Bhagyraaj Vyapaar Pvt. Ltd. And Anr. Vs. Regional Director Ministry of Corporate Affairs, Eastern Region, Kolkata:

The four companies named above agreed to enter into a scheme of amalgamation by which Saffron, Promai and Jalaram agreed to merge with Bhagyraaj. The scheme was framed under Section 391 of the Companies Act, 1956. The Company Judge dispensed with holding of meetings of the shareholders to ascertain their wish as all the shareholders consented to the scheme to be amalgamated as annexed to the said application. Accordingly, an advertisement was published inviting all concerned connected with this company to support or oppose the scheme to appear before His Lordship at the time of final sanction of the same. Central Government was also served through the Regional Director, Company Law Board. When the application came up for final sanction, His Lordship gave direction for filing affidavit by the Central Government. The Central Government initially filed affidavit stating that the Company was not co-operating by replying to all the queries made to them. As a result, the Registrar was not in a position to submit his final report on the scheme. His subsequent affidavit would also reiterate his earlier stand. We would find from the letter that the Central Government was asking for copies of the valuation report to justify the share premium suggested by the scheme. We find that repeated letters were written by the Assistant Director asking for queries on paragraphs 2 and 4 of the office letter dated December 5, 2011 that would relate to issue of shares at premium and the share valuation to support the exchange ratio. The learned Judge gave direction for filing affidavits on January 4, 2012. On April 9, 2012 His Lordship directed a supplementary affidavit to be filed. On June 5, 2012 the learned Judge asked the petitioners to reply to the queries made by the Registrar. When the reply was not forthcoming, the Central Government raised objection. It is at that juncture, the learned Judge vide order dated July 2, 2012 observed that it was a fit case for the Directorate of Revenue Intelligence to conduct an enquiry. His Lordship adjourned the matter and directed the revenue authority to submit report.

The learned Judge used the phraseology “MONEY LAUNDERING”. Mr. Mookherjee referred to the provisions of the Prevention of Money Laundering Act, 2002, particularly Sections 3 and 4, that would deal, what “money laundering” would mean. Mr. Mookherjee contended that the schedule to Section 4 would prescribe offences that would come within the scope of “Proceeds of Crime” within the meaning of Section 3. Mr. Mookherjee contended that the schedule did not include any of the provisions under the Corporate Law.

Here, rival contentions are predicted. It is true that the Court should be slow in rejecting a scheme of amalgamation declining to sanction the same de hors the wishes the majority of the shareholders. In Corporate Jurisprudence majority holds the field. Once the scheme was sanctioned by the majority of the shareholders it would be for the Court to examine and sanction the same. The scope of examination would ordinarily be restricted to the objections raised by the shareholders/creditors and all concerned including the Central Government who has vital role to play. In the instant case, despite advertisement being published none approached His Lordship. His Lordship asked the Central Government to submit their views. The Central Government on two occasions filed supplementary affidavit saying that they would not be in a position to do so in absence of assistance being extended by the applicants on two issues as referred to above. Hence, His Lordship was compelled to direct further investigation. If the applicants' intention was bona fide, they should have dispelled all the doubts that had arisen in the mind of the Registrar of Companies.

The learned Judge said, “It is a settled principle of law that the proposed scheme should only be sanctioned if it is found to be not violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme, the court can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the scheme. Where the court finds that the scheme is fraudulent and is intended for a purpose other than what it professes to be, it may be rejected even at the outset without calling a meeting of the creditors. The court does not function as a rubber stamp or post office, and it is incumbent upon the court to be satisfied that the scheme is genuine, bona fide and in the interest of creditors of the company.”

With these observations, the appeal without any order as to costs is disposed off.