SESA INDUSTRIES LTD. versus KRISHNA H. BAJAJ AND ORS.

Citation: [2011] 3 S.C.R. 317 · Decided: 07-02-2011 · Supreme Court of India · Bench: D.K. JAIN · Disposal: Appeal(s) allowed
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Judgment (excerpt)

[2011] 3 S.C.R. 317 
SESA INDUSTRIES LTD. 
V. 
KRISHNA H. BAJAJ AND ORS. 
(Civil Appeal Nos.1430-1431 of 2011) 
FEBRUARY 7, 2011 
[D.K. JAIN AND H.L. DATTU, JJ.] 
Companies Act, 1956: 
A 
B 
ss.391 and 394 -
Amalgamation of companies - c 
Amalgamation/merger scheme put up for sanction of Court -
Obligation and jurisdiction of the Court - Held: The Court 
would not act as a court of appeal and sit in judgment over 
the informed view of the concerned parties to the scheme, as 
the same is best left to the corporate.and commercial wisdom D 
of the parties concerned, yet the Court is not expected to put 
its sea/ of approval on the scheme merely because majority 
of the shareholders have voted in favour of the scheme -
Before according its sanction to a scheme of amalgamation, 
the Court has to see that the provisions of the Act have been 
duly complied with; the statutory majority has been acting bona E 
fide and in good faith and are not coercing the minority in 
order to promote any interest adverse to that of the latter 
comprising the same class whom they purport to represent 
and the scheme as a whole is just, fair and reasonable from 
the point of view of a prudent and reasonable businessman F 
taking a commercial decision. 
ss.391 and 394 -
Amalgamation of companies -
Scheme of amalgamation between appellant company and 
anothi:.r company - Single Judge of High Court sanctioned G 
the schen;~ - Division Bench, however, revoked the sanction 
- On appeal, ,,.Ad: The Official Liquidator, though aware of the 
inspection report under s. 209A containing adverse comments 
on the affairs of both the companies, relied only on the report 
317 
H 
318 
SUPREME COURT REPORTS 
[2011] 3 S.C.R. 
A of the auditors, which admittedly was not even verified - The 
findings in the report under s.209A were nonetheless placed 
before the Single Judge, and he had considered the same 
while sanctioning the scheme of amalgamation - Therefore, 
the Single Judge had, before him, all material facts which had 
B a direct bearing on the sanction of the amalgamation scheme, 
despite the aforestated lapse on the part of the Official 
Liquidator- In this view of the matter, the Single Judge, having 
examined all material facts, was justified in sanctioning the 
scheme of amalgamation. 
c 
s.391(2), proviso and ss.209A, 235 and 237 -
Amalgamation of companies -
Amalgamationlmerqer 
scheme put up for sanction of Court - Requirement of 
disclosing material facts relating to the companies - Whetrer 
existence of inspection proceedings under s.209A mu->1 be 
D disclosed in terms of the proviso to s.391(2) - Held, Yes -
Though inspection under s. 209A, .:;trictly speaking, may not 
be in the nature of an investigation, but at the same time it 
cannot be construed as an innocuous exercise for record, 
inasmuch as if anything objectionable or fraudulent in the 
E conduct of tho affairs of the company is detected during the 
course of inspection, it may lay the foundation for the purpose 
of investigations under ss.235 and 237. 
s.394(1), second proviso - Amalgamation of companies 
F - Amalgamation/ merger scheme put up for sanction of Court 
- Duty of the Official Liquidator -
Held: An Official Liquidator 
acts as a watchdog of the Company Court - His duty is to 
satisfy the Court that the affairs of the company, being 
dissolved, have not been carried out in a manner prejudicial 
G to the interests of its members and the interest of the public 
at large - Only upon consideration of the amalgamation 
scheme, together with the report of the Official Liquidator, that 
the Court can arrive at a final conclusion. 
s.394(1), second proviso - Amalgamation of companies 
H - Amalgamation/ merger scheme put up for sanction of Court 
SESA INDUSTRIES LTD. v. KRISHNAH. BAJAJ AND 319 
ORS. 
- Effect of misdemeanour on the parl of the Official liquidator A 
- Whether sanction of a scheme of amalgamation can be held 
up merely beca1,1se the conduct of an Official Liquidator is 
·found to be blameworthy - Held: It is neither proper nor 
le<J[$ible to lay down absolute parameters in this behalf - The 
effect of misciemeanour, on the part of the Official Liquidator B 
on the scheme as. such would depend on tne facts obtaining 
in each case and ordinarily the Company Judge should be 
the final arbiter on that issue. 
Words and Phrases - Expression "public policy" -
. Meaning of - Held: The expression is incapable of precise C 
definition - It connotes some matter which con
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