P.D.DESAI, J. - (1.) THESE two petitions have been filed by the Bank of Baroda Ltd. (hereinafter referred to as the 'transferor -company') for the sanction of the court to a scheme of arrangement for its amalgamation with Mahindra Ugine Steel Company Ltd. (hereinafter referred to as the 'transferee -company') under section 391 of the Companies Act, 1956 (hereinafter referred to as 'the Act'), and for consequential directions under section 394 of the Act. * * * *
(2.) I must now turn to the consideration of the question as to whether sanction should be accorded to the scheme. It is well -settled that in exercising its discretion in according sanction, the court will consider, first, whether the statutory provisions have been complied with; secondly, whether the classes were fairly represented by those who attended the meeting and whether the statutory majority were acting bona fide, and, thirdly, whether the scheme is such as a man of business would reasonably approve. Bearing in mind these principles, the scheme may be examined. I might deal first with the legal objection raised on behalf of the Central Government. As stated earlier, the contention of the Central Government is that the scheme is of such a nature that it would affect the rights of the members and creditors, if any, of the transferee -company, as between themselves and the company, and that it would also involve a reorganisation of the share capital of the transferee -company. Under the circumstances, unless the transferee -company takes steps under section 391 and 394 of the Act in appropriate forum and obtains requisite approval and sanction for the scheme, it should not be sanctioned by this court. No such steps, the argument proceeded, are shown to have been taken and as such the petitions deserve to be dismissed in limine, for without such approval and sanction, the scheme would be wholly unworkable. Now, it is apparent that the scheme under consideration is one which might affect the rights of the members and/or creditors, if any, of the transferee -company, as between themselves and the said company, and that it will also require a reorganisation of the transferee -company's share capital. It is well -settled by the decision of this court in In re Kril Standard Products Pvt. Ltd. and the decision of the Bombay High Court in Bank of India Ltd. v. Ahmedabad Mfg. and Calico Printing Co. Ltd. that of the Calcutta High Court In the matter of Corron Tea Co. Ltd. and that of the Madras High Court in In re Union Services Private Ltd. that, in such a case, before the scheme of amalgamation can take effect, the transferee -company must also approach the appropriate court under section 391(!) of the Act and seek proper directions for convening meetings of those affected by the scheme and get the approval of the concerned persons in the prescribed manner and also obtain sanction and directions of the appropriate court under section 391(1) and section 394 of the Act. It is beyond the pale of controversy, therefore, that the transferee -company will also have to initiate proceedings in the appropriate court under sections 391 and 394. This requirement appears to have been in the contemplation of the transferor and transferee company and, therefore, a provision seems to have been made in sub -clauses (c) and (d) of clause 14 of the scheme that it was conditional upon and subject to agreement by the requisite majorities and also to such court sanctions and orders as might be legally necessary or requisite under the Act and further that, in the event of any such agreements, sanctions or orders not being obtained or passed within the agreed time -limit, the scheme sanctioned by this court would by its own force be subject to agreements, sanctions and orders to be obtained by the transferee -company under sections 391 and 394. Counsel for the transferee -company stated to the court that the said company has already initiated proceedings under section 391(1) in the Bombay High Court and pursuant to the directions given therein it has convened meetings of the persons affected on April 6, 1975. In these circumstances, sanction of this court to the scheme cannot be withheld, if it is otherwise required to be given in the circumstances of the case, on the ground urged on behalf of the Central Government. The sanction would not of its own force make the scheme operative and, in order that it might become effective, conditions abovementioned laid down in the scheme will have to be satisfied. The objection raised on behalf of the Central Government is, therefore, unsustainable.
(3.) IT is true that when the registered officers of the transferor and transferee -companies happen to be situate in different places within the jurisdiction of two different High Courts, as in the present case, the compulsion of practical difficulties has necessitated the evolution of this somewhat ingenious formula. I cannot help observing, however, that the solution is far from happy and that in some cases the resultant situation might be embarrassing, especially in those cases in which, in the absence of a provision similar to that contained in clause 14 of the scheme herein, the court in invitum has to accord sanction to a scheme subject to its approval and sanction by another company and court. In such a case, the High Court which is first moved for according sanction to a scheme of amalgamation - and it would ordinarily be the High Court within whose jurisdiction the registered office of the transferor -company is situate -will, if it sanctions the scheme, make a judicial order which will be conditional upon the approval of the scheme by the shareholders and creditors, if any, of the other company as well as upon the sanction of the scheme by the High Court within whose territorial jurisdiction the registered office of such other company is situate. Such an anticipator or conditional judicial order, which depends for its becoming operative not only upon the concurrence of another court but also upon the will of the members and creditors, if any, of one of the parties to the amalgamation scheme, is possibly unknown to any other jurisdiction, particularly when it is realised that the order would be ordinarily made after full debate and deliberations. What is more, the possibility of conflicting orders being passed by two courts with regard to the same scheme cannot be altogether ruled out because the scheme might be looked at by all concerned from two totally different angles. One of the courts might sanction the scheme whereas the other might sanction it subject to certain modifications or it might altogether refuse to sanction it. This possibility is inherent in the very situation. If the court to which the petition for according sanctions is presented earlier in point of time, say by the transferor -company, not only gives anticipatory sanction but also makes a conditional order giving consequential directions under section 394 including the directions as to dissolution, it might possibly be urged that it becomes functus officio upon the passing of such orders and that if any modification is made in the scheme by the court to which a similar petition is subsequently presented by the transferee -company, it would have no jurisdiction to modify the scheme so as to bring it in line with the scheme as amended by the other court. Such a result would bring about a complete deadlock and the situation can presumably be remedied only by an appeal to the higher court. I am not expressing any opinion on the validity of such a contention; it may be right or wrong; it might be possible to urge that even in such a case the court can still exercise powers under section 392 and find a suitable way out. But the possibility of some complications arising in such a situation cannot altogether be ruled out. There is also one more angle from which the question requires to be examined. In respect of some of the matters contemplated by sub -section (1) of section 394, both the courts would be required to pass orders giving suitable directions and it is somewhat incongruous that provision be made for the same thing or matter by two different judicial orders passed by two different courts presumably on two different dates. Could the legislature have really envisaged a situation of this nature ? Even if both the amalgamating companies are required to initiate proceedings under sections 391 and 394, would it not be conducive to the achievement of the legislative object if the jurisdiction to sanction the scheme after following the prescribed procedure in relation to both the companies is exercised on a comprehensive view of the whole matter by one court alone ? Is it possible jot bring about this result by interpreting the word 'court' occurring in sections 391 and 394 in a manner which requires departure from its definition contained in section 2(11) having regard to the subject and context ? Or is it a situation which can be remedied only by legislative intervention by way of amendment ? These are some of the most (sic) questions which suggest themselves to me. But I choose not to express any opinion on them in the present case and reserve liberty to consider them on an appropriate occasion in the future, for, having regard to the presence of clause 14 in the scheme, I will not be required to make a conditional order of sanction. In this context I might observe that on a perusal of the decisions of this court and that of the Bombay High Court referred to earlier, it appears that in both those cases the courts proceeded on the footing that the petition by the transferee -company will have to be filed in the court within whose territorial jurisdiction the registered office of such company was situate. The questions posed above, and more particularly the question relating to forum, were not raised nor considered in those cases from the above angle. The question is still, therefore, open for consideration and, as I said earlier, it might, if necessary, be considered on a future occasion. The only course which I propose to chalk out so far as the present case is concerned is that if ultimately I accord sanction to the scheme, I will reserve the giving of directions under section 394(1) until after proceedings initiated by the transferee -company under sections 391 and 394 have successfully terminated in the Bombay High Court. The adoption of this procedure has at least one distinct advantage. Unlike a case in which conditional orders are made not only sanctioning the scheme but also making provision for consequential matters, on adoption of the above procedure in the present case, I would undoubtedly retain seisin over the matter and would be unquestionably in a position to make suitable orders, if necessity arises, either under sub -section (1) or sub -section (2) of section 392 and thus prevent a possible deadlock. As presently advised, I do not wish to go further than this. * * * *;