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Andhra High Court
In Re M/S. Magnaquest Solutions ... vs !Counsel For The Petitioner: Sri ... on 21 September, 2007
THE HON'BLE MR JUSTICE RAMESH RANGANATHAN Company Petition No. 28 of 2007 21-09-2007 In re M/s. Magnaquest Solutions Private Limited, a company incorporated under the Companies Act, 1956 having its Registered Office at 8-2-684/BP, Plot No. 1523 & 1524, Druga Enclave, Road No. 12, Banjara Hills,Hyderabad - 500 034, rep., by its DirectorMr. Vijay Kumar Debbad. !Counsel for the petitioner: Sri V.S. Raju ^Counsel for the Official Liquidator: Sri M. Anil Kumar :ORDER: In this petition, filed under Sections 391 and 394 of the Companies Act, 1956, the petitioner-transferor company prays that the scheme of amalgamation, as approved by the respective Board of Directors of the transferor and transferee companies, be sanctioned and confirmed by this Court so as to bind all members, creditors and employees of the petitioner, for an order that the petitioner be dissolved without the process of winding up, for an order that the petitioner shall, within thirty days of its receipt, cause a certified copy of the order to be delivered to the Registrar of Companies for registration, that on such certified copy being delivered, the Registrar of companies should take necessary consequential action in respect of the petitioner including its dissolution, and that the parties to the scheme, or other persons interested, be at liberty to apply to the High Court for any direction that may be necessary to carry out the scheme of amalgamation.
The petitioner was incorporated in the State of Andhra Pradesh on 18.10.1999 with its registered office in Hyderabad. Its share capital as on 31st March, 2006 was Rs.15,00,000/- divided into 1,50,000 equity shares of Rs.10/. The entire share capital is fully issued, subscribed and paid up and is entirely held by the transferee company. Its main objects are to carry on the business of manufacture, import, export and to otherwise deal in all kinds of computers, calculators, micro processors, electronic and electrical apparatus, software equipment, etc. The petition gives details of the provisional financial summary of the transferor company as on 31.12.2006 according to which the value of the current assets is Rs.1,00,12,261/-, the current liabilities and provisions are for Rs.17,03,712/- and its profit and loss account shows a profit of Rs.83,08,541/-. The Transferee company was initially incorporated as a private limited company on 14.10.1997 under the name and style of M/s. Zeus Software Private Limited. Its name was later changed to M/s Magnaquest Technologies Private Limited. Its registered office is in Hyderabad. The authorised share capital of the transferee as on 31.03.2006 was Rs.1,00,00,000/- divided into 10,00,000 equity shares of Rs.10/- each and the entire share capital is issued, subscribed and fully paid up. The main objects of the transferee is also to manufacture, import, export and otherwise deal in all kinds of computers, calculators, micro processors etc., Details of the audited balance sheet of the transferee as on 31.03.2006 are furnished which reflect that, while its current assets, loans and advances are Rs.6,05,58,332/-, its current liabilities and provisions are Rs.87,49,540/-. The petitioner submits that the Board of Directors of the transferor and the transferee companies, in their respective meetings held on 29.01.2007, had approved the scheme of amalgamation of the transferor with the transferee with effect from 01.04.2007 subject to approval/consent of the High Court. The Petition details some of the salient features of the scheme of amalgamation. The scheme, among several features, also provides that, upon sanction by the High Court
under Section 394 of the Act and on its becoming effective, the transferor company would be dissolved without the process of winding up with effect from the appointed date or such other date as may be fixed by the Court. This Court, by order dated 09.03.2007, directed publication of the petition in Andhra Jyothi (telugu daily) and New Indian Express (English Daily) (Hyderabad editions), and directed notice to the Central Government as well as to the Official Liquidator. A brief reference can usefully be made to the relevant provisions of the Act and the Rules. Under Section 391 (1) of the Companies Act, while examining a proposal of compromise or arrangement (a) between a company and its creditors or any class of creditors or (b) between a company and its members or any class of members, the Court has the power, to order that a meeting of the creditors or class of creditors or of the members or class of members be held and to issue directions on the manner in which such a meeting should be conducted. Under Section 391(2), if a majority of the creditors or class of creditors, or members or class of members, representing three-fourth in value of the persons voting in the meeting, approve the compromise or arrangement it would, on its being sanctioned by the Court, bind all the creditors, all the members and the company. Before sanctioning a scheme of compromise or arrangement, the proviso to Section 391(2) requires the Court to satisfy itself that the company hasdisclosed all relevant material facts, such as its latest financial position, the latest auditor's report on its accounts, pendency of investigation proceedings under Sections 235 to 251 etc. A certified copy of the order passed by the Court, sanctioning the compromise or arrangement, is required to be filed with the Registrar of Companies until which the order would have no effect. Under Section 394(1), when a compromise or arrangement has been proposed in connection with a scheme for the amalgamation of two or more companies, and thereunder the whole or any part of the undertaking, property or liabilities of the transferor company is to be transferred to a transferee company, the court may, by the order sanctioning the compromise or arrangement, make provision for (i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of the transferor
company; (ii) the allotment or appropriation by the transferee company of any shares in that company which, under the compromise or arrangement, are to be allotted 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 the transferor company; (iv) the dissolution without winding-up of the transferor company; (v) provision to be made for any person who, within such time and in such manner as the court directs, dissents from the compromise or arrangement; and (vi) such incidental, consequential and supplemental matters as are necessary to ensure that the amalgamation is fully and effectively carried out. Under the second proviso, no order of dissolution of any transferor company under Clause (iv) shall be made by the Court unless the official liquidator has, on the scrutiny of books and papers of the company, made a report to the court that the affairs of the company have not been conducted in a manner prejudicial to the interest of its members or to public interest. Under sub-section (2), where an order made under Section 394 provides for the transfer of any properties or liabilities, that property shall be transferred to and vest in and the liability shall be transferred to and become the liabilities of the transferee company. Sub-section (4)(a) of Section 394 defines "property" to include property, rights and powers of every description and "liabilities" to include duties of every description. Under clause (b), while a transferee company does not include any company, other than a company within the meaning of the Companies Act, the transferor company includes any body corporate whether a company or not. Section 394-A requires the Court to give notice of every application made to it, under Sections 391 or 394, to the Central Government and take into consideration representations, if any, made to it by that Government before passing any order. Rules 67 to 87 of the Companies (Court) Rules, 1959 are the rules relating to compromise or arrangement under Sections 391 to 394. Under Rule 69, upon hearing of the summons, the judge shall give such directions as he may think necessary in respect of (1) determining the class or classes of creditors and/or of members whose meeting or meetings have to be held for considering the proposed compromise or arrangement; (2) fix the time
the Court is required to fix a date for the hearing of the petition and the notice of hearing is required to be advertised in the same newspapers in which the notice of the meeting was advertised or in such other papers as the court may direct. or in connection with. and (7) the time within which the chairman of the meeting is to report to the Court the result of the meeting. (6) notice to be given of the meeting or meetings and advertisement of such notice. Rule 75 requires every creditor or member entitled to attend the meeting to be furnished by the company.section (2) of Section 391. The order. should be in Form No. not less than 10 days . a scheme for the amalgamation of two or more companies. as provided by sub. Rule 73 requires notice of the meeting to be given to the creditors and/or members or to the creditors or members of any class as the case may be. made on the summons. or the creditors or members of any class whose meetings have to be held. The notice is required to be accompanied by a copy of the proposed compromise or arrangement and the statement required to be furnished under Section 393. Rule 79 provides that where a compromise or arrangement is agreed to.36 and to be sent to them individually by the Chairperson appointed for the meeting not less than 21 clear days before the date fixed for the meeting. present a petition to the court for confirmation of the compromise or arrangement. (5) the procedure for determining the value of the creditors and/or the members. Under Rule 80. free of charge and within 24 hours of a requisition being made. with or without modification. with a copy of the proposed compromise or arrangement together with a copy of the statement required to be furnished under Section 393. the company shall within 7 days of the filing of the report by the Chairman.35 with such variations as may be necessary. Rule 74 relates to advertisement of the notice of the meeting. Rule 77 requires that a decision in the meeting. to be in Form No. held in pursuance of the order under Rule 69. Where a compromise or arrangement is proposed for the purpose of.and place of such meeting (3) appoint a chairman for the meeting (4) fix the quorum and the procedure to be followed at the meeting including voting by proxy. on all resolutions be ascertained by taking a poll. the petitioner is required to pray for appropriate orders or directions under Section 394.
It is the commercial wisdom of the parties to the scheme. A certified copy of the order is required to be filed before the Registrar of Companies within 14 days or within such other time as may be fixed by the Court. Rule 83 relates to directions at the hearing of the application and. The Court would not act as a court of appeal and sit in judgment over the informed view of the parties to the compromise as it 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. that has to be kept in view by the Court. an enquiry as to the creditors of the transferor company and the securing of the debts and claims of any dissenting creditor. as sui juris with their open eyes and fully informed about the pros and cons of the . where necessary. is called for. Under Rule 81. the class is fairly well represented and that the scheme of arrangement is such as a man of business would reasonably approve. the Court may make such order or give such directions as it may think fit as to the proceedings to be taken for the purpose of reconstruction or amalgamation as the case may be including. who have taken an informed decision about the usefulness and propriety of the scheme supporting it by the requisite majority vote. where the Court sanctions the compromise or arrangement. in such manner as the Court may deem just. APPROVAL OF THE SCHEME OF AMALGAMATION BY THE COURT: SCOPE OF ENQUIRY: Before sanctioning a scheme of arrangement the Court must be satisfied that the statutory provisions are complied with. The supervisor cannot ever be treated as the author or the policy-maker. The order is required to be filed in Form-41 with such variations as may be necessary. upon hearing of the summons. that in case a meeting. The Company Court's jurisdiction to that extent is peripheral and supervisory and not appellate. Rule 84 requires the order under Section 394 to be in Form-42 with such variations as the circumstances may require. thereunder. The propriety and the merits of the compromise or arrangement has to be judged by the parties who. of the members or a class of members or of the creditors or a class of creditors.before the date fixed for hearing. the order shall include such directions in regard to any matter and such modifications that the Judge may think fit.
865/.scheme. a wholly owned subsidiary of the transferee. The scheme of arrangement envisages amalgamation of the transferor. SCHEME OF ARRANGEMENT BETWEEN THE COMPANY AND ITS MEMBERS: SHOULD A MEETING OF THE CREDITORS BE HELD? While the sole secured creditor of the transferor company. sought for both by the transferor and the transferee companies by way of separate petitions. had dispensed with the requirement of holding a meeting of the shareholders as all shareholders had submitted their affidavits/letters of consent to the proposed scheme of amalgamation.44. the sundry creditors. have not. M/s Centurian Bank of Punjab.and its unsecured creditors for Rs. Mafatlal Vs. as reflected in the Balance sheet under the head "current liabilities". no separate petition need be filed by the transferee-holding company is well settled. The Court cannot scrutinise the scheme to find out whether a better scheme could have been adopted by the parties. Andhra Bank .2007. While sanction of the scheme of amalgamation is. the scheme of arrangement is between the transferor company and its members. .A. Section 391(1) requires the Court to direct that a meeting of the members be called for.3 (2003) 3 ALD 654) Since the scheme of arrangement is between the transferor company and its members. in cases where a wholly owned subsidiary is sought to be amalgamated with its holding company. by order in C. Mafatlal Industries Ltd1). ordinarily. That.have given individual letters of consent to the scheme of amalgamation. within whose territorial jurisdiction the registered offices of the respective companies are situated. with the transferee company. Hyderabad Vs.93. This Court. in the present case. (Miher H. arrive at their own reasoned judgment and agree to be bound by such a compromise or arrangement. before the High Court. the petition seeking sanction of the Scheme of arrangement has been filed only by the transferor company and not by the transferee.289 of 2007 dated 20.2. for Rs.98. (In Re Nebula Motors Ltd2. M/s. In the present case. Andhra Bank Housing Finance Limited.021/.
is the result of an agreement between the amalgamating company and its members.. no provision for the participation of persons other . In re7). be required to look not to the transferor for repayment of his dues but to the transferee with whom he neither had any dealings in the past nor privity of contract prior to its substitution in the place of transferor. and there is. Mayfair Limited and Zodiac Clothing Co.. In re4. in the nature of amalgamation. as per the original terms agreed between him and the transferor company. (Asia Udyog Private Limited6). who has a debt due from the transferor company. is a matter of perception of the creditor. a compromise or arrangement is either between a company and its creditors or between a company and its members. Another facet of this view is that. as of right. (Ansal Properties and Industries Ltd. in substitution of the transferor. if the Court were of the view that the interests of the creditors are adversely affected. and that the legislature has cast a duty on the Court to ascertain whether the Scheme affects the interests of the creditors to such an extent that holding of their meeting is essential and. On the question whether a meeting of the creditors is statutorily required to be called for. therefore. under Section 391 of the Act. Ltd6). as well as a corresponding agreement between the transferee company and its members. (Zee Interactive Multi Media Ltd. Whether he would be adversely affected by being required to deal with the transferee. Asia Udyog Pvt. even in a scheme of arrangement between the company and its members. one view is that the creditors are not entitled. would. as the Companies Act does not contain a specific provision for notice being given to the creditors at any stage either prior to the making of the order or subsequent thereto. it could refuse to sanction the scheme unless their consent has been obtained. Ltd In re5. on the scheme of amalgamation being sanctioned. the transferee company may have negative assets or may not have sufficient liquidity to repay the creditor. An arrangement. Union of India Vs. to participate in the process of consideration of sanction of the scheme. except in so far as the creditors may have notice of it by public advertisement. In a given case.A creditor.
Mafatlal Industries Ltd. To quote:"....I am of the firm view that while considering any Scheme of Arrangement or Compromise proposed under Sections 391to 394 of the Companies Act the Court is duty-bound to consider the interests of all the creditors. Karnik... How then Court is to ascertain as to whether the creditors are adversely affected? If the creditors have no right of hearing at the time of hearing of the petition under Section 391 as held by Delhi High Court and this Court.. J of the Bombay High Court.I have my own doubt about the view taken by the Delhi High Court in expressing that the creditors have no right to participate in the process of consideration of the Scheme of Arrangement between the Company and its members.G. Ltd. the Court would exercise discretion as a matter of course to convene meeting of the creditors of .. In re10. In re11 and Nav Chrome Ltd. In re9. What importance should be given to the fact that the creditors are likely to be affected would vary from case to case but the Judge would certainly treat whether the creditors are adversely affected or not as the relevant circumstance... In re12) A slightly different view was taken by D. Telesound India Ltd. Section 391(1) gives a discretion to the Court to convene a meeting of the creditors or any class of them. (Nav Bharat Ferro Alloys In re8..... Therefore.. The Court would exercise the discretion by convening a meeting of creditors if the creditors are likely to be adversely affected by an arrangement between the Company and its members. Attending the meeting and voting are steps of participation in the process of consideration of the Scheme. Coimbatore Cotton Mills Ltd and Lakshmi Mills Co..... in Re: ICICI Bank Limited13.than the members of the two companies to vote on an arrangement of amalgamation proposed between a company and its members. (I have my own doubts about the correctness of this view) the only way of ascertaining whether the creditors are affected or not would be through the wishes of the creditors which may be expressed by them in a meeting which the Court undoubtedly is entitled to convene under Sub-section (1) of Section 391. . .
in a scheme of arrangement between the company and its members. to ascertain whether or not their interests are safeguarded? Would that not amount to usurping the rights of the creditors to decide for themselves whether or not to approve the scheme? In the light of the settled legal position that the Court has no power to usurp the rights of the class of members or creditors to decide whether or not to approve the scheme. as pointed out in Telesound India Limited. on a bare perusal of the audited financial statements placed before it. be justified on the ground that it is always open to the Court.. when these are matters which the creditors should have been permitted to examine and decide for themselves in a meeting to be called for this purpose? If the jurisdiction of the Company Court.. in examining a scheme of arrangement. by the Delhi High Court exists in Section 391. if the class whose interests are affected by the scheme. almost in every case in which creditors are likely to be affected.the Company under Sub-section (1) of Section 391 unless the Court is prima facie satisfied that the interests of the creditors are not likely to be adversely affected by the Scheme." (emphasis supplied) Can failure to hold a meeting of the creditors. but would exercise their discretion under Sub-section (1) of Section 391. the Courts would not fold their hands and wait for the Legislature to provide a cure. is peripheral. would the Court be justified in examining the scheme and recording its satisfaction that the interests of the creditors are not affected. since it does not have the expertise to delve deep into the commercial wisdom of the members who have ratified the scheme by the .. I am of the opinion that if an anomaly... and convene a meeting of the creditors and ascertain their wishes by looking not only at the Resolutions passed in their meeting but looking at the entire report of the Chairman of the meeting which is expected to contain the details of the proceeding in brief and the views expressed by the creditors in the meeting. neither assent to nor approve of it in a meeting held in accordance with the statutory provisions and that the Court cannot confirm the scheme even if it considers that the class concerned has been fairly dealt with or that it would have approved the scheme (Palmers Company Law).... supervisory and not appellate.
prescribed majority. finds that the objection of the minority is justified. in the meeting. would be binding on all the creditors/members "as the case may be" and also on the company. on examining the scheme. in the absence of ascertaining whether 3/4th in value of the creditors approve the scheme or not. of 3/4 the members or creditors in value voting in the meeting to approve the scheme. if a majority representing 3/4th in value of the creditors/members agree. and the dissenting minority of 1/4th or less of the class should not be permitted to derail the scheme of arrangement unless. The expression "as the case may be" finds place both in sub-sections (1) and (2) of Section 391. of course. should the expression "as the case may be" in Section 391(2) then not be read as to bind only the members where a meeting of the members is held and only the creditors where a meeting of the creditors is held? The safeguard in the provision. (Miheer H. a meeting of the creditors or a class of them should or should not be held to ascertain whether they approve of the scheme or not? Section 391(1). enables the Court. and only a meeting of the creditors in a Scheme of arrangement between the Company and its creditors. and . in the facts and circumstances of a given case. on the application of a company or a creditor or a member of the company. is that the wishes of a majority of the class should prevail. in a Scheme of arrangement between the Company and its members. If the words "as the case may be" in Section 391(1) are construed as requiring the Court to order the meeting of only the members. Mafatlal1). for the compromise or arrangement. the Court. the scheme. on what basis would the Court decide that. If no meeting of the creditors is required to be held. on its sanction by the court. even though their consent has not been obtained or their wishes ascertained? If it were held that not holding the meeting. would the Court be justified in statutorily imposing such a scheme of arrangement on the creditors. in a scheme of arrangement between the Company and its members. then. to order a meeting of the creditors/or the members "as the case may be" to be held and conducted in such a manner as the Court directs. Under Section 391(2).
the view. however. not necessary for us to seek answers to the aforesaid questions in the present case. The legal entity of the Corporation is separate from that of its shareholders. as a wholly owned subsidiary is sought to be amalgamated with its holding company. the creditors or the members have no right to the assets of the Corporation. The doctrine of the lifting of the veil has been applied in five categories of . in nominal value. the entire nominal value of the equity share capital of the transferor is held by the transferee. is accepted would that not render the words "as the case may be" in Section 391(1) mere surplusage? These are several questions which need answers. its creditors cannot obtain satisfaction from the assets of its members. on the other hand. a company shall be deemed to be the subsidiary of another only if that other controls the composition of its Board of Directors or where the other company holds more than half. its assets are separate and distinct from those of its members. would result in the scheme of arrangement not to bind them. that a meeting of the creditors/members must necessarily be held in all cases irrespective of whether the scheme of arrangement is between the Company and its members or the creditors. that the Corporation or a Company has a legal and separate entity of its own.ascertaining the wishes of the creditors. has been subjected to certain exceptions by the application of the fiction that the veil of the Corporation can be lifted and its face examined in substance. of its equity share capital. would the very purpose of sanctioning the scheme by the Court not be defeated and approval of the scheme not be an exercise in futility? If. Under Section 4(1)(a) and (b)(ii) of the Companies Act. In the present case. Similarly. it can sue and be sued exclusively for its own purpose. the liability of the members or shareholders is limited to the capital invested by them. LIFTING THE CORPORATE VEIL: PERMISSIBLE IN CASES WHERE A HOLDING COMPANY AND ITS SUBSIDIARY ARE INVOLVED: It is. However the doctrine. it bears its own name and has a seal of its own.
(Tata Engineering and Locomotive Co.and. alternatively. Vs. and in the law relating to trading with the enemy where the test of control is adopted.J. London Borough of Tower Hamlets15. Vs.. particularly where the question of "controlling interest" is in issue. and observed that "this group is virtually the same as a partnership in which all the three companies are partners". The State of Bihar14. said : "This is a case in which one is entitled to look at the realities of the situation and to pierce the corporate veil. in the law relating to exchange control. in certain matters pertaining to the law of taxes and stamps. the company continued to carry on business six month after the number of its members was reduced below the legal minimum. as "one in three."there is evidence of a general tendency to ignore the separate legal entities of various companies within a group. therefore.. (Wakefield) Ltd. where a shareholder has lost the privilege of limited liability and has become directly liable to certain creditors of the company on the ground that. Caddies16 it was argued that the subsidiary companies were separate legal entities each under the control of its own board of directors. and to look instead at the economic entity of the whole group". that in law the board of the holding company could not assign any duties to anyone in relation to the management of the subsidiary companies. L. The argument was rejected by Lord Reid with the observation: "This is too technical an .J. were: "Why then should this relationship be ignored in a situation in which to do so does not prevent abuse but would on the contrary result in what appears to be a denial of justice?" Similarly in Harold Holdsworth & Co.. with his knowledge.". and that. Goff. Ltd Vs. L...cases: where companies are in the relationship of holding and subsidiary (or sub-subsidiary) companies. Palmer's Company Law) In DHN Food Distributors Ltd. Lord Denning quoted with approval the statement in Gower's Company Law that:. He called it a case of "three in one" . the agreement cannot be construed as entitling them to assign any such duties to the respondent." The observations of Shaw.
and it must be construed in the light of the facts and realities of the situation. Along with C. The audited balance sheet of the transferee. Skipper Construction Co.18. were quoted with approval by the Supreme Court in Delhi Development Authority Vs. and Renusagar Power Co.3. the holding company. should be treated as one concern and the power plant of Renusagar must be treated as the own source of generation of Hindalco and Hindalco would be liable to payment of electricity duty on that basis... Raju. may not be necessary.It is high time to reiterate that in the expanding horizon of modern jurisprudence." (emphasis supplied) Lifting the corporate veil.2006.792/-.. however. dealing with the transferee company de-facto though he is the creditor of the transferor company de-jure..A. Union of India18). In State of U.. depend primarily on the realities of the situation. is filed.2007 has not yet been finalised and that the latest available audited balance sheet is only as on 31.S. It was observed : ". learned counsel for the petitioner would submit that the audited Balance Sheet of the transferee company as at 31. Vs. would establish that the creditor is. Renusagar Power Co. would show that its current assets exceed its current liabilities by Rs. as at 31..2007..2006. "This is an argument in re mercatoria .1420 of 2007.. It must.3.. In such limited cases of amalgamation. as at 31.5. its subsidiary." The aforesaid judgments. Sri V. in which the corporate veil was lifted.. the audited Balance Sheet of the transferor company. While its profit for the year after taxes .. lifting of corporate veil is permissible. and obtain their consent to the scheme of amalgamation.3... as the creditors' rights cannot be said to be affected.P.19 the Supreme Court lifted the veil to hold that Hindalco. ..argument". in cases where a wholly owned subsidiary is amalgamated with its holding company. holding of a meeting to ascertain their views. and has always been.08.3. (P) Ltd17 and New Horizons Limited Vs. Its frontiers are unlimited. The horizon of the doctrine of lifting of corporate veil is expanding.
747/-.373/.72. as at 31.27.is Rs.resulting in a loss of Rs. would show that its carry forward losses.478/.2007. RELEVANT DATE UPTO WHICH INFORMATION REGARDING THE LATEST FINANCIAL POSITION AND THE LATEST AUDITED BALANCE SHEET.3.39.3. Under the proviso to Section 391(2). that the net worth of the transferee company is more than adequate to protect the interests of the creditors of the transferor company cannot be said to be without basis.S. Viewed in the light of the aforementioned facts. the submission of Sri V. It cannot.98. The words "latest auditors report" connote the latest auditors report available or which should normally be available at the time of filing of the petition.19. While the transferor company's profits before tax.01.26. its profits are not significant enough to wipe off its accumulated losses.34.the loss carried forward from the previous years is Rs.99.478/-.03. the fact that its accumulated losses as at 31. Though the transferor company has made profits for the year ending 31. the transferee company. There will always be a time gap between the date on which the auditor audits the . including its latest financial position and the latest auditors report on its accounts.00. is Rs. would show that its financial position is not as strong as that of the transferee. the profit and loss a/c balance brought forward from the previous year is Rs.8. (which is yet to wipe off its accumulated losses).2007.8.565.8. The Balance sheet of the transferor company.25.2007. therefore. and the Reserves and Surplus of.324 and the balance carried to the Balance sheet as Reserves and Surplus is Rs. as on that date.19. The Reserves and Surplus of the transferee company as at 31. for the year ending 31. the petitioner-company must disclose all material facts. learned counsel for the petitioner.18.104.22.168.2006 and 31.3.478/-. as on 31.22.being carried forward to the Balance sheet. While the net current assets of the transferor company.653/-. is Rs.03. as compared to the profits made by. be said that the creditors of the transferor company.Raju.1.350/.3.2007.83. SHOULD BE DISCLOSED.889/-.2007 stands at Rs. is Rs. would be adversely affected on amalgamation with the transferee.03.2006 is Rs.14.
and latest auditor's report on the accounts of the company.03.S. must also be held to have been complied with. would mean the latest auditor's report for the period for which the accounts are audited or ought to have been audited.accounts and prepares his report. it is specifically stated that there is no investigation pending under the Companies Act. in his report submitted under the second proviso to Section 394(1). In a given case the Court is not powerless to ask for further details of the latest financial position as on the date of the hearing of the petition.2007. as is reasonably practicable. incidental and ancillary to the attainment of the main objects of the Memorandum of Association of the transferor company. In the Petition. (Zee Interactive Multimedia Ltd.2007. and the audited Balance Sheet of the transferee company as at 31. that Clause 25 of the objects clause.. stipulated in the proviso to sub-section (2) of section 391. enables it to amalgamate. states that he had called for the statutory books from the transferor company which were furnished. The petitioner . has not as yet been finalized.03. Raju. that the audited Balance sheet and profit and loss account of the transferee company. that adequate provision has been . This is especially necessary when there is a long gap between the date of filing of the petition and the date of its hearing. Accepting the submission of Sri V. or as near to the date of the hearing of the petition. The Official Liquidator. the requirement of furnishing the latest financial position. for the year ending 31. REPORTS OF THE OFFICIAL LIQUIDATOR UNDER THE SECOND PROVISO TO SECTION 394(1) AND THE CENTRAL GOVERNMENT UNDER SECTION 394-A. As such all the requirements of the proviso to Section 391(2) must be held to have been satisfied. The statutory requirement of submission of the latest auditor's report.transferor company has submitted its audited Balance Sheet as at 31. In re4). learned Counsel for the petitioner.2006 along with its schedules.3. the date on which the company petition is filed and the date on which the petition is actually heard.
that the relevant provisions under the Companies Act have been complied with by the transferor and that. that at this stage if the transferee. that the transferor and transferee companies are separate legal entities and. that the Companies Act does not specifically exempt the transferee company. as the employees of the transferor company would now become the employees of the transferee company as provided under Clause (5)(ii) of the Scheme. which contemplates combining the authorized capital of the transferor with the transferee. books and records made available to him by the petitioner. on account of the scheme of arrangement. on verification of the material papers. unlike other liabilities to be returned or refunded. it would not come under the purview of transfer of liabilities under the scheme of amalgamation. is impermissible since the authorized capital is the notional limit upto which the company can increase its paid up capital. from payment of registration fee for increase . 1956 by filing the relevant returns with the Registrar of Companies with registration fee/filing fee. As such the requirement of the second proviso to section 394(1) is also satisfied. that. on behalf of the Central Government under Section 394-A.made for protecting the services of the employees. on account of the scheme of arrangement. The Registrar of Companies has filed an affidavit. since the authorized capital of the company is a liability. that two notional limits cannot be clubbed together. that under Clause 8(c) of the Scheme the unsecured loans extended by the transferee to the transferor stand cancelled. on amalgamation. raising two objections to the scheme of amalgamation (1) that the transferee had not approached the High Court seeking dispensation of the meeting of the creditors and that the scheme may be considered subject to production of consent letters of the secured creditors of the transferee company. it is only the transferor company which would be dissolved and the transferee company would continue to exist. and (2) that Clause (10) of the Scheme. he is of the opinion that the affairs of the transferor company do not appear to have been conducted in a manner prejudicial to the interests of its members or to public interest. increases its authorised capital it has to comply with the provisions of Sections 94 and 97 of the Companies Act.
the secured creditors and the creditors under the head "unsecured loans" of the Transferor have given their consent to the scheme of amalgamation. rights. The question regarding obtaining consent of the creditors under the head "current liabilities" has already been dealt with earlier in this order. powers of every description and "liabilities" to include duties of every description. Section 94(1)(a) enables a limited company having a share capital. on an order. a liability of the transferor company. if so authorized by its Articles. It is only the second objection of the Central Government which needs to be examined. it would not only be against the provisions of the Companies Act. on clubbing the authorized capital of the transferor company without any further act or deed as contemplated in the Scheme. The authorized capital.of its authorized capital. the authorized share capital of the transferor company would be added to the authorized share capital of the transferee company and that it must be deemed that all the necessary requirements had been complied with by the transferee. to alter the conditions of its . As noted above. Section 394(4) defines 'property' to include property. PURSUANT TO A SCHEME AUTHORISED CAPITAL OF TRANSFEREE CAN BE CLUBBED: OF AMALGAMATION THE TRANSFEROR THE AND It is stated in the petition that. sanctioning the scheme of amalgamation. upon the scheme of amalgamation being sanctioned. that clubbing of the authorized capital of the transferor with that of the transferee cannot be a part of the Scheme since Section 97 of the Companies Act. that if the transferee company was allowed to increase its authorized capital. being passed by the Court under Section 391 read with Section 394(1) & (4) (a) of the Companies Act. 1956 requires compliance by payment of the registration fee with the Registrar of Companies and does not require permission of the Court. 1956 but would also involve substantial loss to central government revenue. also stands transferred to the transferee.
. inter alia.Amalgamation of a company with another or an amalgamation of two companies to form a third is brought about by two parallel schemes of arrangements entered into between one company and its members and the other company and its members and the two separate arrangements bind all the members of the companies and the companies when sanctioned by the court..(4)(a) of that section. the amalgamation is made effective and binding by virtue of statutory power. which can be transferred on amalgamation. (1948) 18 Comp Cas 1 (Cal). but would not be wider than what the transferor-company was entitled to enjoy. therefore.394(1) have been defined in very wide terms by sub-s. The expression "property" would. it shall file with the Registrar a notice of the increase of the capital within 30 days after passing of the resolution authorizing the increase and the Registrar shall record the increase and make any alterations which may be necessary in the Company's Memorandum or Articles or both.. Bank of Calcutta Ltd. In Telesound India Ltd.. be wide enough to include rights under a contract. so as to include "rights and powers of every description" and "duties of every description" respectively. Under Section 97(1). (J. & Wvg. These are co-extensive with the property and right which the transferor-company has in relation to its assets. The expression "property" and "liabilities". including a contract of tenancy.. property rights and liabilities of the transferor-company by virtue of the provisions of s. under s..K. which are intended to facilitate the process of amalgamation: Sailendra Kumar Ray v. Ltd (1970) 40 Comp Cas 689 (SC).Memorandum. therefore. New Kaiser-I-Hind Spg.. the Delhi High Court observed: ". Co. (Delhi)11. Ltd v. and to that extent it is distinguishable from a mere bilateral arrangement to merge or join in a common endeavour.(Bombay) P. to increase its share capital by such amount as it thinks expedient. an undertaking or enterprise.. by the transferor to the transfereecompany of the whole or any part of the undertaking. Amalgamation is..394 of the Act. where a company has increased its authorized capital... an absorption of one company into another or merger of both to form a third which is not a mere act of the two companies or their members but is brought about by virtue of a statutory instrument and to that extent has statutory genesis and character. In Re. The . Once the court sanctions the amalgamation.
as indeed the liabilities of the transferor-company. increased employment avenues and generation of revenues. It is. Act is one of the incentives for this kind of absorption of one company into another. therefore. better. or ceased to exist. property and liability of the transferee company and. the rights. On amalgamation the transferor-company merges into the transfereecompany shedding its corporate shell. property and liabilities of the transferee-company by virtue of the order of vesting made by the court consequent on amalgamation. with a view to help restoration of sick units to health. but because for all practical purposes... Since the . In that sense the transferor -company does not die either on amalgamation or on dissolution without winding up under sub-s(1) of s. The dissolution is the death of its independent corporate shell. more effective and economical management of the corporate sector to ensure continued production. It is dissolved not because it has died. because a company cannot have two shells. It is neither an assignment of right or property. Section 72-A of the I. which is independent and distinct from the company. property and liabilities of the transferor become the rights.. It is not wound up because it has merged into another. but for all purposes remaining alive and thriving as part of the larger whole.. become the rights." (emphasis supplied) On the scheme of amalgamation being sanctioned by the Court. property. It is for historical reasons that the device of amalgamation was built into the company law for facilitating the merger of companies. as a consequence thereof.394.T. property and liabilities along with the company itself and it is only a result of confusion of thought that it could be described as an assignment by the company to another-person. Winding-up is unnecessary.rights. the right which the transferor has to issue share capital and the existing liability in the form of its authorized capital stand transferred to and are vested in the transferee company. inter alia. it has merged into another forming part of one corporate shell. dissolved because the independent shell or corporate name is superfluous.. nor an assignment of property by the company. It is the transfer of rights. Such a notion ignores the peculiar position of amalgamation in company law and its true legal incident.
.. if the transferee company has right to issue further share capital on the date of the amalgamation the same is a legal right in favour of the transferor company and such a right can be transferred in lieu of Sections 394(2) and (4) of the Companies Act.. Ltd21.. notice has got to be issued to the Registrar by the company within 30 days after such consolidation or conversion.Admittedly... Vs.Having regard to the objections raised by the learned Registrar of Companies....... in which event the Registrar . Motors (P) Ltd. this Court held: "..... In R.In the circumstances... The learned standing counsel for the Central Government argued that in substance the transfer of the right of the transferor company to issue further share capital would mean that the transferee company would be entitled to enhance its share capital without following the procedure prescribed under Section 94 and 97 of the Companies Act and therefore the same should not be permitted. which is transferred to and stands vested in the transferee. M/s. in the present case the transferor company has paid the necessary fee to the Registrar and increase of the share capital insofar as the transferor company is duly recorded by the Registrar as required under Section 97 of the Companies Act. .. requiring the transferor to again seek approval of the Registrar of Companies or to pay fees on such authorized capital. absence of a specific provision either in the Companies Act. this Court observed: ". has already been subjected to payment of the prescribed fee. In Re22.. that approval of the Registrar must again be sought and fees paid all over again. Ltd Vs. or the Rules made thereunder.. must necessarily be rejected.. A perusal of both the provisions shows that in respect of consolidation of share capital or conversion of shares into stock. M/s Krishna Poly Packs Pvt... 1956.(emphasis supplied) A similar view was taken by this Court in M/s Krishnan Products Pvt.. Saparna Infotech Ltd...authorised capital of the transferor...S.... Relinfo Limited20. it is appropriate here to consider sections 95 and 97 of the Act. In M/s.. the contention...K.
by operation of law. In other words. as discussed hereinabove. Similarly. the necessary changes that are required to be made inthe concerned Register by the Registrar of Companies can be effected after receiving the certified copy of the order of this court sanctioning the scheme.shall record such notice and make necessary alterations in the memorandum or articles of association. there is no reason as to why it shall not be treated as notice to the Registrar as envisaged under sections 95 and 97 of the Companies Act. Again the default in not filing certified copy of the order of this court before the Registrar within 30 days entails penal consequences. the Registrar shall include the particulars and class of shares affected and conditions if any subject to which the new shares are to be issued. it becomes operational by virtue of the orders passed by this court. The sanction of the scheme by this court has its own effect. for the purpose of its registration. Well. such changes . appears to be one and the same. the certified copy of the order of this court is required to be filed before the Registrar within 30 days from the date of the order under sub-section (3) of section 394. The scheme upon being sanctioned by this court. The present scheme of arrangement or amalgamation if it is sanctioned by this court. The object of sections 95 and 97 seems to be to keep the Registrar informed about the changes and to incorporate the same in the memorandum or articles of association or both of the respective companies. when the certified copy of the order sanctioning the scheme by this court is required to be filed before the Registrar for the purpose of its registration. The defaulton the part of the company again entails penal consequences under sub-section (3) of section 97. The object behind such intimation. The default entails penal consequences under sub-section (3) of the said section. It is not a mere act of the parties individually and volitionally. notice in the event of increase of share capital of the members shall be given to the Registrar of Companies within 30 days after passing of the resolution by the Board of directors authorizing the increase and upon receiving such notice. which is required under law either under Section 95 or under Section 97 or under Section 394(3). Inasmuch as. the object being the same.
S.. unlike the other cases which do not require the sanctions of the court. but a third Company comes into existence on the basis of the scheme sanctioned by the Court.. is set aside and O. In such a situation.".....(emphasis supplied) In Re Kemira Laboratories Limited23 a Division Bench of this Court held:..would come into effect. On merger. As regards first objection as to the cancellation of equity investment. I am of the considered view that there has been no infraction of the provisions of section 95 or section 97. the second objection raised by the learned Registrar of Companies merits no consideration. Having regard to the same. no separate notice informing the Registrar under section 95 or 97 of the Act need to be given. it has statutory genesis and statutory character... In RE: (1983) 53 Company Cases 926. all the Judges who have decided that no notice is necessary under Section 97 of the Act.. in my considered view..." . it is hard to accept that there would be an increase in the share capital of one of the Companies.P. the order passed in C. 24 of 2005 is allowed to that extent... in any manner. Therefore.... As an order .. Therefore.. as the case may be. to say that neither the transferee Company remains nor the transferor Company remains.. but not mere individual acts of the companies.. No. . inasmuch as the scheme is required to be sanctioned by this court and such sanction is required to be registered with the Registrar of Companies by filing the certified copy of the order of this court. have relied on a judgment of the Delhi High Court reported in Telesound India Ltd.. the scheme shall be suitably modified by making it conditional by incorporating this objection.e......A.. No.. the two Companies seize to exit i." No good reason has been shown why the two merged companies should be required to pay fees again. 199 of 2003 to the effect that Clause 10 of the Scheme of Amalgamation would not be part of the approved scheme...Now.In view of the Law laid down by this Court and also the judgment of the Delhi High Court in Telesound India2 to which I am in respectful agreement. In that view of the matter. on the same authorized capital on which the prescribed fee has already been paid by the transferor Company (Jaypee Cement Ltd24)..
Official Liquidator25. conferred on it by section 391(2) to sanction the scheme of compromise or arrangement. It must scrutinize the scheme to find out whether it is an arrangement which can. having regard to varying circumstances. under Section 391 of the Companies Act itself. it would be open to the court to examine the scheme before imposing it on the unwilling/dissenting members of the class. IS THE SCHEME OF AMALGAMATION IN PUBLIC INTEREST: The Court cannot abdicate its duty simply because the statutory majority has approved it and there is no opposition to the scheme of amalgamation in Court. are overruled. take into account the fact that it has been approved by a big majority vote. regarding increase of authorized share capital by merger of the authorized capitals of the two companies. Ltd. of course. In pursuit of such an enquiry the court is not tied down by any rigid principles or strait-jacket formulae. Vs. the objections of the Central Government. (Bank of Baroda Ltd.can be passed. Sections 391 to 396 constitute a complete code and the provisions are in a way derogatory to the law of contract.26). can be treated as exhaustive so as to limit the scope of the inquiry which. by reasonable people conversant with the subject. (Vasant Investment Corporation Limited Vs. reasonable. the Court has still the . Jaypee Cement Ltd24). to the scheme of amalgamation. the Court by its act is imposing the scheme on dissenting members of that class. No enumeration contained in judicial decisions of the factors which can be taken into account. The burden lies on the petitioner-company to show that the scheme of amalgamation is fair. Before taking such an action. workable and is such that a man of business would reasonably approve. howsoever precise. Even if all the statutory formalities are duly carried out. be regarded as beneficial to those who are likely to be affected by it. Mahindra Ugine Steel Co. might differ from case to case. When it exercises the power. The Court would. but it would not shirk its duty to scrutinize the scheme.
(Hindustan Lever Employees' Union Vs. have been carried on not only in a manner not prejudicial to its members but also that it is not against public interest. has some pecuniary interest. State or national Government. The expression "public interest" must take its colour and content from the context in which it is used. some object and that must have some co-relation with public interest. or is not. It does not mean anything so narrow as mere curiosity. (Bank of Baroda Ltd. Ambalal Sarabhai Enterprises Ltd28). or some interest by which their legal rights or liabilities are affected. The Indian law. a departure from the English law. the courts have evolved. some purpose. that the scheme is not contrary to public interest. In amalgamation of companies. It has been explained in Black's Law Dictionary as:"Something in which the public. What would be in public interest cannot be put in a strait-jacket. enjoins a duty on the Court to examine objectively whether the merger is. Ltd. It is a dynamic concept which keeps on changing.29). violative of public interest. The amalgamation must fulfil some felt need.discretion either to sanction or refuse to sanction the scheme. the principle of "prudent business management test" or that the scheme should not be a device to evade the law. (Union of India Vs. Hindustan Lever Ltd. Interest shared by citizens generally in affairs of local.. is none other than the broad and general principles inherent in any compromise or settlement entered into between the parties that it should not be unfair or contrary to public policy or unconscionable. The basic principle of the satisfaction. No court of law would ever countenance any scheme of compromise or arrangement if it finds that it is an illegal scheme or is otherwise unfair or unjust to the class of . or as the interests of the particular locality which may be affected by the matters in question. of both the transferor and the transferee.26 and Bengal Hotels P. The Court is charged with a duty to ascertain whether the affairs. A scheme valid and good may yet be bad if it is against public interest. the community at large. In re27)." It is an expression of wide amplitude.
data and content service providers.. if necessary. The transferor is a wholly owned subsidiary of the transferee company which is also engaged in similar activities. Unless the scheme is shown to be contrary to any law or is such as to shock the conscience of the court or is patently unfair to the members or creditors or any class of them. The Company Court should examine whether the proposed scheme of compromise and arrangement is violative of any provision of law and is not contrary to public policy. In re4). also has to be kept in view by the Company Court while putting its seal of approval on the scheme.shareholders or creditors for whom it is meant. The petitioner-transferor company is presently engaged in the business of global customer management and billing (CM&B) solutions provider to Pay TV. the court should not come in the way of business by rejecting a bonafide scheme under Section 391. qua the disputing minority shareholders or creditors. It must also ensure that the scheme as a whole is also just. Triple-play and IPTV services and in providing integrated billing and customer care solutions and services to video. which would give them the financial edge necessary to withstand competition and contribute to . as the case may be. (Zee Interactive Multimedia Ltd. 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. The Company Court has also to satisfy itself that the members or class of members or the creditors or class of creditors. were acting bonafide and in good faith and were not coercing the minority in order to promote any interest adverse to them. the Court. can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously x-ray the same. or is against public interest or against public policy. Mafatlal1). The fairness of the scheme. The underlying objects of the scheme is to synergise operations of both the companies and pool its resources to give more thrust and integrate their business facilities and infrastructure under one single unit. Broadband. (Miheer H. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect.
therefore. of the order of this Court. As required under Section 394(3) of the Companies Act. The scheme also provides that the employees of the transferor would become the employees of the transferee without interruption in service and on terms and conditions not less favourable than those subsisting with reference to the transferor company. as members of the transferee company. by way of transfer of the whole of the undertaking of the transferor. in the present case. The scheme of amalgamation. the petitioner shall file a certified copy.the business and profitability of the amalgamated company. remain unaffected as no new shares are being issued and there is no change in the capital structure. therefore. ?1 1997(1) SCC 579 2 2003(5) ALD 327 . be said that the scheme of amalgamation. The scheme of amalgamation does not also affect the creditors of the transferee as the net worth of the transferor is positive and its assets exceed its liabilities. It cannot. unfair or unjust to the members/creditors of both the transferor and transferee companies or that it is against public policy or that it shocks the conscience of the Court. This would be beneficial and advantageous in the long-term interests of both the companies and its shareholders. to sanction the scheme of amalgamation. if approved. 1959. the scheme of amalgamation is a device to evade the law. I consider it appropriate. The scheme of amalgamation involves the entire undertaking of the transferor to be transferred to and vested in the transferee with a view to achieve the aforementioned objects. does not affect the rights and interests of the members of the transferee company as their shareholding and other rights. The transferor is a wholly owned subsidiary of the transferee. It cannot be said that. read with Rule 81 of the Companies (Court) Rules. would be prejudicial to public interest. is unconscionable. with the Registrar of Companies for its registration within thirty days from the date of the order.
Cases 359 (Delhi) 7 (1978) 48 Comp Cas 184 (Delhi) 8 (A. 89 (1997) CC 285 9 (1995) 84 Comp Cas 231 (Guj) 10 (1980)50 Comp Cas 623 (Madras) 11 (1983) 53 Comp Cas 927 (Delhi) 12 Vol.44 Com.Nos.P. L.P.J. 89 1997 CC 285 (AP) 13 (2002) 104 BomLR 399 14 AIR 1965 SC 40 15 (1976)3 All ER 462 16 (1995) 1 All ER 725 17 (1996) 4 SCC 622 18 (1995)1 SCC 478 19 (1988)4 SCC 59 20 Judgment in C. No.P. 102(Bom) 6 (1974) Vol.) Vol.68 and 69 of 2005 dated 13. 149 and 150 of 2001 dated 04.01.3 (2003) 3 ALD 654 4 (2002) 3 Comp Cas 733 (Bomb) 5 (2003)4 Com.2002 21 Judgment in C.2007 22 (2004)60 CLA 309 (AP) .8.
Counsel for the Appellant: SRI Vinod Kumar Deshpande. VARMA) Heard the earned counsel appearing for the appellant as well as the learned Public Prosecutor.S.P. 748 OF 2005 %07-08-2007 #Godugula Adellu s/o Malkanna. 144. Hyderabad. Nos. appearing for the State.S.S. :ORAL JUDGMENT: (per the HON'BLE MR.623 29 (1995) 83 Comp Cas 30 (SC) *THE HON'BLE MR. Nos.23 Judgment in O.A. 145 and 146 of 2003 dated 25. Rep.VARMA AND THE HON'BLE MR. By Public Prosecutor.2007 24 2004 CLC 1031 (Allahabad High Court) 25 (1981)51Com Cas 20 (Bombay HC) 26 (1976) 46 Com Cas 227 27 (1977) 47 comp Cas 597 (Guj) 28 (1984)55 Com. JUSTICE D. High Court of A.R. JUSTICE D.APPA RAO +Criminal Appeal No.R.01. The State of Andhra Pradesh.P. 44 and 46 of 2005 and C. Counsel for the Respondent: Public Prosecutor.. 24. JUSTICE D.Cas. .
who is no other than the mother of the deceased. 09. that their marriage took place about eight years ago and they were residing in the house of P. in brief.1.06. that on the fateful day i. After the flames were extinguished. that since no mutton was served.W.000/-..1. The gravamen of the charge is that the deceased. and were blessed with two daughters.06. Appellant is the accused No.8.1. 4.00 a. P.W..1 in the Sessions Case. she . 5.447 of 2003. is directed against the judgment. are that the deceased was working as Anganwadi Teacher and the accused was working as a driver. in default to suffer simple imprisonment for three months and also convicting for the offence punishable under Section 498-A IPC and sentencing him to suffer rigorous imprisonment for one year and to pay a fine of Rs.03.000/-. This Criminal Appeal.6. The facts of the case. at bedtime.m. at the abatement of the accused No.2002.1.2. in Sessions Case No.2002 at about 8 pm.m. 3.5. along with relatives.W.00 p.1. participated in a festival in the village.e. dated 21. that they cooked food at the place of festival and returned back to home and that at about 8.2005. that the deceased came out of the room in flames and fell down.2.2002 at 6.1 to the police on 10. directing to run both the sentences concurrently. under Section 374 (2) of the Code of Criminal Procedure.. P. was subjected to cruelty and harassment and was eventually murdered by the accused No. Ex.P-1 is the complaint given P. in the morning. on 09. the deceased and her daughter. in default to suffer simple imprisonment for two months. the accused came in an inebriated condition and asked the deceased to serve food with mutton. convicting the appellant for the offence punishable under Section 302 of the Indian Penal Code (for brevity "IPC") and sentencing him to suffer imprisonment for life and to pay a fine of Rs. father of the accused No.W. by pouring kerosene on her and setting fire.1.1. passed by the II Additional Sessions Judge (Fast Track Court). Adilabad. allegedly poured kerosene on the deceased and set her ablaze. by the accused No. he went to the room where the deceased was sleeping. the wife of the accused No.
1 to 24 and got marked Exs.was shifted to Government Hospital. the accused No. Adilabad. PWs. recorded by P. having considered the entire evidence.Ws.P-1 to P-23 and M.W.21 is the Judicial Magistrate of First Class. Judicial Magistrate of First Class. However. as stated above. where she succumbed to the burn injuries. After completion of investigation.1 and 2. under . The Court blow. had recorded the dying declaration of the deceased.1. Adilabad. 8. but P.Ws. during the course of treatment.90 of 2002 was registered against the accused Nos.12. with which he was charged. However. who spoke about the said aspect. as regards the said fact.W. 11 and 13 turned hostile.3 and 4 were marked as Exs.21. P. found the accused No. under Ex. 6. In order to bring home the guilt of the accused Nos.2 not guilty and accordingly acquitted him for the offence punishable under Section 498-A IPC.2 to 9. 7. no oral evidence was let in. the prosecution examined P.10.1 and 2 for the offences punishable under Sections 498-A and 307 IPC.1 and 2 on its behalf and on behalf of the accused Nos. Basing on the complaint given by P. Judicial Magistrate of First Class. Adilabad. 9.1 has preferred this Criminal Appeal.W.2 to 9 were said to be the eyewitnesses. Aggrieved by the conviction and sentence. who spoke about the existence of disputes between the deceased and the accused. however. said to be the eyewitnesses. the Court below found the accused No.1 and 2. PWs. who recorded the dying declaration of the deceased.P-16. both oral and documentary.1 guilty for the offences punishable under Sections 302 and 498-A IPC and sentenced him. P.W.1 and 2. available on record. the section of law was altered to Section 302 and 498-A IPC. 10. After the death of the deceased. the police laid the charge sheet against the accused Nos. and the dying declaration. particularly the evidence of PWs.21. initially a case in Crime No. imposed against him. Adilabad.W.10 to 13 are said to be village elders.Ws. it is only P.D-1 and D-2.Os. portions of 161 statements of P.
15. P. after some time.W.1 in order to demolish her evidence.W. grandmother of the deceased.1 stated that there are three rooms in their house besides kitchen. P. that the incident had occurred in the third room of her house. 11. . In the cross examination. after the flames on the body of the deceased were extinguished.3. P.P-16. 8.1 on the festival day and.1 ran away from the house through back door. the evidence of alleged eyewitnesses i. deposed that he took the deceased to the Government Hospital. P. 14.1 beating the deceased and that she did not call any neighbour for help. 13. that the doors were open from where she could see the accused No.W. PWs.e. P. the deceased was shifted to the Government Hospital. the deceased raised cries. The evidence of P.Ex. and beat the deceased on the ground that she did not preserve mutton for him and.1 came to the house in the evening in a drunken state. on the festival day.2.Ws. Same is the effect of evidence of PWs. who is an auto driver.1.W.W. he saw the deceased coming out of the house in flames and that they shifted the deceased to Government Hospital. Adilabad. deposed that the accused No. Adilabad. Among the above. when the accused poured kerosene on her body and set fire. is more relevant. is that some quarrel had taken place between the deceased and the accused No. for treatment. PWs. with the assistance of other witnesses. Later. 12. that on many occasions.1 used to demand money and used to harass the deceased in that regard.18 to 20 and 24 are the Investigating Officers. nothing was elicited from P.W. 5. mother of the deceased. Adilabad.W.16 and 17 are panch witnesses for confession and recovery. Except that.2 to 9.4. later.. panchayats were also held in the presence of elders of the village and the accused was advised not to harass the deceased. 9 and 22.1.1 further deposed that the accused No. who is nephew of P. came out of the house in flames and fell down in front of the house and that the accused No.
In the instant case.W. From the evidence of abovementioned witnesses. The fact to be .W. 5.8 during her cross-examination.W. the only thing appears to the Court is that the deceased was set ablaze. having satisfied with her mental capability to adduce the evidence. asked the deceased to serve food with mutton and failure to comply with such demand.00 p. Firstly. 3.. Therefore. in another room of the same house. the accused No. Therefore.1 beat her deceased mother and quarreled with her by bolting the door from inside. However. 19. resulted in quarrel between the wife and the husband. the fact remains that all the abovementioned witnesses saw the deceased coming out in flames and there is any amount of consistency in this regard. at whose instance the deceased was found in flames? In other words.m. it is evident that two aspects were categorically spoken. at about 8. which requires consideration is. which were extinguished by the other witnesses. where. 9. and secondly. during the course of treatment.1. from the evidence of PWs. Another important witness is P.8.1 and the deceased alone were in the room where there was a quarrel between them. and was shifted to Government Hospital. nobody saw the accused No. whether the death of the deceased was homicidal or suicidal? 20.1. in favour of the accused No. resulting in everybody seeing the deceased in flames. the aspect.1 came back to home in the evening. 8.16. Now. 21 and 22. the deceased came out of the room in flames. Adilabad. 2. the question is. her mother came out in flames and that her father killed her mother. that after sometime.1 really pouring the kerosene against the deceased and lit her with matchstick.1. 18. She was a child witness and the Court below. posed questions to which she answered that the accused No. on the festival day. we are of the view that the accused No. 17. belonging to P. she died. Again nothing useful came out from the evidence of P. who is no other than mother of the deceased. who is no other than daughter of the accused.
she poured kerosene on herself and set ablaze.1 was the only responsible person for the said incident. in the incident. for the offence punishable under Section 302 IPC. that she filed criminal cases against her husband.2. she set herself ablaze. 23. To this extent. in the hospital.2.1. and accordingly. it can be pursued that the deceased poured kerosene on herself and set fire only at the instance of the accused No. since the accused No. According to her. as stated earlier. In view of this allegation against the father of the accused No.1 i. on the fateful day.1 alone.1 picked up a quarrel with her for some curry.1.essentially established by the prosecution is that the accused No. who was responsible for the death of the deceased. with which he was charged. 22. in this Criminal Appeal. is purely circumstantial. is a crucial piece of evidence.e. at the incitement of her husband. the accused No. Unless the circumstances are so strong and suggestive of the fact that the death was homicidal.2 was acquitted of the offence. it is not sufficient for this Court to jump at the conclusion that it was the accused No. There is absolutely no doubt whatsoever that can be expressed from any angle nor doubt the veracity of her statement. Even from the dying declaration.1. the evidence on record against the accused No. Therefore. on record.P-16. as it was a festival day.1 asked her to pour kerosene on her body and saying so. She further stated that. However. he handed over a matchbox to lit herself. . the accused No. the accused No. 21. The dying declaration of the deceased. P-16. the accused No. while undergoing treatment. in our view. dying declaration.. some additional material has to be searched for and. It is her further evidence that her husband incited her to set herself on fire at the instigation of his father. we are not going into the details of his involvement. wherein it has been stated by the deceased. It is further stated by her that. Ex. Section 498-A IPC was added against him along with the accused No. we found the evidence in the shape of Ex. in that pursuit.
shows that there was some complaint made by . 2. But.24.8. we are of the view that the aspect of homicide.P-16. 21 and 22. They did not actually see the accused No. could not be established by the prosecution beyond all reasonable doubt.1 under Section 498-A IPC. 27. including P. 3. 8. including the dying declaration. but certainly prove to the extent of abetting the deceased to commit suicide creating emotional atmosphere with sufficient background for the dispute and the resultant provocation for the deceased to commit suicide. it is again on record that the evidence of P.1.1. the evidence of P. 5 and 8.1 for dowry. All the eyewitnesses are only partial eyewitnesses.1. under Ex. allegedly committed by the accused No. 9. Therefore.12.1 setting his wife ablaze. punishable under Section 302 IPC. stated that the deceased came out in flames. insofar as the commission of offence by the accused No. As regards the offence said to have been committed by the accused No. In other words.W.1. who is no other than the daughter of the accused No. in our considered view.Ws. had been sufficiently and succinctly established. Further. it is obvious that the involvement of the accused No. by beating and instigating the deceased to commit suicide by pouring kerosene and setting herself ablaze.1. we feel it appropriate to differ with the finding recorded by the Court below.1 and the deceased was ill-treated by the accused No.W. 5.1.1 is not proved to the extent of committing offence under Section 302 IPC. A combined reading of the evidence of PWs. 28. who is a village elder and was a party to the panchayath to resolve the dispute between the deceased and the accused No. is categorical to the effect that there was some dispute between the deceased and the accused No. but the offence punishable under Section 306 IPC. 26. 25. When these circumstances are read together with the dying declaration. the fact remains that every witness. matches with the contents in the dying declaration.
in this regard. P..1 wherein the apex Court held thus: ". the view of the apex Court for a long time was to the effect that Sections 306 and 302 IPC are two distinct and different category of offences.. It is true that Section 222 Cr. STATE OF ANDHRA PRADESH. recorded by the Court below. again we have to see that there is basic difference between the . levelled against the accused No. for the two offences are of distinct and different categories. So. punishable under Section 498-A IPC.C.This appeal must succeed for the simple reason that having acquitted the appellant of the charge under Section 302 IPC . P. inasmuch as. Section 302 IPC is absolutely homicidal death. While the basic constituent of an offence under Sec. whereas Section 306 IPC is suicidal death owing to the abetment. which is rather incidental and forced us to drive at.the deceased about the ill-treatment meted out to her at the hands of the accused No. is.C. was mostly based on the decision inSANGARABOINA SREENU vs. There is not much rebuttal evidence to disprove this charge. 302 IPC is homicidal death. 29.1 can be found guilty for the offence punishable under Section 306 IPC instead of the offence said to have been committed under Section 302 IPC? 30.1.." 31. those of Section 306 IPC are suicidal death and abetment thereof. we are of the considered view that this charge against the accused No.. Here. The earlier law. as to whether the accused No. Therefore. and we agree with the finding. insofar as conviction and sentence as well.the High Court could not have convicted him of the offence under Sec.1. entitles a court to convict a person of an offence which is minor in comparison to the one for which he is tried under Section 306 IPC cannot be said to be a minor offence in relation to an offence under Section 302 IPC within the meaning of Section 222 Cr.1 was also proved.which was the only charge framed against him . The next crucial question. 306 IPC. on this subject.
STATE OF UTTAR PRADESH.C. In order to judge whether a failure of justice has been occasioned. Nevertheless. one commits suicide at the instigation or provocation of the other. 33. it is possible for the appellate or revisional court to convict an accused for an offence for which no charge was framed unless the court is of the opinion that a failure of justice would in fact occasion. brought to the notice of this Court that the apex Court had taken a different view in subsequent judgments and the ratio laid down in SANGARABOINA SREENU's case (1 supra) was held to be no more a good law. to constitute an offence under Section 309 IPC.offences under Sections 306 and 309 IPC. the offence under Section 304-B IPC is slightly inferior to Section 302 IPC.Padmanabha Reddy. In DALBIR SINGH vs. there is a sea change and deviation in law laid down by the apex Court in SANGARABOINA SREENU's case (1 supra) in the latter judgments of the apex Court. 34.. whereas under Section 306 IPC. held thus: ".. the learned Senior Counsel. it will be relevant to examine whether the accused was aware of the basis ingredients of the offence for which he is being convicted and whether the main facts sought to be established against him were explained to him clearly and whether he got a fair chance to defend himself. coupled with some force from different source. The gravity of offence under Section 306 IPC is more serious than the one under Section 309 IPC.In view of Sec.2 the apex Court. Sri C. 304-B and 498-A IPC." 35. 32. it shall be an attempt to commit suicide on one's own volition. However. While assisting this Court. The basic difference between these two Sections is. the distinction between the offences under Sections 306 and 309 IPC is not very relevant to deal with the present subject. while elaborately dealing with Sections 302. P. But. as the case be. 464 Cr. Even though there was no charge framed under Section 304-B . It is to be noted that the offences punishable under Sections 304-B and 302 read with Section 498-A IPC are distinct...
STATE OF KARNATAKA3. that in case of the offence under Section 304-B IPC. it was pointed out by the apex Court. in the event of the Court coming to the conclusion that the offence allegedly committed by the accused does not amount to the offence punishable under Section 302 IPC. We are of the further view that the same would not result in the failure of justice. The circumstances stated by all the witnesses are totally coherent with each other and support the main and important corroborative piece of evidence in Ex. 38. in SHAMNSAHEB M. as was originally charged. the prosecution had failed to establish the guilt of the accused No.. but. 39. which is in a way giving the accused an opportunity of audi alterim partem to explain whether he was liable for the said offence.1 are both under Sections 302 and 498-A IPC. In such circumstances. 37. In the present case also.P-16. Yet in another judgment. this Court. Therefore. he was convicted for the alternative charge for the offence under Section 304-B IPC. there was evidence by way of abetting the deceased to resort to the commission of suicide by pouring kerosene on herself and setting ablaze. where both the charges under Sections 302 IPC and 306 IPC cannot be levelled against the accused. 36.IPC and the charge was under Sections 302 and 498-A IPC only.C. the offences charged against the accused No. being an appellate Court. beyond any doubt. it is .1 for the offence punishable under Section 302 IPC. can always hold that the accused has committed an offence under Section 306 IPC and the conviction for the said offence can safely be recorded. in a situation. but. As already expressed by us.P. though the accused was acquitted for the offences under Sections 302 and 498-A IPC. MULTTANI vs. if the circumstances suggest conclusively that the offence was sufficiently proved to the extent of the offence under Section 306 IPC. rendered by the apex Court. it is imperative for the trial court to put the accused while examining him under Section 313 Cr. in various terms. but amounts to an offence punishable under Section 304-B IPC. dying declaration.
" The Section permits the Court to convict the accused "of the minor offence. as the ingredients of both the offences are substantially common. in the present case also. wherein the main ingredients are common.15 and 16 of the said judgment (3 supra). "When a person is charged with an offence and facts are proved which reduce it to a minor offence. cannot. The two illustrations provided in the section would bring the above point home well. there is a failure on the part of the prosecution. Similarly. as contemplated under Section 222 of Cr. Though the offence under Section 304-B IPC.imperative for the Court to invoke the presumptive jurisdiction. be treated as a minor offence. at paragraph Nos..C. the offences under Sections 302 and 306 IPC should be treated as cognate offences.. 41..P. the accused No. as already observed. held thus: "15. but slightly different situation. though he was not charged with it. in fact. From a conjoint reading of the abovementioned two judgments (2 and 3 supra). What is meant by "a minor offence" for the purpose of Section 222 of the Code? Although the said expression is not defined in the Code it can be discerned from the context that the test of minor offence is not merely that the prescribed punishment is less than the major offence. . MULTTANI's case (3 supra). as pointed out in SHAMNSAHEB M." Sub-section (2) deals with a similar. Only if the two offences are cognate offences. the one punishable among them with a lesser sentence can be regarded as minor offence vis--vis the other offence. it is obvious that even though there is no specific charge . as envisaged under Section 113-B of the Indian Evidence Act. 40. in establishing its case against the accused No. he may be convicted of the minor offence although he is not charged with it.1 was charged only for the offences punishable under Sections 302 and 498-A IPC. The apex Court.Section 222(1) of the Code deals with a case "when a person is charged with an offence consisting of several particulars.1 for the offence punishable under Section 302 IPC. But." 16.
accused No.accused No.1 is found guilty for the offence punishable under Section 306 IPC and. 921 .1.5. with the above modifications in the conviction and sentences. as contemplated under Section 428 Cr.C. he is convicted and sentenced to suffer rigorous imprisonment for six years and to pay a fine of Rs.1. the Criminal Appeal is allowed in part. against the accused No. ?1 (1997) 5 SCC 348 2 (2004) 5 S. we feel it appropriate to modify the conviction and sentence. particularly having regard to the view expressed by us that the offence under Sections 306 and 498-A IPC. The appellant .C. the conviction and sentence.C. accordingly. in default to suffer rigorous imprisonment for five months. 42. on the appellant -.1 is entitled to the benefit of set off. However. the Court can record a finding under such a charge. imposed by the Court below.framed and the offence under other section is made out. which is punishable with lesser sentence for a cognate offence. shall run concurrently. for the offences under Sections 306 and 498-A IPC. For the foregoing discussion.P. 43.accused No. have been established by the prosecution. Both the sentences.C. imposed by the Court below. are confirmed. as under: "The appellant -. 334 3 AIR 2001 S. Accordingly. for the offence punishable under Section 498-A IPC.000/-.