Judgment :- W. A. Beardsell and Company (Private) Limited and Mettur Industries Limited, the petitioners in this application, are seeking for sanction to amalgamate, under sections 391(2) and 394 of the Companies Act (I to 1956). Beardsell was incorporated as a private company limited by shares in June, 1914. Its capital structure consisted of 15, 000 ordinary shares of Rs. 100 each and 5, 000 7% preference shares of Rs. 100 each. The entire share capital, both equity and preference, was held by two companies incorporated in the United Kingdom, namely, St. James Nominees Limited and Whitecroft Industries Holdings Limited. They both held such capital in the ratio of 411 : 89 and it made no difference to the interests of the shareholders how the preference shares and the ordinary shares were equated. As one primary step in the course of amalgamation and to facilitate the same, the 5, 000 preference shares were converted into ordinary shares and this was agreed to by both the ordinary and preference shareholders at meeting held for the purpose on September 9, 1956. The result is the preference shares are to rank pari passu with the ordinary shares. This was followed up by an agreement dated November 3, 1966, entered into between Beardsell and St. James Nominees Limited, representing the ordinary shareholders, and Whitecroft Industries Holdings Limited, representing the preference shareholders. The statutory requirement under section 106 of the Act having thus been satisfied regarding the variance of the class of shareholders, Beardsell thereafter took such steps as were further required to enable them to amalgamate with Mettur Industries Beardsell was the managing agent of Mettur Industries since the latter's incorporation in 1936. Originally, Beardsell was predominantly an import-export house. It expanded its trading activities which now include manufacture of various commodities including marketing of textile machinery. Mettur Industries was essentially a textile manufacturing company. But in view of the great strain and stress which the textile industry is undergoing at present, Mettur Industries thought of diversifying its activities outside textiles. It was mutually thought and decided as between Beardsell and Mettur Industries that the amalgamation of one with the other would ensure to Mettur Industries a satisfactory entry into new industrial activity and marketing. The amalgamation would make available to Mettur Industries, Beardsell's managerial experience as well and its sales and distribution system. It was mutually thought and decided as between Beardsell and Mettur Industries that the amalgamation of one with the other would ensure to Mettur Industries a satisfactory entry into new industrial activity and marketing. The amalgamation would make available to Mettur Industries, Beardsell's managerial experience as well and its sales and distribution system. As already noted, Beardsell was the managing agent of mettur Industries ever since its inception and the said agency by efflux of time only on November 23, 1966. As an interim measure and pending amalgamation, the two companies have entered into agreements with each other terminable upon amalgamation, by which Beardsell has agreed to render secretarial and certain other services to Mettur Industries. The company's auditors have made valuation of Beardsell's shares, and in their view, an allotment of one share in Mettur Industries for every share in Beardsell would be reasonable. In paragraph 17 of the petition, Beardsell states that taking into account the additional allotment of shares that would be involved on amalgamation on the basis of this valuation, the profit of the amalgamated company after tax as a percentage of the new share capital based on the actual combined of Beardsell and Mettur Industries for their financial years 1965-66, would have been in the region of 22.5% as against the actual figure for Mettur Industries alone of 20%The material terms of the scheme of amalgamation are as set out hereunder "(a) All the property, rights and powers of Beardsell shall be transferred without further act or deed to Mettur and accordingly shall, pursuant to section 394(2) of the Act, be transferred to and vest in Mettur for all the estate and interest of Beardsell but subject to all charges affecting the same (b) All liabilities and duties of Beardsell shall be transferred to Mettur pursuant to section 394(2) of the Act and shall become the liabilities and duties of Mettur (c) The resulting company will be called "METTUR INDUSTRIES LIMITED" and will own the assets of Beardsell also in addition to those of that company (d) The shareholders of Beardsell will accept one share of Rs. 100 in Mettur Industries Limited for every share of Rs. 100 held by them in Beardsell. Beardsell's present holding of 4, 260 shares in Mettur will be transferred to the Beardsell shareholders. 100 in Mettur Industries Limited for every share of Rs. 100 held by them in Beardsell. Beardsell's present holding of 4, 260 shares in Mettur will be transferred to the Beardsell shareholders. The balance of 15, 740 shares due to the shareholders of Beardsell on the basis of one for one will be allotted to them without any further application (e) The said balance of 15, 740 shares to be allotted to Beardsell will not participate in the dividend for Mettur's financial year ended on the March 31, 1967." * Beardsell came up to this court in Company Application No. 74 of 1967 and requested that separate meetings of the ordinary shareholders of the petitioner companies be convened and held at their respective registered offices. This court directed the holding of such meetings as required by section 391 of the Companies Act and the meetings have since been held. A common request was made by the two petitioner companies for the holding of such meetings. I sanctioned the said meetings dispensing with the holding of a meeting of the preference shareholders, in view of the fact that the preference shareholders have already agreed to give up the concessions they were then holding as such class of shareholders and have also entered into necessary agreements with Beardsell agreeing to be treated as ordinary shareholders on a par with the equity shares. The meetings of both the petitioner companies were held as directed and the chairmen appointed by this court have submitted their reports of the said meetings. It is seen from the report that the said meeting of Beardsell was attended by both the ordinary shareholders of the company who held the total shares in the company. The said scheme of amalgamation was read out and explained and the members present unanimously approved the scheme of amalgamation of the company with Mettur Industries Limited without any modification. Even so, the meeting of Mettur was attended either in person or by proxy by 20 shareholders who held among themselves 38, 344 shares in the company. The said scheme of amalgamation was again read out and explained and that was unanimously approved. Even so, the meeting of Mettur was attended either in person or by proxy by 20 shareholders who held among themselves 38, 344 shares in the company. The said scheme of amalgamation was again read out and explained and that was unanimously approved. The petitioners state that the amalgamation of the companies would be for the benefit of both the companies and their shareholders and pray that the scheme of amalgamation as prayed for may be sanctioned under section 394 of the Companies Act, 1956 I shall now consider the objections of the Central Government seriatim before I deal with the main aspect of the case whether amalgamation should be ordered or not. As regards the first objection that the notice to the Government should have been given even at the time when this court directed the meetings of both the petitioner-companies to be held under section 391, I do not think that such a notice is necessary or contemplated under the scheme of the Act. Section 394A, which appears after section 394, makes it very clear that it is only the scheme that is approved by the body of shareholders in a manner contemplated under section 391 that should go to the Central Government for their remarks. The role played by the Central Government in such cases is that of an impartial observer who acts in public interest and advises the court that it is or it is not feasible for the two companies to amalgamate. Even amalgamation is one limb of indoor management. Bearing all this in view, I am of the opinion that the notice contemplated under section 394A should be at a stage when the application under section 394 is made to this court for sanctioning the scheme and not at any time before. Even amalgamation is one limb of indoor management. Bearing all this in view, I am of the opinion that the notice contemplated under section 394A should be at a stage when the application under section 394 is made to this court for sanctioning the scheme and not at any time before. The same view was held by the Calcutta High Court in In the matter of Bangeswari Cotton Mills Ltd. While agreeing with the view so expressed, I hold that in an application to the court under section 394 of the Companies Act for the sectioning of a compromise or arrangement, notice to the Central Government need not be given at the initial stage before the court makes an order on an application under section 391(1) calling for a meeting of the creditors or of the membersThe second objection by the Government is that a notice is required the company called Handloom and small Users Art Association Limited, to whom it is alleged that Beardsell owe a sum of Rs. 14, 250. Assuming Beardsell is a debtor to the above association, it does not necessarily follow that its claims have to be considered before the scheme of amalgamation suggested by Beardsell with Mettur is finally considered by this court. If that were to be the sine quo non for sanctioning a compromise by amalgamation for facilitating reconstruction of the company, then it would be necessary that every creditor of the company should be personally heard before such an order is made. In my view, this is not the primary intendment of section 394. If on an overall consideration of the entire picture the court's conscience is satisfied that an amalgamation would benefit not only the company amalgamating but the company with which amalgamation is made and it is in the mutual interests of both the companies that such a scheme should be sanctioned, this court should not hesitate to sanction the compromise and should not falter in giving effect to the genuine and bona fide scheme chalked out by the two companies. Even otherwise, it is statutorily provided that the transferee-company, that is, the company with which one company is amalgamating, is obliged to pay and respect all the liabilities of the transferor-company, namely, the company which is amalgamating and therefore even if there is an outstanding as claimed by the Central Government in paragraph 4 of its affidavit it does stand to reason that the amalgamation sought for should be held up only on that ground and for that reason. In fact, Beardsell's claim is that the association owes them considerable moneys. Whatever may be the truth in the claim and the counter-claim one against the other of Beardsell and the association, it is not necessary that I should hear the association for the purpose of coming to the conclusion that the amalgamation that is sought for by the companies is in their interests or not. I am not therefore convinced that the second objection of the Central Government has any force at allThe third objection is that there should have been a separate application under section 391 of the Act when the preference rights attached to the preference shareholders were varied. I have already referred to Company Application No. 74 of 1967 wherein I have dispensed with the meeting of the preference shareholders on the ground that they have themselves agreed to give up their concession, if any, attached to their rights and they were agreeable to rank pari passu with the ordinary shareholders. This is again a matter coming within the doctrine of indoor management and no unnecessary or untoward inroad can be made against the decision taken by the preference shareholders out of their own volition and which, as I have already held, appears to be bona fide and perfectly reasonable and acceptable. Even otherwise, it is clear that the procedure contemplated under section 106 of the Companies Act, has been complied with and the shareholders of preference shares have voluntarily withdrawn their privileges and every holding thereafter became ordinary in its scope and concept. It does not stand to reason that amalgamation under section 394 should not be considered by this court on the only ground that a separate application was not made for holding the meeting of the preference shareholders when the ordinary meetings were sanctioned by the court in Company Application No. 74 of 1967. It does not stand to reason that amalgamation under section 394 should not be considered by this court on the only ground that a separate application was not made for holding the meeting of the preference shareholders when the ordinary meetings were sanctioned by the court in Company Application No. 74 of 1967. In any event, the matter is concluded by my order when I dispensed with such a notice even in Company Application No. 74 of 1967 As regards the fourth objection that if amalgamation were to be sanctioned, then the acts of Beardsell as managing agents may not come up to light at all and cannot be scrutinised at a future date, it is bordering on speculation. The Central Government is assuming that Beardsell in the course of its managing agency, has done something prejudicial to the interests of Mettur. This is not borne out by any fact or data. They also equally assume that such contingent liability has to be provided for even now by delving into matters which do not appear either on the face of the record or from the record. I am not satisfied in the absence of any note by the auditors who have themselves given unqualified reports about the companies, that any such contingent liability should be thought of and be provided for and considered before final orders are passed in this petitionThe next objection is that the objects of Mettur do not strictly cover the businesses of Beardsell and therefore amalgamation should not be ordered. This, in my opinion, is absolutely not necessary. In fact, the essence of amalgamation is that the transferor company intends to reconstruct itself and for that matter be an aid to the transferee company. If the objection of the Central Government is that only if the objects clauses of the transferee company and that of the transferor company are in pair materia, then only amalgamation is possible, it is a contention without any substance. I do not think that there should be union in the objects of both the transferor and the transferee companies to enable amalgamation to be sanctioned by courts under section 394 of the Companies Act The last objection is that Mettur have not increased their authorised capital. This objection is without any force because Mettur has by itself increased its share capital which was approved at its annual meeting. This objection is without any force because Mettur has by itself increased its share capital which was approved at its annual meeting. Therefore, this objection is factually incorrect and need not be countenanced at this stage. In fact, Mettur has produced a letter dated September 8, 1967, wherein a record has been made of the thirteenth annual general meeting of the company held on Friday the 25th day of August, 1967, to the effect that the nominal capital of the company be increased to 12 lakhs consisting of 1, 20, 000 shares of Rs. 100 each and a consequential amendment be made in the memorandum of association of the company. This resolution was passed unanimously. As a consequential amendment, another resolution also was passed to the effect that article 4 of the company's articles of association be substituted by stating that the authorised share capital is Rs. 1, 20, 00, 000 divided into 1, 20, 000 shares of Rs. 100 each. I am satisfied, on the material placed and in the absence of any other material to the contrary, that Mettur has done what is expected of it to be done under the Companies Act for increasing its authorised capital. Even this objection therefore failsIn the foregoing discussion it is seen that the claim for amalgamation of the petitioner companies is well founded. Even Ministry of Finance, Government of India, by their letter dated March 7, 1967, informed the petitioners that they have no objection to the amalgamation. Attention to this fact was specially drawn in the statement to the shareholders pursuant to section 393 of the Act and it is reported by the petitioners that Government's letter was kept open for inspection at the registered office at Mettur The word "amalgamation" has not been defined in the Act. The ordinary dictionary meaning of the expression is "combination". Judging from the context and from the marginal note of section 394 which appears in Chapter V relating to arbitration, compromise, arrangements and reconstructions, the primary object of amalgamation of one company with another is to facilitate reconstruction of the amalgamating companies and this is a matter which is entirely left to the body of shareholders of the primary company which offers or intends to amalgamate with another. There is indeed an absorption by the company with which it is amalgamated, the latter being statutorily called the transferee company and the former the transferor company. In fact, the company amalgamating and the company with which it is amalgamated are so statutorily defined under section 394(1)(b) of the Companies Act, 1956. On a prima facie examination of the relevant provisions in Chapter V, it is abundantly clear that it is essentially an affair relating to the internal administration of the transferor company. Of course, there should be consensus ad idem between the transferor company and the transfer company in the matter of such amalgamation. The indicia such consensus initiates from the transferor company as an offer which is accepted by the transferee company. The initiative thus lying on the shoulders of the transferor company, it is obligatory that a scheme or arrangement should be proposed by that company and the shareholders put on notice of such intendment and objects and they being informed of the benefits, facilities and privileges attendant upon such an obligation. Thus, amalgamation being within the scope of the decision of the body of the shareholders, such a decision if made by the body unanimously ought not to be lightly interfered with by court. This does not necessarily mean that the consideration of public interest which always figures as a halo ought to be totally ignored. Though the Act of 1956 was silent about notice to Central Government in cases relating to such amalgamation, yet by the amending Act of 1965, a new provision, section 394A, has been introduced envisaging such a notice to Central Government. The representation which the Central Government might make obviously therefore can only be at the stage when the court considers an application under section 394If the above salient features are borne in mind, I am satisfied that this is a fit case in which the scheme of amalgamation should be sanctioned. There is ample scope for improvement of the transferor company and incidentally the transferee company is benefited by such coalition. This company petition is therefore ordered and sanction is accorded to the scheme of amalgamation as set forth in paragraph 18 of the petition so as to be binding on the petitioners herein. Petitioners are at liberty to apply to this court for directions that may be necessary in regard to the working of the arrangement. This company petition is therefore ordered and sanction is accorded to the scheme of amalgamation as set forth in paragraph 18 of the petition so as to be binding on the petitioners herein. Petitioners are at liberty to apply to this court for directions that may be necessary in regard to the working of the arrangement. The petitioners shall file with the Registrar of Companies a certified copy of this order within 14 days from the receipt of the certified copy of the order from this court. The transferee company is entitled by virtue of this amalgamation, to continue the legal proceedings pending and instituted by or against the transferor company and be so entitled to continue any such proceedings by or against the transferee company. There will be no order as to costs.