JUDGMENT - D. G. KARNIK, J.:---Zee Inter Active Media Limited (hereinafter referred to as "the transferor company), who is the petitioner in Company Petition No. 1096/01 is proposed to be amalgamated with Siti Cable Network Limited (hereinafter referred to as 'the transferee company') under a scheme of arrangement proposed under sections 391 to 394 of the Companies Act. In Company Petition No. 1096/01, the transferor company seeks approval and sanction of the scheme. 2. In Comp. P. No. 1097 of 2001, the transferee company seeks approval of the scheme of the merger and amalgamation of the transferor company into it. 3. The transferor company has a paid up capital of only Rs. 700/- and it is a wholly owned subsidiary of the transferee company. The transferor company was incorporated on 5-5-2000 and certificate of commencement of business was granted to it on 7-6-2000. The transferor company however had not commenced commercial operations till the end of the accounting year 2000-2001, ending 31-3-2001. A statement has been made in the Directors Report dated 14-8-2001 of the transferor company that the company had not commenced operations during that year. 4. By an order dated 19-9-2001 of this Court (Coram : R.J. Kochar, J.) passed in Company Application No. 469/01, the convening and holding of the meeting of the equity share holders of the transferor company was dispensed with in view of the consent given by all the equity share holders of the transferor company. By the said order, holding of the meeting of the secured and unsecured creditors of the transferor company was also dispensed with. 5. By an order dated 19-9-2001 of this Court (Coram : R.J. Kochar, J) passed in Company Application No. 469/01 holding of the meeting of the secured and unsecured creditors of the transferee company was dispensed with; however, two separate meetings, one of equity share holders and another of preference share holders were convened on 19-10-2001. In the meeting of the equity share holders the scheme was approved subject to one modification viz. addition of Clause 5.3.3. in the draft scheme of amalgamation. The scheme was also approved in the meeting of the share holders with the same modification. A report of the Chairman of the meeting is annexed to Company Petition No. 1097/2001 as Exhibit-G. 6. addition of Clause 5.3.3. in the draft scheme of amalgamation. The scheme was also approved in the meeting of the share holders with the same modification. A report of the Chairman of the meeting is annexed to Company Petition No. 1097/2001 as Exhibit-G. 6. The share holders of the transferor company also granted consent to the amendment of the scheme by addition of Clause 5.3.3 and gave a letter dated 22-10-2001 to the Board of Directors of the transferor company to that effect. Accordingly, scheme was modified and the modified scheme has been submitted for approval of this Court under section 391 of the Companies Act. 7. Notices of the two petitions were issued in Economic Times and Maharashtra Times, both dated 17-12-2001 and affidavits of publication have been filed. Notices of the petition were also issued to the Regional Director and the Official Liquidator. 8. The Regional Director appears through Shri C.J. Joy, Panel Counsel. Shri Joy states that the Regional Director has no objection for approval of the scheme. 9. Shri B.L. Meena, Official Liquidator is present in person who submits his report, dated 17-1-2002. In the said report, the Official Liquidator has certified that affairs of the transferor company have not been conducted in a manner prejudicial to the interest of it's members or to public interest. Official Liquidator submits that he has no objection for the sanctioning of the scheme. 10. At the hearing of the petition, Mr. B.A. Dilemma, Advocate appeared for two creditors of the transferor company, viz. R.P.G. Cables Limited and Ray Chem Limited and objected to the sanctioning of the scheme. Ms. S.D. Rane Advocate for the Modi Entertainment Network Limited and Doshi Brothers two creditors of the transferee company appeared and opposed the scheme. Shri Virag Tulzapurkar, Counsel for the petitioner submitted that he has no objection for the hearing of the creditors. Therefore, without going into as to whether the creditors have a right of hearing at the time of consideration of the sanction of the proposed scheme under section 391 of the Companies Act, objecting creditors were heard. Affidavit of Sandeep Joshi and Makarand Dhrukant Desai on behalf of the objecting creditors were filed. Shri Dilemma, learned Counsel for the objecting creditors raised two objections, which are considered below. 11. Affidavit of Sandeep Joshi and Makarand Dhrukant Desai on behalf of the objecting creditors were filed. Shri Dilemma, learned Counsel for the objecting creditors raised two objections, which are considered below. 11. It was contended that substratum of the transferor company has been eroded completely and therefore, the amalgamation should not be allowed. My attention was invited to the audited balance sheets of the transferor company as well as the transferee company annexed to the petition. It was pointed out that so far as the transferor company is concerned, it's paid up capital is only Rs. 700/- as against loans of over Rs. 127 crores. However, the asset side of the balance sheet also shows assets of similar value and the loans appear to have been utilised for the purpose of acquisition assets including fixed assets and current assets. In fact, the transferor company had not even commenced the operation till the year ending 31-3-2001 and therefore, the profit and loss account was also not drawn. Merely because the company had borrowed money for the purpose of acquisition of assets, it cannot be said that the substratum of the company is lost. Assuming without admitting that the substratum of the transferor company is lost, the creditors of the transferor company cannot object to the sanctioning of the scheme on the said ground because by amalgamation, they would not only be able to look to the assets of the transferor company (whose substratum is allegedly lost) but also be able to look to the assets of the transferee company. It is not the case of the objecting creditors of the transferor company that the substratum of the transferee company is also lost. Therefore, the such objecting creditors would have a better security for re-payment of their debts and they are not adversely affected by the proposed scheme of amalgamation. 12. The second objection raised by Mr. Dilemma is the balance sheet which is annexed to the petition is for the period of 31-3-2001. He submits that the company petition was filed on 8-11-2001 and therefore, it was obligatory on the company to file the latest balance sheet. He contends that under proviso to section 391(2), the company is required to disclose all material facts relating to the company including latest financial position of the company and the latest auditor's report on the accounts of the company. He contends that under proviso to section 391(2), the company is required to disclose all material facts relating to the company including latest financial position of the company and the latest auditor's report on the accounts of the company. Relying upon the judgment of this Court rendered in (KEC International Limited v. Kamani Employees Union and others)1, reported in 2000(1) All.M.R. 388, it was contended that the latest financial position of the company referred to in proviso to section 391(2) is the position as at the time of the final hearing of the application i.e. at the time of sanctioning of the scheme of arrangement. It was contended that as the petition is being heard on 1st February 2002, the company must disclose the latest financial position at the date of the hearing of the petition and not as on 31-3-2001. In response, Shri Tulzapurkar referred to and relied upon an earlier unreported judgment of this Court dated 7-12-1999 (Coram S.S. Nijjar, J.) in the matter of Blue Star Limited, Company Petition No. 1007/98. Shri Tulzapurkar further submitted that this judgment has subsequently been affirmed by the Division Bench, of this Court. 13. After referring to the judgment of the Gujarat High Court in (Navjeevan Mill Co. Ltd., Kollol In re Kohinoor Mill Co. Ltd.)2, reported in 1972 (Vol. 42) Co. Cases 265, and judgment of Delhi High Court in (Bhagwan Singh Sons Pvt. Ltd. v. Kalavati others)3, reported in 1986 (Vol. 60) Company Cases 94 and of another judgment the Gujarat High Court in (In re Maneckchowk v. Ahmedabad Manufacturing Company Limited)4, reported in 1970 (Vol. 40) Company Cases 819, Nijjar, J., observed: "Reading all the judgments together, one can say that the relevant point of time for disclosing the latest financial position would be at the time of filing of the petition. It is only as in the case of Bhagwan Singh (supra) when there is a long gap between the filing of the latest balance sheet etc. and the time when Court considers the scheme for sanction that the Court may require the latest financial position, otherwise it has been clearly laid down that the latest financial position should be disclosed at the time of moving/filing of the petition." 14. and the time when Court considers the scheme for sanction that the Court may require the latest financial position, otherwise it has been clearly laid down that the latest financial position should be disclosed at the time of moving/filing of the petition." 14. In my opinion, there can be no doubt with the proposition that the petitioner company must disclose all material facts including latest financial position of the company and the latest auditors report on the accounts of the company. The words "latest auditors report" in my opinion connote the latest auditors report which is available or which should normally be available at the time of filing of the petition. It is not compulsory that company must get the accounts audited time and again till the petition comes up for hearing and place that auditors report, before the Court at the time of hearing the petition. There would always be some time gap between the date on which the auditor audits the accounts and prepares his report and the date on which the company petition is filed and the date on which petition is actually heard. Therefore, the statutory requirement of the submission of latest auditor's report contained in the proviso of sub-section (2) of section 391, in my opinion, would mean the latest auditor's report for the period for which the accounts are audited or ought to have been got audited by the Company. In the case of listed companies (whose shares are listed on a stock exchange) a limited audit for every period of half year may be compulsory and in future it may become necessary even quarterly. In such cases, auditor's report for latest half year ending/quarter ending would be necessary. Of course, in a given case, the Court is not powerless to ask the further details of the latest financial position as on the date of the hearing of the petition or as on the date as near to the date of the hearing of the petition, as is reasonably practicable. This is especially necessary when there is a long gap between the date of filing of petition and the date of it's hearing. In the present case, the audit was completed for the financial year ending 31-3-2001. Transferor company is an unlisted company and hence, I am told half yearly limited audit is not compulsory. This is especially necessary when there is a long gap between the date of filing of petition and the date of it's hearing. In the present case, the audit was completed for the financial year ending 31-3-2001. Transferor company is an unlisted company and hence, I am told half yearly limited audit is not compulsory. Therefore, the last auditor's report available was only for the period 31-3-2001. That auditor's report along with the balance sheet and Annual report were annexed to the petition. This was legally correct. However, exercising Court's power to call for further and latest possible information, during the course of hearing I directed the petitioner to file the balance sheet and profit and loss account upto period ending 30-9-2001 (for which provisional balance sheet was prepared) The learned Counsel for the petitioner handed in the copies thereof both in respect of transferor as well as transferee company. Copies are taken on record and marked Exhibit-A in their respective petitions. The Counsel for the petitioner undertakes to file an affidavit proving those copies within a period of two weeks. Undertaking is accepted. Copy of this order shall not be issued until the affidavit is filed. 15. In view of this position, second objection of the objecting creditors of the transferor company that the latest financial position has not been disclosed, does not survive. 16. Ms. Rane, learned Counsel appearing on behalf of the objecting creditors of the transferee company submitted that the scheme should not be granted because large amounts of about Rs. 19 lakhs is due to the Modi Entertainment Network. She further submits that unless the dues of objecting creditors are paid to them, the scheme should not be sanctioned. In my opinion, this is not an obligatory requirement. Of course, in a given case the Court may direct payment, or direct that creditors or any class of them should be paid their dues or be sufficiently secured, before Court sanctions the scheme. But it must be remembered that a scheme under section 391 of the Companies Act is not a tool in the hands of a creditor to recover money or to coerce the company to pay. But it must be remembered that a scheme under section 391 of the Companies Act is not a tool in the hands of a creditor to recover money or to coerce the company to pay. The objecting creditor must show to the Court that the scheme is mala fide or fradulent is likely to adversely affect him or interest of creditors or any class of them are likely to be adversely affected if the scheme is sanctioned without securing him or any or all the creditors. No argument was advanced as to how the scheme is mala fide or fradulent or would adversely affect creditors of the transferee company. In the circumstances, objections raised by the creditors are rejected. 17. Shri H.K. Sudhakar appears for one of the creditors viz. Pioneer Polyfab Limited and states that the transferor petitioner company has admitted it's dues. He however, does not object to the sanctioning of the scheme. He would be entitled to all rights under the scheme as are available to the creditors. 18. The Court cannot lose sight of the commercial realities of today's world. Often, companies are formed as special purpose vehicles for different commercial reasons. The transferor company appears to be such one, special purpose vehicle which was created and at or before the commencement of the commercial business such special purpose vehicle is proposed to be merged with the parent i.e. the holding company. It is not for the Court to sit in judgment over the commercial wisdom of the business men in creating such special purpose vehicles as long as they do not infringe any law of the land. Courts do not have the access to the materials which necessitated creation of such special purpose vehicles and their eventual merger with the parent. Unless the Scheme is shown to be contrary to any law or shocks the conscience of the Court or is patently unfair to the members or creditors or any class of them, the Court is against the public interest or against the public policy, the Court should not come in the way of business by rejecting bona fides scheme under section 391. 19. I, therefore, sanction the scheme. Accordingly, Company Petition No. 1096/01 is allowed in terms of prayer Clauses (a) to (j) and Company Petition No. 1097/01 is allowed in terms of prayer Clauses (a) to (j). 20. Costs of Rs. 19. I, therefore, sanction the scheme. Accordingly, Company Petition No. 1096/01 is allowed in terms of prayer Clauses (a) to (j) and Company Petition No. 1097/01 is allowed in terms of prayer Clauses (a) to (j). 20. Costs of Rs. 1500/- shall be paid by each of the petitioners to the Regional Director within four weeks. 21. Costs of Rs. 1500/- shall be paid to the Official Liquidator by the petitioner in Company Petition No. 1096/01 within four weeks. Order accordingly. -----