mr. Shodhan. But even then the fact remains that this Opec Innovation Ltd. will be a wholly owned subsidiary company of the transferee-company. It cannot be said that Opec Innovation Ltd. is a concern which will have no connection with the transferee-company after the amalgamation. Mr. Shodhan then contended that looking to the provisions of s. 390, the scheme could not be approved because neither the transferee-company nor the transferor-company could be said to be one liable to be wound up. Mr. Shodhan urged that a company could be said to be liable to be wound up only of the financial condition thereof was not sound. There is a judgment of the Bombay High Court in the case of Seksaria Cotton Mills Ltd. v. A. E. Naik , which supports the contention of Mr. Shodhan. Justice Tarkunde (as he then was) held in that case (p. 661) :
'Whatever may be the correct meaning of the expression 'any company liable to be wound up under this Act' which occurred in section 153(6) of the Indian Companies Act, 1913, and which now occurs in clause (a) of section 390 of the Companies Act, 1956, it seems to me obvious that section 391 of the present Act which empowers the court to sanction a compromise or other arrangement can have no application to a company which is in a sound financial condition.'
58. There is, however, a later decision of the said High Court reported in Khandelwal Udyog Ltd. and Acme Mfg. Ltd., In re . The learned judge has explained as to what is meant by 'any company liable to be wound up under this Act'. After referring to the relevant provisions of the Companies Act and the earlier decision of the Bombay High Court, he has held that the expression 'any company liable to be wound up under this Act' means that all companies to which the provisions relating to winding up apply. He further observed that the expression 'liable to be wound up' would only mean that on factual ingredients being satisfied, a particular company would come within the coverage of winding up provisions and would be liable to be wound up. He lastly observed that if a company was within the reach of the provisions of the Companies Act pertaining to winding up, such company must be held to be a company 'liable to be wound up under this Act'. Such company would, therefore, be entitled to invoke the provisions of s. 391 of the Act. We are in complete agreement with the view expressed in the later decision of the Bombay High Court, which explains as to what is meant by the phrase 'liable to be wound up'.
59. So far as the payment of the amount towards goodwill before the transferee-company went public is concerned, in our opinion, it is not a relevant factor to be taken into consideration for the purpose of deciding whether or not the sanction should be accorded to the amalgamation of the transferor-company with the transferee-company. If any irregularities or illegalities are committed by the transferee-company, at or before the time it went to public, it may be open to Mr. Shodhan to take appropriate steps under law, if it is open to him to take such steps. There also does not seem to be any substance in the allegation that the scheme of amalgamation is made for the benefit of the members of the family.
60. The discussion made above and the contents of the affidavit of Mr. P. N. Shah, a director of the transferee-company (paper-book pages 94 to 305), and that of Dr. N. A. Mehta, another director of the company (pages 306 to 315 of the paper book), clearly show that there is no substance in any of the contention raised by Mr. Shodhan. We therefore, reject the same finding as there is no substance in it.
61. Albright Morarji & Pandit Ltd. which claims to be a creditor of the transferee-company, has also opposed the scheme of amalgamation. The learned Advocate General, who appeared on behalf of this company, fairly conceded before us that it was not obligatory to call a meeting of the creditors, but was desirable that such a meeting was called, so as to enable the creditors to have their say with regard to the proposed scheme. We do not find any substance in this contention. The interest of the creditors is in no way affected by the scheme of amalgamation. As a result of the scheme of amalgamation, if sanctioned, the transferor-company shall stand dissolved and its assets will vest in the transferee-company. It is not pointed out that the liability of the transferor-company exceeds its assets. So far as the loss suffered by it in 1980-81 is concerned, the transferee-company is in an advantageous position in the sense that it would get the advantage of the adjustment or set-off of carried forward loss against its income. In our opinion, therefore, the interest of the creditors of the transferee-company is in no way affected by the scheme of amalgamation. We may point out at this stage that though Albright Morarji and Pandit Ltd. claims to be a creditor of the transferee-company, the transferee-company denies that allegation. It is an admitted position that the said company has filed a suit against the transferee-company in the High Court of Bombay and in the written statement filed in that suit, the transferee-company has not only denied the allegation made by the said company, but has even made a counter-claim. But even assuming that this company is a creditor of the transferee-company, we do not find any substance in the contention that a meeting of the creditors should have been called. The learned Advocate-General also contended that the shifting of the date from July 1, 1981, to April 1, 1980, was with the object of defeating the Revenue and, therefore, also, it should not be permitted. We have already dealt with this aspect and come to the conclusion that the proposed amalgamation and even the shifting of the date from July 1, 1981, to April 1, 1980, is not with the alleged oblique motive to deprive the Government of legitimate income-tax. Stay extended up to August 31, 1983.