Judgment :- 1. Heard Sri. S. Vijayashankar, learned Senior Counsel appearing for petitioner, Sriyuths K.S. Mahadevan and V. Jayaram appearing for Official Liquidator and Sri. K. Nagaeshwarappa, Central Government Counsel appearing for Regional Director and perused the petition, Annexures filed thereto, Affidavit of Registrar of Companies, Report of Official Liquidator and reply affidavits filed thereto. 2. Petitioner is second transferor company and in this Company Petition sanction of the Scheme of Amalgamation appended to the petition as per Annexure G1 is sought for. Petitioner Company was incorporated on 13.10.2000 at Bangalore under the name of “Siemens Shared-India Pvt. Ltd.” and later changed its name to “Siemens BPO Services Pvt. Ltd.” w.e.f. 15.7.2005 and thereafter changed its name to the present name w.e.f. 17.8.2006 as per certificate of incorporation produced along with Memorandum and Articles of Association vide Annexure-E. 3. The petitioner Company is having its registered office at Ozone Manay Tech Park, Block A, 6th Floor, No.56/18 & 55/9, G.B. Palya, Hosur Road, Bangalore-560 068. 4. The authorised, issued, subscribed and paid up share capital of the petitioner Company is as per the audited balance sheet made up to 30th September 2010 which is specifically mentioned in paragraph 4 of the Petition. 5. The objects of the petitioner Company is as enumerated in the Memorandum and Articles of Association and carries on its business in data processes, call centre operators and render services in connection therewith as mentioned in detail therein. 6. Siemens Corporation Finance Pvt. Ltd., (first Transferor Company) was incorporated on 4.8.2005 at Mumbai, State of Maharashtra and is having its Regd. Office located at No.130, Pandurang Budhkar Marg, Worli, Mumbai 400 018. Siemens Information Systems Ltd., (Transferee company) was incorporated on 29.9.1986 at Mumbai, State of Maharashtra and is having its Regd. Office located at No.130, Pandurang Budhkar Marg, Worli, Mumbai 400 018. The first Transferor company holds 100% of the issued, subscribed and paid up share capital of the transferee company. 7. The petitioner (second Transferor Company) has got only two share holders i.e. the transferee company which holds 49% of its paid up share capital and the first transferor company which holds 51% of its paid up share capital. 8. The Petitioner Company (second transferor) has only three un-secured creditors and there are no secured creditors. 7. The petitioner (second Transferor Company) has got only two share holders i.e. the transferee company which holds 49% of its paid up share capital and the first transferor company which holds 51% of its paid up share capital. 8. The Petitioner Company (second transferor) has only three un-secured creditors and there are no secured creditors. This Court vide order dated 21.1.2001 passed in Company Application 1194/2010 has dispensed with convening of the meetings of share holders and creditors of the company as per Annexure-H. 9. The first transferor Company and transferee company have filed Companies Scheme Petition 82/2011 and 83/2011 before the High Court of Judicature at Bombay. Said petitions came to be allowed by the High Court of Mumbai by order dated 26.8.2011. The attested true copy of it is filed alongwith Memo dated 13.9.2011 and same has been placed on record. The Scheme of Amalgamation as per Annexure-G1 to the present petition has been sanctioned by the High Court Judicature of Mumbai on 26.8.2011 in COP’s 82/2011 and 83/2011 subject to order to be passed in the present petition by this Court. 10. The Board of Directors of the Petitioner (second transferor company) have passed a resolution on 6.12.2010 approving the Scheme of Amalgamation whereunder it is sought to be amalgamated with Siemens Information Systems Ltd., (transferee). The true extract of the Board resolution is appended to the present petition as per Annexure-G. 11. This Court vide order dated 18.2.2011 directed notice on the Regional Director of Company Affairs and Official Liquidator. Petitioner was further directed to take out advertisement of this petition in “THE HINDU” and “KANNADA PRABHA” on or before 4.3.2011 by fixing the date of hearing as 25.3.2011. Accordingly, petitioner has taken out advertisement in the newspapers on 26.2.2011 and has filed a memo on 3.3.2011 enclosing the copies of the newspapers. Same has been placed on record. 12. Pursuant to the notice issued to the Regional Director, the Registrar of Companies, Bangalore has filed affidavit on behalf of the Regional Director with following observations: “3.1. The finances of the second Transferor Company (which is situated in Karnataka) for which the Balance Sheet and Profit and Loss account as at 30.9.2010 has been audited, adopted, approved and filed with the Registrar of Companies as required Sec.210 and 220 of the Act. The finances of the second Transferor Company (which is situated in Karnataka) for which the Balance Sheet and Profit and Loss account as at 30.9.2010 has been audited, adopted, approved and filed with the Registrar of Companies as required Sec.210 and 220 of the Act. If the company is not filing the Balance Sheet and Profit and Loss account as at 30.9.2011, its affairs for one full financial year will not be audited, adopted, approved and filed in accordance with various provisions of Companies Act and also will not be available in public domain u/s. 610 of the Act. Hence, the company should file its Balance Sheet and Profit and Loss account for the financial year 30.9.2011 before the scheme being put into operation or alternatively the appointed date may be changed as on 1.10.2010. 3.2 Though the scheme provides that accounting treatment adopted shall be the pooling of Interest Method in accordance with Accounting Standard-14 but such accounting treatment does not spell out accounting of surplus/deficit as a result of cancellation of inter company investments between the Transferor and Transferee companies and difference in paid up value and investment value of those shares going to be cancelled. In this case, on cancellation of investment of Transferor company No.1, there will be loss (debit) by Rs.1,11,10,560/-and by merger of Transferor company No.1, there will be loss (debit) of Rs.21,12,58,200/- i.e. in aggregate of Rs.22,23,68,760/-, since under the Pooling of Interest Method the adjustment has to be made to the Reserves and accordingly, the petitioner company is required to file an affidavit under taking that such an adjustment shall be made to Reserves.” (Emphasis supplied by me) 13. In reply to the said observation of the Registrar of Companies, the Chief Financial Officer of the Petitioner Company has filed an affidavit stating as under: “2. I submit that the Registrar of Companies (ROC), Karnataka has filed an Affidavit in the above Company Petition raising certain points in paragraphs 3.1 and 3.2 thereof. 3. With regard to para 3.1 of the Registrar of Companies Affidavit, I humbly submit that the accounts of the Petitioner will be audited up to 30.09.2011 and a copy of the same will be submitted to ROC as soon as they are available.” 14. 3. With regard to para 3.1 of the Registrar of Companies Affidavit, I humbly submit that the accounts of the Petitioner will be audited up to 30.09.2011 and a copy of the same will be submitted to ROC as soon as they are available.” 14. It is contended by Sri S. Vijayashankar, learned Senior Counsel appearing for petitioner that in so far as second observation of the Registrar of Companies is concerned an affidavit of undertaking to comply the same would be filed and there would be compliance of AS14, and brings to the notice of this Court para 4 of the affidavit of Sri Sridhar Subramaniam, who is the Chief Financial Officer of the petitioner Company whereunder he has undertaken to comply with the observations of the ROC made at para 3.2. Said undertaking and submission made thereto is placed on record. 15. The 1st observation of the Registrar of Companies at para 3.1 is balance sheet and profit and loss account of petitioner company as on 30.9.2010 has been audited, adopted and approved and filed with the Registrar of Companies, Karnataka as required u/s.210 and 220 of the Companies Act, and if the company (second Transferor) is not filing the balance sheet and profit and loss account as at 30.9.2011, its affairs for one full financial year will not have been audited, adopted, approved and filed in accordance with the provisions of the Companies Act and consequently, the affairs of the petitioner Company for the period 1.10.2010 to 30.9.2011 will not be available for public domain which is required to be made available under section 610 of the Companies Act and as such “appointed date” in the Scheme ought to be revised as 1.10.2010 on the petitioner company has to file its Balance Sheet and profit and loss account for the financial year 30.9.2011 before Scheme being put into operation. 16. 16. In so far as the first observation of ROC at para 3.1 is concerned, the argument advanced on behalf of the learned senior counsel is that what is required to be placed on record by the petitioner company as per proviso to Sec. 391(2) is latest financial position of the company, alongwith the latest auditors report of the accounts of the petitioner company and the petition in question having been filed on 28.1.2011, the petitioner company has placed on record the audited balance sheet as on 30.9.2010 and non-filing of the accounts relating to the period 1.10.2010 up to date would not come in the way of this Court sanctioning the scheme from the appointed date namely 1.10.2011. In support of this submission, he has placed reliance on the judgment of the Delhi High Court in the matter of Aradhana Bewerages and Foods Company Ltd., reported in AIR 1999 Delhi 69 at paragraph 12. He would elaborate his submission by contending that very scheme of amalgamation which is sought to be sanctioned by this court as per Annexure-G1 was also the subject matter of consideration by High Court judicature Mumbai in Company Petition Nos.82 and 83/2011 and said scheme having been sanctioned by the High Court of Bombay, there is no impediment for this court to sanction said scheme as it would not affect the rights of equity share holders or unsecured creditors or the public at large. He would further contend that Regional Director, Mumbai, having not raised any objection with regard to “appointed date” now the Regional Director, Karnataka cannot raise any objection and he having any objection to the scheme of amalgamation and Regional Directors of different states cannot take inconsistent stands in respect of same scheme. In support of his submission, he relies upon the judgment of the Hon’ble Apex Court in the case of Sesa Industries Ltd., Vs. Krishna H. Balaji and Others reported in 2011 (3) SCC 218 at paragraph 40. 17. Thus, the question that arises for consideration in this petition is: Where there is statutory compliances made by the petitioner Company (Second Transferor)? And, if not: Whether Scheme of Amalgamation is to be rejected or sanctioned and if sanctioned what conditions are required to be imposed? BACKGROUND OF THE CASE: 18. 17. Thus, the question that arises for consideration in this petition is: Where there is statutory compliances made by the petitioner Company (Second Transferor)? And, if not: Whether Scheme of Amalgamation is to be rejected or sanctioned and if sanctioned what conditions are required to be imposed? BACKGROUND OF THE CASE: 18. It is not in dispute that the present Company Petition has been filed on 28.1.2011 and as on the said date the latest financial position alongwith auditors report that was available with the petitioner company (second Transferor) being upto 30.9.2010 has been filed. However, in the Scheme of Amalgamation at Annexure-G1, the appointed date has been specified to mean 1.10.2011, the extract of the same as found in the Scheme of Amalgamation is as follows: 1.2 “Appointed Date” shall mean 1st October 2011 or such order date as may be fixed or approved by the High Court.” 19. The Board resolutions of the second transferor company (petitioner herein), first transferor company and transferee company passed on 6.12.2010. 6.12.2010 and 4.12.2010 respectively are appended to the present petition collectively as Annexure-G would also depict the Board of Directors of these Companies have agreed that ‘appointed date’ under the Scheme of Amalgamation would be 1.10.2011. The 1st transferor company (Siemens Corporate Finance Pvt. Ltd.,) and transferee company (Siemens Information Systems Ltd.,) had filed company petitions 82/2011 and 83/2011 before High Court of Judicature at Bombay enclosing this very Scheme of Amalgamation (Annexure-G-1) for sanction and same has to be sanctioned and approved by order dated 26.8.2011 and “subject to present petition being sanctioned by this Court”. 20. Learned counsel for the petitioner has filed a memo on 20.9.2011 enclosing copies of the Company Scheme Petition Nos.82 and 83/2011 filed by first Transferor Company and Transferee Company before the High Court Judicature at Mumbai. In the said petitions also the audited accounts for the year ending 30.9.2010 had been appended thereto which came to be considered while sanctioning the Scheme. However, it would be of relevance to note the observation made by the High Court of Mumbai, while sanctioning the scheme in COP Nos.82 and 83/2011 which is as under: “14. Since all the requisite statutory compliance have been fulfilled, Company Scheme Petition Nos.82 of 2011 and 83 of 2011 are made absolute in terms of prayer clauses (a) to (k). Since all the requisite statutory compliance have been fulfilled, Company Scheme Petition Nos.82 of 2011 and 83 of 2011 are made absolute in terms of prayer clauses (a) to (k). The scheme is sanctioned subject to the order to be passed by the High Court of Karnataka in the Petitions filed by the Second Transferor Company.” 21. In the light of the observation made by the High Court of Mumbai, as extracted hereinabove, the contention of the learned Senior Counsel that: present company petition filed 2nd Transferor company has to be allowed and scheme has to be sanctioned automatically in view of the very same scheme having already been sanctioned by the High Court of Mumbai, does not stand to reason and is liable to be rejected since Mumbai High Court has observed that sanction by it is subject to sanction of the Scheme by this Court and as such the contention now raised that once Scheme having been sanctioned by Mumbai High Court it is to be automatically sanctioned by this Court cannot be accepted and said contention is hereby rejected. 22. The ‘appointed date’ in the instant case is stated to be prospective namely 1st October 2011. While this court sanctions the Scheme of Amalgamation it would make provision for certain acts to be implemented under section 394(1) and under clause (b)(iv), this court would also order dissolution of the transferor company without an order of winding up being passed separately. Before embarking upon such an exercise, a duty is cast on the company court to obtain a report from the Registrar of Companies and report of Official Liquidator who would get scrutiny of the books and accounts of the company done to ensure that company has not conducted its business in any manner prejudicial to the interest of share-holders or public. To arrive at such a conclusion, the accounts made up to the ‘appointed date’ would necessarily be required as otherwise, this court would be affixing its seal by sanctioning the scheme and thereby approving the accounts which is neither placed before the shareholders of the company or not placed before this court and same would not have been audited or scrutinized. Admittedly, in the instant petition ‘appointed date’ is shown as 1.10.2011. Admittedly, in the instant petition ‘appointed date’ is shown as 1.10.2011. Hence, in the normal course, this court would have refused to sanction the scheme as propounded by accepting the ‘appointed date’ as 1.10.2011 or would have sanctioned the Scheme with ‘appointed date’ modified as 1.10.2011. However, this court is placed in a piquant situation namely not able to refuse the sanction of scheme inasmuch as the High Court Judicature of Mumbai has already sanctioned the very same scheme which is at Annexure-G1 in COP No.81 and 83/2011 on 21.1.2011, wherein the “appointed date” has been shown as 1.10.2011. 23. In order to answer the above formulated question it would be necessary to extract the proviso to sub-section (2) to Section 391 of the Companies Act, 1956, which reads as under: “391. Power to compromise or make arrangements with creditors and members- (1) xxxxx (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 u/s.643), by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the (Tribunal), 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 contributories of the company:” Provided that no order sanctioning any compromise or arrangement shall be made by the (Tribunal) unless the (Tribunal) is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the (Tribunal), 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 351, and the like. (Emphasis supplied by me) 24. It would also be necessary to take note of two provisos to sub section (1) of section 394 which reads as under: “394. (Emphasis supplied by me) 24. It would also be necessary to take note of two provisos to sub section (1) of section 394 which reads as under: “394. Provisions for facilitating reconstruction and amalgamation of companies-(1) Where an application is made to the (Tribunal) under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the (Tribunal)- (a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies; and (b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a “transferor company”) is to be transferred to another company (in this section referred to as “the transferee company”). the (Tribunal) may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:- (i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities or any transferor company; (ii) the allotment or appropriation by the transferee company of any shares, debentures policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company; (iv) the dissolution, without winding up, of any transferor company; (v) the provision to be made for any persons who, within such time and in such manner as the Court directs dissent from the compromise or arrangement; and (vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out: [Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other company or companies; shall be sanctioned by the (Tribunal) unless the Court has received a report from the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its member or to public interest: Provided further that no order for the dissolution of any transferor company under clause (iv) shall be made by the (Tribunal) unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the (Tribunal) that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.] 25. The Regional Director on behalf of Registrar of Companies has contended that if ‘appointed date’ is approved prospectively, then the accounts of the petitioner Company would not be available for public scrutiny so as to raise their objections and it would be contrary to the provision of section 610 of Companies Act. Hence, the said provision is also extracted herein. 610. Inspection, production and evidence of documents kept by Registrar. Hence, the said provision is also extracted herein. 610. Inspection, production and evidence of documents kept by Registrar. (1) [Save as otherwise provided elsewhere in this Act, any person may]- (a) inspect any documents kept by the Registrar [in accordance with the rules made under the Destruction of Records Act, 1917 (5 of 1917)] being documents filed or registered by him in pursuance of this Act, or making a record of any fact required or authorised to be recorded or registered in pursuance of this Act, on payment for each inspection, of [such fee as maybe prescribed]; (b) require a certificate of the incorporation of any company, or a copy or extract of any other document or any part of any other document to be certified by the Registrar, [on payment in advance of [such fees as may be prescribed]]: Provided that the rights conferred by this sub-section shall be exercisable:-(i) inrelation to documents delivered to the Registrar with a prospectus in pursuance of sub-clause (i) of clause (b) of subsection (1) of section 60, only during the fourteen days beginning with the date of publication of the prospectus; and at other times, only with the permission of the Central Government; and (ii) in relation to documents so delivered in pursuance of clause (b) of sub-section (1) of section 605, only during the fourteen days beginning with the date of prospectus; and at other times, only with the permission of the Central Government. (2) No process for compelling the production of any documents kept by the Registrar shall issue from any Court [or the (Tribunal)] except with the leave of that Court [or the (Tribunal)]; and any such process, if issued, shall bear thereon a statement that it is issued with the leave of the Court [or the (Tribunal)]. (3) A copy of, or extract from, any document kept and registered at any of the offices for the registration of companies under this Act, certified to be a true copy under the hand of the Registrar (whose official position it shall not be necessary to prove), shall, in all legal proceedings, be admissible in evidence as of equal validity with the original document.” 26. One another prayer that has been sought for in this petition apart from approval/sanction of the scheme is dissolution of the company without being wound up as of the ‘appointed date’. One another prayer that has been sought for in this petition apart from approval/sanction of the scheme is dissolution of the company without being wound up as of the ‘appointed date’. In effect, the petitioner company is seeking for its dissolution. While sanctioning the Scheme this court would also consider the prayer for dissolution of the 2nd transferor company without separate order for winding up being passed and it is at that juncture, it would be incumbent upon this court to secure the reports from the Regional Director, Ministry of Corporate Affairs as well as Official Liquidator to ascertain whether there is statutory compliances and as to whether the books of accounts of such company is duly audited and it has not conducted its affairs in any manner prejudicial to the interests of its members, share holders or the public at large. This exercise can be done by the company court only after the duly audited accounts of the petitioner company is placed on record and not otherwise. Before such audited accounts are placed on record by such company before this Court it has to be approved by its shareholders. Creditors etc., as also its board of Directors. The corporate entity of the Second Transferor Company seizes to exist with effect from the date of approval of Scheme of Amalgamation which in the instant case is propounded to be 1.10.2011. In the instant case, neither the share holders, creditors of the Second Transferor Company nor the share holders and creditors of the Transferee Company are aware as to what is the financial position of the Second Transferor Company for the period 1.10.2010 to 30.9.2011, in order to enable them to approve the said accounts of the Second Transferor Company. It is in this background, the Scheme of Amalgamation will have to be examined to find out as to whether the scheme can be approved prospectively. At this juncture, it would be of benefit to note the power of the court to enforce the compromise or arrangement which has been sanctioned u/s.391 and the said power to enforce the same is traceable to sec.392 which reads under: 392. Power of Tribunal to enforce compromise and arrangement. At this juncture, it would be of benefit to note the power of the court to enforce the compromise or arrangement which has been sanctioned u/s.391 and the said power to enforce the same is traceable to sec.392 which reads under: 392. Power of Tribunal to enforce compromise and arrangement. (1) Where the Tribunal makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company, it- (a) shall have power to supervise the carrying out of the compromise or an arrangement; and (b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement. (2) If the Tribunal aforesaid is satisfied that a compromise or an arrangement sanctioned under section 391 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act. (3) the provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of the Companies (Amendment) Act, 2001 sanctioning a compromise or an arrangement. 27. While sanctioning the scheme of arrangement this court retains its powers to supervise such scheme and this court is also empowered to give directions either at the time of passing the order or thereafter and modify the arrangement for its proper working. In fact sub-section (2) of Section 392 empowers this court to order for winding up if the scheme of arrangement cannot be worked satisfactorily with or without modifications. In the light of this provision when the facts of the present case are examined, it can be noticed that accounts of the petitioner company for the period 01.10.2010 to 30.09.2011 has not been audited, not approved by the Board of directors of the petitioner company, its shareholders, its creditors etc. In the light of this provision when the facts of the present case are examined, it can be noticed that accounts of the petitioner company for the period 01.10.2010 to 30.09.2011 has not been audited, not approved by the Board of directors of the petitioner company, its shareholders, its creditors etc. In that view of the matter it would be necessary to issue direction to the petitioner company to serve a copy of the audited accounts relating to the period 01.10.2010 to 30.09.2011 on the Regional Director/Registrar of Companies, Karnataka and on the Official Liquidator to enable them to have their say both in the interest of the shareholders, creditors, etc., as also the public. In that view of the matter, directions are being given herein below by passing the following: ORDER CO.P.27/2011 is hereby allowed. The Scheme of Amalgamation vide Annexure-G1 is hereby sanctioned subject to the following conditions: (i) The applicant company shall file the audited accounts of the petitioner company relating to the period 01.10.2010 to 30.09.2011 with the Regional Director, Ministry of Corporate Affairs, South-East Region, Hyderabad with a copy to the Registrar of Companies, Karnataka, Bangalore on or before 30.11.2011. On such accounts being filed the Regional Director/Registrar of Companies shall examine the same and file a report/affidavit in this regard within two weeks from the date of receipt of the said accounts. (ii) The applicant company shall also serve a copy of the audited accounts on or before 30.11.2011 relating to the period 01.10.2010 to 30.09.2011 with the Official Liquidator and he shall get the said accounts audited through panel auditor namely, Sri. H.D. Ramakrishna, No.260/1, I Floor, Shankarmutt Road, Chamarajpet, Bangalore-18. On receipt of audit report the Official Liquidator shall file a report to this court. (iii) Official Liquidator and Regional Director are at liberty to move this court for variation, modification, recall of the order in the event of accounts being contrary to the scheme sanctioned or the provisions of the Companies Act, 1956. (iv) The applicant company shall file an Affidavit of undertaking to the above effect within 10 days from date of receipt of this order.