JUDGMENT H.N. Nagamohan Das, J.—The petitioner-company has filed this petition under Sections 391 - 394 of the Companies Act, 1956 (for short "the Act"), seeking sanction of the scheme of arrangement as per annexure A. 2. The petitioner-company was incorporated under the Companies Act, 1956, in the year 1989 in the State of Gujarat. Between 1989 and 2000 the petitioner-company changed its name several times and also its registered office. At present the name of the petitioner-company is Sasken Communication Technologies Ltd., and its registered office is situated at Bangalore in the State of Karnataka. The main objects of the petitioner-company as set out in the memorandum of association are as under: (a) to establish, acquire, run, operate, provide services and design, development and implementation of turn key solutions both in hardware and software for infocom markets. (b) To manufacture, produce, work, distribute, buy and sell, import and export or otherwise to deal in all kinds of electronic hardware and software for computer systems and allied products. 3. The annual report 2007-08 containing the audited profit and loss account and the balance-sheet of the petitioner-company is at annexure C. 4. The board of directors of the petitioner-company in their meeting held on January 17, 2009, passed a resolution approving the draft scheme of arrangement as per annexure D. Under the draft scheme of arrangement the petitioner-company proposes to create a business restructuring reserve from out of the securities premium account to an extent of 50 per cent, and to use the said reserve for restructuring expenses. The salient features of the draft scheme of arrangement are as follows: (A) The scheme of arrangement is between the petitioner-company and its equity shareholders, wherein the petitioner-company shall set off the restructuring expenses incurred/to be incurred in the process of business restructuring of the petitioner-company, against the business restructuring reserve to be created from the securities premium account of the petitioner-company, pursuant to Sections 391 - 394 and other applicable provisions of the Act. (B) The scheme, shall come into operation from the appointed date, i.e., April 1, 2008, or such other date as the hon'ble High Court may fix and shall however become effective only from the effective date. (B) The scheme, shall come into operation from the appointed date, i.e., April 1, 2008, or such other date as the hon'ble High Court may fix and shall however become effective only from the effective date. (C) Pursuant to the scheme of arrangement, the treatment in the books of account of the petitioner-company will be as follows: (i) With effect from the appointed date, a sum being 50 per cent, of the amount lying to the credit of the securities premium account, as appearing in the books of account of the petitioner-company as at the appointed date, shall be credited to the "business restructuring reserve account (BRB). (ii) With effect from the appointed date, the restructuring expenses, as defined in Clause 1.5 of the scheme of arrangement, to the extent incurred by the petitioner-company and till the availability of balance in the business restructuring reserve account, shall be debited to the "business restructuring reserve account" in the stand alone and consolidated financials of the petitioner-company and consequently such expenses shall not be charged to the debit of the profit and loss account of the petitioner-company. (iii) With effect from the appointed date, for the limited purpose of consolidation of the financials of the petitioner-company on every balance-sheet date, such expenses as are in the nature of restructuring expenses but are incurred by the subsidiaries of the petitioner-company and debited to their respective profit and loss accounts, shall be disclosed as adjustment against the balance in the business restructuring reserve account of the petitioner-company, if any, as on the relevant balance-sheet date as if such expenses were incurred by the petitioner-company and corresponding adjustment will be made by reducing the relevant expense in the consolidated profit and loss account. (iv) The amounts credited to the business restructuring reserve account as mentioned in Clause (i) above, shall be utilised by the petitioner-company to adjust the restructuring expenses in the manner specified in Clause (ii) and Clause (iii) above, on an ongoing basis. (v) All the expenses shall be adjusted to the business restructuring reserve account until such date as may be determined by the board and consequently such expenses shall not be charged to the debit of the profit and loss account of the petitioner-company. (v) All the expenses shall be adjusted to the business restructuring reserve account until such date as may be determined by the board and consequently such expenses shall not be charged to the debit of the profit and loss account of the petitioner-company. (vi) After the adjustment is made, in the manner as set out in Clause (ii) and Clause (iii) above and at such time as the board of directors of the petitioner-company may decide to freeze the business restructuring reserve account, the residuary balance, if any, lying to the credit of the business restructuring reserve account may be credited to the general reserves of the petitioner-company. (vii) Before any expense is charged to the business restructuring reserve account, the treatment thereof shall have first been approved by the audit committee of the board of the petitioner-company based on the certificate to be obtained in that behalf by the petitioner-company from an independent firm of chartered accountants. (viii) To the extent the amount is transferred to the business restructuring reserve account as mentioned in (i) above, there shall be reduction of the securities premium account which shall be effected as an integral part of the scheme itself. (ix) Notwithstanding the charging of the restructuring expenses to the business restructuring reserve account under this scheme, such expenses shall not be reckoned for the purposes of determination of net profits of the petitioner-company for any year under Section 349 of the Act for any purpose. 5. The petitioner-company filed Co. A. No. 89 of 2009 before this Court under Section 391(1) of the Act seeking dispensation of meeting of secured creditors, unsecured creditors and to hold the meeting of shareholders for approval of the proposed scheme of arrangement. This Court vide order dated February 13, 2009, as per annexure F dispensed with the meeting of secured creditors in view of the fact that the petitioner does not have secured creditors. Further, it is directed to convene the meeting of unsecured creditors and shareholders. Accordingly, the chairman appointed for the meeting of the shareholders and unsecured creditors filed a report as per annexure H and J stating the majority shareholders and unsecured creditors as required under law approving the proposed scheme of arrangement. Therefore, the present petition is filed seeking sanction of the scheme of arrangement. 6. Accordingly, the chairman appointed for the meeting of the shareholders and unsecured creditors filed a report as per annexure H and J stating the majority shareholders and unsecured creditors as required under law approving the proposed scheme of arrangement. Therefore, the present petition is filed seeking sanction of the scheme of arrangement. 6. In this petition the notice was issued, to the Regional Director, Ministry of Corporate Affairs, Southern Region, Chennai and directed the petitioner to take out the advertisement of this petition in the English daily The New Indian Express and in the Kannada daily Kannada Prabha Bangalore editions on or before April 30, 2009. Accordingly, the petitioner has taken out the advertisement on April 26, 2009, in the said newspapers and filed copies of the same along with the memo dated May 29, 2009. Pursuant to the advertisement no objections have been received from the shareholders, creditors and employees. 7. The Registrar of Companies has filed an affidavit on October 16, 2009, opposing the scheme of arrangement, inter alia, contending that the scheme is against various accounting standards and also Section 211 of the Act. 8. After hearing for sometime, the petitioner-company filed an undertaking affidavit by way of answer to the objections raised by the Registrar of Companies and the same reads as under: I submit that the petitioner-company hereby undertakes that it shall restrict the restructuring expenses that it shall charge to the business restructuring reserve account to the items enumerated in Clause 1.5.1 to 1.5.8 of the scheme of arrangement. It is submitted that in terms of the above undertaking the defined term 'restructuring expenses' at Clause 1.5 of the scheme of arrangement shall stand amended and be read as follows: 1.5. 'Restructuring expenses' means the following expenses incurred/to be incurred from the appointed date and certified by an independent firm of chartered accountants appointed by the board for this purpose: 1.5.1. Mark to market adjustments on foreign exchange forward contracts and on any other derivative instruments; 1.5.2. Impairment of investments and consequentially any impairment on goodwill, if any, arising on consolidation or otherwise; 1.5.3. Tangible and intangible assets, the values of which have been eroded or impaired; 1.5.4. All extraordinary costs (that cannot be capitalised) associated with the company's future organic projects in India; 1.5.5. Costs associated with expansion plans for international acquisitions; 1.5.6. Impairment of investments and consequentially any impairment on goodwill, if any, arising on consolidation or otherwise; 1.5.3. Tangible and intangible assets, the values of which have been eroded or impaired; 1.5.4. All extraordinary costs (that cannot be capitalised) associated with the company's future organic projects in India; 1.5.5. Costs associated with expansion plans for international acquisitions; 1.5.6. Costs from existing projects under company's current portfolio allocation, including rationalisation of manpower, costs, facilities costs; 1.5.7. Such other expenses of the nature covered in the above clauses as may be identified and recommended by the board within the overall limit of 50 per cent, (fifty per cent.) of share premium account and that may be certified by an independent firm of chartered accountants appointed by the board for this purpose. 1.5.8. All legal and other related expenses in connection with business restructuring and this scheme. The aggregate 'restructuring expenses' would be restricted to 50 per cent, of the share premium account as at the appointed date. 3.1 submit that the petitioner-company hereby further undertakes that it shall make the disclosures as required by Section 211(3B) of the Companies Act, 1956, regarding the scheme and the deviation from the accounting standards in its stand alone balance-sheet and financial statements as well as its consolidated balance-sheet and financial statements. The company hereby further undertakes that it shall make a summarised disclosure about the impact on the profit and loss account in its notes appended to quarterly financial statements which are published pursuant to the requirements of Clause 41 of the listing agreements with the Bombay Stock Exchange Ltd., and the National Stock Exchange of India Ltd. 9. Further the petitioner-company filed additional undertaking affidavit on February 25, 2010 and the same reads as under: I submit that further to the undertaking affidavit dated February 22, 2010, the petitioner-company hereby undertakes that it shall make the disclosures in its balance-sheet and financial statements in a similar manner to the disclosures M/s. Hindako Industries Ltd., and M/s. Geometric Ltd., have made in their respective balance-sheets and financial statements for the year 2008-09. 10. Heard arguments on both the side and perused the entire petition papers. 11. The Supreme Court in Miheer H. Mafatlal Vs. 10. Heard arguments on both the side and perused the entire petition papers. 11. The Supreme Court in Miheer H. Mafatlal Vs. Mafatlal Industries Ltd., (1996) 7 AD SC 260 , held as under (page 811 of 87 Comp Cas): The aforesaid provisions of the Act show that a compromise or arrangement can be proposed between a company and its creditors or any class of them or between a company and its members or any class of them. Such a compromise would also take in its sweep any scheme of amalgamation/merger of one company with another. When such a scheme is put forward by a company for the sanction of the court in the first instance the court has to direct the holding of meetings of creditors or class of creditors or members or class of members who are concerned with such a scheme and once the majority in number representing three-fourths in value of creditors or class of creditors or members or class of members, as the case may be, present or voting either in person or by proxy at such a meeting accord their approval to any compromise or arrangement thus put to vote, and once such compromise is sanctioned by the court, it would be binding on all creditors or class of creditors or members or class of members, as the case may be, which would also necessarily mean that even to dissenting creditors or class of creditors or dissenting members or class of members such sanctioned scheme would remain binding. Before sanctioning such a scheme even though approved by a majority of the concerned creditors or members the court has to be satisfied that the company or any other person moving such an application for sanction under Sub-section (2) of Section 391 has disclosed all the relevant matters mentioned in the proviso to Sub-section (2) of that Section. So far as the meetings of the creditors or members, or their respective classes for whom the scheme is proposed are concerned, it is enjoined by Section 391(1)(a) that the requisite information as contemplated by the said provision is also required to be placed for consideration of the concerned voters so that the parties concerned before whom the scheme is placed for voting can take an informed and objective decision whether to vote for the scheme or against it. On a conjoint reading of the relevant provisions of Sections 391 and 393 it becomes at once clear that the company court which is called upon to sanction such a scheme has not merely to go by the ipse dixit of the majority of the shareholders or creditors or their respective classes who might have voted in favour of the scheme by requisite majority but the court has to consider the pros and cons of the scheme with a view to finding out whether the scheme is fair, just and reasonable and is not contrary to any provisions of law and it does not violate any public policy. This is implicit in the very concept of compromise or arrangement which is required to receive the imprimatur of a court of law. No court of law would ever countenance any scheme of compromise or arrangement arrived at between the parties and which might be supported by the requisite majority if the court finds that it is an unconscionable or an illegal scheme or is otherwise unfair or unjust to the class of shareholders or creditors for whom it is meant. Consequently, it cannot be said that a company court before whom an application is moved for sanctioning such a scheme which might have got the requisite majority support of the creditors or members or any class of them for whom the scheme is mooted by the concerned company, has to act merely as a rubber stamp and must almost automatically put its seal of approval on such a scheme. It is trite to say that once the scheme gets sanctioned by the court it would bind even the dissenting minority shareholders or creditors. Therefore, the fairness of the scheme qua them also has to be kept in view by the company court while putting its seal of approval on the concerned scheme placed for its sanction. It is trite to say that once the scheme gets sanctioned by the court it would bind even the dissenting minority shareholders or creditors. Therefore, the fairness of the scheme qua them also has to be kept in view by the company court while putting its seal of approval on the concerned scheme placed for its sanction. It is, of course, true that so far as the company court is concerned as per the statutory provisions of Sections 391 and 393 of the Act the question of void ability of the scheme will have to be judged subject to the rider that a scheme sanctioned by majority will remain binding on a dissenting minority of creditors or members, as the case may be, even though they have not consented to such a scheme and to that extent absence of their consent will have no effect on the scheme. It can be postulated that even in the case of such a scheme of compromise and arrangement put up for sanction of a company court it will have to be seen whether the proposed scheme is lawful and just and fair to the whole class of creditors or members including the dissenting minority to whom it is offered for approval and which has been approved by such class of persons with requisite majority vote. However, the further question remains whether the court has jurisdiction like an appellate authority to minutely scrutinise the scheme and to arrive at an independent conclusion whether the scheme should be permitted to go through or not when the majority of the creditors or members or their respective classes have approved the scheme as required by Section 391(2). On this aspect, the nature of compromise or arrangement between the company and the creditors and members has to be kept in view. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the court. The court certainly would not act as a court of appeal and sit in judgment over the informed view of the concerned parties to the compromise as the same would be in the realm of corporate and commercial wisdom of the concerned parties. The court certainly would not act as a court of appeal and sit in judgment over the informed view of the concerned parties to the compromise as the same would be in the realm of corporate and commercial wisdom of the concerned parties. The court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the scheme by the requisite majority. Consequently, the company court's jurisdiction to that extent is peripheral and supervisory and not appellate. The court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. 12. Keeping in mind the law laid down by the Supreme Court in Miheer H. Mafatlal Vs. Mafatlal Industries Ltd., (1996) 7 AD SC 260 , it is necessary to examine the fact situation in the present case. In identical circumstances, the Bombay High Court in Reliance Communications Ltd., In re [2009] 94 SCL 219 : [2010] 153 Comp Cas 233, held as under (page 258 of 153 Comp Cas): The next issue raised is about breach of accounting standard by the demerged company. This argument is made with reference to Clause 2.3.3. CLAUSE 2.3.3. of the scheme reads thus: '2.3.3. The difference between the consideration and net book value of the optic fibre undertaking, shall unless otherwise determined by the board of the demerged company be credited to the general reserve account of the demerged company. The general reserve account so credited shall constitute free reserves available to the demerged company for all purposes as it may consider proper including in particular for declaration of dividends. Such general reserve shall be a reserve which arises pursuant to the scheme and shall not be and shall not for any purpose be considered to be a reserve created by the demerged company. The argument was that the accounting treatment proposed in the scheme for accounting purpose between the consideration and the net book value is not in line with the accounting standards prescribed by the Companies Act. The argument was that the accounting treatment proposed in the scheme for accounting purpose between the consideration and the net book value is not in line with the accounting standards prescribed by the Companies Act. Assuming there is merit in this objection, as has been held" in the case of Hindalco Industries Ltd., In re [2009] 151 Comp Cas 446 (Bom), the possibility of violation of accounting standard, per se, cannot be the basis to straightaway disapprove the scheme. Inasmuch as, observance of accounting standard is a norm, but violation thereof is not completely impermissible. It is regulated by the provisions of Section 211 of the Act. The companies, through counsel assure to abide by the said regime to be followed as per Section 211 of the Act even in the present case. In other words, so long as necessary disclosures are made, the company cannot be faulted even if there were to be deviation from the accounting standards, more so, to be made a ground to disapprove the scheme. 13. Further the Bombay High Court in Hindalco Industries Ltd., In re [2009] 151 Comp Cas 446, held as under (page 463): A priori, it is not as if deviation of the Accounting Standards per se can be a ground to reject the scheme propounded by the petitioner-company. In the present case, it is noticed that the scheme is the product of conscious act of the shareholders. It is their commercial wisdom or business decision. In their wisdom, they have approved the proposed scheme which bestows complete discretion in the board in which they have full confidence. As aforesaid, there is no law which prohibits adjustment of loss by spreading it out including that of the subsidiary companies. There is no manifest unfairness to the shareholders in any manner. No creditor is affected by the proposed scheme. 14. In the instant case, the Registrar of Companies is opposing the scheme on the ground that the same is in violation of the accounting standards and Section 211 of the Act. In view of the law laid down by the Supreme Court and the Bombay High Court in the decisions referred to above and also the petitioner's undertaking affidavit dated February 22, 2010 and February 25, 2010 the scheme of arrangement of the petitioner-company cannot be rejected. In view of the law laid down by the Supreme Court and the Bombay High Court in the decisions referred to above and also the petitioner's undertaking affidavit dated February 22, 2010 and February 25, 2010 the scheme of arrangement of the petitioner-company cannot be rejected. I am in agreement with the view taken by the Bombay High Court in the two decisions referred to above. With some modification the draft-scheme of arrangement of the petitioner-company will not be against the interest of the shareholders and the same is just and reasonable. For the reasons stated above, the following: ORDER (i) The scheme of arrangement--annexure A proposed by the petitioner-company is hereby sanctioned subject to the modification as per the undertaking of the petitioner-company in their affidavits dated February 22, 2010 and February 25, 2010, with effect from today and the same is binding on the petitioner-company and its shareholders. (ii) The petitioner-company is directed to serve a copy of this order on the Registrar of Companies, State of Karnataka, within 30 days from the date of receipt of copy of this order. (iii) Registry is directed to draw up a decree in Form No. 42. (iv) Ordered accordingly.