ASHIM KUMAR BANERJEE, J. - (1.) This is an application for sanction of the scheme of amalgamation approved by the requisite majority of the shareholders of the transferor companies as well as transferee company. The Central Government initially asked for clarification on various issues and ultimately decided to oppose the application as they were not satisfied with the explanation given by the applicants.
(2.) It appears from the auditors' report as well as the director's report of the transferor companies that there were spate of litigations.concerning taking over of the respective undertakings being the sugar mills by the government. The compensation was not yet received by the respective transferor companies from the appropriate authority. The litigations are pending upto the Apex Court level. In this backdrop the auditors in their report commented that they were not able to certify that the valuation of the shares of the transferor companies was fair. The relevant extract of the auditors' comment is quoted below: "4. The company is engaged in legal matters consequent to acquisiton of its business by the U.P. State Government. The decisions in these legal matters may influence the company's business plans and the accounts have been prepared on the basis of 'going concern'. In view of the above, we are unable to comment whether the accounts prepared on the basis of 'going concern' is correct."
(3.) Similar comment was made in respect of all transferee companies. The Central Government in their affidavit contended that they were in agreement with the observation made by the auditors of the transferor companies and in view of such observation, the Central Government was not in a position to arrive at a conclusion that the scheme would not be detrimental to the interest of the public at large and as such, they decided to oppose the proposed merger. The applicants filed affidavit in reply. In the affidavit in reply it has been contended that the issues of taking over of the sugar mills and payment of compensation are long overdue to be resolved since 1979. According to the applicants, the transferee company is not in any way involved with those litigations and the transferor companies are not transacting any business at all save and except conducting those litigations for the purpose of recovery of the compensation amount. According to the applicants, if the proposed merger is sanctioned, the transferor companies would be in a better position to mobilise their resources and stand behind the transferee company for future betterment.;