JUDGMENT 1. - This appeal is directed against the order of the company judge dated April 20, 1990, disposing of three company petitions. 2. Company Petition No. 4 of 1988 was filed by Indo Continental Hotels and Resorts Limited (the transferee company). Company Petition No. 5 of 1988 was filed by Hotel Pink City Private Ltd. (the transferor company). 3. Company Petition No. 14 of 1988 was filed jointly by both, i.e., the transferee and transferor companies. These petitions were filed under Sections 391 and 394 of the Companies Act, read with rule 67 of the Companies (Court) Rules, 1959. 4. The prayer made by the transferee company in Company Petition No. 4 of 1988 was that suitable directions may be issued by this court for convening, holding and conducting the meeting(s) of the equity shareholders and creditors, if required, of the transferor company also, and appointing the chairman or chairmen of the meeting(s) and notices may be issued and published in respect thereof and for all other incidental matters relating thereto. 5. Similar prayers were made in Company Petition No. 5 of 1988, filed by the transferor. 6. In Company Petition No. 14 of 1988, which was a joint petition by the transferor and transferee companies, a prayer was made that the scheme of amalgamation/merger/compromise/arrangement, framed by the companies may be sanctioned by the court so as to bind all the members and the creditors of the aforesaid petitioners (i.e., the transferor and the transferee companies). 7. As a matter of fact, the main relief claimed in the bunch has been sought in Company Petition No. 14 of 1988. 8. Heard Mr. P.C. Jain, on behalf of the Income-tax Department, and Mr. Anant Kasliwal for the companies. 9. It is not necessary to give the details of all the incorporated assets of the two companies. Suffice is to say that the two companies have been amalgamated under the provisions of Section 391 of the Companies Act. The scheme of amalgamation which was prepared on July 19, 1990, is annexed as Schedule-1 to the judgment. 10. 9. It is not necessary to give the details of all the incorporated assets of the two companies. Suffice is to say that the two companies have been amalgamated under the provisions of Section 391 of the Companies Act. The scheme of amalgamation which was prepared on July 19, 1990, is annexed as Schedule-1 to the judgment. 10. The circumstances which necessitated the merger/amalgamation of the transferor company with the transferee company are as follows : (a) by amalgamation the transferor company shall be able to avail of the infrastructural facilities developed by the transferee company, which will result in reduction in cost of both the companies and their hotels, The cost benefits would be the maximum in the areas of management, marketing, purchase, contracting out the various jobs, recruitment, advertisement, publicity, secretarial and personnel, (b) about 75 per cent. to 90 per cent. foreign tourists visiting India visit Agra and/or Rajasthan. By amalgamation, all the three hotels, Mumtaj at Agra, Mansingh at Jaipur and Mansingh Palace at Ajmer, will come under the common banner and a tourist visiting any of the aforesaid three places, which would mean more assured business for all the three hotels. Thus by amalgamation, apart from providing better facilities to the tourists, the profits of all the three hotels would go up. (c) the transferee company has already established an efficient team of managers and other staff. This strength of personnel can be effectively used, if all the aforesaid hotels are owned by one company. Amalgamation would not only provide easy transferability of employees, but would also mean utilising the services of expert employees in a particular hotel for the other hotels as well, (d) the transferor company since the beginning of its operation has not been able to do well, especially because of low business and heavy overheads, The need of the hotels is wide advertisements, publicity and a reputed association for securing more business and renovation and expansion of the existing hotel. However, these things are not possible as the transferor company has serious financial problems and as per its latest balance-sheet, it is not in a position to obtain financial assistance from the Government agencies or from the public. On the other side, the transferee company is in a very sound financial position and can provide the necessary financial assistance for publicity, creation of an image and for its renovation and expansion. On the other side, the transferee company is in a very sound financial position and can provide the necessary financial assistance for publicity, creation of an image and for its renovation and expansion. By amalgamation, the transferor company would be able to avail of the financial facilities of the transferee company for its expansion and modernisation plans which would result in more business and better profits for the hotel at Agra, (e) though the operations of the transferor company are improving over the last 2-3 years, however, the same require rationalisation. Amalgamation would enable consolidation of certain operations of both the companies with a view to achieve economies of scale, which will be in the interest of both the companies, (f) amalgamation of the aforesaid companies would mean expansion, modernisation and diversification, which would generate further employment in the country and this amalgamation is in public and national interest as well, (g) amalgamation will provide a healthier financial base, especially from the view-point of the transferor company, which will enable it to avail of better financial assistance from the banks and/or financial institutions for its working capital requirements and expansion projects, (h) increase in business and thereby profits at the hotels would lead to better services to the tourists and other guests at the hotels. Apart from earning a goodwill for the company, the amalgamation would, therefore, also be in the interest of the tourist industry as a whole, (i) it is seen from the above that by amalgamation, all the aforesaid three hotels would generate more profits and, therefore, the amalgamation is in the interest of both the companies, their shareholders and creditors. 11. This amalgamation was done in the best interest of all concerned which included the creditors as well. 12. Vide order dated April 22, 1988, the learned single judge had passed orders for two separate meetings, one of the creditors and the other of the members of both the companies to consider the proposed scheme of amalgamation/merger. The court appointed two advocates of this court to act as chairmen of the meetings of the creditors and the meetings of the members of the company. Both the chairmen submitted their separate reports. 13. The Income-tax Department filed an application in this court that order of amalgamation is likely to affect the Income-tax Department and so, it be impleaded as a party. Both the chairmen submitted their separate reports. 13. The Income-tax Department filed an application in this court that order of amalgamation is likely to affect the Income-tax Department and so, it be impleaded as a party. Learned counsel on behalf of the Department was heard on the merits of the case. 14. All the members present, while the chairmen were holding their meetings, were of the opinion that the scheme of amalgamation/merger/compromise/arrangement should be approved with certain modifications. The meeting resolved that Clause 4 of the aforesaid scheme of amalgamation regarding the share exchange ratio shall be modified and substituted and for every 1(one) equity share of Rs. 100 each of the transferor company 4 (four) equity shares of Rs. 10 each of the transferee company as fully paid up, i.e. to say, the transferee company shall allot for every 25,000 (twenty-five thousand) equity shares of Rs. 100 (rupees one hundred only) each of the transferor company, 1,00,000 (one lakh) equity shares of Rs. 10 each of the transferee company as fully paid-up. 15. After both the chairmen submitted their reports, a prayer was made that the amalgamation scheme may be sanctioned so as to be binding on all the members and creditors of the two companies. Notices of the petitions were advertised in the newspaper (Times of India). The official liquidator and the Regional Director, Company Law Board (Northern Region), Department of Company Affairs, Ministry of Industries, Kanpur, were also served. 16. On the request of the official liquidator, Shri N.C. Jain, the chartered accountant, was appointed to scrutinise the books and relevant papers. He submitted his report on December 17, 1988. According to his report, the balance-sheets of both the companies were true and expressed a fair view of the state of affairs. He submitted his opinion regarding the book value of the shares. 17. In this case, the only point which we have to consider and decide is as to how the Income-tax Department would be affected by this amalgamation so far as capital gains tax liability or any other tax liability is concerned. 18. We are conscious of the fact that, while scrutinising the matter of amalgamation of two companies, the court has always to keep in mind the public interest as supreme. 18. We are conscious of the fact that, while scrutinising the matter of amalgamation of two companies, the court has always to keep in mind the public interest as supreme. While doing so, the scheme has to be examined having regard to the object, general conditions and the background under which the scheme has been framed. This scheme has always to be according to the wisdom of the shareholders. 19. If the court, on a careful examination of all the factors leading to the framing of the scheme, comes to the conclusion that it is fair and is in public interest, it will have no hesitation in accepting the same and passing an order for amalgamation. Except the Income-tax Department nobody else has raised any objection to the merger/amalgamation of the two companies. 20. Mr. Jain, appearing on behalf of the Department, contended that this merger was done in order to avoid the tax liability and capital gains on the transferor. Except making this bald submission he did not elaborate it obviously for the reason that he had nothing to substantiate his contention. After hearing him, we do not find any merit in the argument. The merger of the companies, under no stretch of imagination, can be said to be a colourable exercise of the power given under Section 394 of the Companies Act. If there was any tax liability, that could always be recovered by the Department in accordance with law. The merger was not done with a view to escape the tax liability. 21. The learned single judge has modified Clause 4 of the scheme of amalgamation by the impugned order, which, in our opinion, was in public interest. It protected the interest of creditors and shareholders. It did not cause any prejudice to the interest of the Income-tax Department. 22. We do not find any merit in the appeal, it is hereby dismissed. *******