M. K. SHARMA ( 1 ) THESE are petitions filed by the petitioners under Section 391 (1) of the Companies Act praying for sanction of the scheme of amalgamation of the transferor company with that of the transferee company. The petitioner in C. P. 231/97 is M/s. Sandy Estates Limited which is the transferor company. The said company was incorporated on 31st March 1992 with its registered office at New Delhi. The objects for which the transferor company was incorporated have been set out in detail in the Memorandum and Articles of Association of the company which is on record. ( 2 ) ON the other hand, the transferee company, namely, M/s. Landbase India limited, is the petitioner in C. P. No. 232/97. The said transferee company was incorporated on 24. 1. 1992 having its registered office at New Delhi. The objects for which the transferee company was incorporated have been set out in detail in the Memorandum and Articles of Association of the said company which is also placed on record. ( 3 ) DURING the course of carrying on its business, the transferor company entered into an agreement with the transferee company to develop and construct and/or build a condominium complex. The plot of land on which the aforesaid complex was intended to be built is in the ownership of the transferor company. It is stated in the petition that the transferor company is a 100% wholly owned subsidiary of the transferee company. Accordingly, it is stated that the managements of the transferor company as well as the transferee company felt that in view of the fact that both the companies have been pursuing the same line of activity, there was no point to have separate companies and that it would be advantageous to combine the activities in a single company. In the light of the aforesaid intention, a scheme of amalgamation was propounded which was duly approved by the Boards of Directors of the transferor company as also of the transferee company. ( 4 ) BY order dated 26th March 1997, this Court ordered for holding of the meetings of the shareholders and creditors of the transferor company. This Court, however, on the facts and circumstances of the case, dispensed with the meeting of the shareholders as well as the creditors of the transferee company. ( 4 ) BY order dated 26th March 1997, this Court ordered for holding of the meetings of the shareholders and creditors of the transferor company. This Court, however, on the facts and circumstances of the case, dispensed with the meeting of the shareholders as well as the creditors of the transferee company. However, in the aforesaid order, this Court specifically recorded that the question as to whether the scheme is not in public interest as it seeks to transfer only the capital assets of the transferor company without payment of stamp duty and taxes, would be considered when the petition for sanction of the scheme is filed by the company. ( 5 ) IN pursuance of the aforesaid order passed by this Court, the notice of the meetings was duly advertised as directed in the two newspapers. On 3rd May 1997, meetings of the equity shareholders and creditors were held in terms of the order passed by this Court which were presided over by the Chairpersons appointed by this Court. Pursuant to the said meetings, the Chairpersons have submitted their reports stating that the scheme of amalgamation was unanimously approved by the equity shareholders and creditors present In the meetings. Accordingly, the present petitions have been filed by the petitioners praying for sanction of the scheme of amalgamation so as to be binding on all the equity shareholders and creditors of both the companies and on the said companies. ( 6 ) PURSUANT to the filing of the present petitions, the Regional Director has filed reports, contending inter alia, that the affairs of the two companies have not been conducted prejudicial to the interest of its members or public interest. Pursuant to the notice issued by this Court, the Official Liquidator has also submitted his report, contending inter alia, that the affairs of the transferor company have not been conducted in a manner prejudicial to the interest of its shareholders or of public interest, so that the transferor company may be dissolved without the process of winding up orders. Since the transferee company, M/s. Landbase India Ltd. is a receiving company and is not subject matter of dissolution without process of winding up orders by this Court, it is stated that no report is required to be filed. Since the transferee company, M/s. Landbase India Ltd. is a receiving company and is not subject matter of dissolution without process of winding up orders by this Court, it is stated that no report is required to be filed. However, on the basis of the information received, the Official Liquidator stated that the affairs of the said company have also not been conducted in a manner prejudicial to the interest of its members or public interest. ( 7 ) I have heard the learned counsel appearing for the petitioners as also Mr. R. P. Meena, Dy. Official Liquidator and also Mr. A. W. Ansari, representing the Regional Director. Ms. zubeda Begum also made her submissions as amicus curiae. On a careful perusal of the contents of the reports filed by the Official Liquidator as also by the Regional Director and upon considering the statements made before me and also on careful perusal of the averments in the petition, and also the scheme of amalgamation, I am of the considered opinion that the scheme of amalgamation as propounded appears to be just and fair. ( 8 ) HOWEVER, in the light of the order passed by this Court on 24th October 1997, I am still required to consider and decide the issue raised as to whether the scheme is not in public interest as it seeks to transfer only the capital assets of the transferor company without payment of duty and taxes. In order to fully appreciate and answer the aforesaid issue, it is necessary to bear in mind certain important factors. The transferor company is a 100% subsidiary of the transferee company. It is also apparent that both the companies carried on almost similar nature of business. The reason for the amalgamation of the companies as indicated in the petition is because in the wisdom of management of both the companies, it was not prudent to have two companies doing the same business and instead combine them into one company which would be more advantageous in terms of reduction in cost, larger base, more resources etc. ( 9 ) IN the context of the aforesaid facts, I may now notice the relevant provisions of the statute connected with the aforesaid issue and thereafter make an endeavour to answer the issue raised for my consideration. ( 9 ) IN the context of the aforesaid facts, I may now notice the relevant provisions of the statute connected with the aforesaid issue and thereafter make an endeavour to answer the issue raised for my consideration. Section 3 of the Stamp Act is the charging section wherein it is provided that the instruments mentioned in the first schedule would be chargeable with duty of the amount indicated as against each entry of items in that article as the proper stamp duty. Schedule I gives a list of instruments liable to stamp duty and its provision must be treated as exhaustive for the purpose. Article 23 of Schedule I specifies that in a case of conveyance as defined under Section 2 (10) of the Stamp Act and not being a case of transfer changed or exempted under Article 62, stamp duty is leviable. Similarly, Article 62 of Schedule I indicates that a deed of transfer is also required to be stamped in the prescribed manner. ( 10 ) IT is submitted by Mr. Ganesh that the expression "amalgamation" does not and cannot lead to any act of conveyance or transfer as through the aforesaid process of amalgamation, the intention is to get the whole of the transferor company absorbed in the transferee company. It is further submitted that a wholly owned subsidiary company is regarded as an integral part of the parent company itself, and the properties of the subsidiary company are considered to be the properties of the parent company and therefore a scheme of amalgamation of a wholly owned subsidiary company with its parent company stands, therefore, on an entirely different footing as compared to a scheme of amalgamation of two hitherto unrelated companies. Mr. Ganesh also submitted that the present scheme cannot possibly be contrary to law or to public interest and therefore the same is deserved to be sanctioned by this Court. ( 11 ) DURING the course of his arguments, the learned counsel also drew my attention to the provisions of Sections 45 and 47 of the income Tax Act and relying on the aforesaid provisions contended that in the case of an amalgamation of a 100% subsidiary company, there is no accrual of capital gains and therefore it also cannot be said that there is any intention of avoiding any tax as well. In support of his contention, the learned counsel relied upon mainly on the decision of Forbes Forbes Campbell and Co. Ltd. Vs. Commissioner of Income Tax reported in (1984) 1 Company Law Journal 41. The aforesaid decision was rendered by the Bombay High-Court in an income tax case wherein the scope and effect of amalgamation under Section 434 of the Companies Act also came to be considered. The High Court held that in a case of amalgamation of 100% subsidiary with its parent company, no question of accrual of capital gains or sustaining of capital loss arises. The said decision noted with approval the decision of Calcutta High Court in Shaw Wallace and Co. Ltd. Vs. Commissioner of Income Tax, West Bengal II reported in (1979) 119 ITR 399 . ( 12 ) THE scope and effect of amalgamation of companies under Section 394 of the Companies Act has been set out and analysed by the Calcutta High Court in the case of Shaw Wallace and Co. Ltd. (supra ). In the said decision, it has been held that the legal effect of amalgamation between a 100% subsidiary company with the parent company is that the transferor companies get absorbed into and blended with the transferee company. It is held in that decision that the result of the amalgamation was not securing of any additional amount or asset by the transferee company but blending of the assets of the transferor company with it and in pursuance of that scheme of amalgamation, the abolition of the shares in the transferor company which shares earlier represented the said assets. In the said case, the Calcutta High Court looked behind the facade of the transaction and lifted the corporate veil to come to the aforesaid conclusion. After noticing the provisions of the scheme and also the provisions of Section 45 and Section 47 of the Income Tax Act, it was further held that since the net effect of the scheme of amalgamation was a transfer of the entire capital assets of the subsidiary companies to the holding company which also held the entire share capita! of the subsidiary companies, therefore, such a transfer or transaction would fall within Section 47 (v) of the Income Tax Act and should be excluded from the operation of Section 45 of the said Act. of the subsidiary companies, therefore, such a transfer or transaction would fall within Section 47 (v) of the Income Tax Act and should be excluded from the operation of Section 45 of the said Act. ( 13 ) SINCE, in the facts and circumstances of the present case, I am not called upon to consider the question of amalgamation of a company with another which does not own 100% of the shares of the transferor company, I deem it appropriate to leave the said question open to be decided in future in an appropriate case. Here is a case where amalgamation is sought for between a 100% subsidiary company with its parent company. As has been held by the Bombay High Court, by virtue of the aforesaid amalgamation, the transferor company which is a 100% subsidiary company would get absorbed into and blended with the transferee company which is the parent company. Therefore, in the light of the ratio of the Bombay and Calcutta High Courts, the properties and assets of the transferor company would be absorbed into and blended with the properties and assets of the transferee company which is the parent company. Under these circumstances, there cannot be any capital gain or loss arising from such a transfer as Section 45 does not apply to such transfer. ( 14 ) IN A. W. Fisggis and Co. Ltd. Vs. Queens Park Property Co. Ltd. reported in (1980) 50, Company Cases page 95, the Calcutta High Court held that there is no law barring any scheme of arrangement of transfer of a portion of a company s properties to another company formed for that purpose as a wholly owned subsidiary. After scrutiny of the scheme, it was held that the scheme could not be said to be unfair, unreasonable or not honest and in that view of the matter the scheme proposed was sanctioned by the Court. In the said decision, the Calcutta High Court has held that although the Court is not a rubber stamp, it is also true that the Court would not ordinarily interfere with the judgement and decision of the shareholders of a company. In the said decision, the Calcutta High Court has held that although the Court is not a rubber stamp, it is also true that the Court would not ordinarily interfere with the judgement and decision of the shareholders of a company. The Calcutta High Court also reiterated the principles of law settled that if anybody can arrange his matters in such a way which is absolutely legal as to avoid any provisions of law, it cannot be said to be an evasion but would be quite legal and lawful and in support of the said settled principles of law, the Calcutta High Court cited the decisions of the Supreme Court in Commissioner of India Tax Vs. A. Raman and Co. reported in (1968) 67 ITR page 11, Commissioner of Income Tax Vs. Calcutta Discount Co. Ltd. reported in (1973) 91 ITR 8. The said decisions of the Supreme Court has well settled the principle that by lawfully arranging matters, nobody could be held guilty of any evasion of or provisions of law even if it may avoid certain incidence of tax or duties. In Mihir H. Mafatlal Vs. Mafatlal Industries Ltd. reported in (1997) 1 S 579, the Supreme Court has outlined nine broad principles while identifying the scope and jurisdiction of the Company Court in respect of a matter relating to the scheme of arrangement or amalgamation. One of the principles laid down is that the Company Court must be satisfied that the proposed scheme is not violative of any provision of law and is not contrary to public policy. It was also held that once the broad principles and parameters are found to have been met, the Court would not sit in appeal over the commercial wisdom of the majority of the class of persons who have given approval to the scheme. ( 15 ) MY attention was also drawn to the decisions of the Supreme Court in State of U. P. and Others Vs. Renusagar Power Co. and Others wherein the Supreme Court permitted lifting of the corporate veil in order to find out whether the concerns could be treated and held to be one concern. Relying on the aforesaid law laid down by the Supreme Court in Renusagar Power Co. and Others (supra), Mr. Renusagar Power Co. and Others wherein the Supreme Court permitted lifting of the corporate veil in order to find out whether the concerns could be treated and held to be one concern. Relying on the aforesaid law laid down by the Supreme Court in Renusagar Power Co. and Others (supra), Mr. Ganesh submitted that in the present case also the corporate veil could be lifted and the fact that the transferor company is a 100% subsidiary company, should be appreciated by the Court while deciding the issue filing for consideration. ( 16 ) REFERENCE may also be made to the decision of Gujarat High Court in Wood Polymer Limited and Bengal Hotels Pvt. Ltd. reported in (1977) Vol. 47 Company Cases page 597. In the said case, the Gujarat High Court has held that notwithstanding the fact that even if all the formalities had been complied with, the Court would not approve a scheme which was brought into existence for the purpose of avoiding payment of capital gains tax. The Gujarat High Court on the facts of the said case held that if the only purpose discernible behind the amalgamation is to defeat the liability to pay tax by creating a paper company and transferring an asset to such a company, it would distinctly appear that the provision for such a scheme of amalgamation was utilised for avowed object of defeating tax. The aforesaid decision of the Gujarat High Court was accepted with approval by this Court in Mohan Exports India Ltd. Vs. Tarun Overseas (P) Ltd. reported in (1994) 3 Company Law Journal page 193. The single bench of this High Court, on the facts of the said case, held that it depends on the facts of each case to decide whether a particular scheme is a bona fide one or it is not in violation of any public interest. In the light of the facts of that case, the Court held that the main and real purpose of the scheme of arrangement is to transfer very valuable immovable assets of the transferor company to the transferee company which was just a paper company and if such a scheme is approved, it would not be in public interest because by the said device the immovable assets are sought to be transferred without payment of government dues. ( 17 ) IN order to appreciate the ratio of the aforesaid decision, I also looked into the facts of the aforesaid case decided by this Court. In the said case, the paid-up capital of the transferor company was Rs 41,40,000. 00 of equity shares whereas the paid-up capital of the transferee company was only Rs. 200. 00 divided in 20 equity shares of Rs. 10. 00 each. In the said case, it was also found that the sole purpose for which the transferee company was incorporated was to take over the export division of the transferor company. In the present case, the facts are clearly distinguishable and it is a case of reverse nature. The paid up capital of the transferor company is Rs. 1,00,000. 00 whereas that of the transferee company is Rs. 4. 00 crores. Accordingly, therefore, the facts of each case are to be appreciated by the Court to find out the real intent and purpose behind the amalgamation. It is no doubt true that if it is found that the only purpose behind the amalgamation is to defeat levy of tax, such a scheme in all fairness should not be sanctioned by the Court, since the scheme is in the nature of prejudicial to the public interest. However, as against the backdrop of the facts and circumstances of the present case, it cannot be said that there was any intention on the part of either of the two companies to defeat levy of tax and/or duty in any manner. I have already referred to the provisions of the Stamp Act relevant to the facts of the present case in order to find out if there be any intention on the part of the two companies to avoid and/or defeat payment of stamp duty. On careful analysis of the facts of the present case, I am of the considered opinion that in a case of present amalgamation where the transferor company, a 100% subsidiary of the parent company, was absorbed into and blended with the parent company, which is the transferee company, the incidence and concept of "conveyance" and "transfer" as understood in Articles 23 and 62 of Schedule I of the Stamp Act is not attracted. In such type of amalgamation, the transferee company does not acquire any additional asset but only blends the assets of the transferor company with it for the shares held by the transferee company in the transferor company represented the capital invested by the transferee company in the said transferor company and by the said amalgamation the transferee company becomes the sole owner of the entire capital and assets of the transferor company. ( 18 ) MY attention has also been drawn by the counsel appearing for the petitioners to the contents of a notification on 16. 1. 1937 and published in the Gazette of India 1937 as Part I Page 78. Under the said notification, it was notified that in exercise of the powers conferred by Clause A of Section 9 of the Indian Stamp Act, the Governor General in Council was pleased to remit the stamp duty chargeable under Articles 23 and 62 of Schedule I to the said Act on instruments evidencing transfer of property between companies limited by shares as defined in the Indian Companies Act including where the transfer takes place between a parent company and a subsidiary company, one of which is the beneficial owner of not less than 90% of the issued share capital of the other. In view of the contents of the aforesaid notification, even if it is assumed that the provisions of Articles 23 or 62 of Schedule I of the said Act are attracted to the facts of the present case, yet in view of remission granted to a case where transfer takes place between a parent company and a subsidiary company, one of which is the beneficial owner of not less than 90% of the issued share capital of the other, no stamp duty would be leviable on such instrument conveying-transfer of property between such companies. ( 19 ) IN view of the aforesaid remission granted, no stamp duty would be leviable in any case to the transfer of assets between the transferor and the transferee companies when the transferor company is a 100% subsidiary of the transferee company which is the parent company. In the light of the decisions of the Bombay and Calcutta High Court in the decisions referred to above, capital gains tax is also not leviable in the facts and circumstances of the present case. In the light of the decisions of the Bombay and Calcutta High Court in the decisions referred to above, capital gains tax is also not leviable in the facts and circumstances of the present case. Therefore, it could be conclusively held that there was neither any intention nor desire on the part of either of the companies to avoid and/or defeat payment and/or levy of any tax or duty by resorting to the process of amalgamation. ( 20 ) CONSIDERING the entire facts and circumstances of the case, the scheme proposed appears to be fair, reasonable and bona fide and therefore, in my considered opinion, it is a fit case where sanction could be granted by this Court to the present scheme of amalgamation. Accordingly, I accord sanction to the scheme of amalgamation entered into between the transferor and the transferee companies and declare that the said scheme shall be binding on all the equity shareholders and creditors of the petitioner company. All requirements in connection with this petition and the Scheme of Amalgamation will be issued by the transferee company both by publication and by notices to the appropriate authorities in accordance with law. It is open to any person interested to move this Court for appropriate directions as may be considered necessary in future. ( 21 ) THE Registry will draw up the formal order immediately. The Scheme of Arrangement will form part of the formal order. ( 22 ) THE petitions are accordingly allowed and stand disposed of. The transferor company stands dissolved without referring to the process of winding up.