JUDGMENT : R. Balia, J. This appeal is against the order dated 14 November, 1994, of the learned Company Judge in Company Petition No. 22 of 1994, by which the objections filed by the present appellant in respect of the scheme proposed by Mafatlal Industries Ltd. (hereinafter referred to as the MIL') under which scheme of amalgamating Mafatlal Fine Spinning and Manufacturing Company Ltd. (hereinafter referred to as 'M. Fine') with the petitioner MIL were approved and sanctioned. 2. The MIL moved the company court for sanction of the scheme under which the M. Fine, the transferor company, was to amalgamate with the petitioner MIL with effect from 1.4.1993. The application was moved on 16.12.1993 which was numbered as Company Application No. 872 of 1993. On 22.12.1993, the learned company judge issued directions for convening meeting in accordance with section 391(1) of the Companies Act, 1956 (hereinafter referred to as the Act') and appointed Shri A.N. Mafatlal to preside over the meetings to be convened in pursuance thereof. In pursuance of this direction, after notices were issued to individual shareholders as well as public, an extraordinary general meeting was held on 22.1.1994 in which the proposed scheme was approved by a majority representing more than three fourth in value of the members present and voting either in person or proxies. After such approval, Company Petition No. 22 of 1994 for sanction of the scheme was presented on 8.2.1994. In pursuance of the notice of the company petition, the present appellant who is a member of Mafatlal family filed his objections opposing the scheme before this court. The transferor company, M. Fine, having its registered office in the State of Maharashtra had also moved similar application before the Bombay High Court. The present objector who is also a shareholder in the said transferor company had neither participated in the meeting of shareholders held in pursuance of section 391(2) in the proceedings of application filed by the M. Fine, nor did he object to sanctioning of the scheme by the Bombay High Court. The scheme, ultimately, came to be sanctioned by the Bombay High Court on the petition filed by the M. Fine and had become final, no appeal having been filed against that order. The scheme, ultimately, came to be sanctioned by the Bombay High Court on the petition filed by the M. Fine and had become final, no appeal having been filed against that order. The court also issued notice to Central Government under section 394A of the Act in response to which the learned counsel for the Central Government had informed the court that the Central Government had decided not to make any representation in favour or against the proposed scheme of amalgamation. A report of the appropriate authority was also submitted that the affairs of the company having been conducted in a manner not prejudicial to the interest of its members or public interest. 3. The objections which were raised before the learned company judge were summarised in the following manner in the order under appeal. Objection No. (i) The scheme is not for the avowed purpose or objects for which it is proposed. Objection No. (ii) Consequently, as the scheme is not for the purpose for which it is proclaimed to be, I submit it is for an ulterior motive which is explained hereinafter in detail. Objection No.(iii) That the scheme even otherwise is not in the interest of Mafatlal Industries Ltd. Objection No. (iv) Miheer H. Mafatlal, in his personal capacity, and as karta of his Hindu undivided family and as trustee of trusts and his family members are the shareholders of MIL holding 5 per cent of the total share capital of MIL. He, therefore, claims that he and his family members are of a distinct class of shareholders having interest in the petitioner company, MIL, of a distinct nature in view of the family arrangement, dated 1 March, 1979, and, therefore, they were required to be treated as a separate and distinct class of shareholders and their separate meeting was required to be called for in approving the proposed scheme as the scheme vitally affects the rights of this class of shareholders. In the absence of such meeting, the scheme ought not to be sanctioned. Objection No. (v) The scheme of amalgamation and arrangement was approved at a meeting of shareholders only held under the Chairmanship of Arvind N. Mafatlal. The said Arvind N. Mafatlal is a person who is personally interested in getting the scheme approved and sanctioned. In the absence of such meeting, the scheme ought not to be sanctioned. Objection No. (v) The scheme of amalgamation and arrangement was approved at a meeting of shareholders only held under the Chairmanship of Arvind N. Mafatlal. The said Arvind N. Mafatlal is a person who is personally interested in getting the scheme approved and sanctioned. In the circumstances, he having a personal interest in the scheme, could not have chaired the meeting and, at the same time, obtained proxies to vote in favour of the scheme ; the court, in the circumstances, ought not to sanction the scheme. Objection No. (vi) The scheme of amalgamation and arrangement along with the explanatory statement thereto, was sent to the shareholders of MIL. The scheme and the explanatory statement do not disclose all material facts relating to MI[, and M. Fine and in the absence of all material facts being placed before the shareholders, the shareholders are not and were not in a position to exercise an intelligent judgment as to whether they should vote in favour of the scheme or against it. The notice, the consequential meeting and the resolution passed therein, therefore, are of no effect and the scheme, in the circumstances, ought not to be sanctioned by this Hon'ble court. Objection No. (vii) The scheme of amalgamation is passed at a meeting of shareholders which, inter alia, included shareholders like Nocil and Sushrupad Investments (P) Ltd. whose allotment is illegal and contrary to, and in violation of, the order of the City Civil Court at Ahmedabad. Moreover, the rights issue of 1987 and 1992 being under a cloud, the allottees of shares under the said issue or their transferees could not have participated in the meeting of shareholders and passed resolution favouring amalgamation and hence also the scheme cannot be sanctioned. Objection No. (viii) The scheme of amalgamation is supported insofar as fair exchange ratio is concerned by the report of C.C. Choksi and Co. and IcIcl both of whom being interested parties could not have given any such report, and in any event, the scheme based on exchange ratio fixed on the basis of such report ought not to be sanctioned by this court. and IcIcl both of whom being interested parties could not have given any such report, and in any event, the scheme based on exchange ratio fixed on the basis of such report ought not to be sanctioned by this court. Objection No. (ix) The scheme vitally affects the secured and unsecured creditors and in view of the fact that necessary meeting of such class of creditors has not been called, this Hon'ble court ought not to grant sanction to the scheme of amalgamation. 4. It was objected to on behalf of the petitioner company that the objector having not raised any demur before the Bombay High Court against sanctioning of the proposed scheme and the objector on account of his conduct and also on account of the fact that he had agreed at one stage to transfer his shareholdings in MIL in favour of Arvind N. Mafatlal or his assignees, he is estopped from raising any objections and the court could not have entertained such objections in respect of the proposed scheme of amalgamation at the instance of the present objector. The learned Company Judge after noticing the conduct of the objector in relation to participation in scheme and in dealing with shares under the alleged family arrangements was not prepared to reject such objections on that ground and decided to examine each of the objections raised by the appellant in detail. All the objections were overruled except part of the objection No. 7. The court held, that allotment of shares out of right issue of 1987 to NOCIL and Sushrupad Investments (P) Ltd. were contrary to and in violation of the stay order of the City Civil Court, Ahmedabad in Civil Suit Nos. 3181 and 3182 of 1987 and to the extent of such shareholding, the allot tees could not have been allowed to participate in the meeting held in pursuance of the directions of this court dated 22.12.1993. 3181 and 3182 of 1987 and to the extent of such shareholding, the allot tees could not have been allowed to participate in the meeting held in pursuance of the directions of this court dated 22.12.1993. Inspite of the aforesaid finding having been recorded against the petitioner company that it had allotted certain shares of the rights issue of 1987 in favour of NOCIL and Sushrupad Investments (P) Ltd. contrary to and in violation of order of the City Civil Court operating against the company, the court came to the conclusion that from the material on record even after exclusion of such illegally issued shares from the consideration, the remaining majority fulfils the statutory requirement of approving the scheme under section 391(2) of the Act. Therefore, result of the meeting was not materially affected so as to affect the validity of the scheme for non-compliance with statutory provision relating to required majority to agree with the proposed scheme. In respect of the finding recorded against the petitioner company about allotment of shares out of rights issue of 1987 in favour of NOCIL and Sushrupad Investments (P) Ltd., the MIL has preferred cross objections. 5. Two preliminary objections have been raised on behalf of the respondents. Mr. Vakil, learned counsel for the respondent company, at the outset objects to maintainability of appeal at the instance of objector appellant Miheer H. Mafatlal. Reason advanced for this objection is conduct of Miheer H. Mafatlal in not objecting to according of sanction to the proposed scheme before the Bombay High Court in petition filed by M. Fine ; when he is a shareholder of M. Fine also and had opportunity to raise such objection. In fact, this was also the plea before learned single judge to the entertaining of any objections at his instance. He also submitted that his conduct in not himself remaining present in person in the meeting of shareholders and having not raised objections before the meeting of shareholders, when he had an opportunity to do so, is now estopped from raising those objections before the court. The court ought not to entertain such objection. Secondly, in appeal, the appellant is not entitled to raise any new ground whether of fact or law which had not been raised before the learned company judge, particularly, when such new contentions are founded on facts not pleaded and needs enquiry in new facts. 6. The court ought not to entertain such objection. Secondly, in appeal, the appellant is not entitled to raise any new ground whether of fact or law which had not been raised before the learned company judge, particularly, when such new contentions are founded on facts not pleaded and needs enquiry in new facts. 6. So far as the first objection is concerned, the learned Company Judge himself has not found it sufficient reason for not examining objections raised by the present appellant notwithstanding the finding that the appellant had failed to raise such objection when he had an opportunity to do so. The fact that the Bombay High Court had sanctioned the scheme on petition filed by M. Fine has little relevance to the maintainability of objections of locus standi of present objector to raise objections to the petition filed by M11, before this court. As discussed in detail by learned single Judge that in the situation usual to arise in cases where in a scheme of amalgamation the companies involved are situated within the jurisdiction of different High Courts, necessitating filing of petitions in separate High Courts, for seeking accord of sanction in respect of proposed scheme of amalgamation, which has been approved by members of the concerned companies. This inheres independent application of mind by two different courts at different time. One is not bound by the finding of others. Approval by all the concerned courts to the scheme proposed by the company under its jurisdiction is necessary. It may be that refusal by one results in infructuating the scheme, and may not require consideration by other court, issue becoming of academic importance. But that being the position of law requiring approval from High Courts of respective jurisdiction, in each court proceedings are independent and decision by one court does not take away the jurisdiction of other to decide other way round. Section 391 envisages a scheme or arrangement between a company and its members or its creditors or a class of them. In the case of such scheme or arrangement envisaging amalgamation of two or more companies, what goes before the company is not the proposal between the two or more companies amalgamating with each other but scheme in the case of each company and its members approving such amalgamation. In the case of such scheme or arrangement envisaging amalgamation of two or more companies, what goes before the company is not the proposal between the two or more companies amalgamating with each other but scheme in the case of each company and its members approving such amalgamation. Therefore, scheme between each company and its members have to be approved through separate proceedings whether before the same court or separate courts. The same has to be viewed independently, keeping in focus primarily the interests attached with the petitioner company, its members and creditors. The fact that simultaneous proceedings before the same court are more convenient and expedient which result in avoiding duplicity of enquiry and viewing the scheme by the court in whole perspective, does not make the two proceedings one. 7. Exercise of right by any member of a company to object to the scheme proposed by company, which is a matter between him and company, is independent of exercise of right of members of the other company involved. The fact that a person may be member of both the companies cannot alter the position about his locus to raise objection to (the) scheme proposed by one company and not by another company as that is independent exercise of right to object depending upon ones interest in each company vis-a-vis shareholding in that company. 8. One has to discern between locus to raise objection to proposed scheme, and weight to attached to it. Conduct vis-a-vis scheme proposed by company A cannot affect the former, but may be relevant to evaluate the weight to be attached to it. 9. In fact, the main contention of the objector is that (the) scheme as a whole is heavily loaded in favour of M. Fine and against the interests of MIL. Therefore, the fact that objector as a shareholder of M. Fine has not objected to scheme proposed by M. Fine and approved by its members, if he has decided to object the scheme as a shareholder of MIL, when proposed by it, cannot affect his locus to do so. Therefore, the fact that objector as a shareholder of M. Fine has not objected to scheme proposed by M. Fine and approved by its members, if he has decided to object the scheme as a shareholder of MIL, when proposed by it, cannot affect his locus to do so. If two different persons as shareholders of the two companies could lead to raising of such objections, inspite of sanction by the Bombay High Court, it cannot affect the locus of Miheer, simply because he happens to be shareholder in both the companies having separate and independent business interests in the two concerned companies. 10. The reason is obvious. Scheme of amalgamation is primarily a matter of agreement between the parties thereto. Ordinarily, in the field of entering into a contract intervention of the court is not envisaged. The very fact that under the statutory provisions where a compromise or arrangement is proposed between the company and its creditors or any class of them, or between company and its members or any class of them, it is required to be sanctioned by the court before it can become operative, even after it has been approved by a requisite majority in accordance with requirement under sub-section (2) of section 391 and that the court is not made to act as rubber stamp to put its seal over the resolution of the creditors or members, as the case may be, representing the requisite majority of two-third; but is required to sanction or reject the scheme on being satisfied about fairness and justness of the scheme and the public interest which is likely to be affected thereby makes it obligatory upon the court to examine the fairness, justness and viability of the scheme as a commercial proposition before it nods its head in approval. It is a duty cast on the court and is not subject to raising of any objection from any quarters. Not raising of any voice against it may be a circumstance which may go in favour of holding the scheme to be just and fair to all interests affected by it and may be approved by the court. It is a duty cast on the court and is not subject to raising of any objection from any quarters. Not raising of any voice against it may be a circumstance which may go in favour of holding the scheme to be just and fair to all interests affected by it and may be approved by the court. That cannot by itself be a ground for the court to shut its eyes, if anything is pointed out or brought to its notice from whatever source which may affect decision of the court in evaluating the justness and fairness of the scheme for the purpose of granting or withholding the sanction. It is only after the scheme is sanctioned by the court that it becomes binding and enforceable. Therefore, when the jurisdiction of the court to examine the scheme does not depend on the raising of objections by any particular person or from any particular quarter, the mere fact that the person, who has come forward to object before the court about the intrinsic worth of the scheme had failed to do so when he had opportunity to raise such objections at earlier stage, or past conduct embellishes his true intention in raising the objection cannot take away the court's right to look into these objections. It may affect the evaluation of such objections. 11. The right of appeal to the person aggrieved by the order of the court also cannot be taken away. We may point out that right to appeal under sub-section (7) of section 391 of the Act is not confined to a person who had appeared before the court to oppose or support the proposed scheme or arrangement. The tenor of the aforesaid provision leaves no room of doubt that any person aggrieved by the order of sanction or withholding sanction to the proposed scheme can file an appeal. He need not be a person who has actually raised objection before the learned Company Judge. Jurisdiction under section 391 of the Act is not in nature of settling dispute between the objector and the proposer of the scheme, but is of sentinel character in the nature of duty cast upon the court to examine fairness and justness of the proposed scheme to all the interests which are likely to be affected by the scheme. Jurisdiction under section 391 of the Act is not in nature of settling dispute between the objector and the proposer of the scheme, but is of sentinel character in the nature of duty cast upon the court to examine fairness and justness of the proposed scheme to all the interests which are likely to be affected by the scheme. Therefore, all the persons whose interests are affected are the affected parties by the order and if they have any grievance against the order passed by the court they have a right to appeal. 12. Coming to the second preliminary objection, we have no hesitation in accepting in principle that, ordinarily, no new point of fact or question of law can be raised by the an appellant before the appellate court as a matter of right, and as a matter of practice. Ordinarily, the appellate court does not permit raising of any new questions before it. However, it is equally well settled that where a new plea involving pure question of law is raised and it goes to the root of the matter or even where pleas involving question of fact are raised before the appellate court and the court is of the opinion that it is necessary to go into such questions so that it may not occasion in failure of justice or if new pleas are raised on existing and admitted material which is already on record, it can permit raising of such new pleas. Ultimately, it is a matter which rests with the discretion of the court whether to permit or not to permit raising of new pleas before it. In this connection, we may also point out that merely raising of another new objection does not necessarily amount to a new plea. It may be extension or expansion of the plea already raised and discussed by a court from whose order the appeal is preferred. In such an event, arguing an issue in a multiple aspect on the existing material cannot be considered to be raising of a new plea. The fundamental principles governing such cases are that ordinarily new pleas are not allowed to be raised, which require investigating new facts ; where new plea is allowed to be raised, other party must have adequate opportunity to meet the new plea so as not to cause prejudice to any party. The fundamental principles governing such cases are that ordinarily new pleas are not allowed to be raised, which require investigating new facts ; where new plea is allowed to be raised, other party must have adequate opportunity to meet the new plea so as not to cause prejudice to any party. We, therefore, do not propose to reject or uphold the aforesaid objection on abstract principle ; but shall bear in mind the aforesaid principles while considering the various issues raised before us. 13. In great detail, arguments were prefaced on behalf of both the sides about the ambit and scope of power of the court to enquire into the matters germane for consideration sanctioning scheme of compromise or arrangement. We think that, as is indicated in the provisions itself, grant of sanction is not a mere formality. Section 391 envisages precisely that compromise or arrangement may be proposed between a company and its creditors or any class of creditors or between a company and its members or any class of its members, or any composite combination of the company members and its creditors. The ordinary principle is that any compromise or arrangement is the outcome of an agreement between two or more parties and only the parties, who have agreed to such compromise arrangement, are bound by it. But, in order that such compromise be binding not merely on those who are parties to the compromise but on others also who may or may not be agreeable to it for the larger interest of the company or its members or class of members or creditors or class of creditors, examination by court ; an institution entrusted with administration of justice and repository of trust that it protects all interests in consonance with principles of justice and fair play, which permeates all its functions in various spheres, is envisaged whose approval puts a seal of its binding character on all concerned. Once a compromise or arrangement scheme is propose by any one or more of the parties, in the first instance, an application is required to be moved before the court by the company or any of the creditors or members of the company or where the company is wound up, by the liquidator. Once a compromise or arrangement scheme is propose by any one or more of the parties, in the first instance, an application is required to be moved before the court by the company or any of the creditors or members of the company or where the company is wound up, by the liquidator. On such application being made, the court directs a meeting of the creditors or class of creditors or members or class of members, as the case may be to be held and conducted in such a manner, as the court directs. That is the indication that, at the stage of making application, the court exercises its power for calling upon a meeting to be conducted in manner in which the court thinks it proper. Thereafter, in the meeting called as per the direction of the court, if a majority in number representing three fourths in value of the creditors, or class of creditors, or members, or class of members, as the case may be, present and voting either in person or where proxies are allowed by proxy, at the meeting, agree to such compromise or arrangement. That is the expression of consents or dissents of parties. The process does not end there where the compromise or arrangement has the approval of required majority, the matter is to be brought before court for its sanction. Thereafter, when the compromise so approved by the requisite majority is sanctioned by the court, it becomes binding on all the creditors or all the creditors of the class, or all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributors of the company. This is another indication that mere requisite majority approving proposed compromise or arrangement is not sufficient to make it binding on all concerned. It is further required to be sanctioned by the court. No doubt it is true that approval accorded to a proposed scheme by an overwhelming majority is a very vital factor while it is considered by the court whether to sanction it or not, and, ordinarily, the court does not substitute its wisdom for collective wisdom of the shareholders or creditors, as the case may be, in the matter of effecting any compromise or arrangement between them and the company. Nonetheless the court does not function as a mere rubber stamp to put its seal on the approval of the majority. It is to be noticed that sub-section (2) of section 391 does not speak merely of sanctioning of the scheme approved by requisite majority but forbids from sanctioning any compromise or arrangement unless the court is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the court, by affidavit or otherwise, all material facts relating to the company such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 and 251 and the like. This requirement is further indicative of the fact that in respect of a scheme approved by the requisite majority, before the court may at all sanction the scheme, it must be satisfied about the disclosure of all material facts related to the company by the applicant before it. The very fact that the material facts are required to be disclosed or in other words the court is required to be satisfied about disclosure of all the facts which are material in its opinion for the purpose of according sanction, cannot be a requirement of mere form. Before sanctioning, the court is required to satisfy itself about the fulfilment of the statutory requirements as well as about the affairs of the company in respect of whom any proposal for compromise or arrangement is to be made, more particularly, about its latest financial position, as may be disclosed from the material placed by the applicant or the auditors report or otherwise and also about the nature of any investigation that may be pending against the company under sections 235 and 251 of the Act. Not only that, before sanction is accorded for proposed compromise or arrangement for the purpose of or in connection with the scheme for amalgamation of a company with other company or compromise, report of the Registrar of Companies is to be obtained certifying that the affairs of the company have not been conducted in a manner prejudicial to the interest of its members or public interest and also calling for a report from the official liquidator about the fact whether affairs of the company, which is transferor company, and is to be dissolved without winding up, have not been conducted in a manner prejudicial to the interest of the members or public interest. This provision clearly implies that the court is not only to be satisfied that the proposed scheme has been approved by properly conducting meeting in pursuance of its direction under section 391(1) of the Act by the requisite majority as is required under section 391(2) of the Act, but is also to be satisfied about various other aspects of the matter, namely, financial position of the companies involved, the fact whether the affairs of the company have not been conducted in a manner prejudicial to the interest of the members of public interest. Satisfaction about all these affairs is not dependent on raising objection by any person concerned but is a duty cast upon the court while considering the issue about according sanction. 14. Undoubtedly, the statute gives wide discretion to approve any arrangement between a company and its shareholders or a company or its creditors. Guiding factors for exercise of discretion are now fairly well settled by a catena of decisions. Following principles can be culled out from various precedents, which guide the courts. (i) Firstly, the court must be satisfied that the provisions of the statute have been complied with, which means that the court should be satisfied that the resolutions are passed by the statutory majority in value and in number in accordance with section 391(2) of the Act at a meeting or meetings duly convened and held. The resolution by requisite majority is jurisdictional fact. The resolution by requisite majority is jurisdictional fact. In absence of approval of scheme by requisite majority of the members or the creditors in value and in number in accordance with section 391(2), the proposal does not proceed further and stage is not at all reached where the court can be called upon to exercise its jurisdiction to accord or withhold sanction. This entails enquiry into proper conduct of meetings of members or creditors or class of them, if so required. Ancillary enquiry becomes relevant to know what are the interests affected by the proposed scheme for the purposes of proper classification. (ii) The court should satisfy itself that members or class of members or creditors or class of creditors as the case may be was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent. This requires an enquiry into proper disclosure of relevant facts to members, creditors and to the courts. (iii) Arrangement is such as a man of business would reasonably approve. It is the function of the court to see that the scheme as a whole, having regard to the general conditions and background and object of the scheme, is a reasonable one, that is to say, if the court is of the opinion that there is such an objection to it as any reasonable man would say that he would not approve it, then the court may refuse to confirm the scheme. Where if the scheme as a whole is fair and reasonable, the court would not launch on an investigation upon the commercial merits or demerits of the scheme, which is the function of those who are interested in the arrangement. 15. The principles have been clearly expressed by Lindley, L.J., in Re Alabama, New Orleans, Taxas and Pacific Junction Railway Company, reported in (1891) 1 Ch D 213, as under : "... what the court has to do is to see, first of all, that the provisions of that statute have been complied with ; and, secondly, that the majority has been acting bona fide. what the court has to do is to see, first of all, that the provisions of that statute have been complied with ; and, secondly, that the majority has been acting bona fide. The court also has to see that the minority is not being overridden by a majority having interests of its own clashing with those of the minority whom they seek to coerce. Further than that, the court has to look at the scheme and see whether it is one as to which persons acting honestly, and viewing the scheme laid before them in the interests of those whom they represent, take a view which can be reasonably taken by businessmen. The court must look at the scheme, and see whether the Act has been complied with, whether the majority are acting bona fide, and whether they are coercing the minority in order to promote interests adverse to those of the class whom they purport to represent and then see whether the scheme is a reasonable one or whether there is any reasonable objection to it, or such an objection to it as that any reasonable man might say that he could not approve of it." Justice Fry, in his concurring opinion in this regard, said : "Then the next inquiry is-under what circumstances is the court to sanction a resolution which has been passed approving of a compromise or arrangement ? I shall not attempt to define what elements may enter into the consideration of the court beyond this, that I do not doubt for a moment that the court is bound to ascertain that all the conditions required by the statute have been complied with; it is bound to be satisfied that the proposition was made in good faith ; and, further, it must be satisfied that the proposal was at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such a member, might approve of it. What other circumstances the court may take into consideration I will not attempt to forecast." These observations have since then been oft-quoted by various courts in England as well as in India. Almost a century later, Ashtury, J. in Anglo-Continental Supply Co. What other circumstances the court may take into consideration I will not attempt to forecast." These observations have since then been oft-quoted by various courts in England as well as in India. Almost a century later, Ashtury, J. in Anglo-Continental Supply Co. Ltd., Re (1922) 2 Ch 723, reiterated : "Before giving its sanction to a scheme of arrangement, the court will see firstly that the provisions of the statute have been complied with; secondly that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent ; and thirdly, that the arrangement is such as a man of business would reasonably approve." Where the proposed arrangement of compromise is for amalgamation or merger or reconstitution of a company, the court is further to satisfy that it is not contrary to public interest. 16. The principles enunciated in Re Alabama, New Orleans, Taxas and Pacific Junction Railway Company, reported in (1891) 1 Ch D 213, were reiterated by the Madras High Court in Re Coimbatore Cotton Mills Ltd. and Laxmi Mills Co. Ltd., reported in (1980) 50 Comp Cas 623 (Mad), when the court summarised the principles : "(i) The court should be satisfied that the resolutions are passed by the statutory majority in value and in number in accordance with section 391(2) of the Act at a meeting or meetings duly convened and held. This factor is jurisdictional in the matter of confirmation of the scheme... (ii) The court should satisfy itself that those who took part in the meeting are fairly the representatives of the class and that the statutory meeting did not coerce the minority in order to promote the adverse interests of those of the class whom they purport to represent. (iii) In exercising its discretion under sections 391 and 394 of the Act, the court is not merely acting as a rubber stamp. It is the function of the court to see that the scheme as a whole, having regard to the general conditions and background and object of the scheme, is a reasonable one and if the court so finds, it is not for the court to interfere with the collective wisdom of the shareholders of the company... It is the function of the court to see that the scheme as a whole, having regard to the general conditions and background and object of the scheme, is a reasonable one and if the court so finds, it is not for the court to interfere with the collective wisdom of the shareholders of the company... (iv) There should not be any lack of good faith on the part of the majority." 17. The Bombay High Court in J.S. Davar v. Dr. Shanker Vishnu Marathe (1967) 2 Comp LJ 16 (Bom) : AIR 1967 Bom 456 , speaking through Chandrachud, J. (as he then was), after reviewing number of authorities including Re Alabama, New Orleans, Taxas and Pacific Junction Railway Company, reported in (1891) 1 Ch D 213, held (at pages 24-25 of Comp LJ) : "On a review of the authorities and, from the provisions [in section 153(2) of the Indian Companies Act, 191311, it seems to us clear that the consent of the majority of creditors or shareholders to a scheme does not conclude the issue whether the scheme should be sanctioned. The jurisdiction of the court which is called upon to sanction a scheme transcends the mere consideration that a majority of those affected by the scheme is willing to submit to the scheme. The creditors of a company may agree to accept a fraction of the amount due to them from the company and yet on consideration of more lasting importance, like public or commercial morality, the court may refuse to accept the verdict of the majority. It may also refuse to accept the scheme on the ground that it is not reasonable or that it is not feasible or that there is no chance that it will yield to a smooth and satisfactory execution. By 'reasonable' is generally meant that the arrangement cannot reasonably be supposed by sensible business people to be for the benefit of the class which they represent. The court will also not sanction the scheme if the facts which would have influenced the decision of the majority or if the sponsors to the scheme were not known or disclosed to the majority, or if the sponsors of the scheme have misrepresented the true position of the company. The court will also not sanction the scheme if the facts which would have influenced the decision of the majority or if the sponsors to the scheme were not known or disclosed to the majority, or if the sponsors of the scheme have misrepresented the true position of the company. Finally, if the acceptance of the scheme would lead to the stifling of an inquiry into the conduct of the delinquent directors, the court would be slow to give its sanction to the scheme." On same point on similar lines, the Gujarat High Court expressed its view about the ambit and scope of court's jurisdiction while considering any proposed compromise or arrangement proposing a scheme for amalgamation in Maneckchozvk and Ahmedabad Manufacturing Co. Ltd., In re (1970) 2 Comp LJ 300 (Guj) : (1970) 40 Comp Cas 819 (Guj) : "How should the court approach for its scheme of compromise and arrangement submitted for its sanction which is shown to have been approved by a statutory majority of creditors and members who are directly affected by the scheme. The burden, of course, of showing that the scheme is a fair and reasonable one initially lies on the petitioner. The petitioner must prima facie show that the scheme is preeminently fair and reasonable shareholder would approve of and not object to. In order to show prima facie that the scheme is fair and reasonable, it is open to the petitioner to submit that due weight must be accorded to the fact that the majority has recorded a decision in favour of the scheme and the court must not lightly ignore or set aside that decision. ... It must look at the scheme to see that it is a reasonable one and while so doing, the court will be strongly influenced by a big majority vote and the reasons which actuated the contesting creditors in opposing the scheme. Nonetheless, it is essential that the scheme must be a fair and equitable one though it is none of the business of the court to judge upon the commercial merits which in fact is the function of the creditors and members." Without multiplying precedents, to borrow the expression of Chandrachud, J., in J.S. Davar's case [J.S. Davar v. Dr. Nonetheless, it is essential that the scheme must be a fair and equitable one though it is none of the business of the court to judge upon the commercial merits which in fact is the function of the creditors and members." Without multiplying precedents, to borrow the expression of Chandrachud, J., in J.S. Davar's case [J.S. Davar v. Dr. Shanker Vishnu Marathe (1967) 2 Comp LJ 16 (Bom)], supra, it is not possible to enumerate exhaustively what materials the court is entitled to take into the consideration. The court is required to examine each scheme on its own merit and in light of attendant circumstances. The court has to view totality of the scheme and its workability primarily from following points of view : (i) whether it satisfies the statutory requirement, and (ii) whether it satisfies the test of reasonable scheme proposed in good faith which a man of business would reasonably approve it. 18. The appellant had contended before the learned Company Judge that he in his personal capacity as karta of Hindu undivided family and trustees of the trust settled by members of his family and its family members are holding 5 per cent of the total share capital of the MIL. According to (the) genealogical tree, Mafatlal is the founding father of Mafatlal family's business empire. He had three sons of which Pransukhlal died issue less. Navinchandra's sons are Arvind, Yogindra and Rasesh. The third brother Bhagubhai had only one son, Hemant, who died in 1971, leaving behind Miheer, the present appellant, his sister and mother. At the time of death of Miheer's father, the shareholding of Miheer and his other members of Bhaghubhai's branch coupled with shares held by trusts settled by Bhagubhai's branch was about 50 per cent in aggregate, by taking Mafatlal family's shareholding as one whole. This was in consonance with principles of sharing estate of any Hindu undivided family, 1/2 in the branch of Navneetlal and ½ in the branch of Bhagubhai. On certain dispute having arisen between Arvind and his two brothers, a family settlement took place, which is evidenced by a note prepared by Choksi and Co. on 24.2.1979 suggesting various alternatives of division of family interests in various companies labelled as Mafatlal group of companies and by minutes of meeting held on 1.3.1979 accepting suggestion No. V in note dated 24.2.1979 with some modification. on 24.2.1979 suggesting various alternatives of division of family interests in various companies labelled as Mafatlal group of companies and by minutes of meeting held on 1.3.1979 accepting suggestion No. V in note dated 24.2.1979 with some modification. This settlement envisaged division of family interest in Mafatlal group of industries amongst three sons of Navin Mafatlal and Miheer Hemant Mafatlal. Under the settlement, the ratio of existings interests of Navinchandra's branch and Bhagubhai's branch were kept intact ; that is to say, the family business was to be so divided by adjustment of shareholding in each of the group company so as to divide half share of Navinchandra amongst his three sons giving each of Navinchandra's sons about ?th share in the whole, and ½ share of Bhagubhai was to remain with Miheer. In this scheme, Miheer was to be placed in absolute control of MIL and all other interests outstanding in other members were to be transferred to MHM and he had to lose all interests in M. Fine. This settlement, which MHM claims to be binding on all concerned gives him a special interest in the shareholding of MIL. As a result of machinations of ANM, the shareholdings of MHM, members of his family and family trusts were reduced at the time of proposed scheme to 5 per cent of total share capital. Holders of share affected by the alleged family settlement viz., Miheer H. Mafatlal, the members of his family and family trusts constitute distinct class of shareholders and their separate meeting ought to have been called for approving the proposed scheme in terms of section 391(1) of the Act. This contention was rejected by the learned Company Judge, primarily on the ground that so-called family arrangement was not one to which (the) company was party, nor the same had been made part of company's articles of association so as to bind it. In this connection, the learned Company Judge has also observed that prima facie Miheer has offered to transfer his shareholdings in MIL to ANM or his assignees on account of which the family arrangement has been superseded. 19. In this connection, the learned Company Judge has also observed that prima facie Miheer has offered to transfer his shareholdings in MIL to ANM or his assignees on account of which the family arrangement has been superseded. 19. Before us, it was contended by the learned counsel for the appellant that if it is held in his favour that as a result of certain rights or obligations accruing under the alleged family arrangement in terms of the note dated 24.2.1979 followed by minutes of meeting dated 1.3.1979, interest of the appellant Miheer H. Mafatlal as a shareholder of the company is distinct from other ordinary shareholders, then not only Miheer H. Mafatlal, but also all those shareholders who are affected by the said family arrangement will necessarily constitute one class of shareholders and category of 'distinct interests' under the shares held by Mafatlal family may not be confined to Miheer H. Mafatlal alone. 20. This was strenuously contested by Shri S.B. Vakil, learned advocate appearing for the company by stating that it raised altogether new grounds amounting to abandonment of original plea by substituting new plea which ought not to be permitted. On merits, it was contended that without admitting that any such family arrangement to which Miheer H. Mafatlal was a party existed, but assuming for the sake of argument that there is a family arrangement between the aforesaid four descendants of Mafatlal, the same does not constitute Miheer H. Mafatlal or any one of them into a separate and distinct class of shareholders different from others for the purpose of section 391 of the Act. 21. So far as first objection of the learned counsel for the respondent goes, we are not impressed. The basic issue which was raised before the learned Company Judge was that as a result of family arrangement spelt out from note of Mr. Choksi dated 24.2.1979, followed by minutes dated 1.3.1979, Miheer's interest in the company became of a distinct nature than other ordinary shareholders. The fact that he confined this distinct classification to himself and not to others is of little consequence insofar as the court is concerned. Choksi dated 24.2.1979, followed by minutes dated 1.3.1979, Miheer's interest in the company became of a distinct nature than other ordinary shareholders. The fact that he confined this distinct classification to himself and not to others is of little consequence insofar as the court is concerned. If the court comes to the conclusion that as a result of family arrangement, the interest of Miheer becomes a separate and distinct interest from that of other ordinary shareholders to justify separate classification, the further consequence is irresistible that all those whose interests are affected by the said family arrangement will fall in the same class whether the appellant argues or does not argue to that extent. On agreeing with the objector to confer upon him the status of a separate class of shareholders on the anvil of family arrangement, the court cannot stop there, but will have to reach logical end by holding that all those affected by the said family arrangement constitute one class of shareholders. Merely by making this obvious position as a part of argument in appeal before us, it cannot be said that the appellant has raised any new plea. 22. We may now examine merits of the objection. It would be necessary here to refer to the relevant provisions in order to appreciate what is meant by class of members and what is the nature of interest which is required for a separate classification of members and also in what set of circumstances separate meetings are to be held under section 391 of the Act. Sub-sections (1) and (2) of section 391 read as under : "391. Power to compromise or make arrangements with creditors and members.-(l) Where a compromise or arrangement is proposed (a) between a company and its creditors or any class of them ; or (b) between a company and its members or any class of them ; the court may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the court directs. (2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, where proxies are allowed under the rules made under section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributors of the company ;" On perusal of the aforesaid, we think that what is envisaged under the provisions are two types of arrangement or compromise. One type of compromise or arrangement is such which may be between the company and its creditors as a whole or between its members as a whole ; and the other type of compromise or arrangement is such which is not between company and its creditors or members as a whole, but may be between the company and a class of creditors or between the company and a class of members. Where under any one single compromise or arrangement, different terms are offered to a separate class of creditors or separate class of members resulting in creation of different interests in respect of different class of creditors/shareholders, vis-a-vis the company, different interests come into existence or to say one single compromise ; may be an amalgamation of separate and independent settlement between the company and a distinct class of shareholders or the creditors, as the case may be. Sub-section (1) of section 391 envisages, on an application being made, issue of direction to 'meeting of the creditors or class of creditors or the members or class of members as the case may be'. Likewise, sub-section (2) provides when the scheme becomes binding on all. 23. Sub-section (1) of section 391 envisages, on an application being made, issue of direction to 'meeting of the creditors or class of creditors or the members or class of members as the case may be'. Likewise, sub-section (2) provides when the scheme becomes binding on all. 23. It provides, firstly, that in the meeting held in pursuance of directives issued under section 391(1) it should be agreed to by a majority in number representing three fourth in value of creditors or class of creditors or member or class of members, as the case may be, and after such agreement if sanctioned by the court, such compromise or arrangement shall be binding on all the creditors or all the creditors of class, all the members or all the members of class, as the case may he. 24. In our opinion, a plain reading of the section does not leave any doubt that only where separate terms are offered to separate class of shareholders or creditors under the proposed compromise or arrangement, separate meetings are required to be held in respect of each class of creditors or shareholders for whom separate compromise or arrangement has been offered. Otherwise, use of phrase 'as the case may be' in sub-section (1) for the purpose of holding separate meetings and in sub-section (2) of section 391 of the Act for the purpose of agreeing with the proposed scheme by requisite majority and its binding effect on being sanctioned by the court, would be superfluous. If in any given case, where compromise or arrangement has been proposed between the company and creditors as a whole without conferring or spelling out different terms for different class of creditors or between the company and its members as a whole without giving any separate package for different class of members, separate meeting of different class of members was required to be held, the phrases 'as the case may be' for the purpose of ordering a meeting of creditors or a class of creditors or of the members or class of members or requirement of a majority representing the requisite value of creditors or class of creditors or members or a class of members, as the case may be, would carry no meaning. Whatever may be the case, if the contention of the learned counsel for the objector is to be accepted, whether compromise is one confined to a class of members or to a body of members as a whole would make no difference and in each case, separate meeting will have to be called for only a class of members irrespective of the fact whether scheme affects the class differently or not. Or, in a given case, no compromise or term is offered to a particular class of shares but may be confined to one or more than one class of shares. Therefore, before adverting to the question whether the appellant objector constitute a separate class of shareholders or not, it has to be seen whether any different terms have been offered to different class of creditors or members and whether any classification of members is required to be made in accordance with those distinction in terms of compromise offered to them and whether any such separate meeting was required to be called. The classification of members or creditors will be founded on the basis of difference in terms offered under the scheme. The difference in terms of the scheme can be only criterion for identifying the separate class for the purpose of convening separate meeting for such class. 25. It is not even the case of the shareholder objector that any different terms have been offered to persons holding share affected by the family arrangement or otherwise. In fact, the entire proposal is one affecting in like manner all the existing shareholders of the petitioner company, namely, that under the proposed scheme, the M. Fine shall be amalgamated with the MIL and in consideration of such amalgamation with the petitioner company, the petitioner company shall make the members of the transferor company participants in its share capital by issuing two shares of MIL in lieu of five shares of the M. Fine to the members of the M. Fine or in substance the business of the M. Fine shall be acquired by the MIL for consideration which is equal to the conversion of five equity shares of transferor company with two equity shares of the transferee company. That is to say, instead of paying cash to the transferor company, the consideration shall be paid in terms of issue of share capital to the members of transferor company directly in the aforesaid ratio. That will be so because on amalgamation, transferor company M. Fine shall cease to exist. We have not been able to apprehend how these terms operate distinctly or differently for one shareholder from another shareholder of the MIL vis-a-vis the interest/rights of the company and its shareholder. Whatever may be the personal interest of the individual shareholder may affect pattern of voting. If the personal interest of the shareholder or personal ambitions of the individual shareholder constitute a different interest requiring separate classification, then each shareholder irrespective of terms of the scheme would constitute a class by himself, because interest of each shareholder in that sense would be different from others and such interest would be affected differently on the scheme being approved and implemented. The tact that the petitioner objector and other members of Mafatlal family are holding substantially large number of shares which hitherto before were controlling the MIL because they were acting in unison having now fallen apart and having their interest in conflict with each other is wholly irrelevant for the purpose of conferring status of distinct class to any such member so long as under the scheme, they are not treated differently. Any other view will lead to stale and chaotic result. Ought one know that (those) who stand today apart may be united tomorrow and vice versa those in conflict may unite. If such interest simpliciter were to be relevant consideration for treating then a separate class, any private dispute between joint shareholders or group of shareholders about distribution of legacy would result in conferring the distinction of a separate class on each of the contesting claimants. That in our opinion, has no place in the scheme of provisions. Class of creditors or members envisaged under section 391 is directly related to interrelationship between the company and the shareholder on the basis of rights and obligations attached to the class of shares issued and such rights being affected by the proposed scheme of arrangement or compromise differently and not personal rights of the holders of shares emanating from their right of inheritance or personal contracts between themselves. Who is on Board of a company or is in the driver's seat in controlling the affairs of a company is not a part of proposed scheme or no special rights are attached to any shareholder, but is a result of democratic functioning of the body of shareholders electing its Board. 26. What constitutes a class of members or a class of creditors, in the context of the provisions of section 391 of the Act, is not defined under the statute. But, as discussed above, it is obvious from the scheme of (the) provision itself that, in order to be treated as separate class of members or creditors claiming a right to hold a separate meeting for the purpose of approving the proposed compromise scheme or arrangement by requisite majority, it must be such which is to be treated differently under the scheme in its implementation or intended effect of the scheme or such interest. 27. In Pahner's Conrhanit Law 24th Edition, the principle. which is germane for constituting a separate class of members of creditors requiring a meeting in pursuance of the directions of the court under the English law, has been enunciated thus - "What constitutes a class The court does not itself consider at this point that classes of creditors or members should he made parties to the scheme. This is for the company to decide, in accordance with what the scheme purports to achieve. The application for an order for meetings is a preliminary step, the applicant taking the risk that the classes which are fixed by the judge, unusually on the applicant's request, are sufficient for the ultimate purpose of the section, the risk being that if in the result, and we emphasise the words in the result' they reveal inadequacies, the scheme will not be approved'. It e.g. rights of ordinary shareholders are to be altered, but those of preference shares are not touched, a meeting of, ordinary shareholders will be necessary but not of preference shareholders. If there are different groups within a class, the interests of which are different from the rest of the class, or which are to be treated differently under the scheme, such groups must be treated as separate classes for the purpose of the scheme. If there are different groups within a class, the interests of which are different from the rest of the class, or which are to be treated differently under the scheme, such groups must be treated as separate classes for the purpose of the scheme. Moreover, when the company has decided what classes are necessary parties to the scheme, it may happen that one class will consist of a small number of persons who will all be willing to be bound by the scheme. In that case it is not the practice to hold a meeting of that class, but to make the class a party to the scheme and to obtain the consent of all its members to be bound. It is, however, necessary for at least one class meeting to be held in order to give the court jurisdiction under the section." (emphasis supplied), From the aforesaid, it is clear that what is the primary importance for the purpose of constituting a class requiring a separate meeting thereof, is different treatment given to a group under the proposed scheme. No separate classification is required until a group is treated differently under the scheme. The illustration clarifies the position transparently that where rights of ordinary shareholders are to be altered but those of preference share are not touched, a meeting of ordinary shareholders alone is required but not of preference shareholders. If amongst the ordinary shareholders, some group is to be treated differently than the other group, that too, within the class of ordinary shareholders separate meeting may have to be held for the purpose of binding different interests which are treated differently under the scheme. The term of 'any interest treated differently under the scheme' is important. The fact that the shareholders members of the same class, offered same terms under the scheme perceive their interest or consider that their interest may be affected differently from others because of their interrelationship or their interests other than as shareholder simpliciter, cannot sustain their claim to constitute as a class distinct from others. Such interest is to be taken care (of) by way of expressing their views and voting during the course of meeting. Such interest is to be taken care (of) by way of expressing their views and voting during the course of meeting. If that were not so, all interests were to be identical and if anybody has any interest apart from being treated differently under the scheme, likely to be affected in different manner because of personal circumstance of holder of shares or creditor as the case may be on account of consequences of the scheme but not on account of terms of treatment under the scheme, would lead to whole provisions unworkable inasmuch as every person claiming his interest to be adversely affected by the proposed scheme on that account will have to be treated differently resulting in classification of groups having identical interest and identical response to the scheme. 28. A great deal of reliance was placed by the learned counsel for the appellant on to judgments in the cases of Sovereign Life Assurance Co. v. Dodd, reported in (1892) 2 QB 573 (CA) and Hellenic and General Trust Ltd., Re reported in (1976) 1 WLR 123 (Ch D). 29. However, a close reading of two judgments, in our opinion, does not lead to a different conclusion, rather it fortifies the conclusion to which we have reached. 30. In Sovereign Life Assurance Co., supra, Mr. Dodd had taken two policies of life insurance against his own life from the company according to which if Mr. Dodd was alive on the date, namely, 7 May, 1889, date of maturity, they would pay the money assured to Mr. Dodd. Mr Dodd had paid all premia payable by him. He had also obtained two separate loans against each policy from the company. During this period, a petition for winding up of the company was presented. During the pendency of that winding up petition, the policy matured and amount became payable under that policy to the assured, which was not paid to Mr. Dodd. He had also obtained two separate loans against each policy from the company. During this period, a petition for winding up of the company was presented. During the pendency of that winding up petition, the policy matured and amount became payable under that policy to the assured, which was not paid to Mr. Dodd. After the policies had become matured and the claims under them had crystallised in July, 1889, in the first instance, winding up order was made and thereafter arrangement under Joint Stock Companies Arrangement Act, 1870, was entered into between the plaintiff company and another company under which it was agreed that the plaintiff company shall be transferred to another company ; in lieu thereof, all the holders of the policies shall accept certain reduced payments from the transferee company which was approved by a majority of shareholders. Mr. Dodd did not assent to the arrangement. After the scheme was sanctioned, the plaintiff company filed a suit against Mr. Dodd for recovery of two loans raised against two policies taken out by him. In defence, Mr. Dodd claimed full amount payable under the policy as set off which but for winding up would have been payable to him upon the policies. The plaintiff company put forward the said arrangement to negative the claim of set off. It is under these circumstances when the matter reached the Court of Appeal. Bowen, J. in his judgment concurring with Lord Esher, M.R., stated thus : "If we are to construe the section as it is suggested on behalf of the plaintiffs, it ought to be construed we should be holding that a class of the policyholders whose interests are uncertain may by a mere majority in value override the interests of those who have nothing to do with futurity, and whose rights have been already ascertained. It is obvious that these two sets of interests are inconsistent, and that those whose policies are still current are deeply interested in sacrificing the interests of those whose policies have matured. They are bound by no community of interest, and their claims are not capable of being ascertained by any common system of valuation. Are we, then, justified in so construing the Act of Parliament as to include these persons in one class ? They are bound by no community of interest, and their claims are not capable of being ascertained by any common system of valuation. Are we, then, justified in so construing the Act of Parliament as to include these persons in one class ? The word 'class' is vague, and to find out what is meant by it, we must look at the scope of the section, which is a section enabling the court to order a meeting of a class of creditors to be called. It seems plain that we must give such a meaning to the term 'class' as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest." (emphasis added)' It would be apparent from the aforesaid principle as applied to the facts of the case before the Court of Appeal, that the court clearly spelt out dissimilarity of interest vis-a-vis the scheme as existed between the holders of the policy then current requiring payment of future date of maturity, valuation of which could not be fairly ascertained on that date and interest of holders of policy, which on amalgamation have already been ascertained. Therefore, two sets of claims were quite dissimilar on the date when arrangement was being considered vis-a-vis their rights against the company. Therefore, it became necessary to decide whether scheme and arrangement proposed for it is fair and reasonable from ordinary business point of view. It was considered to be unreasonable that by calling a joint meeting of shareholders an unfair advantage was offered to majority in value, namely, those whose rights have not been ascertained to override the interests of those minority whose rights already stood ascertained against the liquidator of the company. It is apparent that classification of creditors into two classes, namely, holders of the policies that have been matured and holders of policies that are current are held to have adverse affect directly as result of scheme on their respective interests, because of state of things existing on the date of calling of the meeting in relation to rights and liabilities vis-a-vis company. 31. 31. A great deal of argument was advanced and emphasised on the basis of principle enunciated in Re Hellenic and General Trust Ltd. case [(1976) 1 WLR 123 (Ch D), supra. In order to appreciate the ratio of that decision, it would be necessary to notice briefly circumstances in which (the) question had arisen. 'Proposed arrangement was in respect of a company' Hellenic and General Trust Ltd.'. Under the arrangement, all the ordinary shares of the company were to be cancelled and new shares were to be issued to Hambros which would make the company as wholly owned subsidiary of Hambros. Holders of such cancelled shares were to be paid by Hambros at 48p. In short, it was an arrangement for taking over of the company by Hambros. 53.0`7 shares of the Hellenic company were held by another company MIT. MIT itself was a wholly owned subsidiary company of Hambros, the proposed acquirer of the company and the present shareholders were to go out of the Hellenic company. Under section 209 of the Companies Act, 1948, where the scheme of take over was proposed if the objectors to the scheme held shares of the value more than 10% of the subscribed capital notwithstanding approval by the 'remainder of the shareholders, they could not be coerced to sell out their interest and cannot be appropriated by the majority. But if it is a proposed arrangement between a company and its shareholders under section 206, notwithstanding the fact that objectors held shares more than 1017, in value if the scheme is proposed by necessary majority, notwithstanding objections the scheme can be sanctioned and binding on the minority. In this scenario, where majority of the shares in the company was held by wholly owned subsidiary of the acquirer of the company and the company had resorted to the provisions of section 206, instead of section 209, whereas in substance, the scheme was of take over of the company in its entirety. The National Bank which held 13.95% of ordinary shares voted against this scheme and objected to sanctioning of the scheme. We have noticed while discussing the scope and ambit of enquiry to be made by the court by considering whether sanction should be accorded or withheld. The National Bank which held 13.95% of ordinary shares voted against this scheme and objected to sanctioning of the scheme. We have noticed while discussing the scope and ambit of enquiry to be made by the court by considering whether sanction should be accorded or withheld. One of the fundamental considerations that the court must consider whether majority has been acting bona fide and to see that the minority is not being overridden by majority having interest clashing with the minority who seeks to coerce them. Noticing the facts of the case, the position of the MIT and its shareholders vis-a-vis scheme it was explained by Templeman, J., as under : "In the present case, on analysis Hambros are acquiring the outside shares for 48p. So far as the MIT shares are concerned, it does not matter very much to Hambros whether they are acquired or not. If the shares are acquired, a sum of money moves from parent to wholly owned subsidiary and shares move from the subsidiary to the parent. The overall financial position of the parent and the subsidiary remain the same. The shares and the money could remain or be moved to suit Hambros before or after the arrangement. From the point of MIT, provided MIT is solvent, the directors of MIT do not have to question whether the price is exactly right. Before and after the arrangement, the directors of the parent and the subsidiary could have been made the same persons with the same outlook and the same judgment. Mr. Heyman, on behalf of the petitioners, submitted that since the parent and subsidiary were separate corporation with separate directors, and since MIT were ordinary shareholders in the company, it followed that MIT had the same interests as the other shareholders. The directors of MIT were under a duty to consider whether the arrangement was beneficial to the whole class of ordinary shareholders, and they were capable of forming an independent and unbiased judgment, irrespective of the interests of the parent company. This seems to me to be unreal. Hambros are purchasers making an offer. When the vendors meet to discuss and vote whether or not to accept the offer, it is incongruous that the loudest vice in theory and the most significant vote in practice should come from the Wholly owned subsidiary of the purchaser. This seems to me to be unreal. Hambros are purchasers making an offer. When the vendors meet to discuss and vote whether or not to accept the offer, it is incongruous that the loudest vice in theory and the most significant vote in practice should come from the Wholly owned subsidiary of the purchaser. No one can be both a vendor and a purchaser and in my judgment, for the purpose of the class meetings in the present case, MIT were in the camp of the purchaser. of course, this does not mean that MIT should not have considered at a separate class meeting whether to accept the arrangement. But their consideration will be different from the considerations given to the matter by the other shareholders. Only MIT could say, within limits that what was good for Hambros must be good for MIT." (emphasis supplied by the court), From the above, it is clear in no uncertain terms that being in a position of wholly owned subsidiary company of Hambros, kirr had in fact placed itself in the position of purchaser of the company and only remaining shareholders were in a position to act as vendors of the company. Therefore, decision making process of two separate interest in the proposed scheme which was for acquisition of the company by Hambros stood out distinctly against each other vis-a-vis the scheme. Obviously, interest of purchaser and interest of vendor cannot be said to be subjected to the same treatment under the proposed scheme. Response to consideration by a person placed in the position of the purchaser of a company would be entirely different from a person placed in the position of the vendor vis-a-vis scheme. In either case, the consideration is qua interrelationship of the scheme towards the different interests of the vendor and the purchaser. Apart from this, very important consideration, which weighed in the facts and circumstances of the case, insofar as the present controversy before us is concerned, was that it being a scheme of acquisition was ordinarily required to be considered under section 209 and had an application been given under section 209, holders of the shares for the value of more than l0"/, of the total share capital of the company if opposed to the scheme could not be coerced to part with their interest in favour of the person seeking to acquire the company. But this right of the minority shareholders of requisite value and more was being sought to be defeated by a subterfuge adopted by the proposed scheme by having recourse to section 206. The court lifted the veil to disclose the real transaction and reached the conclusion that the scheme cannot be accorded approval, as it cannot be considered to be a reasonable and fair scheme. 32. Templeman, J., made this position further clear that question as to what forms a class different from others depends on facts and circumstances of each case when he said "The question, therefore, is whether Min', a wholly owned subsidiary of Hambros, formed part of the same class as the other ordinary shareholders. What is an appropriate class must depend upon the circumstances ..... .. Similar view was expressed by D.A. Desai, J., in a decision of this court rendered in Maneckchowk and Ahmedabad Manufacturing Co. Ltd., Re, reported in (1970) 2 Comp LJ 300 (Guj) : (1970) 40 Comp Cas 819 (Guj) where he observed : "It is always a moot question what constitutes a class". In Slater v. Darlaston Steel and Iron Co. (1877) WN 139, it was stated : "Where the right of the creditors concerned are not so dissimilar as to make it impossible for them to consult together with a view to their common interest, such creditors can be treated as a single class. It can only be decided in the circumstance of each case." 33. The sole claim of the appellant for constituting himself as separate class and other persons affected by the alleged family arrangement who constitute one class is founded not on any interrelationship between the appellant and other members of the Mafatlal family vis-a-vis the company, because no different treatment has been offered to them as ordinary shareholders or the so called controlling block held by the Mafatlal family, but because of the family disputes and in case the family arrangement is enforced on the members of the family, the objector may be placed in a stronger position to seek his claim for being put in the control of the company in a meeting of the shareholders who alone have a right to elect its board to manage the affairs of the company. The mere fact that because of expanded shareholding by one shareholder or by a group of shareholders taken together stand better chances of being elected to the management of the company, does not confer upon the holders of the shares of the same class a different status other than the shareholders of the same class unless on the ground of that shareholding, different treatments are offered to such shareholders. This alone is sufficient to reject this objection of the appellant and the subsidiary contentions raised on that basis, inasmuch as the scheme of amalgamation was between the company and its members as one whole class. No separate terms were offered or withheld on the basis of interest claimed by the objector. No separate classification of shareholder was required to be made for the purpose of the scheme consequently no separate meeting of them was required to be convened. Projected conflicting interest of Miheer H. Mafatlal as a result of family dispute between him and the other members of Mafatlal family could not confer the status of a separate class on the members of Mafatlal family for the purpose of requiring a separate class meeting under the aforesaid provision. We, therefore, affirm the finding of the learned Company Judge in respect of this objection, though for different reasons. Since we have come to the conclusion that an objector by himself or along with other members of Mafatlal family affected by the alleged family arrangement do not constitute a separate class in relation to the proposed scheme of amalgamation, we do not wish to further examine the alternative argument that if they are held to be separate class, what would have been (the) effect on the outcome of the meeting held on 22 January, 1994. 34. Mr. Shah urged that the circumstances reveal that Mafatlal's were having controlling interest in the MIL and M. Fine, therefore, they have a distinct interest in the scheme, to be treated as a class for the purpose of separate meeting. This contention has been stated to be rejected. Firstly, this contention was raised before the learned single Judge, and we find no reason to permit this ground to be raised in appeal for the first time. Secondly, on the merit also, we do not find any substance in it. This contention has been stated to be rejected. Firstly, this contention was raised before the learned single Judge, and we find no reason to permit this ground to be raised in appeal for the first time. Secondly, on the merit also, we do not find any substance in it. What is a controlling interest, is not a term of statute, but is of business determination of which depend upon multiple and varying factors in each case. Neither the statute, nor the articles of association nor the scheme provide any distinction between rights, privileges, duties and obligation attached to shares held by one person termed as investor and other treating himself to be having a controlling interest. Company is a separate juristic person independent of its shareholders. The body of shareholders in accordance with statutory provisions and articles of association governing the affairs of company decides who are the persons to govern the company. That is the legal position. If the person or group of persons so, for the time being, in charge of affairs of the company thinks company to be its property, it cannot be given a judicial recognition. For the reasons already discussed above, in the context of the scheme, we do not find any substance in the contention to treat so called controlling interest of Mafatlal family to confer upon the members a separate classification as shareholders, unless a separate or different treatment is offered to such interest under the proposed scheme. 35. Another objection regarding statutory requirements of holding meeting of members or class of members, creditors or class of creditors, for seeking approval of required majority in terms of section 391(2) for the proposed scheme of amalgamation, was that those financial institutions and creditors who hold duel capacity, being in position of shareholders as well as creditors constitute separate class of members but no such separate meeting of them has been held. Also no meeting of the creditors of the company who are vitally affected by the scheme of amalgamation has been called. Therefore, the scheme must not be sanctioned for want of compliance of statutory requirements. 36. This plea was not raised before the learned single Judge. Had such objection been raised at that time, and found favour, the effect would have been given to it by directing a meeting of such class of members and creditors to be held before proceeding further. 36. This plea was not raised before the learned single Judge. Had such objection been raised at that time, and found favour, the effect would have been given to it by directing a meeting of such class of members and creditors to be held before proceeding further. It maybe recalled that the objector appellant himself did not participate in the meeting of the members but has rest contented by making representation through proxy, when meeting of the members was called. Having lost that opportunity, he did not raise this objection before the learned single Judge at any time. The objection as to proper classification of members for purpose of holding meeting is not a pure question of law but a question about the classification on existence of certain facts. Such objection, in our opinion, cannot be allowed to be raised for the first time. 37. Moreover, grudge, if any, about not holding a separate meeting of such dual interest and a separate meeting of creditors of the company can be held by a member of such class. But no one holding such interest has chosen to come forward raising a complaint at any time. On the contrary, from the minutes of meeting, it is apparent that such creditor members have participated in meeting and favoured the scheme. 38. On merit also, we are not satisfied about the validity of the objection. So far as the classification on the basis of dual interest is concerned, it may be noticed that classification of members or creditors for the purpose of group as a separate class for the purpose of section 391 is directly related to the fact whether such interests have been differently treated in the matter of offerings under the scheme. If no such separate terms are offered with respect to those interest, the fact because of existence of interests other than as a shareholder their perception about the effect of scheme on their interests in totality may be different from other shareholders does not require them to be classified separately. Such different perception, because of existence of other interest, may affect the decision of shareholders as members of the company whether to agree or disagree with the proposed scheme but no claim can rest on that basis for separate class meeting. Such different perception, because of existence of other interest, may affect the decision of shareholders as members of the company whether to agree or disagree with the proposed scheme but no claim can rest on that basis for separate class meeting. It is for the individual member to weigh the scheme vis-a-vis its effect on his interest as shareholder as creditor or dealer with the company in any other capacity or with respect to any other interest which the shareholder may be having to reach his own conclusion whether for him the scheme is such to which he would agree or not. It is not envisaged that he should keep out of consideration while according approval or disapproval in the scheme, his other interest. For the purpose of convening separate meeting for different classes of members, the company is to be guided by the existing interests which are proposed to be affected differently under the terms of the proposed scheme. The company is not concerned with the individual interests which shareholders may be holding in addition to the interest as a shareholder for whom the scheme is proposed. 39. The appellant argued that as under the scheme of amalgamation, assets and liabilities of the transferor company vest with the transferor company, MIL, it shall definitely affect the interest of creditors inasmuch as on such transfer, the overall financial position of the company and its assets evaluation is likely to affected. For raising this contention, learned counsel for the appellant also required us to examine and go through the arithmetic calculation of evaluation of certain assets and existing liabilities pointing out that there are discrepancies in the ratio of book value and market value of the assets of two companies affecting the assets liability ratio of transferor company as well on the implementation of the scheme. It was also pointed out that as debt equity and debt servicing ratio has direct hearing on debt security, the two companies concerned have different debt equity and debt servicing ratio and, on amalgamation, that would be different with new company. Hence, meeting of creditors was necessary. Firstly, in our opinion, the appellant does not have necessary locus to raise this issue. Hence, meeting of creditors was necessary. Firstly, in our opinion, the appellant does not have necessary locus to raise this issue. Secondly, prima facie, we are of the view that, on its own saying, the appellant is not able to show that the net worth of the transferor company is negative resulting in additional burden on transferee company and its assets to discharge the liabilities of the transferor company. 40. Notwithstanding all the discrepancies pointed out by the learned counsel for the appellant, the net worth of the transferee company remains in surplus meaning thereby the assets of the transferor company are more than the liabilities to be discharged by it. Therefore, on implementation of the scheme, no additional burden comes to be shouldered by the petitioner company. If that be so, prima facie, the interest of the creditors of the MIL are not being affected. We are not concerned with the creditors of the transferor company here. In the case of transferor company, as liability is sought to be transferred to a third party, the position may be different. But, as noticed, the proposed scheme on behalf of the transferor company has already been approved by appropriate court. 41. Moreover, the proposed scheme of amalgamation is more in the nature of acquiring running business of transferor company for consideration to be paid in the form of proposing the members of the vendor company to participate in the share capital of the acquiring company. If, without indulging in the scheme of amalgamation, the petitioner company had resorted to outright purchase of the running business of transferor company on payment of same amount of consideration, in our opinion, no approval of its creditors was required to he obtained before entering into such transaction with the arrangement that the acquisition of business may ultimately result in lower profitability or injuries to the health of the company, for entering into such business transaction, as a business proposition, ordinarily, the consent of the existing creditors is not needed. Without pursuing this point any further, we leave it at that. 42. Without pursuing this point any further, we leave it at that. 42. Another ancillary issue, which had been raised by the objector in respect of fulfilment of statutory requirement of requisite majority, relates to participation of shares allotted to Nocil and Sushrupad Investment (P) Ltd. and others, because shares were illegally allotted to them contrary to the interim relief granted by the City Civil Court, Ahmedabad, in Civil Suit Nos. 3181 and 3182 of 1987 from amongst rights shares offered at that time. 43. So far as this appeal is concerned, it must not detain us much. The learned Company Judge has found that the shares were allottee to NoCIL and Sushrupad Investments (P) Ltd. from the rights issue of 1987 contrary to the operative order of the City Civil Court, Ahmedabad, referred to above, and were not entitled to participate. However, he came to the conclusion that even after such illegally allotted shares are kept out of consideration, still there is no shortfall in the requisite majority according approval to the proposed arrangement and, therefore, such illegality had not affected the fulfilment of statutory requirement in that regard. The learned counsel for the appellant candidly stated that if appellant's plea about treating the appellant as well as other members of Mafatlal family affected by the alleged family arrangement cannot be treated as separate class for the purpose of calling a meeting, this conclusion of the learned Company Judge is not assailable. As noticed earlier, the finding about allotment of shares to NoCIL and Sushrupad Investments (P) Ltd. out of the rights issue of 1987 in breach of injunction and its effect on validity of such allotment have been challenged by the company through separate cross-objection which we shall deal with separately. 44. As we have reached conclusion that Miheer and other members of Mafatlal family, affected by alleged family arrangement do not constitute a separate class for the purpose of section 391, entitling them for separate meeting vis-a-vis the proposed scheme, nor the separate meeting of creditors or financial institutions was required to be held., the challenge to the proposed scheme for want of statutory majority is not sustainable. 45. Regarding disclosures which are required to be made under the statutory provisions, petitioner had raised two-fold arguments before us. 45. Regarding disclosures which are required to be made under the statutory provisions, petitioner had raised two-fold arguments before us. The first argument relates to non-disclosure of materials required to be disclosed to shareholders in terms of section 393(1) of the Companies Act. It was argued that, firstly, under the said provision, true and complete disclosure is required to be made of all material facts relating to MIL and M. Fine to all members and creditors of the company of the terms of compromise or arrangement and explaining its effect on their interests, to place them in a position to exercise an intelligent judgment as a prudent businessman as to whether they should go in favour of the scheme or against it. The second limb of (the) argument is that apart from the disclosure of material facts about the scheme and its effect on respective interests affected thereby, the company is under further obligation to state any material interest of the directors, managing directors, secretary and treasurer or manager of the company, whether in their capacity as such, or members or creditors of the company, or otherwise, and the effect of scheme of such interest of these persons insofar as the same is different from the effect on the like interests of other persons. 46. Regarding first limb of the argument, it was urged that the creditors and shareholders of the company were not informed by material disclosures the detailed objects of the scheme and the effect of these objects on the functioning of the company. It was also urged that only a bare statement of general description of the purported objects of the scheme have been stated in the explanatory note attached to the notice of the meeting without showing as to how the-same are likely to be achieved and what will be the benefit of alleged objects for the company, nor has it been disclosed as to what steps have been taken for achieving such objects. The second limb of contention concerns the interests in the scheme, which the Chairman, Arvind N. Mafatlal, and director, H.A. Mafatlal, had in the scheme, apart from as a mere shareholder. The second limb of contention concerns the interests in the scheme, which the Chairman, Arvind N. Mafatlal, and director, H.A. Mafatlal, had in the scheme, apart from as a mere shareholder. Because the scheme has direct effect on the working of the alleged family arrangement about which there is a dispute between A.N. Mafatlal and his family, on one side, and the objector, on the other side, both of whom held substantial shares, and have substantial interest in the two companies affected by amalgamation, such interests having not been disclosed along with the details about the pending litigation in that regard, has resulted in non-compliance of the statutory provisions. Section 393 of the Act reads as under : "393. Information as to compromises or arrangements with creditors and members.- (1) Where a meeting of creditors or any class of creditors, or of members or any class of members, is called under section 391, (a) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect, and in particular, stating any material interests of the directors, managing director, or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interests, of the compromise or arrangement, if, and insofar as, it is different from the effect on the like interests of other persons; and (b) in every notice calling the meeting which is given by advertisement, there shall be included either such a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of such a statement as aforesaid. (2) Where the compromise or arrangement affects the rights of debenture holders of the company. the said statement shall give the like information and explanation as respects the trustees of any deed for securing the issue of the debentures as it is required to give as respects the company's directors. (2) Where the compromise or arrangement affects the rights of debenture holders of the company. the said statement shall give the like information and explanation as respects the trustees of any deed for securing the issue of the debentures as it is required to give as respects the company's directors. (3) Where a notice given by advertisement includes a notification that copies of a statement setting forth the terms of the compromise or arrangement proposed and explaining its effect can be obtained by creditors or members entitled to attend the meeting, every creditor or member so entitled shall, on making an application in the manner indicated by the notice, be furnished by the company, free of charge, with a copy of the statement. (4) Where default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees, and for the purpose of this sub-section, any liquidator of the company and any trustee of a deed for securing the issue of debentures of the company shall be deemed to be an officer of the company : Provided that a person shall not be punishable under this sub-section if he shows that the default was due to the refusal of any other person, being a director, managing director, manager or trustee for debenture holders, to supply the necessary particulars as to his material interests. (5) Every director, manager director, or manager of the company, and every trustee for debenture holders of the company shall give notice to the company of such matters relating to himself as may be necessary for the purposes of this section, and if he fails to do so, he shall be punishable with fine which may extend to five hundred rupees." 47. It is to be seen that first formal step for bringing in existence any binding compromise or arrangement in terms of section 391, is moving the court by an application either by the company or by any creditor or member of the company or in case of a company which is being wound up by liquidator of such company. It is to be seen that first formal step for bringing in existence any binding compromise or arrangement in terms of section 391, is moving the court by an application either by the company or by any creditor or member of the company or in case of a company which is being wound up by liquidator of such company. On such application, court is to order a meeting of creditors or class of creditors or of the members or class of members, as the case may be, to be held and conducted in such manner as the court directs, for the purpose of considering the proposed compromise or arrangement and accord its approval by the requisite majority or reject it. It is in aid of this first process that notice of meeting is to be issued. When notice calling the meeting is issued, statutory obligation has been cast upon the company that a statement setting forth the terms of compromise or arrangement and its effect be disclosed to the members and creditors. Obviously, without any such information, there cannot be any effective deliberation about the approval or rejection of the scheme by the creditors or members affected by the scheme. The question, however, is to what extent this obligation extends and in case of any breach, what is its effect. It now stands firmly established by catena of decisions that compliance of this provision is mandatory before meeting can consider a scheme of compromise or arrangement, and it is accorded approval by the court. The court must be satisfied that a statement showing compliance with the section is annexed to the notice convening the meeting required to be held and conducted under section 391. 48. Statement annexed to the notice of meeting, pointed out the capital structure of the two companies in first two paragraphs. In paragraph 3, it was stated that proposed amalgamation is to enable the carrying on of the combined business more economically and advantageously which would lead to substantial benefits in view of synergy of operations. The amalgamation of both the companies would give improved capital structure which would lend better flexibility in capital gearing which would enable the amalgamated company to raise required finance at (on) better terms. The amalgamation of both the companies would give improved capital structure which would lend better flexibility in capital gearing which would enable the amalgamated company to raise required finance at (on) better terms. A larger company would generate more confidence in the investors and with the persons dealing with the company and will afford access to resources easily and at lower costs. The amalgamation of M. FINE with MIL will pave the way for better, more efficient and economical control in the running operations and would lead to economy in the administrative and management cost, resulting in improving profitability. The amalgamated company will have strong and large resource funds. The combined technological, managerial and financial resources would enhance the capability of the amalgamated company to invest in larger and sophisticated projects to ensure rapid growth. The amalgamated company's textiles division with the five operative units at its disposal will have flexibility in its operations. 49. In para 4, the statement refers to the obtaining opinions from C.C. Chokshi and Co. and ICICI Securities and Finance Co. Ltd. (I-Sec.) for the purpose of ascertaining the fair and reasonable basis of amalgamation. The salient features of the scheme were stated thus in para 5 : "(a) The entire business, undertaking and assets of MF as also its debts, liabilities, contracts, duties and obligations will vest in and transferred to MIL without any further act or deed by the order to be made by the High Court as provided under section 394 of the Companies Act, 1956. (b) The scheme of amalgamation when sanctioned by the Bombay High Court and the Gujarat High Court will take effect from the 1st day of April, 1933 (1993 ?). (c) On the amalgamation of M. Fine with MIL, all the 12,06,914 ordinary shares in M. Fine held by MIL shall stand cancelled without any further act or deed. (d) On completion of requisite formalities of the amalgamation, MIL shall issue and allot 2 equity shares of Rs. 100 each credited as fully paid in respect of every 5 ordinary shares of Rs. 100 each held by members of M. Fine. MIL shall make provision for issue and consolidation of fractional certificates or for payment of pro rata cash value for any fractional entitlement that may arise in implementing the scheme as explained in the said scheme. 100 each credited as fully paid in respect of every 5 ordinary shares of Rs. 100 each held by members of M. Fine. MIL shall make provision for issue and consolidation of fractional certificates or for payment of pro rata cash value for any fractional entitlement that may arise in implementing the scheme as explained in the said scheme. This would result in issue and allotment of 7,06,096 equity shares of Rs. 100 each by MIL. MIL shall also issue and allot effective 1st October, 1994, 70,848 equity shares of Rs. 100 each credited as fully shares corresponding to 1,77,120 ordinary shares of Rs. 100 each required to be issued by MF in discharge of its guarantee obligations to the said financial institutions and banks. (e) The respective Boards of directors of M. Fine and MIL will be at liberty to accept and to assent to any modification whatsoever in the said scheme of amalgamation which the respective Hon'ble High Courts while sanctioning the said scheme may direct to be made therein. (f) In order to give effect to the said scheme of amalgamation when approved by the requisite majority of the members of both the companies at their respective meetings and sanctioned by the respective High Courts, MIL will take the necessary steps to issue equity shares of Rs. 100 each for being allotted to the members of M. Fine on the basis mentioned earlier. What is stated above is not the complete scheme and the members are advised to read a copy of the scheme of amalgamation, which is enclosed." 50. Copy of detailed scheme was annexed. Proposed issue of bonds of US $ 100 each by N9IL was also disclosed. In the notes it was stated that copies of balance sheets and profit and loss accounts of the last five accounting years of the two companies, agreements entered between M. Fine and Shri H.A. Mafatlal, Managing Director, Shri P.R. Amin, Executive Vice-President, Shri Prem Malik, Executive Vice-President, the report dated 10.11.1993 of C.C. Chokshi and Co. on fair basis of scheme of amalgamation and the opinion letter dated 10.11.1993 of ICICI Securities and Finance Company Ltd. amongst certain other documents were stated to be available for inspection to the members at the registered office of the company on any working day between 2.00 to 4.00 P. M. 51. on fair basis of scheme of amalgamation and the opinion letter dated 10.11.1993 of ICICI Securities and Finance Company Ltd. amongst certain other documents were stated to be available for inspection to the members at the registered office of the company on any working day between 2.00 to 4.00 P. M. 51. On the aforesaid premises, the material contention of the objector appellant before the learned single Judge has been that MIL has not disclosed certain facts which included the family dispute between Arvind N. Mafatlal and his family, on the one hand, and the objector appellant, on the other hand, vis-a-vis the shares held by them in various capacities which was the subject matter of the alleged family members referred to above (sic) including pending suits and interim orders passed therein and that the scheme of amalgamation circulated amongst the shareholders contained no details of balance sheets of the two companies which were proposed to be amalgamated. In the absence of such material, the shareholders could not exercise intelligent decision and also that the company has not disclosed that compared to investments made by MIL in shares and stocks, the investments made by MF in shares and stocks had not appreciated and, in fixing the fair exchange ratio, book value of investments have been relied on, disclosure of which fact was material which has not been disclosed. 52. Before us also, same arguments have been advanced. In addition, it has also been urged that the creditors and shareholders were not informed about the objects except a bare statement of general description of the purported objects of the scheme without showing the basic material on which the expected benefits are founded, how the same are to be achieved and what will be the benefits of the alleged objects for the company. 53. Learned counsel for the appellant had taken us in great detail about the working of the two companies prior to the proposed amalgamation and working of the two companies since the proposed date of amalgamation as well as the details in the working of the exchange ratio offered in the proposed scheme to support his contention with all these details were required to be disclosed to the shareholders without which members could not have taken an intelligent decision as a prudent businessman for according or withholding their consent to the scheme. To say, in other words, the objection about non-disclosure in terms of section 393(1) about the terms of proposed scheme is that the explanatory statement attached to the notice did not furnish the detailed material and analysis on the basis of which scheme has been proposed, the detailed working out of the exchange ratio had not been disclosed and method and manner of future working to attain the proposed object were also required to be explained in the explanatory statement. We are not referring to such details in as much as, in our opinion, for the reasons to be stated hereinafter it is not necessary to do so. In the first place, the requirement of section 393(1)(a) is that any person required to be invited to the meeting must be furnished with a statement setting forth the terms of compromise or arrangement and explaining its effect. It is not required to state the foundation on the basis of which the terms of the compromise or arrangement has been worked out. Explaining its effect could only mean that, on the implementation of proposed compromise or arrangement, to what extent, the existing interest of shareholders or the creditors is going to be affected on the basis of those terms. It is nowhere required to be stated in explanatory note as to how and in what manner on amalgamation being effected, the proposed scheme shall be executed in future to achieve the projected benefits or gains in the scheme. Learned judge after detailed discussion of the requirement envisaged under section 393(1) and referring to decisions in Kalinga Tubes Ltd. v. Shanti Prasad Jain (1964) 1 Comp LJ 117 (Ori) : AIR 1963 Ori 189 ; S. M. Ganpatram v. Shri Sayaji Jubilee Cotton and Jute Mills Co. Ltd. (1964) 1 Comp LJ 326 (Guj) : (1964) 34 Comp Cas 777 (Guj) ; Re, Maneckchowk and Ahmedabad Manufacturing Co. Ltd. (1970) 2 Comp LJ 300 (Guj) : (1970) 40 Comp Cas 819 (Guj) ; Khandelwal Udyog Ltd. and Acme Mfg. Ltd. (1964) 1 Comp LJ 326 (Guj) : (1964) 34 Comp Cas 777 (Guj) ; Re, Maneckchowk and Ahmedabad Manufacturing Co. Ltd. (1970) 2 Comp LJ 300 (Guj) : (1970) 40 Comp Cas 819 (Guj) ; Khandelwal Udyog Ltd. and Acme Mfg. Ltd. (1977) 47 Comp Cas 503 (130m); United Bank of India v. United India Credit and Development Company Ltd. (1977) 47 Comp Cas 689 (Cal) ; Suri and Nayar Limted, In re (1995) 5 Comp LJ 183 (Kam) : (1983) 54 Comp Cas 868 (Karn) ; Jitendra R. Sukhadia v. Alembic Chemical Works (1987) 3 Comp LJ 141 (Guj) : (1988) 64 Comp Cas 206 (Guj); Sidhpur Mills Co. Ltd. In re, AIR 1962 Guj 305 has succinctly stated principle culled out from ratio laid down in the aforesaid cases as under [see Mafatlal Industries Ltd., In re (1995) 5 Comp LJ 38 (Guj), at page 1601 : "The statement under this section should incorporate only specified items such as terms of compromise or arrangement and must explain the terms of such compromise, arrangement or amalgamation. It is quite clear that what has got to be explained are not the details of the scheme, but the effect which the scheme will have obviously on such terms as to the welfare of the company and the welfare of the shareholders or creditors for whose interest the scheme purports to be. The word 'effect' means consequence, the condition which arises as a result of certain cause of action. If there is anything in the scheme or compromise or arrangement which is not quite obvious to a person reasonably acquainted with the facts of the case by merely reading the terms of the scheme, then a duty is cast upon the persons concerned to mention what the consequences will be if the scheme is approved. In other words, it is only the consequence or the result which has got to be explained which would arise on account of the approval of the scheme." (emphasis supplied by the court)' 54. We are in agreement with this conclusion. It relates to the requirement to be incorporated in the statement to be annexed to the notice about the terms of proposed compromise or arrangement and its effect on the interest of members or creditors as such, as the case may be. We may not repeat the detailed discussion made by the learned single judge. It relates to the requirement to be incorporated in the statement to be annexed to the notice about the terms of proposed compromise or arrangement and its effect on the interest of members or creditors as such, as the case may be. We may not repeat the detailed discussion made by the learned single judge. However, we would like to add that in the case of Jitendra R. Sukhadia v. Alembic Chemical Works (1987) 3 Comp L) 141 (Guj), supra, the issue was raised like in the present case that while the statement of case mentioned the proposed exchange ratio, it did not disclose the details how the exchange ratio has been worked out which could enable the intelligent shareholders to take a decision as a prudent businessman would take about the reasonableness and fairness of the proposed terms offered under the scheme. This court reached the conclusion that the exchange ratio of the shares of the two companies which were to be amalgamated had to be stated alongwith the notice of the meeting. How this exchange ratio was worked out however was not required to be stated in the statement contemplated under section 393(1)(a). The ratio was approved by Supreme Court in Hindustan Lever Employees' Union v. Hindustan Lever Ltd. and others reported in (1994) 4 Comp LJ 267 (SC). In this connection, the Supreme Court further explained that the nature of jurisdiction by the court, while considering the question of sanctioning a scheme of arrangement or compromise is of sentinel nature and is not of appellate nature to examine the arithmetical accuracy of scheme approved by majority of shareholders. While considering the sanction of a scheme of merger, the court is not required to ascertain with mathematical accuracy the terms and targets set out in the proposed scheme. What is required to be evaluated is general fairness of the scheme. The contention raised was that High Court in exercise of the sentinel nature of jurisdiction in companies matters is expected to act as a guardian of interest of the companies, the members and the public. Complaint was made in the appeal that the High Court has failed to exercise its jurisdiction in that way but was swayed by considerations which were neither legal nor relevant. Complaint was made in the appeal that the High Court has failed to exercise its jurisdiction in that way but was swayed by considerations which were neither legal nor relevant. In making this contention with great vehemence, it was pointed out that exchange ratio was not correctly determined by placing before the court comparative figures of the assets of the two companies, their market value, their holdings in the market etc. Rejecting the-plea, the court said [see Hindustan Lever Employees' Union v. Hindustan Lever Ltd. and others (1994) 4 Comp LJ 267 (SC), at page 275, para 3] : "But what was lost sight of (was) that the jurisdiction of the court in sanctioning a claim of merger is not to ascertain with mathematical accuracy if the determination satisfied the arithmetical test. A company court does not exercise an appellate jurisdiction. It exercises a jurisdiction founded on fairness. It is not required to interfere only because the figure arrived at by the valuer was not as better as it would have been if another method would have been adopted. What is imperative is that such determination should not have been contrary to law and that it was not unfair for the shareholders of the company which was being merged. The court's obligation is to be satisfied that valuation was in accordance with law and it was carried out by an independent body." On the facts of the case the court found that the proposed scheme was approved by more than 99% of the shareholders and the grievance voiced by the objector was not shared by them. The objection was raised by the objector on the availability of same facts which were with other shareholders. The same explanatory statement at once sent to the objector and on the basis of which he had taken inspection of all the relevant documents, the court took notice of the fact that the explanatory statement was approved by the Registrar as a relevant factor. The same explanatory statement at once sent to the objector and on the basis of which he had taken inspection of all the relevant documents, the court took notice of the fact that the explanatory statement was approved by the Registrar as a relevant factor. The court said [see Hindustan Lever Employees' Union v. Hindustan Lever Ltd. and others (1994) 4 Comp LJ 267 (SC), at page 289, para 581 : "In the facts of this case, considering the overwhelming manner in which the shareholders, the creditors, the debenture holders, the financial institutions, who had 41% shares in TOMCO, have supported the scheme and have not complained about any lack of notice or lack of understanding of what the scheme was about, we are of the view, it will not be right to hold that the explanatory statement was not proper or was lacking in material particulars." 55. The principle which applies while considering the disclosure of one of the terms of the proposed amalgamation scheme, in our opinion, applies to other terms of the proposes scheme as well, if similar objections are raised as to statutory compliance. 56. In the present case, the undisputed fact is that the scheme had been approved by MIL company by overwhelming majority of over 95% of voters present in person or by proxy and was opposed by only 4.25'/% of the voters present in person or proxy. The total voting was of over 75% of the full value of the share capital. The material on which the scheme was founded and about non-disclosure of which complaint has been made was available for inspection in the form of audited accounts of last 5 years disclosing the working of the two companies, the opinion, on the basis of which exchange ratio has been worked out, and no voice as to the lack of proper notice was raised at the time of meeting, is an indication enough to come to conclusion that objection with explanatory statement was not proper or was lacking in material particulars as to the terms of the scheme and explaining its effect on the interest of shareholders is not correct. 57. Coming to the second contention about non-disclosure of interests of A.N. Mafatlal and Hrishikesh N. Mafatlal, we may examine the provision in that light as well. 58. 57. Coming to the second contention about non-disclosure of interests of A.N. Mafatlal and Hrishikesh N. Mafatlal, we may examine the provision in that light as well. 58. This takes us back to the principal foundation of the objection to the proposed scheme. According to objector, a family arrangement came into existence in 1979, amongst the family members of Mafatlal which included Arvind N. Mafatlal, Yogendra N. Mafatlal, Rashesh N. Mafatlal, the three sons of Navneetbhai and Miheer H. Mafatlal, son of Hemant Mafatlal who was brother of Navneetbhai. Broadly speaking, out of the family empire built by Mafatlal, the two surviving branches of the family tree, one represented by Arvind N. Mafatlal and his two brothers and another by objector Miheer had 50: 50 claim to the family fortune which included their interests in Mafatlal group of companies in which out of the shareholdings held by the various members of the families and trust controlled by them, this position was reflected. According to said family arrangement, Miheer H. Mafatlal was to get exclusive control to MIL to the exclusion of Arvind N. Mafatlal and his two brothers. Under the proposed family arrangement M. Fine was to be hived off from MIL and the control and management of the M. Fine was to be held by Arvind N. Mafatlal and that of MIL was to be handed over to objector Miheer H. Mafatlal. This family arrangement has suffered rough weather. Suit No 1010 of 1987 was filed by Arvind N. Mafatlal against Miheer H. Mafatlal and others before the Bombay High Court alleging that another agreement subsequent to the said family arrangement has come into existence under which Miheer H. Mafatlal and other brothers of Arvind had agreed to transfer all their holdings in MIL to A.N. Mafatlal, drawing a curtain on the family arrangement of 1979. Miheer H. Mafatlal has filed counter-claim in that suit claiming enforcement of family arrangement of 1979. The said dispute and the outcome thereof will have direct effect on the respective interests of the shares held by A.N. Mafatlal. Miheer H. Mafatlal and other members of the Mafatlal family, and trusts under them. Miheer H. Mafatlal has filed counter-claim in that suit claiming enforcement of family arrangement of 1979. The said dispute and the outcome thereof will have direct effect on the respective interests of the shares held by A.N. Mafatlal. Miheer H. Mafatlal and other members of the Mafatlal family, and trusts under them. While under family arrangement, M. Fine was to be hived of from MIL and interest in M. Fine and MIL were to be held exclusively by respective parties under the family arrangement under the proposed scheme of amalgamation, M. Fine was to be amalgamated with MIL and all its interests were to be transferred to MIL by losing its identity at all. All members of M. Fine are to become members of MIL. This arrangement, therefore, was likely to affect directly the interests of persons under family arrangement. In what manner the interests are likely to affect is not presently to be decided by this court. However, this being the position, it is contended that A.N. Mafatlal being Chairman of the Board and his son Hrishiikesh being the director of the Board, were having interests in the proposed scheme of amalgamation which is likely to affect such interest differently from the interests of M.H. Mafatlal which are of the like nature. The facts about these interests having not been disclosed as required under section 393(1), there is a breach of statutory requirement. For this reason, the court should not accord its approval to the proposed arrangement of amalgamation. The second limb of this argument concerns the non-disclosure about pendency of Suit No 5198 of 1992 filed by Miheer H. Mafatlal challenging the rights issue of 1992 by MIL and Civil Suits Nos. 3181 and 3182, both of 1987, filed by two separate shareholders of MIL before the Ahmedabad City Civil Court challenging the rights issue of 1987 in which there was an operative interim order regarding issue of shares and shares had been issued contrary to that order to NOCIL and Sushrupada Investments (P) Ltd., now known as Surekha Holdings (P) Ltd., which could not have participated in the meeting. Withholding this information from the shareholders by not disclosing it in the explanatory note, the company had committed breach of the provisions of section 393(1), that should also result in non-compliance of statutory provision and brooks refusal of sanction of the court. Withholding this information from the shareholders by not disclosing it in the explanatory note, the company had committed breach of the provisions of section 393(1), that should also result in non-compliance of statutory provision and brooks refusal of sanction of the court. It has been contended on behalf of the company that the pendency of Civil Suit No 1010 of 1987 in the High Court of Bombay or the counter-claim filed by Miheer H. Mafatlal does not concern the petitioner company and that the pendency of Civil Suits Nos. 3181 and 3182 of 1987 filed by two shareholders against the rights issue of 1987 and Civil Suit No. 5198 of 1992 filed by Miheer H. Mafatlal against the rights issue of 1992 has no bearing on the scheme of amalgamation. 59. Regarding the first part of non-disclosure, the learned single Judge recorded his finding as under [see Mafatlal Industries Ltd., In re (1995) 5 Comp LJ 38 (Guj), at page 1611 "It is, at once, clear that section 393(1), being a special provision, deals with setting out of certain details in the statement which are more particularly provided in the section itself. Firstly, such statement must set out the terms of the compromise or arrangement or the scheme of amalgamation. It is not disputed before this court that this requirement is fully complied with. Secondly, such statement shall explain the effect of the terms of such compromise or scheme of amalgamation and the effects of the scheme of amalgamation are also clearly stated. The other two requirements are not material for the purpose of this discussion. This section does not refer to disclosure of all material facts concerning a special item of business. Therefore, such statement should only comply with the statutory requirement of section 393(1)(a). Various details of litigations between Arvind Mafatlal, on the one hand, and his brothers and Miheer, on the other, would not fall under any of the stipulations of section 393(1)(a). It may be noticed at this stage that C.S. No. 1010 of 1987, pending in the Bombay High Court is a suit filed by Arvind Mafatlal against his brothers and Miheer for specific performance of the allegedly concluded agreement. In such suit, neither MIL nor MF is a party. It may be noticed at this stage that C.S. No. 1010 of 1987, pending in the Bombay High Court is a suit filed by Arvind Mafatlal against his brothers and Miheer for specific performance of the allegedly concluded agreement. In such suit, neither MIL nor MF is a party. In such suit Miheer has filed his counter-claim for specific performance of the family arrangement alleged to have been reached amongst the family members in 1979. Details of such suit are matters of/for concerned parties to the proceedings and not to the entire class of shareholders. Neither the alleged family arrangement of 1979 nor the allegedly concluded agreement of 1985 between Arvind Mafatlal, his two brothers and Miheer are incorporated in the articles of association of the company or companies by appropriate amendments thereof. The alleged family arrangement of 1979 or the allegedly concluded contract of 1985 amongst family members, therefore, cannot bind the company/ companies nor can such private agreements have any effect or consequence upon the rights of the shareholders. The details of such litigation's, in my opinion, therefore, do not constitute material facts non-disclosure of which would affect the interests of shareholders." (emphasis supplied by the court), 60. Having considered the rival contentions and closely examined the scheme of section 393, we are unable to sustain the conclusion that the facts about the interests under the allegedly family arrangements and the effect of proposed arrangement for amalgamation on such interests were not required to be disclosed under section 393(1)(a).) What is to be sent alongwith notice of meeting is : (i) a statement setting forth the terms of compromise or arrangement ; (ii) explaining its effect ; (iii) statement of any material interests of directors, managing director or manager of the company ; whether in their capacity as such or as members or creditors of the company or otherwise ; and lastly, (iv) the effect on those interests of the compromise or arrangement if and in so fur as it is different from effect on the like interests of other persons. (emphasis supplied by the court)' From the conclusions of the learned single Judge reproduced herein above, it is apparent that the Judge has kept out of consideration the last two requirements of the statute. 61. (emphasis supplied by the court)' From the conclusions of the learned single Judge reproduced herein above, it is apparent that the Judge has kept out of consideration the last two requirements of the statute. 61. The second part of clause (a) of section 393(1) requires two things to be mentioned in the statement (1) the material interests of several persons connected with company, and (2) the effect of the scheme on those interests if and insofar as it is different from the effect on the like interests on other persons. First part of second limb of clause (a) cannot be considered as to the interest of company in respect of which the scheme is being propounded. In indicating clause (a) legislature has envisaged the statement referred therein as one whole statement. The interests which are required to be mentioned by the concerned persons are not restricted to only such interests which they hold as such concerned persons in the company or members, but also such interest which they hold otherwise. The section is cast in the widest possible terms. It states in express terms the interests which the director holds not only as a member or creditor but any other interests which he possesses in any other capacity has got to be mentioned in the statement under clause (a). 62. It would follow that the effect on that interest of the scheme must also be mentioned in the statement if, and insofar as, that effect is different from the material interest, if any, other persons having like interest in the scheme may have. The expression 'like interest' means the interest spoken of in the earlier part of clause (a) and that earlier part refers to material interests. The second limb of clause (a) requires that the statement after mentioning the material interests of the concerned persons must compare these material interests of the concerned persons with the material interest of other persons and if the effect of the scheme on the interests of the concerned person is different, than its effect on the interests of others, then that effect must also be mentioned in the statement. Obviously, while the statute does not forbid a proposal in which persons described in section 393(1)(a) are interested, but requires in the interests of transparency that such interests are disclosed to body which is to decide upon it so that it may take into account these factors as well for truly evaluating the proposals keeping in mind whether the proposal is genuine and bona fide business proposition or merely a cloak for furthering personal interests of such persons holding position in company. 63. There is vital difference between the separate requirements under section 393(1)(a). The earlier part of clause (a) of section 393(1) refers to effect on compromise on the interest of shareholders or creditors, as the case may be, for whom it is propounded. The second part of clause (a) of section 393(1) refers to interests of concerned persons in the scheme which is required to be disclosed to the shareholders. Therefore, the second limb of requirement is not dependent on a finding whether those interests of concerned persons must necessarily be binding on the company or the company must be interested in those interests. If one bears out this distinction in mind, there cannot be difficulty in reaching to the conclusion that the second limb of clause (a) refers to the personal interests of the concerned in any capacity which it may have on the approval of the scheme, and irrespective of the fact whether the company is bound by those interests or not, it is to be disclosed to the shareholders or creditors whose meeting is convened for the purpose of seeking its agreement or approval to the scheme propounded. 64. The basic premise of the conclusion of learned single Judge, is that the company being not a party to such arrangement and the same not having been incorporated in the articles of association of the company, are not binding on company and cannot be enforced against it. The company is not required to take notice of it. With utmost respect, we are unable to agree.' 65. What is required to disclose is the interests of certain officers of the company, not as a general shareholder, but personal interests, which such officers may have in the scheme and how such interests of such officers are likely to be affected by the proposed scheme. With utmost respect, we are unable to agree.' 65. What is required to disclose is the interests of certain officers of the company, not as a general shareholder, but personal interests, which such officers may have in the scheme and how such interests of such officers are likely to be affected by the proposed scheme. It is not necessary that the company must have any obligation or enforceable right in respect of the personal interests of such directors or other officers. That is why such officers have too been obligated to inform about their interests to the company, which the company has the inform to invitees to the meeting. Requirement of section 393(1) is not referable to enquiry into existence of any enforceable right by or against the company, but referable to question whether fairly all that is necessary for taking a decision to accord agreement, whose agreement only the foundation of scheme is laid for seeking approval of courts. While refusal to disclose information about terms of compromise or arrangement and its effects generally is referable to enable the member or creditor to take an independent decision, the requirement to inform about personal interests of certain officers of the company is to warn and vouch against the possible furtherance of personal interest under the corporate cloak. Once such interests are disclosed, it is for the shareholders or creditors to approve the scheme as a prudent business proposition in spite of existence of such interest or for the court to accord approval to it. To sum up, it is the interest which is material for decision-making of shareholder is required to be disclosed. Interest of company in such interests is not material. 66. In Hindustan Lever case [Hindustan Lever Employees' Union v. Hindustan Lever Ltd. and others (1994) 4 Comp LJ 267 (SC)], supra, contention was raised that in the explanatory statement annexed with the notice of meeting did not disclose the fact that Mr. Malegam who was appointed as a valuer for the purpose of arriving at a fair exchange ratio was also the director of the company was not disclosed in terms of section 393(1)(a). Supreme Court in overruling the objection on facts held as under : "Section 393(1)(a) requires particulars to be given of any material interests of some persons connected with the company, including the directors and managing director. Supreme Court in overruling the objection on facts held as under : "Section 393(1)(a) requires particulars to be given of any material interests of some persons connected with the company, including the directors and managing director. The interest that is contemplated under section 393(1)(a) is interest material for consideration of the scheme by the shareholders. It has not been shown that Mr. Malegam had any interest in the scheme. If he had any shares in ToMco, then his interest would be like that of any other shareholder." (emphasis supplied by the court), From the aforesaid, it is apparent that what is required to be disclosed in the statement annexed to the notice are the material interest of the persons connected with the company which they have in the scheme, whether as director, shareholder or otherwise. If the scheme is likely to affect the inter se dispute between a person connected with the company in his capacity as director or managing director with other shareholders which is likely to be affected by the proposed scheme in one way or the other, can it be said to have no interest in the scheme otherwise than as a shareholder or managing director and which is not required to be disclosed ? Our answer is in affirmative. 67. In order to bring into existence a binding arrangement of scheme under section 391(2), two things are required. Firstly, it should be agreed by a majority representing three fourth in value and of the members present and voting either in person or proxy in a meeting which is called, held and conducted in such manner as the court directs. That is to say, decision of shareholders approving the scheme is to be manifested in that meeting ; and, secondly, if such agreement is reached by the requisite majority of shareholders, the court must sanction the same, before it becomes final. That is to say, decision of shareholders approving the scheme is to be manifested in that meeting ; and, secondly, if such agreement is reached by the requisite majority of shareholders, the court must sanction the same, before it becomes final. We have also seen while examining the scheme (of) section 391 and scope and ambit of enquiry by the court before sanctioning the scheme that the entire enquiry surrounds the reasonableness and fairness of the scheme because even though the statutory requirements are fulfilled, unless the court finds that the class was fairly represented by those who attended the meeting, that the majority are acting bona fide and/or not coercing the minority in order to promote interests adverse to those class whom they represent and lastly, that arrangement is such that a man of business would reasonably approve. This inheres into it that transparency is assured at all levels of proceedings. It is fundamental to the scheme that, in the first instance, it is for the members or the creditors, as the case may be, in the meeting called for the purpose of approving the scheme, they must be fairly informed of the matters which may affect the decision, one way or the other, about agreement with the scheme at the meeting. What are those minimum requirements of disclosures to be made to the shareholder of the creditor has been stated in section 393(1)(a). The first part of the disclosure to the members or the creditors invited at the meeting concerns the proposal itself. But the legislature has not stopped at that. The provision further enjoins that those who are in the control and connected with the managing the affairs of the company in the democratic set up (should disclose ?) if they have any interests other than those general interests, whether pertaining to their interests as holding the position in the company as managing director, managing agents or manager or their interests as shareholders or creditors apart from their interest as a holder of office or which is of importance or is otherwise. This use of the word, 'otherwise', by the statute unmistakably makes the legislative intent clear that it refers to disclosures of personal interests of the directors, managing director or the manager of the company of whatever nature, in such compromise or arrangement and likely effects of the proposed scheme on such interest which are different than the like interest held by others. That is to say, interest with which director has, as a director or as a member or creditor of the company or even outside those two capacities differently than those other persons having similar interests. This disclosure is not the same disclosure as is required to be made under the first part of the statement setting forth the terms of compromise or arrangement or explaining its effect. Apparently such disclosure gives an insight to the shareholders for reaching the conclusion whether the proposed scheme is pure and simple business proposition or it also furthers additional and other interests of those who are managing the affairs of the company and to what extent. It has a vital bearing on coming to the conclusion by the shareholders about their perceiving the scheme whether as a prudent business proposal or a scheme motivated furthering interests of such director or managing director or manager, as the case may be. In other words, it has a vital bearing on the decision-making of the body of shareholders, members or creditors, keeping in view such other interests involved in the scheme, whether the proposed scheme is primarily a scheme of reasonable business prudence, and incidentally the interests of managing director, director or manager of the company is also furthered or it is a pure and simple cloak for furthering those interests. Existence of such interests by itself does not affect the reasonableness or validity of a scheme nor it disqualifies the scheme as a business proposition. We are furthering this enquiry only for the purpose of finding out what is the requirement of statute, what is the object of the statute and the ambit and scope of requirement of such disclosures. It is to be noticed that not only such interests are required to be disclosed but effect of the proposed scheme on such interests is also to be disclosed. It is to be noticed that not only such interests are required to be disclosed but effect of the proposed scheme on such interests is also to be disclosed. While requirement to disclose such interests is unequivocal, effect of scheme on such interests is to be disclosed only in the cases where it has diverse effect on the like interests existing as are of such director, managing director or manager of the company. It is not relevant whether entire body of shareholders and creditors are affected with those interests or not. When it is a matter of enquiry whether majority is acting bona fide and not coercing the minority affecting their interests adversely, it is of paramount importance that those interests of majority as are adverse to minority are made known to the decision-making body. 68. In this connection, we notice that sub-section (5) of section 393 enjoins a duty on the managing director, director or manager of the company and every trustee or debenture holder of the company to give notice to the company of such matters relating to himself as may be necessary for the purpose of this section. Obviously, this is so because personal interests of such persons connected with the company whether in his capacity as a director, managing director or manager or trustee or debenture holder, whether as a shareholder or creditor simpliciter or whether interests are de Hors either of these two capacities are within the personal knowledge of such director, managing director or manager. That is why, firstly, information by such director, managing director or manager of the company or trustee or every trustee of the debenture holder of the company, has been made obligatory on such person, and on receiving such information, it has been made obligatory for the company to inform the shareholders or the creditors, whose meeting has been convened, about such interests, and diverse effect on such interests that the proposed arrangement or compromise may have and then leave it to shareholders to decide for themselves whether to approve or not to approve the scheme. 69. 69. Coming to the facts of the case at hand, considering the compliance of section 393(1)(a) it is not germane whether such alleged family arrangements or alleged subsequent agreements between A.N. Mafatlal and his two brothers and Miheer H. Mafatlal whether incorporated or not in articles of association, bind the company, or pending dispute in court can affect the company. What is germane is whether Mr. Arvind N. Mafatlal, who is managing director of MIL and Hrishikesh A. Mafatlal, a director of MIL, have such interests in respect of the same, which they are required to disclose in terms of statutory provision to the members and/ or creditors and whether interests of different persons connected are with the said family arrangement and disputes relating thereto are likely to be affected diversely by the proposed scheme. This is so to ensure transparency of conduct of those who hold position of trust and to appraise the shareholders or creditors of personal interest of such holders of position in the proposed scheme of arrangement or compromise. That is primary requirement of good faith. 70. From the order of Division Bench of Bombay High Court in L.P.A. No. 773 of 87 (780/87) arising out of Suit No. 1010 of 1987 filed by A.N. Mafatlal, following facts stare out : (1) Suit No 1010 of 1987 was filed by A.N. Mafatlal before Bombay High Court for specific performance to enforce the agreement for sale of equity shares of mil against several defendants which included Yogendra N. Mafatlal and Rashesh N. Mafatlal, brothers of plaintiff as defendants No 1 and 2 and Miheer H. Mafatlal as defendant No 3; (2) Documents of family arrangement were executed between the parties on 23.2.1979 and 1 March, 1979; (3) The plaintiff (A.N. Mafatlal) claimed that family arrangement was only between the plaintiff and defendants Nos. 1 and 2 while contesting defendants claimed that it also included defendant No 3 (Miheer H. Mafatlal) ; (4) According to this family arrangement, the assets were divided into four groups and the plaintiff and defendants Nos 1, 2 and 3 were allotted assets in proportion to their shares ; (5) Defendant No 3, Miheer H. Mafatlal, having half share while the plaintiff, defendants No 1 and 2 together share remaining half. Defendant No 3 Miheer H. Mafatlal had attained majority just about a year before 1979 and was undertaking education and, therefore, family arrangement provided that the plaintiff (A.N. Mafatlal) being the senior-most member of the family would look after the management of the assets of defendant No. 3 and after passage of certain time, defendant No 3 should manage his own assets. (6) By June, 1985, the relations between the parties became strained and, in the general meeting of MIL to be held on 10.6.85, Miheer H. Mafatlal offered himself as director. Prior to that period, Miheer H. Mafatlal was not a director and, under the family arrangement, defendants Nos. 1, 2 and 3 were represented through proxy in respect of holdings in MIL. In July, 1985, the plaintiff demanded proxies for the defendants Nos. 1 and 2 which were declined. (7) Defendant Nos. 1 and 2 offered to sell to the plaintiff or his nominee shares held by them and by members of their family in MIL at the fair price. Miheer H. Mafatlal also made an identical offer to the plaintiff on behalf of himself and members of his family and the companies under his control to sell the equity shares of MIL to the plaintiff, which offer according to plaintiff was accepted but was not being honoured by the defendants. These are the factual premises on the basis of which suit was filed which were contested by defendants and, as noticed above, a counter for specific performance of family arrangement dated 23/1.3.79 was filed in that suit by Miheer H. Mafatlal. 71. From the aforesaid facts it is apparent that so far as existence of family arrangement contained in two documents referred to by the objector was not the subject matter of dispute. Subject matter of dispute is whether Miheer H. Mafatlal is a privy to that family arrangement or not, and whether that family arrangement has been subsequently superseded by offer of sale of shares in MIL held by Miheer H. Mafatlal, members of his family and companies controlled by him, to be sold to A.N. Mafatlal or his nominees. From the documents referred to above as family arrangements, which are part of this record also, it is clear that it envisaged transfer of family control of MIL to Miheer H. Mafatlal and M. Fine to A.N. Mafatlal. From the documents referred to above as family arrangements, which are part of this record also, it is clear that it envisaged transfer of family control of MIL to Miheer H. Mafatlal and M. Fine to A.N. Mafatlal. In these circumstances, it cannot be said that, in a scheme which proposes amalgamation of M. Fine with MIL and transfer of M. Fine in its entirety to MIL and shareholders of M. Fine offered shares of MIL in lieu of their shareholdings in M. Fine, A.N. Mafatlal did not have like intent as other parties to dispute have and it does not affect the interests of parties claiming their rights under the said family arrangement and happenings that has taken place subsequent thereto diversely. 72. We are not concerned here to enquire whether the alleged family arrangement is one to which Miheer M Mafatlal was a party or beneficiary, whether he had an enforceable right under that family arrangement against the other parties of the said arrangement and whether the same has been subsequently superseded by offer made by M.H. Mafatlal, as those are the questions which are sub judice in the civil suit filed by AN. Mafatlal and counter-claim filed by M.H. Mafatlal. For the present purposes, these facts do disclose that A.N. Mafatlal and M.H. Mafatlal had sufficient interests which are of like character in the proposed scheme of amalgamation of M. Fine with MIL and that (the) proposed scheme of amalgamation affects the interests or rival claims in the suit. One of the parties to arrangement, Mr A.N. Mafatlal happens to be the Chairman/ managing director of the MIL, the petitioner company in the present case. That interest is held by AN. Mafatlal neither as a Chairman of the company nor as a shareholder in the company, but otherwise than these two capacities. That interest, in our opinion, was required to be disclosed in the notice of meeting under section 393(1)(a).' As parties to (the) dispute have rival claims under suit affecting family arrangement, the proposed scheme too shall have effect on interests of Chairman, A.N. Mafatlal, which is different on the interest of rival claimants under the suit. That interest, in our opinion, was required to be disclosed in the notice of meeting under section 393(1)(a).' As parties to (the) dispute have rival claims under suit affecting family arrangement, the proposed scheme too shall have effect on interests of Chairman, A.N. Mafatlal, which is different on the interest of rival claimants under the suit. About these interests and effect, Chairman was under an obligation to disclose the same to the company in terms of section 393(5) and company was under an obligation to disclose such interests in terms of section 393(1) in statement annexed to notice of meeting. We are further of the opinion that learned single Judge was not right in examining the merit of the claims of A.N. Mafatlal or M.H. Mafatlal at the instance of company in this case and record his conclusion about it, even prima facie at the instance of company. Company, on the one hand, pleads itself ignorant and stranger about such personal affairs of A.N. Mafatlal and M.H. Mafatlal, yet, takes stand to support its Chairman, A.N. Mafatlal, about his rights or obligations under the so called arrangements, existence of which is not even denied by AN. Mafatlal, but is in fact admitted in his suit. In fact, at one stage it was argued on behalf of company that the two documents are not family arrangement. Merits of rival claims had nothing to do with obligation to disclosures. The company did fail to disclose such interests as A.N. Mafatlal, Chairman, had in the scheme in terms of section 393(1)(a). It also failed to disclose its diverse effect on the interests of A.N. Mafatlal vis-a-vis interests of other members of Mafatlal family and parties to dispute relating to family arrangement concerning shareholding and interests in MIL and M. Fine which are of like nature. 73. Next question which calls for consideration is what is the effect of such nondisclosure. We are in agreement with learned single Judge that all non-disclosure cannot be fatal unless it is fraudulent and have prejudicial effect on the decision-making process. It may also be relevant here to notice that while under proviso to section 391(2) non-disclosure. of all material facts relating to the company as are required to be disclosed under that provision results in denuding the power of the court to sanction the scheme. It may also be relevant here to notice that while under proviso to section 391(2) non-disclosure. of all material facts relating to the company as are required to be disclosed under that provision results in denuding the power of the court to sanction the scheme. No consequence as such on the scheme has been provided under section 393 for failure or default in disclosures required to be made under clause (a) of sub-section (1) of section 393(1). On the contrary, such default by the company would result in punishment of every officer of the company who is in default with a fine which may extend to Rs. 5,000. Even that may not be leviable if such default is because of refusal to supply the necessary particulars as to his material interests by such director, managing director or manager or trustee of the debenture holder as the case may be. In that event, for breach of condition of sub-section (5) such person in default whose interests are required to be disclosed and who is under obligation to furnish necessary information to the company, is liable to be punished with fine to the extent of Rs. 500. Therefore, in the absence of any statutory provision, the effect of non-disclosure in each case will have to be examined in the light of facts of that case depending upon whether such non-disclosure had any effect on any reasonable and fair consideration of the scheme, by the shareholders or effect otherwise, the fairness of the scheme which may be examined by the court. 74. The principles on which the court acts while considering the scheme under section 391 are well settled. Considering the scheme of section 206 of the Companies Act of England, which corresponds to section 391 of the Act of 1956, Buckley on the Companies Act stated the position of law as follows : "The court will be slow to differ from the meeting unless either the class has not been properly consulted, or the meeting has not considered the matter with a view to the interests of the class which it is empowered to bind or some blot is found in the scheme." 75. In Re National Bank Ltd (1966) 1 All ER 1006 (Ch D), the court was considering the effect of non-disclosure of the information as is required under section 207 of the Companies Act, 1948, of England which corresponds to section 393(1)(a) of Indian Companies Act, 1956, relating to certain persons connected with the company. The court was to consider whether deliberate omission to disclose the information was fatal to arrangement. In the circumstances of the case, the court answered the question in negative, by holding "By section 206 the court is given widest possible discretion to approve any sort of arrangement between a company and its shareholders. It seems to me that to say full disclosures must be made of all material facts begs the question of the nature of the scheme which is being propounded. The extent of disclosure required must depend on the nature of the scheme. Here the scheme is one which is based on the withholding of exempt information. If the evidence satisfies me (as it does) that the scheme is fair, I see no reason why I should not sanction it." (emphasis supplied by the court), 76. In re Tiptop Canners Ltd., reported in (1972) 32 DLR 28 (Canada), the court reached conclusion that where a scheme is fair and reasonable, the court will approve it even though the explanation of the arrangement issued to the shareholders is not as informative as it should be. At the same time, the courts have held that mere sending a copy of the company petition alongwith the notice convening the meeting or a statement saying that the directors have no interest in the scheme other than as members alongwith other members of the company is not sufficient compliance with the requirements, though annexing the whole scheme with the notice may satisfy the requirement of making the statement as to the terms of the proposed scheme or arrangement and its general effect on the shareholders or creditors as a class. However, such disclosure of the scheme and the statement would not satisfy the requirement as to specific interest of managing director, directors, or managers or trustees of debenture holder which are specifically held by them alone or with certain other persons. Those interests are specifically required to be disclosed and its effect on those interests are also required to be disclosed if they affect the like interests differently. Those interests are specifically required to be disclosed and its effect on those interests are also required to be disclosed if they affect the like interests differently. Coming to the question of its effect the paramount consideration must be to find out whether such non-disclosure has affected the decision of the shareholders. 77. What is required to be seen primarily about the proposed scheme of compromise or arrangement is whether it is such which a man of business would reasonably approve. If on the basis of meeting of members who have been unmindful of the existing interests of such director/ managing director or manager have come to agree with the proposed scheme with their wisdom as ordinary businessman and is otherwise considered fair, in our opinion in such circumstances the scheme would not fail or the court will not withhold its sanction merely for reason of such non-disclosure unless it can be said that voting at the meeting, were controlled by the holder of such undisclosed interests to his advantage overriding the minority holding the adverse interest, the approval made by the body of shareholders by overwhelming majority would not be set at naught by the courts on that ground alone. In such case a decision of members unmindful of personal interests of director does not cease to be their business decision. Without laying down exclusive rule of exception, a situation may arise where by obtaining proxies from majority of shareholders those persons whose interests have not been disclosed have exercised such voting right by themselves as holders of proxies to the detriment of interests which are adverse to them. In such case, it may be possible to say for the court that the decision has not been reached by members as men of business would reach, but the decision has been coerced by persons holding specific interests and exercising voting powers for themselves as well as for proxies to their advantage. However, no such contention has been urged before us. From the pattern of voting which have been worked out by objector, it is apparent that out of hundred per cent of the share capital 75.75 per cent in value participated of which 95.75 per cent voted in favour of the proposed scheme. However, no such contention has been urged before us. From the pattern of voting which have been worked out by objector, it is apparent that out of hundred per cent of the share capital 75.75 per cent in value participated of which 95.75 per cent voted in favour of the proposed scheme. For the present purposes, the alleged family arrangement affected the shares held by members of Mafatlal family either individually or through trusts both in MIL as well as M. Fine, but it did not include the shares held by companies termed as Mafatlal group of companies. From the said statement, out of 95.75 per cent of the voters in value, a paltry 8.43 per cent votes have been attributed to A.N. Mafatlal group consisting of individuals and trusts. 39.45 per cent are the votes attributable to financial institutions which can be said to have no interest other than their own interests as men of business in considering the proposed scheme. Over 23 per cent votes have been attributed to public limited companies or private limited companies which hold the share of MIL and in which AN. Mafatlal is also alleged to have interests. 11.57 per cent votes have been alleged to be represented by those shares which have illegally been issued to Nocil and Sushrupad Ltd. in contravention of the court's order. It is not the case of the objector either that majority of the shares voting was held by A.N. Mafatlal as proxy. Though before learned single judge objection was raised about legality of conduct of meeting by A.N. Mafatlal as Chairman because of his existing personal interest and because of his acquiring proxies. That objection has not been pressed before us. In that event, even if we exclude the decision of 8.43 per cent from 95.5 per cent, still the scheme has been approved by overwhelming majority of the value of voters present. In these circumstances, the court must be guided by the principle that where the scheme was approved by overwhelming majority of shareholders, it is not for the court to substitute its wisdom for the collective decision of the shareholders and reject the scheme only for the reason of non-compliance with the provisions of section 393(1), unless of course, the scheme is otherwise found to be unfair. We are of the opinion' that it cannot be said that because of this non-disclosure, the result of the meeting has been affected substantially so as to hold it to be fatal for according sanction to the scheme. 78. Coming to the second part of the objection as to non-disclosure of facts about issue of shares in violation of injunction order, in Suit Nos. 3181 and 3182, both of 1987, concerning the 'right issue' of 1987 and Suit No. 5198 of 1992 filed by the objector challenging the 'right issue' of 1992, we concur with the finding reached by the learned single judge that the pendency of such suits at the instance of shareholders were not the material facts to be disclosed alongwith the statement annexed with the notice required under section 393(1)(a). We have already expressed our concurrence with the learned judge about the fact that even the exclusion of votes attributable to alleged issue of shares contrary to the court's order has not affected the statutory requirement of majority for the purpose of approving the scheme. We, therefore, hold that, though there is non-disclosure of material interests required to be disclosed under sub-section (1)(a) of section 393, such non-disclosure had not affected the outcome of the meeting. 79. The appellant's contention relating to non-disclosure to the court by affidavit or otherwise as to the latest financial position of the company, latest auditors report on the accounts of the company, pending any investigation, proceedings in relation to the company under sections 235 to 251 and like matters, raises two-fold questions, Firstly, it relates to certain non-disclosures before the learned single Judge which, according to the appellant, the petitioner was under obligation to disclose. In absence of such disclosure, the court had no jurisdiction to order sanctioning of the proposed scheme of amalgamation. Second limb of contention is that non-disclosure by the petitioner of the financial position of two concerned companies as they exist now during the pendency of the appeal before this court, must entail rejection of the petition. 80. It may be stated at the outset that this contention was not before the learned single Judge. Second limb of contention is that non-disclosure by the petitioner of the financial position of two concerned companies as they exist now during the pendency of the appeal before this court, must entail rejection of the petition. 80. It may be stated at the outset that this contention was not before the learned single Judge. While raising the issue of non-disclosure under section 393(1)(a) reference to proviso to section 391(2) was made but that was with the purpose of raising the issue that information which was required to be disclosed before the court is also required to be disclosed to the members or creditors whose meeting is convened under section 391(2) as contemplated under section 393(1)(a). Learned counsel for the respondents vehemently urged that as this contention requires investigation of facts about the information which has not been disclosed, the appellant should not be permitted to raise this objection now, apart from contesting the objections on merit. Since the question relates to jurisdiction of the court to accord sanction in absence of necessary disclosures, we are not inclined to sustain the objection against entertaining the same. 81. Proviso to section 391(2) reads as under "Provided that no order sanctioning any compromise or arrangement shall be made by the court unless the court is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the court, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like." A perusal of the aforesaid provision leaves no room of doubt that unless the court is satisfied that all the material facts related to the company about its latest financial position, latest auditors' report anal accounts of the company, about the pendency of investigation, proceedings in relation to the company under sections 235 to 251 of the Companies Act, or of like nature, which the court thinks are material for the purpose of reaching its decision to accord or not to accord sanction, it cannot make an order. We have already noticed that apart from satisfying the statutory requirements for proposing a scheme for approval of the court has been complied with, the court has to satisfy itself as to the bona fides of the scheme and whether it is such which a man of business will reasonably approve. Such satisfaction can be reached only if material facts about the financial position of the company, latest auditors' report, and accounts of the company, and like matters which are relevant for reaching the conclusion are before the court. If the court is not satisfied with all the material facts disclosed to it, how can it reach its conclusion about the bona fides and reasonableness, the scheme which can be approved by a man of business reasonably ? The court has been assigned the task to consider about according its approval only after the scheme has been approved by the majority representing three fourth of value of creditors or members, as the case may be, before it may become binding on those who are not party to such agreement. It cannot fall back on the principle that the parties must fail or succeed on the basis of materials produced by them as the court has been made as a guardian of unrepresented interest or dissenting interest to certify the fair character of the scheme in general which has to bind all. 82. This satisfaction about placing of all relevant material facts before the court is condition precedent to accord such sanction. But, it is the satisfaction of the court which is concerned with the according of the sanction, about the placement of required material before it, that is necessary. It cannot be requirement of anyone else. If anyone wishes to raise this objection, it has to disclose those facts to the court exercising jurisdiction under section 391(2) and to point out that those material facts which have bearing on the enquiry decision of the court on relevant aspects of the enquiry which was required to be disclosed by the company or such other person by whom the application has been made under sub-section (1), but the same has not been disclosed. If such material has not been placed before the court sanctioning the scheme and on the existing material before it, the court is satisfied that all the relevant material facts related to the company, necessary to reach its decision, the requirement is complied with. The purport of the provisions is obvious. Court does not act as mere rubber stamp while according its sanction. Even if the scheme is approved unanimously by the members before it can become operative sanction of the court is required to be obtained. The principle for according the sanction remains the same, viz., the court must see that the scheme is, in general, a fair business proposition, that it is in the public interest to sanction the scheme, that it is not detrimental to the interest of company. That enquiry the court has to undertake whether the scheme is objected to or not. To satisfy the court on these aspects is the duty of company or the applicant. Hence, the requirement that before the court accords sanction, it must be satisfied that all the relevant factors relating to company have been disclosed to it by the company or applicant. Once the court is satisfied that it is possessed of all relevant information, it can proceed to accord sanction. If it has any doubt about lack of information, benefit of it cannot go in favour of approval but court must stop there. In our opinion, in appeal, the order of sanction cannot fail for want of jurisdiction for non-fulfilment of requirement of proviso to section 391(2). It may affect the question of determining the bona fides of the company on merits, but it cannot affect exercise of jurisdiction by the learned single Judge in absence of such material. 83. For determining this question, it is of paramount importance to find out what is the stage at which such disclosure are required to be made and if material now sought to be relied upon was in existence which could have been disclosed and whether such duty to disclose the facts about continuing working of the company, continues until the case is finally decided by the court, in appeal. 84. In re : Manekchowk and Ahmedabad Mfg. 84. In re : Manekchowk and Ahmedabad Mfg. Co Ltd, (1970) 2 Comp LJ 300 (Guj) (1970) 40 Comp Cas 819 (Guj), the court said that it is obligatory upon the applicant under section 391(1) to set out in an affidavit the particulars required in Form No 34. The details required to be mentioned in the affidavit have been so prescribed as to enable the court to give proper directions and no disclosures are required to be made as required by the proviso at that stage. It is not possible to accept the view that disclosure as required by the proviso should be made at the initial stage when the application is made under section 391(1) ; these disclosures are required to be made only when a petition is filed under section 391(2) for sanctioning the scheme and must be available when the court proceeds to examine the scheme to find out whether sanction should be accorded to it or not. 85. We are in agreement with the aforesaid expression of view on the issue of point of time when the disclosures are required to be made. 86. Under the Companies (Court) Rules, 1959, rule 69 requires an application to be made under section 391(1) for an order convening the meeting of creditors and/or members or any class of them. When in pursuance of this application, a meeting is convened and where the proposed compromise or agreement with or without modification as provided under section 391(2) and a report about the same is filed as required under rule 78 within seven days thereof, objection, if any, is required to be filed before the court for confirmation of the compromise or arrangement in Form No 40 as per rule 79. This clearly shows that at the first stage only an application is to be moved under section 391 for the purpose of securing an order for convening meeting of shareholders or creditors or a class of them as the case may be. At that stage, the court is not called upon to apply its mind about sanctioning of the scheme. That stage arises only when the scheme is approved by the requisite majority in terms of section 391(2). It is only after approval is accorded by requisite majority under section 391(2) that the question is required to be gone into whether it is to be sanctioned by the court. That stage arises only when the scheme is approved by the requisite majority in terms of section 391(2). It is only after approval is accorded by requisite majority under section 391(2) that the question is required to be gone into whether it is to be sanctioned by the court. Therefore, stage for sanctioning the scheme comes into existence only when the scheme is approved by the meeting convened in terms of order passed by the court on an application under section 391(1) and it is at that stage that the question of disclosure of material facts relating to the Company as required under proviso to section 391(2) would arise and not before. 87. Keeping in view the aforesaid principle, it is noticed from the respective contention before us that it is not the case of the appellant that the requisite information about the existing financial status with latest auditor's report, etc., as were available were not disclosed at the time of filing the petition under section 391(2) on 8.2.1994 nor it is the case that any material which had come into existence until the conclusion of argument before the learned Company Judge had not been disclosed. What is contended before us is that certain documents or financial statements which have come into existence after conclusion of arguments but before delivery of the judgment by the learned Company Judge were not brought to his notice and further case is that since the pronouncement of the judgment until hearing of this appeal, latest position of the two companies concerning their financial status and accounts have not been placed before the court to enable it to exercise jurisdiction under proviso (2) to section 391(2). 88. We are unable to accept this contention. It is not the requirement that the day to day progress and financial position as existing from day to day should be apprised to the court until final order is signed by the court. That would make the proceedings impossible to be concluded. Once the matter is heard and the arguments are concluded, the stage of making submissions or disclosure before the court comes to an end. How much time a Judge would take to consider and decide the issue raised before him is not matter of prediction. It depends upon variable factors. The only thing can be said that the Judge would decide the case as early as possible. How much time a Judge would take to consider and decide the issue raised before him is not matter of prediction. It depends upon variable factors. The only thing can be said that the Judge would decide the case as early as possible. As soon as the argument before the court is concluded, the role of the parties comes to an end and no responsibility can be fastened on them to continue to monitor the case from day to day and feed the court with day to day financial progress of the two companies until the court pronounces the judgment. We may not be understood to have expressed any opinion whether such duty continues until disclosure of arguments after the fact has been disclosed in the petition or until completion of pleading but in the present case we have assumed it to be so, because there is no dispute that there was no such material concerning financial position of the company which was in existence and not disclosed in the petition under section 391(1) but has come into existence during the course of the hearing before its closure. 89. Particular reference has been made to half-yearly statement of accounts by learned advocate for the appellant, with great emphasis. It has come into existence before moving application under section 393(1) but the same was not disclosed until filing of the petition under section 391(2). In view of the discussion above, this cannot be treated as breach of proviso to section 391(2). We are also not impressed with the contention that this duty to disclose the material facts about the latest financial status of the companies in question continues during pendency of the appeals whether this court or Supreme Court and failure to do so would oust the jurisdiction of the court to sanction the scheme in terms of the proviso. For the purpose of this statutory requirement, an appeal cannot be deemed to be continuation of original proceedings. As we have discussed above, the appellate court does not discharge the function of sanctioning the scheme. For the purpose of this statutory requirement, an appeal cannot be deemed to be continuation of original proceedings. As we have discussed above, the appellate court does not discharge the function of sanctioning the scheme. The appellate court examines the correctness of the order sanctioning the scheme or refusing to sanction the scheme made by the learned single Judge and what is germane for consideration is whether the statutory requirement for proposing the scheme under consideration has been complied (with) before petition has been filed, whether the scheme has been proposed bona fide which can necessarily mean bona fides of the majority of shareholders according their approval to the scheme and, lastly, whether the scheme is such which is reasonable in the sense that the man of business would reasonably approve of it. That also has reference to date when the scheme was proposed. Primarily, it is the existence of the state of affairs on the day when the affected interests had considered the question of according its approval. It has the approval by the requisite majority. That is not the consideration before the court. Unless there is something in the agreement of proposed scheme which fails to fulfil the text of statutory requirement bona fide and reasonableness of facts in future have ordinarily no room to enter into consideration of the court for reaching its decision to accord or withhold its approval. 90. Moreover, proviso is applicable on the question of grant of sanction to the scheme by the court. If at the time of grant of sanction to the scheme, the court is satisfied that all material facts related to the company necessary for its decision has come before it, there is no further impediment and such subsequent disclosures of fact which were in existence and if brought before the court might have affected its mind, may effect the merit of the decision but not the jurisdiction. The jurisdiction of the court depends upon its own satisfaction and not on the satisfaction of the appellate court. 91. Therefore, so far as the appellant's objection as to non-satisfaction of statutory requirement is concerned, we find no force in any of the submissions made in that regard and reject the same subject to our observations made herein above. 92. It was next contended by learned counsel for the appellant that the proposed scheme of amalgamation is not bona fide. Therefore, so far as the appellant's objection as to non-satisfaction of statutory requirement is concerned, we find no force in any of the submissions made in that regard and reject the same subject to our observations made herein above. 92. It was next contended by learned counsel for the appellant that the proposed scheme of amalgamation is not bona fide. Two aspects contended before us were that, firstly, the scheme is not for avowed purpose for which it is purported to have been proposed and, secondly, it is proposed with oblique motive of advancing interest of Arvind N. Mafatlal in the matter of family arrangement. It is urged that, as per the explanatory statement, proposal to amalgamate M. Fine with MIL is to unable the carrying on of the combined business more economically and advantageously. Amalgamation would lead to substantial benefit in view of synergy of operations which would give improved capital structure and which would lend better flexibility in capital gearing which would enable the amalgamated company to raise required finance at better terms, and a larger company would generate more confidence in the investors and with the persons dealing with the company and would afford access to resources easily and at lower costs. Amalgamation would pave the for better, more efficient and economic control in the running operations and would lead to economise administration and management cost, resulting in improving profitability. Particular emphasis was laid in all amalgamated company's textile divisions with five operative units at its disposal. 93. A great deal of arguments were advanced on the merit of the proposed scheme and its projects objects with reference to nature of business of two companies, trade cycle prevalent, in the textile industry, financial resources of the two companies of the past and the present and theories propounded by the economists and management experts about advantages and disadvantages of centralised large organisation on one side indulging in.diverse activities and decentralised activities of various styles to the similar unit. It is to be accepted that in given circumstance, the unison of two organisations for the purpose of improved results keeping in view the totality of circumstances that exist in respect of companies to be amalgamated is a matter of opinion, and the decision-makers or theoreticians may always reach different conclusions on the same materials. It is to be accepted that in given circumstance, the unison of two organisations for the purpose of improved results keeping in view the totality of circumstances that exist in respect of companies to be amalgamated is a matter of opinion, and the decision-makers or theoreticians may always reach different conclusions on the same materials. Therefore, while examining this issue, one must look at the scope of inquiry before proceeding further. It is now well settled that the arrangement or compromise proposed under section 391 which may include scheme amalgamation is primarily a decision of the parties to the arrangement or compromise. The matter comes up before the court for approval so as to bind even those who will not have agreed to it. As we have already seen that the jurisdiction is not of appellate nature so as to substitute the court's decision, but is only to examine general fairness of the scheme from the point of view of a ordinary man of business. The court is not to examine the issue with mathematical precision and to adjudicate upon the correctness of the decision taken by the statutorily required majority in that sense. It is a question of examining whether the opinion of the persons approving the scheme about the projected targets or objects to be achieved is bona fide. Merely because other opinion could also be reached on the basis of very same material can be no ground for upsetting the majority opinion by substituting the court's own opinion. The objects and targets stated in the scheme are always a matter in the embryo of future and, therefore, the purpose for which the scheme is proposed for amalgamation is a reflection on what would be achieved by amalgamation of resources of the two companies. If both the companies have positive balance-sheet securing increased profitability may be the objective. If the object may be to restore a sick unit to health, that decision is to be viewed from that light. It is a matter of common experience that for multiplying business of one organisation, one does not have to multiply resources in the arithmetical proportion. That is to say, for multiplying business five times of the existing business, one does not have to multiply its resources by five times. May be that by multiplying its resources by three times, one is able to achieve returns five times. That is to say, for multiplying business five times of the existing business, one does not have to multiply its resources by five times. May be that by multiplying its resources by three times, one is able to achieve returns five times. In the common parlance, among the persons dealing with business this phenomenon is understood as synergy of operations. Viewed from that point of view, it is a matter of opinion for the persons concerned whether amalgamation of two companies would lead to better synergy of operations giving improved results in higher proportion to the amalgamated resources in production, trade and consequent profitability. Therefore, the matter is to he decided not on the arithmetic calculations but on the basis of perceptions of persons actually engaged in the business which is sought to be amalgamated. So also it is a matter of common experience about decrease in proportionate expenses or costs of combined activity. We are not impressed by the contentions raised before us that it is a case in which it is not possible to take a view that in the existing state of affairs, there is no possibility of attaining further synergy of operations or for better flexibility of capital gearing or impossibility of attaining better flexibility of capital gearing cutting into combined costs of two companies on amalgamation or there is no room for perceiving that more efficient and economic control in running operations can be achieved by combining the two companies. We are, therefore, in agreement with learned Company Judge in his finding that it cannot be said that the proposed scheme of amalgamation is not for the stated objectives as brought out in the explanatory statement, because it cannot be said that no man of business could reasonably reach such opinion. We, therefore, do not wish to burden the judgment with detailed exercise with mathematical precision to examine the occurring of the objects and targets projected to be achieved in future as a result of amalgamation. Ultimately, these objects are expression of expectations in future and is a matter of opinion. One man of business, with greater optimism, can reach different conclusion diametrically opposite to an another man with marked pessimist vision. Yet for that reason, the decision taken in presenti for future cannot be adjudged unfair. Nor even the ultimate failures in achieving targets and objects will render the decision in presenti invalid. 94. One man of business, with greater optimism, can reach different conclusion diametrically opposite to an another man with marked pessimist vision. Yet for that reason, the decision taken in presenti for future cannot be adjudged unfair. Nor even the ultimate failures in achieving targets and objects will render the decision in presenti invalid. 94. Second aspect of the contention of the learned counsel that the scheme is for ulterior motive to advance interest of Arvind N. Mafatlal in the matter of family arrangement. In this connection, bed-rock of contention is the background of family disputes for the last 15 years and conduct of Arvind N. Mafatlal in that regard. For that purpose, it was contended that suggestion No. 5 contained in note dated 23.2.1979 prepared by C.C. Chokshi was accepted with certain modifications as per the minutes of the meeting held on 1.3.1979 attended by Arvind N. Mafatlal, Y.N. Mafatlal, R.N. Mafatlal, sons of Arvind N. Mafatlal, Padmanabh and Hrishikesh and Miheer H. Mafatlal. This family arrangement contemplated formation of four groups headed by Arvind N. Mafatlal, Y.N. Mafatlal, R.N. Mafatlal, and M.H. Mafatlal, respectively, and formation of three companies as 100% subsidiaries of MIL and the shareholding existed then was to be transferred to three subsidiary companies as arranged and/or three subsidiary companies will be hived off in due course, thus, creating four blocks. Because of prevailing circumstances then, Arvind N. Mafatlal and M.H. Mafatlal continued to carry on together. In furtherance of the said family arrangement, two subsidiary companies were formed and the interests of Y.N. Mafatlal and R.N. Mafatlal were segregated. Thus, as per Miheer, the family arrangement was acted upon. However, Arvind N. Mafatlal and Miheer H. Mafatlal fell our due to a family incident which has been referred in the affidavit of M.H. Mafatlal. The machination of Arvind N. Mafatlal to act to the prejudice of Miheer H. Mafatlal commenced. From these allegations, it is informed that Arvind N. Mafatlal did not think it fit to form a third subsidiary. As a part of gaining more control over MIL, rights issue of 1987 was carried out. Shares were allotted to Nocil and Sushrupath contrary to the orders of the court. Effort was made to see that Miheer H. Mafatlal is not able to subscribe the rights issue of 1987. As a part of gaining more control over MIL, rights issue of 1987 was carried out. Shares were allotted to Nocil and Sushrupath contrary to the orders of the court. Effort was made to see that Miheer H. Mafatlal is not able to subscribe the rights issue of 1987. For that purpose, Arvind N. Mafatlal filed Civil Suit No. 1010/87 in the High Court of Bombay claiming that there is a valid, subsisting and concluded agreement between the plaintiff and the defendant Nos. 2 and 3 defendant M.H. Mafatlal superseding the family arrangement, according to which the shares held by the defendants on their own behalf and on behalf of others were to be sold to the plaintiff or his nominee and injunction was obtained by Arvind N. Mafatlal, and restraining M.H. Mafatlal and members of his family from renouncing the shares in favour of any party other than Arvind N. Mafatlal or from transferring, mortgaging or pledging any shares held by them in MIL, thereby making it impossible for M.H. Mafatlal to generate funds for accepting allotment of rights issue in his favour. Again, for acquiring more control and diluting proportionate shareholding of M.H. Mafatlal, resort was taken in 1992 to further rights issue, which was also challenged by way of civil suit by M.H. Mafatlal. Funds which were acquired by the rights issue were utilised for non-company purpose and diverted to purchase shares of NOCIL at Rs. 9.50 per share from foreign collaborator Shell which was not in the interest of MIL inasmuch as it was already facing financial crunch. Reference was also made to allotment of fully convertible debentures in short period in favour of Arvind N. Mafatlal group of companies, certain private parties and Unit Trust of India. 95. We have already noticed above that it cannot be said that Arvind N. Mafatlal had no other interest in the proposed scheme of amalgamation except as shareholder of managing director of the company. But, we have also made it clear that the scheme is not bad simpliciter, because the managing director had other interests in the scheme. This is so because ultimate proposal of a compromise or arrangement which comes before the court for consideration is not decision of the managing director, but is of the body of members or creditors as the case may be. This is so because ultimate proposal of a compromise or arrangement which comes before the court for consideration is not decision of the managing director, but is of the body of members or creditors as the case may be. Relevance of disclosure of interest of persons holding a position of trust and importance is only to the extent that the decision-makers, viz., the shareholders or creditors who have been offered certain terms under the scheme have occasion to take into consideration those existing interests of such persons as have been named under section 393(1) before approving or disapproving proposal for the purpose of securing sanction from the court. They may examine the proposed compromise or arrangement with care and caution and view the business aspect in it dispassionately. It is the ultimate decision of the body of members or creditors as men of business which comes before the court for its approval. In our opinion, therefore, the personal interest of one person whether as managing director or otherwise cannot be raised to a level that mere existence of such interest would vitiate bona fides of the scheme. We have already noticed that the scope of enquiry while considering the question of according approval to the proposed scheme by the court is to see general reasonableness and fairness of the scheme that the statutory majority were acting bona fide in the sense that they were not coercing the minority in order to promote any other interest adverse to those of the class represented by them and arrangement is such as an intelligent honest man belonging to the class concerned or affected may reasonably approve. To say, in other words, it is bona fides of the majority acting as a group is to be examined and not of the person whose personal interests have not been disclosed. Bona fide; of person can only be relevant if it can be established with reasonable certainty that he represents majority or is controller of majority. In this connection, reference may be made to Hellenic's case [Hellenic and General Trust Ltd., Re, (1976) 1 WLR 123 (Ch D)l, supra. It was a case in which the acquirer of the company Hambros was owning a company which had 53% of shares in the transferor company. In this connection, reference may be made to Hellenic's case [Hellenic and General Trust Ltd., Re, (1976) 1 WLR 123 (Ch D)l, supra. It was a case in which the acquirer of the company Hambros was owning a company which had 53% of shares in the transferor company. This situation led the court to conclude that the subsidiary company of Hambros which was holding such large number of shares placed itself vis-a-vis Hambros in the position of vendor and lifted the veil of transaction to be one of acquisition than of amalgamation. That is a pointer to the fact that what is required to be considered is bona fides of the majority and not of one single person. It is true that all these allegations, if remained un-controverted, as they have remained un-controverted in the present case for want of any affidavit or reply on the part of Arvind N. Mafatlal adverse inference of motive to further his own interest can be drawn against Arvind N. Mafatlal. But, no presumption beyond this can be drawn from these allegations. We have already noticed that an overwhelming majority of the members present in person and in value had approved the scheme in the meeting held for that purpose in pursuance of the directions of the court under section 391(1) of the Act. As per the voting pattern disclosed by the appellant, individual trusts controlled by Arvind N. Mafatlal and private companies accounted for only about 16% of the shares voted in the meeting. About 4470 of the shares represented by the financial institutions, employees and public taken together and two companies stated to be from amongst Mafatlal group had about 15% of shares. Apart from the statement from M.H. Mafatlal in his affidavit, there is nothing on record to show or suggest that the Board of respective companies had acted in furtherance of alleged motive attributable to Arvind N. Mafatlal and not from the point of view of business interest of the company concerned. Normal course of business is that decision for companies is taken by the Board. Normal course of business is that decision for companies is taken by the Board. The fact that Arvind N. Mafatlal is a member of the Board and was in a position to influence the decision of the Board, by itself, cannot lead to a finding that the Board of respective company acted at the behest of Arvind N. Mafatlal, for furthering his objects alone without considering businessman like viability of the scheme. There is nothing on record to suggest that the Board in fact acted for Arvind N. Mafatlal's interest only without consideration of its business interest. There is no material on record about the composition of respective Boards, nature and amount of influence which Arvind N. Mafatlal could have exercised on other members of the Board, interaction of Arvind N. Mafatlal and other members of the Board. In absence of such material, it is not possible for us to hold that respective Boards of different companies have acted in support of Arvind N. Mafatlal for furtherance of his personal interests and not as a man of business will reasonably act. It is also not brought to our notice that whether Arvind N. Mafatlal participated in the meeting for and on behalf of any of the companies whose names have been disclosed as holder of proxies of them, thus, amalgamating his decision into the decision of the Board of the company at the meeting. Position may be different where a person having interest other than interest only as shareholder and managing director of the company secures proxies of majority of shareholders and place himself in a position to decide as the holder of majority of votes to influence the decision of the meeting. Therefore, merely on the basis of existence of additional interest of Arvind N. Mafatlal furthering his personal interest in the matter of family disputes, same motive cannot be attributed to the entire assemblage of the shareholders at the meeting, who were the decision-makers. In absence of attribution of this motive to the majority of shareholders, conclusion cannot be reached that majority of shareholders were coercing the minority to further the interest of Arvind N. Mafatlal which are opposed to the interest of minority. 96. In absence of attribution of this motive to the majority of shareholders, conclusion cannot be reached that majority of shareholders were coercing the minority to further the interest of Arvind N. Mafatlal which are opposed to the interest of minority. 96. We of course do not countenance monumental silence maintained by Arvind N. Mafatlal in not filing reply affidavit about allegations made against him and the conduct of company in attempting to defend the stand of Mafatlal vis-a-vis family dispute at various levels of arguments. But, making arguments on the basis of available material during the course of hearing is one thing than to draw conclusion therefrom that a company and the members as a body of decision making in its meeting as a group were acting only for the interest of Arvind N. Mafatlal and not taking decision as a reasonable business man would take keeping in view the business. We have already found that, so far as the company is concerned, and the terms of offer under the scheme are concerned, from the point of view of the company, existence of family dispute is not of any relevance inasmuch as no separate terms have been offered on that basis. 97. The allegation that the court should lift the corporate veil of various companies and see the face of Arvind N. Mafatlal behind, does not commend us. The argument in fact proceeds on fallacious assumption. The family arrangement, to which the appellant swears by, assumes (that the) companies, which are separate and independent juristic persons, are personal property of Mafatlal fortune. For the purpose of raising objection to the scheme, the appellant wants to keep apart the identity of the company and Arvind N. Mafatlal. In fact, the family arrangement around which the appellant's case rivets, is founded on existence of joint interest of all the family members of Mafatlal and division thereof as personal property. If that is to be accepted, as the foundation for examining the scheme, then, it must be accepted that no company really exists as they are not independent entities but is merely accumulation of wealth of Mafatlal family available for division amongst claimants and interests other than of members of Mafatlal family are redundant, then behind every company not the face of Arvind N. Mafatlal only, but the faces of all the members of Mafatlal family who raise claim in respect thereof leers. This is not apparently on which objection is aimed. What is purported to be argued is to confine the lifting of veil qua Arvind N. Mafatlal and free the existence of company from the influence of Arvind N. Mafatlal as part of its management. In connection with the provisions under section 391, it is to be seen that it is not the scheme of proposer simpliciter before the court. The proposal for compromise and arrangement can be by any party to the compromise or persons suggesting such compromise between company and company, between company and its members and between company and its creditors, as the case may be. A creditor may be proposer, shareholder may be proposer, company itself can propose a scheme, to seek approval of its Board. But, ultimately, what reaches for approval to the court is scheme which is approved by requisite majority of the members of creditors of the company with whom the proposal is concerned. Therefore, the original proposer of scheme passes into oblivion if the scheme is approved by requisite majority. In order to unveil the bona fides of such decision, what is required to be established is that such requisite majority was acting in furtherance of interest not germane to the scheme but of 'X', 'Y' or 'Z'. For lifting of veil in such position, it has to be established by the objector that behind requisite majority is lurking face of such other interest. As we have seen from the voting patterm, the objector appellant has failed to establish. In that view of the matter, we are unable to sustain the challenge to the finding recorded by the learned single judge in this regard and hold that the petitioner has failed to establish that the majority was not acting bona fide and was coercing minority to further interests of Arvind N. Mafatlal and not their own interests as reasonable men of business would do. 98. It was then argued that the scheme of amalgamation is proposed on the basis that every member of M. Fine shall be allotted two equity shares of Rs. 100 each of MIL for every five ordinary shares of Rs. 100 each of M. Fine. It is urged that this exchange ratio is heavily loaded in favour of shareholders of M. Fine and is not fair to the shareholders of MIL. 100 each of MIL for every five ordinary shares of Rs. 100 each of M. Fine. It is urged that this exchange ratio is heavily loaded in favour of shareholders of M. Fine and is not fair to the shareholders of MIL. According to learned counsel for the appellant, this exchange ratio is determined mainly on the basis of report dated 10 November, 1993, submitted by C.C. Chokshi and Co. and the opinion expressed by ICICI Security and Finance Company Ltd. Both the reports as per the certificate attached thereto are based on the information as to the net asset value, the prevailing market price of share and future prospects of two companies furnished by MIL and share to be credited by them without independent verification about correctness of such information. Opinion furnished by C.C. Chokshi and Co. is tainted with bias because the member of C.C. Chokshi & Co. happened to be chartered accountants of whole family of Mafatlal and they also happened to be auditors of the Mafatlal group of companies. It was pointed out meticulously by learned counsel for the appellant that various factors referred to by the C.C. Chokshi and Co. in its report, which have bearing on determination of fair exchange ratio of shares does not disclose at the culmination of report opining exchange ratio as to how much weight and what consideration has been given to various factors. While it was not seriously disputed that exchange ratio roughly corresponds to prevailing market price of shares of two companies during the relevant time, but it is stated that the market quotation on the stock exchange though relevant are not determinative of exchange ratio in each and every case of amalgamation. According to the arithmetic calculation worked out by the appellant, earning per share of the equity share of M. Fine and of MIL will work out one share of MII, for 3.36 equity shares of M. Fine or two shares of MIL for 6.72 equity shares of M. Fine. Yet, according to another arithmetic calculation, for average price of MIL shares during 24 months preceding report would work out about one share of MIL for two shares of M. Fine by taking average market price at 1933 per share of MIL and 678 per share of M. Fine for the period. Yet, according to another arithmetic calculation, for average price of MIL shares during 24 months preceding report would work out about one share of MIL for two shares of M. Fine by taking average market price at 1933 per share of MIL and 678 per share of M. Fine for the period. Apart from this objection about the report, it has also been sought to be argued that in arriving at exchange ratio offered under the scheme, there have been factors which have been ignored in arriving at break-up value of equity shares of two companies for the purpose of fixing exchange ratio. It was urged that while non-recurring profits have been taken into consideration for the purpose of finding out profitability of the company, non-recurring losses have been excluded, that is to say, parity has not been kept in giving treatment to non-recurring profits and losses for the purpose of arriving at earning per share in each case. It was also pressed into service that in its reports C.C. Chokshi and Co. has not taken into consideration the half-yearly results of the company which were then available and subsequent working of the companies make exchange ratio fixed vulnerable to the charge of unfairness and prejudicial to the interest of members of MIL. 99. If one were to examine the exactitude of exchange ratio that may be offered fairly on the arithmetic scale by taking into consideration various details, there is some force in what were suggested by Mr. B.R. Shah on behalf of the appellant. However, keeping in view the scope of enquiry which the court is required to undertake, and with whose findings we are concerned, it will not be permissible for us in law to undertake this exercise in the facts and circumstances of present case in absence of bona fides. 100. On principle, it is well settled that the scheme may be open to criticism, but unless it is affirmatively shown to be unfair, the court will not interfere. That was the opinion expressed in Sussex Brick and Co., Re (1976) 1 WLR 123 (Ch D) : (1960) 30 Comp Cas 536 (Ch D). It is a matter of shareholders to consider commercially whether such merger is beneficial or not. That was the opinion expressed in Sussex Brick and Co., Re (1976) 1 WLR 123 (Ch D) : (1960) 30 Comp Cas 536 (Ch D). It is a matter of shareholders to consider commercially whether such merger is beneficial or not. The court is really not concerned with the commercial decision of the shareholders until and unless the court feels that the proposed merger is manifestly unfair or is being proposed unfairly and/or to defraud the shareholders. Whether the merged companies will be ultimately benefited or will be able to economise in the matter of expenses is a matter for shareholders to consider. If three companies are amalgamated, certainly there will be some economics in the matter of maintaining accounts, filing of returns and various other matters. However, the court is not concerned with the exact details of the matter and if the shareholders approved the scheme with requisite majority, then the court only looks into the scheme as to find out that it is not manifestly unfair and/or is not intended to defraud or do injustice to the other shareholders. 101. In order to infructuate the scheme approved by commercial wisdom of majority of shareholders, the test of unfairness does not fall with the quest for finding a 100 per cent fair of right scheme to the mathematical precision. Even if one reaches a conclusion that scheme is open to certain valid criticism and that a better scheme might have been evolved, the quest for court to consider is not whether there is any point in the scheme on which a better view might have prevailed or more better terms could have been offered to shareholders. It is not the yardstick to see that no scheme be effective to bind a dissenting shareholder unless it conforms to the extent of 100 per cent with the highest possible standard of fairness, equity and reason. After all, a man may have an offer made to him and, although he would prefer something better, would be quite prepared to accept it because it was good enough in all the circumstances. Therefore, mere existence of grounds for criticising scheme may not be enough to render the scheme unfair in the sense in which the court would treat it for withholding approval. 102. Maughm J. in Hoare and Co. Therefore, mere existence of grounds for criticising scheme may not be enough to render the scheme unfair in the sense in which the court would treat it for withholding approval. 102. Maughm J. in Hoare and Co. (No. 2), Re, (1933) All ER 105, laid down that where the statutory majority has accepted the offer the onus must rest on the applicants to satisfy the court that the price offered is unfair. He said : "The other conclusion I draw is this .... the court ought to regard the scheme as a fair one inasmuch as it seems to me impossible to suppose that the court, in the absence of any strong grounds, is to be entitled to set up its own view of fairness of the scheme in opposition to so very large a majority of shareholders who are concerned. Accordingly, without expressing a final opinion on the matter because there may be special circumstances in special cases, I am unable to see that I have any right to order otherwise in such a case as I have before me, unless it is affirmatively established that notwithstanding the view of a very large majority of shareholders, the scheme is unfair." 103. In Press Caps, Re, (1949) 1 All ER 1013, the issue arose about the fairness or price offered by M.B. Co. Ltd. for acquiring fully paid up shares of P.C. Ltd. at the stock exchange price which was accepted by all shareholders except the objector. Vaisey, J., accepted the objection and declared that dissentient was not bound to accept the offer, by resorting to computations made on the basis of balance-sheet valuations. The Court of Appeal in the above report upturned the judgment of Vaisey, J., on the principle enunciated by Maughm J. in Hoare and Co. Vaisey, J., accepted the objection and declared that dissentient was not bound to accept the offer, by resorting to computations made on the basis of balance-sheet valuations. The Court of Appeal in the above report upturned the judgment of Vaisey, J., on the principle enunciated by Maughm J. in Hoare and Co. Sanawell, L.J., discarded the subjective test of finding whether objector is acting on reasonable ground by reiterating the view expressed in Esertite Locknuts Ltd., Re, (1945) 1 All ER 403, wherein it was said at the same time that, if I were to accede to this present application, it seems to me that whole matter would be left in a condition of quite intolerable uncertainty and that it cannot be right that owning shareholder among one seven hundredth part of the shares affected by proposed should be entitled to stand out against the decision of 699/700th of the share capital merely because he has, as he thinks, been left somewhat in dark in regard to material facts. Lord Evashed in his opinion said : "Since 1,115 shareholders out of 1,116 have accepted the offer prima facie we should take it as fair and to borrow the language of Maughm, J., the court ought not to set up its own view of the fairness of the scheme in opposition to very larger majority of the shareholders who are concerned." Wynn Pauy, J., commenting on the view taken by Vaisey, J., said : "In my view he is substituting the view of shareholder for the view of the court. A valuation is only an expression of opinion. It may be made on one of many bases prima facie the stock exchange markings can be taken as satisfactory indication of the value of shares in question." 104. In short, the decided cases do not (sic) indicate that the exchange ratio of shares in the case of scheme of amalgamation, when supported by a opinion of expert chartered accountant and approved by a very large number of shareholders concerned, is prima facie to be accepted as fair, unless proved otherwise by the objectors. It is also well established that there are number of bases on which valuation or the offered exchange ratio, which ultimately is a matter of opinion, can be founded and final, determination can be made by accepting one of amalgamation of various consideration. It is also well established that there are number of bases on which valuation or the offered exchange ratio, which ultimately is a matter of opinion, can be founded and final, determination can be made by accepting one of amalgamation of various consideration. It is also well settled that mathematical precision is not the criterion for adjudging the fair exchange ratio. 105. The courts in India have also applied same principle while considering the question of according sanction to scheme for amalgamation. Reference may be made in this connection to M G Investment and Industrial Co. Ltd. v. Newshrock Spinning and Mfg. Co. Ltd. (1972) 42 Comp Cas 145 (Bom) and Kamala Sugar Mills Ltd., Re (1996) 4 Comp LJ 91 (Mad) : (1984) 55 Comp Cas 308. In Kamala Sugar Mills case, the court said (headnote of Comp Cas) : "Once the exchange ratio of the shares of the transferee company to be allotted to the shareholders of the transferor company has been worked out by a recognised firm of chartered accountants who are experts in the field of valuation and if no mistake can be pointed out in the said valuation, it is not for the court substitute its exchange ratio, especially, when the same has been accepted with demur by the overwhelming majority of the shareholders of the two companies to say that the shareholders in their collective wisdom should not have accepts the said exchange ratio on the ground that it will be detrimental to their interest.' That is the case before us also. The materials on the basis on which objections are now raised about the correctness of the exchange ratio fixed by the chartered accountants and ICICI were available to the objector at the time when meeting of the shareholders of MIL was held. He opted not to remain present personally in the meeting and voted through proxy. The materials on the basis on which objections are now raised about the correctness of the exchange ratio fixed by the chartered accountants and ICICI were available to the objector at the time when meeting of the shareholders of MIL was held. He opted not to remain present personally in the meeting and voted through proxy. In respect of material now available and which is now pressed into service was also available at the time when the meeting was convened, no objection was raised about correctness of the exchange ratio in the meeting or any error in the correctness of exchange ratio valuation was pointed out, and the shareholders present and voting in their collective wisdom approved the exchange ratio by overwhelming majority without considering it to be detrimental to their interest as shareholders of MIL and fairness of exchange ratio fixed under the scheme not found liable to be interfered (with) by the learned single Judge is not likely to be interfered with in appeal, merely because some criticism can be validly made against arithmetic calculation of exchange ratio proposed by the Board of the company on the basis of opinion obtained from the experts. 106. This principle was succinctly stated by the Calcutta High Court in the case of Maknam Investment and others, Re, reported in (1995) 4 Comp LJ 330 (Cal), (at page 335, paras 13 and 14) that "It is the matter for the shareholders to consider commercially whether amalgamation or merger is beneficial or not. The court is really not concerned with the commercial decision of the shareholders until and unless the court feels that the proposed agreement is manifestly unfair or is being proposed unfairly and/or to defraud other shareholders. Whether the merged companies will be ultimately benefited or not, or will be able to economic in the matter of expenses is a matter for the shareholders to consider..... the court is really not concerned with the exact details of the matter and if the shareholders approved the scheme by requisite majority, then the court only looks into the scheme as to find out that it is not manifestly unfair and/or is not intended to defraud or do injustice to other shareholders . ... The court does not go into the matter for fixing of exchange ratio in great detail or to sit in appeal over the decision of the chartered accountant. ... The court does not go into the matter for fixing of exchange ratio in great detail or to sit in appeal over the decision of the chartered accountant. If the chartered accountant or repute has given exchange ratio as per valuation made by him and if the same is accepted by requisite majority of shareholders, the court will only see whether there is any manifest unreasonableness or manifest fraud involved in the matter. 107. This principle follows ratio of decision of the Supreme Court in the case of Hindustan Lever Employees' Union v. Hindustan Lever Ltd. and others reported in (1994) 4 Comp LJ 267 (SC). 108. In their book 'Take-overs and Mergers', Weinberg and Blank have discussed the problem of valuation in the case of amalgamation of two companies, the authors have opined that some or all the following factors will have to be taken into account in determining the final share exchange ratio (1) The stock exchange prices of the shares of the two companies before the commencement of negotiations or the announcement of the bid. (2) The dividends presently paid on the shares of the two companies. It is often difficult to induce a shareholder, particularly an institution, to agree to a merger or a share-for-share bid, if it involves a reduction in his dividend income. (3) The relative growth prospects of the two companies. (4) The cover (ratio of after-tax earnings of dividends paid during the year) for the present dividends of the two companies. The fact that the dividend of one company is better covered than that of the other is a factor which will have to be compensated for at least to some extent. (5) In the case of equity shares, the relative gearing of the shares of the two companies. The 'gearing' of an ordinary share is the ratio of borrowings to the equity capital. (6) The value of the net assets of the two companies. Where the transaction is a through going merger, this may be more of a talking point than a matter of substance, since what is relevant is the relative values of the two undertakings as going concerns. (7) The voting strength in the merged enterprise of the shareholders of the two companies. (8) The past history in the merged enterprises of the shareholders of the two companies. (7) The voting strength in the merged enterprise of the shareholders of the two companies. (8) The past history in the merged enterprises of the shareholders of the two companies. The aforesaid opinion of the learned authors received approval of the Supreme Court in the case of Hindustan Lever Employees' Union v. Hindustan Lever Ltd., reported in (1994) 4 Comp LJ 267 (SC). After quoting with approval the aforesaid statement of opinion, the court said "It will, therefore, appear that in case of amalgamation, a combination of all or some of the methods of valuation may be adopted for the purpose of fixation of the exchange ratio of the shares of the two companies." In relation to the challenge made to exchange ratio in that case, the court said (at page 285, para 37 of Comp LJ) "The question is what method should be adopted for arriving at a proper exchange ratio. The usual rule is that share of the going concern must be taken at quoted market value. This principle was also recognised by this court in the case of Commissioner of Wealth-tax v. Mahadeo lalan (1972) 86 ITR 621 (SC)." 109. Before the Supreme Court, an attempt has been made to show that determination of exchange ratio was vitiated because the chartered accountant to whom the work was entrusted did not perform his function objectively and in accordance with the settled financial norms and practice and his action was vitiated as he was one of the directors of the company. Comparative figures of shares of the two companies, their market value, their holding in the market were placed to demonstrate that calculation was vitiated. This is how the court repelled the contention (at page 275, para 3 of Comp LJ). "But what was lost sight of (was) that the jurisdiction of the court in sanctioning a claim of merger is not to ascertain with mathematical accuracy if the determination satisfied the arithmetical test. A company court does not exercise an appellate jurisdiction. It exercises a jurisdiction founded on fairness. It is not required to interfere only because the figure arrived at by the valuer was not as better as it would have been if another method would have been adopted. A company court does not exercise an appellate jurisdiction. It exercises a jurisdiction founded on fairness. It is not required to interfere only because the figure arrived at by the valuer was not as better as it would have been if another method would have been adopted. What is imperative is that such determination should not have been contrary to law and that it was not unfair for the shareholders of the company which was being merged. The court's obligation is to be satisfied that valuation was in accordance with law and it H carried out by an independent body. The High Court appears to be correct in approach that this test was satisfied as even though the chartered accountant who performed this function was a director of TOMCO, but he did so as a member of renowned firm of chartered accountants. His determination was further got checked and approved by two other independent bodies at the instance of shareholders of TOMCO by the High Court and it has been found that the determination did not suffer from any infirmity. The company court, therefore, did not commit any error in refusing to interfere with it." (emphasis supplied by the court)] 110. The position is no different in the present case. The exchange ratio offered under the scheme by the company was founded on the opinion obtained from the reputed firm of chartered accountants C.C. Chokshi and Co. Ltd. C.C. Chokshi and Co. Ltd. in its detailed opinion has taken into account that on amalgamation, shares held by MIL in M. Fine shall have to be cancelled. Increase in share premium account in equity capital of the MIL will also be taken into account as a result of final call made in respect of Bond 1992 issue. It has also taken into account significant increase in the paid up equity of MIL as a result of issue of its bond in the international market. It has undertaken exercise in calculating net worth of the two companies by making certain adjustments apart from taking into consideration adjusted net worth of two companies. It has also referred to the method of valuation of exchange ratio on the basis of earning per share on the basis of earning per share of the two companies by taking into account five years working results of the two companies making certain adjustments. It has also referred to the method of valuation of exchange ratio on the basis of earning per share on the basis of earning per share of the two companies by taking into account five years working results of the two companies making certain adjustments. Apart from taking into considerations the past results of the two companies, the chartered accountants have taken into account the potentiality of the two companies to earn profit in future, considering existing expansion and modernisation of projected and planned expenditure by the MIL as well as subsidiary and sister concern in hand. It has also taken into account the market price of equity shares of past 24 months, declared dividend by the two companies, the overall effect of security scam in the market price, realisable investment and their market value. Taking into consideration multifarious considerations detailed in the report, note was also taken of the fact that MIL held substantial shares of M. Fine, which shall have to be cancelled on merger of M. Fine with MIL. Two fully paid up equity shares of MIL of Rs. 100 each of every five equity shares of Rs. 100 each of M. Fine, was considered to be a fair exchange ratio to be offered as term of amalgamation. It was clarified that "In absolute terms, it would mean that the MIL is keeping consideration of equity capital of par value of Rs. 7.77 crores which at the last issue price of share amounts to about Rs. 38.84 crores and which at the current market price amounts to Rs. 57.4 crores. At the stage of dividend declared for 1992-93, it will result in a cost in terms of distributable profits of Rs. 2.72 crores. For an undertaking in a diversified business activity of textile and chemicals with the total infrastructure, knowhow, technology tie up and range of established products and capacities and potential the aforesaid cost to MIL can be regarded as fair and reasonable." 111. Another independent body, ICICI Security and Finance Co. 2.72 crores. For an undertaking in a diversified business activity of textile and chemicals with the total infrastructure, knowhow, technology tie up and range of established products and capacities and potential the aforesaid cost to MIL can be regarded as fair and reasonable." 111. Another independent body, ICICI Security and Finance Co. Ltd., reached same conclusion which was conveyed by its letter dated 10 November, 1993, to the company that on the basis of information made available to us and on the prevailing conditions, we are of the opinion that exchange ratio of shares for the purpose of effecting merger be two fully paid up shares of Mafatlal Industries Ltd. for every five fully paid up shares of Mafatlal Fine and Spinning Manufacturing Company Ltd. 112. The basis of valuation was stated to be net asset value, prevailing market prices of the shares and future prospects of the two companies as provided by the company. 113. On scrutiny of various aspects, the learned single Judge found that it is not possible for the court to agree with the objector that the said exchange ratio is unfair or unjust to the shareholders of MIL or it would result into gradual decrease in per share income. 114. Allegation of bias against C.C. Chokshi and Co. does not travel beyond assumption that because C.C. Chokshi and Co. happened to be chartered accountants for the whole family of Mafatlal and also happens to be auditors of Mafatlal group of companies, the report be considered as biased one. The fact that C.C. Chokshi and Co. is rendering professional service to two companies, and also to the members of Mafatlal family in their personal affairs, does not lead to any such inference that C.C. Chokshi and Co. in rendering their professional service of rendering (tendering ?) opinion on the question of as to what should be the exchange ratio on amalgamation of two companies would act mala fide against shareholders of MIL. Similar plea was raised in the case of Hindustan Lever Hindustan Lever Employees' Union v. Hindustan Lever Ltd. reported in (1994) 4 Com LJ 267 (SC)], supra, against seeking professional opinion from Mr. Malegam, senior partner of S.B. Billimoria and Co., which was adopted by the Board of directors against TOMCO. Mr. Malegam also happened to be director of ToMCO. Objection as to appointment of Mr. Malegam, senior partner of S.B. Billimoria and Co., which was adopted by the Board of directors against TOMCO. Mr. Malegam also happened to be director of ToMCO. Objection as to appointment of Mr. Malegam as auditor of ToMco and evaluator of companies was raised. It was also contended that Mr. Malegam is director of ICICI whose opinion was also sought for evaluation of shares. The court rejected that contention. The court also rejected the contention stating that evaluation report was on the basis of material supplied by Hindustan Lever Ltd. and not on the basis of any independent verification particularly when Mr. Malegam was director of ToMco as well as ICICI. Contentions raised about correctness of exchange ratio determined by C.C. Chokshi and Co. and ICICI are almost on parallel lines as the case of Hindustan Lever Ltd. case referred to above which did not found favour with the courts 115. Moreover, as said in Hindustan Lever's case, [Hindustan Lever Employees' Union v. Hindustan Lever Ltd. and others reported in (1994) 4 Com LJ 267 (SC)], it is required to be seen that exchange ratio is not unfair to shareholders of the company which is being merged. In the case in hand, it is the case of appellant himself that exchange ratio is more favourable to shareholders of transferor company, viz., M. Fine. That affirms that the exchange ratio is not unfair to the shareholders of the company which is being merged. 116. We, therefore, reject this contention of the appellant also. 117. As a result of the aforesaid discussion, this appeal fails and is hereby dismissed. There shall be no order as to costs.