MEHTA, J. -
(1.) BY the group of these two petitions, this court has been moved to accord its sanction under s. 391(2) read with s. 394 of the Companies Act, 1956, to the scheme of amalgamation of Maneklal Harilal Spg. and Mfg. Co. Ltd. (hereinafter referred to as 'the transferor company') with the Bihari Mills Ltd. (hereinafter referred to as 'the transfer company'). At the outset, it should be noted that this is not the usual amalgamation of a sick unit which is non -viable with a healthy or prosperous unit. This is a case which is precisely the reverse of it which is an instance of 'takeover by reverse bid'. This is a scheme whereby the entire undertaking of the transferor company is to be merged and vested in the transfer company. I will consider at the appropriate places as to whether this peculiar feature of the scheme has any bearing on the larger question as to whether the court should or should not accord its sanction to the scheme in question. It would be profitable to briefly advert to certain particulars of the transferor company and the transferee company so as to appreciate the relevant and material aspects which have a bearing on the question of according sanction to the scheme in question.
(2.) THE transferor company was incorporated on September 5, 1888, as a company limited by shares under s. 36 of the Indian Companies Act, 1882. The original name under which the transferor company was incorporated was 'Tricomlal Harilal Spg. and Mfg. Co. Ltd.' which subsequently changed to its present name, that is, 'Maneklal Harilal Spg. and Mfg. Co. Ltd.' The registered office of the transferor company is situate in the area known as Saraspur within the City of Ahmedabad. The authorised share capital of the transferor company is Rs. 3,00,00,000 divided into 4.500 4 1/2% cumulative redeemable preference shares of Rs. 50 each and 1,48,875 equity shares of Rs. 200 each. The issued, subscribed and paid up capital is Rs. 98,25,000 divided into 48,000 equity shares of Rs. 200 each fully paid up and 4,500 4 1/2% cumulative redeemable preference shares of Rs. 50 each fully paid up redeemable at the option of the company at par by two months' notice. It should be noted at this stage that the above 4,500 preference shares been redeemed by the company by October 31, 1982, and the shareholders have been already paid the face value of the shares along with accrued dividend for the period up to October 31, 1982. The objects, as detailed in the memorandum of association of the transferor company, are, inter alia, the business of manufacturing and dealing in textiles and yarns.
The transferee company was incorporated on August 8, 1931, under the Indian Companies Act, 1913, having its registered office in the locality known as Mithipur in Khokhra -Mehmedabad within the City of Ahmedabad. The authorised share capital of the transferee company is Rs. 35,00,000 divided into 10,000 ordinary shares of Rs. 200 each; 10,000 6.43% cumulative redeemable preference shares of Rs. 100 each and 20,000 5.72% cumulative redeemable second preference shares of Rs. 25 each. The issued, subscribed and paid up share capital of the transferee company is Rs. 17,20,000 divided into 5,600 ordinary shares of Rs. 200 each fully paid up, 4,800 6.43% cumulative redeemable preference shares of Rs. 100 each fully paid up for cash and 4,800 5.72% cumulative redeemable second preference shares of Rs. 25 each issued as bonus shares by way of capitalisation of reserves without payment being received in cash and have been treated as fully paid up. It should be noted at this stage again that subsequent to the filing of this petition, by a special resolution passed at the extraordinary general meeting of the shareholders of the transferee company held on November 12, 1982, at the registered office of the company, it has been resolved to increase the authorised capital of the company from Rs. 35,00,000 to Rs. 3,00,00,000 which will be made up of ordinary capital of Rs. 2,85,00,000 divided into Rs. 1,42,500 equity shares of Rs. 200 each and the remaining component by way cumulative redeemable first and second preference shares remaining the same, and the consequent amendment of the relevant clauses in the memorandum and articles of association have been also resolved upon accordingly. The objects of the transferee -company, as detailed in its memorandum and articles of association, are, inter alia, business of manufacturing and dealing in textiles and years.
(3.) IT appears that at the respective meetings of the board of directors of the transferor company and the transferee company held on August 17, and August 18, 1982, respectively, it was resolved to evolve and approve a scheme of amalgamation whereby the entire undertaking of the transferor company is to be transferred and be vested in the transferee company. The circumstances that have necessitated the proposed scheme of amalgamation are, broadly stated, as under : (1) The transferee company is subsidiary of the transferor company, inasmuch as the transferor company holds 4,303 shares out of 5,600 equity shares issued by the transferee company.
(2) The transferee company is a sick unit in the sense that it has been incurring loses since last about 7 to 8 years except the accounting year 1978, and the debit balance of the company as on December 31, 1982, is Rs. 1,48,60,252, and its current liability is to the tune of Rs. 2,22,50,560 and has also raised loans against security and otherwise to the extent of Rs. 2,22,19,802, as against its assets and properties of about Rs. 2,40,00,000.
(3) The transferor company is not only a healthy and a prosperous company but has a strong financial base and resources.
(4) The amalgamation of the transferor company with the transferee company will have a twin advantage. In the first place, the transferee company will attain viability and regain its health so as to maintain and develop production and employment. Secondly, it will provide an opportunity to the transferor company for its future expansion and development since it will have an advantage of the excess available vacant land of the transferee company admeasuring about 56,427 sq. metres.
(5) Apart from the aforesaid twin advantage, the usual benefits of amalgamation, namely, reduction in the cost of production, stabilisation of business, economy resulting from expansion, and the tax benefits will also be available.;