JUDGMENT 1. These Company Petitions are filed under Sections 391 and 394 of the Companies Act, 1956 for sanctioning the Scheme of Arrangement (Demerger) between the Demerged Company VAK Engineering Private Limited, the petitioner in C.P.No.90 of 2014 with the Resulting Company EVOS Design Living Private Limited, the petitioner in C.P.No.91 of 2014 with effect from 01.04.2013. The Scheme of Arrangement is annexed at page nos.65 & 50 of the typed set of papers filed in C.P.Nos.90 & 91 of 2014 respectively. 2. A perusal of the records show that the petitioners have complied with the formalities as prescribed under the Companies Act and the Rules framed therein. Both the Companies have two shareholders each and they have given their consent. There are no secured creditors in both the petitioner-Companies and the Chartered Accountants' certificates certifying to that effect have been filed. 3. By order dated 07.02.2014 made in Comp.A.Nos.172 & 173 of 2014, the convening of the meeting of the equity shareholders was dispensed with by this Court. 4. The Board of Directors of the Demerged Company and the Resulting Company vide its resolutions dated 07.10.2013 and 10.10.2013 respectively considered and approved the Scheme of Arrangement (Demerger) of the Demerged Company, the petitioner in C.P.No.90 of 2014 with the Resulting Company, the petitioner in C.P.No.91 of 2014. The copies of the Board resolutions are enclosed in the typed set of papers. 5. The petitioners state that no investigation proceedings are pending against the petitioner-Companies under Sections 235 to 251 of the Companies Act, 1956. 6. On notice, the Regional Director, Ministry of Company Affairs has filed his report to the effect that the scheme protects the interest of all the employees of the Companies upon arrangement and there is no objection to the scheme. 7. I have perused the records. There is no objectionable feature in the Scheme of Arrangement (Demerger) detrimental to the employees of the Demerged Company VAK Engineering Private Limited, the petitioner in C.P.No.90 of 2014 or the Resulting Company EVOS Design Living Private Limited, the petitioner in C.P.No.91 of 2014. 8. One A.R.Kannan, son of A.P.Rajagopalan filed objections to the Scheme of Arrangement stating that he is the owner of the land in T.S.No.138, Adambakkam Village and the said property is the subject matter of the Company Petition. 8. One A.R.Kannan, son of A.P.Rajagopalan filed objections to the Scheme of Arrangement stating that he is the owner of the land in T.S.No.138, Adambakkam Village and the said property is the subject matter of the Company Petition. The objector filed his objection on the public notice issued by this Court in the said Company Petition. The objector has stated that the petitioner-Company acquired land from Garlick Engineering Company in T.S.Nos.105, 121, 122 and 138 of Adambakkam Village. The main object of the petitioner-Company is construction. 9. Mr.G.Rajagopalan, learned senior counsel appearing on behalf of the objector submitted that the objector has got a right in the land in T.S.No.138. Since the suits are pending in respect of the said Survey Number, the Scheme of Arrangement should not be approved by this Court. 10. Countering the submissions made by the learned senior counsel for the objector, Mr.M.S.Krishnan, learned senior counsel appearing on behalf of the petitioner-Companies submitted that as per the Scheme of Arrangement, the land comprised in T.S.Nos.121, 122 and 138 in Adambakkam Village, Alandur Taluk, measuring an extent of 8.02 acres, shall remain with the Demerged Company and the land comprised in T.S.No.105 of Adambakkam Village, Alandur Taluk, measuring an extent of 2.69 acres, shall vest with the Resulting Company. Therefore, according to the learned senior counsel there will be no change in status of the land in T.S.No.138. 11. It is not in dispute that the objector, along with his brother and father, had filed a suit in O.S.No.1714 of 1997 on the file of the District Munsif Court, Alandur, for bare injunction in respect of T.S.No.138. The Demerged Company filed O.S.No.1635 of 1997 on the file of the District Munsif Court, Alandur, for bare injunction in respect of T.S.Nos.138 and 105 and O.S.No.1826 of 1997 on the file of the District Munsif Court, Alandur for bare injunction in respect of T.S.No.138. 12. From the above, it is clear that the objector has not filed any suit in respect of T.S.No.105. The objector is concerned only about T.S.No.138. Therefore, the contention of the objector that litigations are pending in respect of T.S.No.105 is irrelevant for the reason that he is not claiming any right in respect of T.S.No.105. 12. From the above, it is clear that the objector has not filed any suit in respect of T.S.No.105. The objector is concerned only about T.S.No.138. Therefore, the contention of the objector that litigations are pending in respect of T.S.No.105 is irrelevant for the reason that he is not claiming any right in respect of T.S.No.105. That apart, so far as T.S.No.138 is concerned, as per the Scheme of Arrangement, the property shall remain with the Demerged Company, therefore, there will not be any change of status in respect of T.S.No.138, in which the objector is claiming right. Only the land in T.S.No.105 shall vest with the Resulting Company, in which the objector is not claiming any right. When there is no change of status in respect of T.S.No.138, I find no reason to accept the contention raised by the objector. 13. Mr.M.S.Krishnan, learned senior counsel appearing on behalf of the petitioner-Companies, in support of his contention relied upon a judgment reported in (1997) 1 Supreme Court Cases 579 [Miheer H.Mafatlal Vs. Mafatlal Industries Ltd.] wherein the Apex Court held as follows: “29. However 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 subsection (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 parties concerned to the compromise as the same would be in the realm of corporate and commercial wisdom of the parties concerned. 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 Courts jurisdiction to that extent is peripheral and supervisory and not appellate. 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 Courts 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. The supervisory jurisdiction of the Company Court can also be culled out from the provisions of Section 392 of the Act which reads as under: “392. (1) Where a High Court 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 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 Court aforesaid is satisfied that a compromise or 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 this Act under Section 153 of the Indian Companies Act, 1913 (7 of 1913), sanctioning a compromise or an arrangement.” Of course this section deals with post-sanction supervision. But the said provision itself clearly earmarks the field in which the sanction of the Court operates. It is obvious that the supervisor cannot ever be treated as the author or a policy-maker. But the said provision itself clearly earmarks the field in which the sanction of the Court operates. It is obvious that the supervisor cannot ever be treated as the author or a policy-maker. Consequently the propriety and the merits of the compromise or arrangement have to be judged by the parties who as sui juris with their open eyes and fully informed about the pros and cons of the scheme arrive at their own reasoned judgment and agree to be bound by such compromise or arrangement. The Court cannot, therefore, undertake the exercise of scrutinising the scheme placed for its sanction with a view to finding out whether a better scheme could have been adopted by the parties. This exercise remains only for the parties and is in the realm of commercial democracy permeating the activities of the concerned creditors and members of the company who in their best commercial and economic interest by majority agree to give green signal to such a compromise or arrangement. The aforesaid statutory scheme which is clearly discernible from the relevant provisions of the Act, as seen above, has been subjected to a series of decisions of different High Courts and this Court as well as by the courts in England which had also occasion to consider schemes under pari materia English Company Law. We will briefly refer to the relevant decisions on the point. But before we do so we may also usefully refer to the observations found in the oft-quoted passage in Buckley on the Companies Act, 14th Edn. They are as under: “In exercising its power of sanction the court will see, first that the provisions of the statute have been complied with, second, that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interest adverse to those of the class whom they purport to represent, and thirdly, that the arrangement is such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve. The court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting, but at the same time, the court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considered the matter with a view to the interest of the class which it is empowered to bind, or some blot is found in the scheme.” In the case of Alabama, New Orleans, Texas and Pacific Junction Rly. Co., Re [(1891) 1 Ch 213 : (1886-90) All ER Rep Ext 1143] the relevant observations regarding the power and jurisdiction of the Company Court which is called upon to sanction a scheme of arrangement or compromise between the company and its creditors or shareholders were made by Lindley, L.J. as under: “What the court has to do is to see, first of all, that the provisions of that statute have been complied with; and, secondly, that the minority has been acting bona fide. The court also has to see that the minority is not being overriden by a majority having interests of its own clashing with those of the minority whom they seek to coerce. Further than that, the court has to look at the scheme and see whether it is one as to which persons acting honestly, and viewing the scheme laid before them in the interests of those whom they represent, take a view which can reasonably be taken by businessmen. The court must look at the scheme, and see whether the Act has been complied with, whether the majority are acting bona fide, and whether they are coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and then see whether the scheme is a reasonable one or whether there is any reasonable objection to it, or such an objection to it as that any reasonable man might say that he could not approve it.” To a similar effect were the observations of Fry, L.J., which read as under: “The next enquiry is: Under what circumstances is the court to sanction a resolution which has been passed approving of a compromise or arrangement? I shall not attempt to define what elements may enter into the consideration of the court beyond this, that I do not doubt for a moment that the court is bound to ascertain that all the conditions required by the statute have been complied with; it is bound to be satisfied that the proposition was made in good faith; and, further, it must be satisfied that the proposal was at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such a member, might approve of it. What other circumstances the court may take into consideration I will not attempt to forecast.” In Anglo-Continental Supply Co. Ltd., Re [(1922) 2 Ch 723 : 91 LJ Ch 658] Ashtury, J., a century later reiterated the very same propositions as under: “Before giving its sanction to a scheme of arrangement the court will see firstly that the provisions of the statute have been complied with; secondly that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and, thirdly, that the arrangement is such as a man of business would reasonably approve.” The learned Single Judge of the Calcutta High Court in the case of Mankam Investments Ltd., Re [(1995) 4 Comp LJ 330 (Cal)] relying on a catena of decisions of the English courts and Indian High Courts observed as under on the power and jurisdiction of the Company Court which is called upon to sanction a scheme of merger and amalgamation of companies: “It is a matter for the shareholders to consider commercially whether amalgamation or merger is beneficial or not. The court is really not concerned with the commercial decision of the shareholders until and unless the court feels that the proposed merger is manifestly unfair or is being proposed unfairly and/or to defraud the other shareholders. Whether the merged companies will be ultimately benefited or will be able to economise in the matter of expenses is a matter for the shareholders to consider. If three companies are amalgamated, certainly, there will be some economies in the matter of maintaining accounts, filing of returns and various other matters. Whether the merged companies will be ultimately benefited or will be able to economise in the matter of expenses is a matter for the shareholders to consider. If three companies are amalgamated, certainly, there will be some economies in the matter of maintaining accounts, filing of returns and various other matters. However, the court is really not concerned with the exact details of the matter and if the shareholders approved the scheme by the requisite majority, then the court only looks into the scheme as to find out that it is not manifestly unfair and/or is not intended to defraud or do injustice to the other shareholders.” We may also in this connection profitably refer to the judgment of this Court in the case of Employees Union v. Hindustan Lever Ltd. [1995 Supp (1) SCC 499] wherein a Bench of three learned Judges speaking through Sen, J. on behalf of himself and Venkatachaliah, C.J., and with which decision Sahai, J., concurred, Sahai, J., in his concurring judgment in the aforesaid case has made the following pertinent observations in this connection in the Report: (SCC pp. 506-08, paras 3-6) “But what was lost sight of was that the jurisdiction of the court in sanctioning a claim of merger is not to ascertain with mathematical accuracy if the determination satisfied the arithmetical test. A company court does not exercise an appellate jurisdiction. * * * Section 394 casts an obligation on the court to be satisfied that the scheme for amalgamation or merger was not contrary to public interest. The basic principle of such satisfaction is none other than the broad and general principles inherent in any compromise or settlement entered between parties that it should not be unfair or contrary to public policy or unconscionable. In amalgamation of companies, the courts have evolved, the principle of ‘prudent business management test’ or that the scheme should not be a device to evade law. But when the court is concerned with a scheme of merger with a subsidiary of a foreign company then the test is not only whether the scheme shall result in maximising profits of the shareholders or whether the interest of employees was protected but it has to ensure that merger shall not result in impeding promotion of industry or shall obstruct growth of national economy. Liberalised economic policy is to achieve this goal. Liberalised economic policy is to achieve this goal. The merger, therefore, should not be contrary to this objective. Reliance on English decisions Hoare & Co. Ltd., Re [1933 All ER Rep 105, Ch D] and Bugle Press Ltd., Re [1961 Ch 270 : (1960) 1 All ER 768 : (1960) 2 WLR 658] that the power of the court is to be satisfied only whether the provisions of the Act have been complied with or that the class or classes were fully represented and the arrangement was such as a man of business would reasonably approve between two private companies may be correct and may normally be adhered to but when the merger is with a subsidiary of a foreign company then economic interest of the country may have to be given precedence. The jurisdiction of the court in this regard is comprehensive.” Sen, J., speaking for himself and Venkatachaliah, C.J., also towed the line indicated by Sahai, J., about the jurisdiction of the Company Court while sanctioning the scheme and made the following pertinent observations: (SCC p. 528, para 84) “An argument was also made that as a result of the amalgamation, a large share of the market will be captured by HLL. But there is nothing unlawful or illegal about this. The Court will decline to sanction a scheme of merger, if any tax fraud or any other illegality is involved. But that is not the case here. A company may, on its own, grow up to capture a large share of the market. But unless it is shown that there is some illegality or fraud involved in the scheme, the Court cannot decline to sanction a scheme of amalgamation. It has to be borne in mind that this proposal of amalgamation arose out of a sharp decline in the business of TOMCO. Dr Dhavan has argued that TOMCO is not yet a sick Company. That may be right, but TOMCO at this rate will become a sick Company, unless something can be done to improve its performance. In the last two years, it has sold its investments and other properties. If this proposal of amalgamation is not sanctioned, the consequence for TOMCO may be very serious. The shareholders, the employees, the creditors will all suffer. The argument that the Company has large assets is really meaningless. In the last two years, it has sold its investments and other properties. If this proposal of amalgamation is not sanctioned, the consequence for TOMCO may be very serious. The shareholders, the employees, the creditors will all suffer. The argument that the Company has large assets is really meaningless. Very many cotton mills and jute mills in India have become sick and are on the verge of liquidation, even though they have large assets. The Scheme has been sanctioned almost unanimously by the shareholders, debenture-holders, secured creditors, unsecured creditors and preference shareholders of both the Companies. There must exist very strong reasons for withholding sanction to such a scheme. Withholding of sanction may turn out to be disastrous for 60,000 shareholders of TOMCO and also a large number of its employees.” In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the Company Court has clearly got earmarked. The following broad contours of such jurisdiction have emerged: 1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391(1)(a) have been held. 2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391 sub-section (2). 3. That the meetings concerned of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. 4. That all necessary material indicated by Section 393(1)(a) is placed before the voters at the meetings concerned as contemplated by Section 391 sub-section (1). 5. That all the requisite material contemplated by the proviso of sub-section (2) of Section 391 of the Act is placed before the Court by the applicant concerned seeking sanction for such a scheme and the Court gets satisfied about the same. 6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. 6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same. 7. That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same class whom they purported to represent. 8. That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. 9. Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. The aforesaid parameters of the scope and ambit of the jurisdiction of the Company Court which is called upon to sanction a scheme of compromise and arrangement are not exhaustive but only broadly illustrative of the contours of the Courts jurisdiction.” The ratio laid down by the Apex Court in this judgment squarely applies to the facts and circumstances of the present case. 14. Therefore, I find no objectionable feature in the Scheme of Arrangement (Demerger) detrimental to the employees of the Demerged Company or the Resulting Company. The said scheme is not violative of any statutory provisions. 14. Therefore, I find no objectionable feature in the Scheme of Arrangement (Demerger) detrimental to the employees of the Demerged Company or the Resulting Company. The said scheme is not violative of any statutory provisions. The scheme is fair, just, sound and is not against any public policy or interest. No proceedings are pending under Sections 231 to 237 of the Companies Act. Further, all the statutory provisions have been complied with. 15. For the reasons stated above, the contentions raised by the objector for rejecting the Scheme of Arrangement is liable to be rejected. Accordingly, the same is rejected. Since there will not be any change of status of the land in respect of T.S.No.138, the claim of the objector cannot be sustained. 16. In these circumstances, there shall be an order approving the Scheme of Arrangement (Demerger) of the Demerged Company, the petitioner in C.P.No.90 of 2014 with the Resulting Company, the petitioner in C.P.No.91 of 2014 as provided in the Scheme of Arrangement (Demerger) annexed at page nos.65 & 50 of the typed set of papers to the respective Company Petitions with effect from 01.04.2013, as the procedure laid down under Sections 391 and 394 of the Companies Act have been duly complied with. These Company Petitions are allowed. 17. The learned Central Government Standing Counsel is entitled to a fee of Rs.5,000/-from the Resulting Company.