JUDGMENT - Mrs. SUJATA MANOHAR, J.:---Both these petitions are for amalgamation of Zenith Electro System Private Limited with Zenith Technologies Limited under section 391 of the Companies Act. Company Petition No. 32 of 1989 is by the Transferror Company namely. Zenith Electro-System Private Limited, while Company Petition No. 33 of 1989 is by the Transferee Company, namely Zenith Technologies Limited. Meetings of Share-holders and Creditors of both the Companies have been dispensed with in view of the consent letters annexed to the petition. The Official Liquidator's report under section 394(1) has already been filed. There are no objections in that report. 2. Mr. Rele learned Counsel for the Central Government has objected to the scheme of amalgamation on the ground that the transferee Company has violated section 372 of the Companies Act. (The amendment to this section has not come into operation so far). Under section 372(2), "the Board of Directors of the investing company shall be entitled to invest in any shares of any other body corporate upto 10% of the subscribed capital of such other body corporate :provided that the aggregate of the investments so made by the Board in all other body corporates shall not exceed 30% of the subscribed capital of the investing Company." The Transferee Company in May 1988 applied for the shares of a Public Limited Company known as Zenith Computers Ltd. The application was for 58,800 shares in Zenith Computers Ltd. The allotment of these shares was made to the transferee company in September 1988. The investment so made by the transferee company far exceeded 30% of its subscribed capital. 3. It is however, pointed out by Mr. D.J. Khambatta, learned Counsel for the petitioners that under section 372(14) the provisions of that section are not applicable to a Private Limited Company unless it is a subsidiary of a public Limited Company. In the present case the transferee Company prior to 1-12-1987 was a Private Limited Company. On 1st December, 1987 two thousand shares of the transferee company were allotted to Zenith Computers Ltd. a Public Limited Company. These 2000 shares exceeded 25% of the subscribed capital of the transferee Company. Hence under section 43-A(1) of the Companies Act the transferee company became a deemed Public Limited Company. On 1st December, 1987 two thousand shares of the transferee company were allotted to Zenith Computers Ltd. a Public Limited Company. These 2000 shares exceeded 25% of the subscribed capital of the transferee Company. Hence under section 43-A(1) of the Companies Act the transferee company became a deemed Public Limited Company. On 26th August, 1988 the share capital of the transferee Company was increased and a fresh allotment of further equity shares of the transferee company was made. As a result, the total paid up equity share capital of the transferee company substantially increased and the holding of Zenith Computers Limited in the transferee Company was reduced to 10% of the total paid up share capital of the transferee Company. The transferee Company has subsequently obtained a certificate from the Central Government dated 25-8-1989 to the effect that, "the transferee Company having complied with the requirements under section 43-A(4) of the Companies Act 1956, the name of the said Company upon re-conversion is on that day changed to Zenith Technologies Private Limited." 4. In these circumstances it is submitted by learned Counsel for the petitioners that the violation of section 372(2) by the transferee company is only technical. Looking to the above circumstances, there is force in this contention. 5. Moreover, for a violation of section 372 a remedy is provided under section 374. It imposes a fine of Rs. 5000/- on the Company and every officer of the Company in default. In case the Central Government desires to take any steps against the transferee Company for this alleged violation of section 372 in has a remedy at law which is not affected in any way by virtue of this amalgamation. Because the transferee company will continue to exist. Steps can therefore be taken against the transferee company if so required. 6. The alleged violation of section 372(2) therefore does not stand in the way of the amalgamation scheme. In any case the transferee Company at present is not violating section 372(2) as this section is no longer applicable to the transferee Company. There is no provision under the Company Act which prevents the present amalgamation scheme. 7. 6. The alleged violation of section 372(2) therefore does not stand in the way of the amalgamation scheme. In any case the transferee Company at present is not violating section 372(2) as this section is no longer applicable to the transferee Company. There is no provision under the Company Act which prevents the present amalgamation scheme. 7. (In re Sulekha Works Ltd.)1, reported in A.I.R. 1965 Calcutta 98 at page 115 the Calcutta High Court considered the question whether violation of section 372 by a Company would be a just or equitable ground for winding up the Company; and answered it in the negative. The ratio of that decision has no application to the present case. 8. In the case of (In re : Navjivan Mills Co. Ltd. Kalol)2, reported in (1972)42 Company Cases Page 265 at page 294, the Gujarat High Court held that when the shares of a company are being taken over by another Company by way of a scheme of compromise and arrangement, the scheme need not comply with the provisions of section 372. In other words, the restraint placed by section 372 on acquiring of shares in another company cannot apply to a scheme for amalgamation of two companies. In the case before the Gujarat High Court, as a result of the amalgamation scheme, the provisions of section 372 were being violated. The Gujarat High Court held that section 372 is operative in a different area. The section puts a restriction inter alia on the power of a Company, to utilise its surplus funds to buy over another company. It is meant to prevent a merger or amalgamation of two companies by the method of buying over shares without going through the procedure contemplated by section 371 onwards. The Gujarat High Court sanctioned the scheme of amalgamation even though it would have amounted to a violation of section 372, had the section applied. 9. In the present case no such situation has arisen. There is only an alleged violation of section 372 in the past by the transferee Company relating to a totally separate transaction which has no connection with the present scheme of amalgamation. 10. In the premises, Petition No. 32 of 1989 is made absolute in terms of prayers (a) to (g). Petition No. 33 of 1989 in made absolute in terms of prayers (a) to (f). 10. In the premises, Petition No. 32 of 1989 is made absolute in terms of prayers (a) to (g). Petition No. 33 of 1989 in made absolute in terms of prayers (a) to (f). Costs of the Official Liquidator In Petition No. 32/89 are fixed at Rs. 300/ Costs of the Regional Directors in each of the petitions are fixed at Rs. 300/. Order accordingly. -----