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IN THE HONOURABLE SUPREME COURT OF PENTOS

_____________________________________________________________________________

IN THE MATTER OF:

MOJO LIMITED & ANR. ..

APPELLANT

VERSUS

REPUBLIC OF PENTOS & ANR.

RESPONDENT

______________________________________________________________________________
ON SUBMISSION TO THE HONBLE SUPREME COURT
______________________________________________________________________________

MOST RESPECTFULLY SUBMITTED

COUNSEL FOR THE RESPONDENT
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______________________________________________________________________________
TABLE OF CONTENTS

2
3
4
5
6
I
II

INDEX OF AUTHORITIES ....

A Statutes
B Books
C Judicial Decisions
D Essays/Articles
STATEMENT OF JURISDICTION ....
STATEMENT OF FACTS
STATEMENT OF ISSUES ..
SUMMARY OF ARGUMENTS ..
ARGUMENTS ADVANCED ....
The SLP is not Maintainable under Article 136
1.1 The Writ Petition was rightly summarily dismissed ..

7
8
10
11
12
14
14

The impugned notification is valid in law ..16

2.1 Section 396 of the Companies Act, 1956 is constitutionally valid
.
2.2 The impugned notification is valid in law ....

III

18
19

The corporate veil should be pierced and the two companies should be amalgamated
in public interest .. 20
3.1 Pierce the corporate veil to make the parent company liable . 22
3.2 Amalgamation is in public interest .. 23

PRAYER 25

______________________________________________________________________________
______________________________________________________________________________
INDEX OF AUTHORITIES

A. STATUTES
1 Constitution of India, 1950
2 The Companies Act, 1956.
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3 The Code of Civil Procedure, 1908
B. BOOKS
1 BASU, D.D., COMMENTARY ON THE CONSTITUTION OF INDIA, Vol. 1-8 (Ed. 8,
2

2007, Lexis Nexis Butterworths Wadhwa)

DATAR, A.P., COMMENTARY ON THE CONSTITUTION OF INDIA, Vol. 1-2 (Ed. 2

2007, Wadhwa Nagpur)

JAIN, M.P., PRINCIPLES OF ADMINISTRATIVE LAW , Vol. 1-2 (Ed.7 2013, Wadhwa

and Company)
RAMAIYA, A., GUIDE TO THE COMPANIES ACT, Vol. 1-3 (Ed. 17, 2010, Wadhwa

5
6

and Company)
RAMANUJAM, S., MERGERS ET AL, (Ed. 2, Wadhwa & Company)
SAMPATH, K.R., LAW AND PROCEDURE FOR MERGERS/JOINT VENTURES,

7
8
9

AMALGAMATIONS, TAKEOVERS & CORPORATE RESTRUCTURE, (Ed. 4, 2006)

SARKAR, CODE OF CIVIL PROCEDURE, (Ed. 11, 2010)
SATHE, S.P., ADMINISTRATIVE LAW, (Ed. 7, Rep. 8, 2013)
SEERVAI, H.M., CONSTITUTIONAL LAW OF INDIA, Vol. 1 (Ed. 4 Rep. 2008,

Universal Law Publishing Co.)

10 SEERVAI, H.M., CONSTITUTIONAL LAW OF INDIA, VOL. 2 (Ed. 4 Rep. 2008,
Universal Law Publishing Co.)
11 SHULKA, V.N., CONSTITUTION OF INDIA, (Ed. 12, 2013 Eastern Book Company)
12 TAKWANI, C.K., LECTURES ON ADMINISTRATIVE LAW, (Ed. 5, 2014,
UNIVERSAL).
C. JUDICIAL DECISIONS
1. A.K. Kraipak v. Union of India, (1962) 2 SCC 262.
2. Allarakha K. Mansuri v. State Of Gujarat, AIR 1961 SC 715.
3. Arjun Singh v. A.D.J. and Anr, AIR 2003 SC 3044.
4. Balwant Rai Saluja v. Air India Ltd., AIR 2015 SC 375.
5. Bank of India Ltd. v. Ahmedabad Manufacturing & Calico Printing Co. Ltd., (1972) 42
Comp Cas 211 (Bom).
6. Bennett Coleman & Co. and Ors. v. Union of India, AIR 1973 SC 106.
7. British India Corporation Ltd. and Ors. v. The Industrial Tribunal, Punjab and Anr., AIR
1957 SC 354.
8. Caltex Oil Refining (India) Ltd. and Hindustan Petroleum Corporation Limited
Amalgamation Order, Company Law Board, 9th May, 1978.
9. Century Spinning and Manufacturing Company Ltd. and Anr. v. The Ulhasnagar
Municipal Council and Anr., AIR 1971 SC 1021.
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10. Chintaman Rao v. State of M.P., 1958 SCR 1340.
11. Chiranjit Lal Chowdhuri v. Union of India, (1950) 1 SCR 869.
12. D.A.V. College v. State of Punjab, (1971) 2 SCC 261.
13. Delhi Cloth & General Mills Co. Ltd. and Ors. v. Union of India, AIR 1983 SC 937.
14. Delhi Development Authority v. Skipper Construction Co. (P) Ltd., (1996) 4 SCC 622.
15. Dharma Dutt v. Union of India, (2004) 1 SCC 712.
16. Dwarkadas Shrinivas v. Sholapur Spinning and Weaving Co. Ltd. and Ors. , 1954 SCR
674.
17. E.P. Royappa v. State of Tamil Nadu, (1974) 4 SCC 3.
18. Escort farms Ltd. v. Commr. , Kumaon divison, nainital, U.P. and Ors. (2004) 4 SCC
281.
19. H.L. Trehan and Ors. v. Union of India and Ors., AIR 1989 SC 568.
20. Hindustan petroleum corporation Ltd. v. Darius Shapur chenai, (2005) 7 SCC 627.
21. In Re: Tech-men Tools (P.) Ltd., (2009) 150 CompCas 800 (AP).
22. In Re: Wood Polymer Limited, In Re: Bengal Hostels Pvt. Ltd.; (1977) 109 ITR 177
(Guj).
23. Indian Railway Construction Co. Ltd. v. Ajay Kumar, AIR 2003 SC 1843.
24. Janata Dal v. H.S. Chowdhary and Ors., AIR 1993 SC 892.
25. Jilubhai Nanbhai Khachar v. State of Gujrat, AIR 1995 SC 142.
26. Jose Da Costa and Anr. v. Bascora Sadasiva Sinai Narcornim, AIR 1975 SC 1843.
27. K.T. Plantation (P) Ltd. v. State of Karnataka, (2011) 9 SCC 1.
28. Kasturi Lakshmi Reddy v. State of J&K, AIR 1980 SC 1992.
29. Kavalappara Kottarathil Kochunni Moopil Nayar v. The State of Madras and Ors., AIR
1959 SC 725.
30. Kochunni v. State of Madras, AIR 1959 SC 725.
31. Kuldeep Singh v. Govt. of Delhi, AIR 2006 SC 2652.
32. Life Insurance Corporation of India v. Escorts Ltd. and Ors. (1986) 1 SCC 264.
33. Maneka Gandhi v. Union of India, AIR 1978 SC 597.
34. Manohar Singh & Anr. v. Caltex Oil Refining (India) Ltd. Bombay, AIR 1981 MP 123.
35. Mathew Michael and Ors. v. Teekoy Rubbers (India) Ltd. & Anr., (1983) 54 Comp Cas
88.
36. Mohinder Singh Gill v. Chief Election Commr. , (1978) 1 SCC 405.
37. National Spot Exchange Limited and Financial Technologies (India) Limited
(Amalgamation in Public interest) Order, Ministry of corporate affairs, 21st October
2014.
38. Neptune Assurance Co. Ltd., and Ors. v. Union of India, AIR 1973 SC 602.
39. NOIDA Entrepreneur Assn. v. NOIDA, AIR 2011 SC 2112.
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40. Oswal Fats and Oils Limited v. Additional Commissioner (Administration), Bareilly
Division, (2010) 4 SCC. 728.
41. Railway Board & Ors. v. Mrs. Chandrima Das & Ors., AIR 2000 SC 988.
42. Raja Ram Pal v. Lok Sabha, (2007) 3 SCC 184.
43. Rajesh Kumar and Ors. v. D. Commissioner of Income Tax and Ors, AIR 2007 SC 18.
44. Ramanlal Bhailal Patel and Ors. v. State of Gujarat, AIR 2008 SC 1246.
45. Ramchand Jagadish Chand v. Union of India, AIR 1963 SC 563.
46. Ramlila Maidan Incident v. Home Secretary, Union of India, (2012) 5 SCC 1.
47. Reliance Natural Resources Ltd. v. Reliance Industries Ltd., (2010) 7 SCC 1.
48. Rustom Cavasjee Cooper v. Union of India, (1970) 1 SCC 248.
49. S.M.D. Kiran Pasha v. Government of Andhra Pradesh (1990) 1 SCC 328.
50. Sangram Singh v. Election Tribunal, Kotah,Bhurey, AIR 1955 SC 425.
51. Shail v. Manoj Kumar And Ors, (2004) 4 SCC 785.
52. Shri Shekhar Ghosh v. Union of India and Anr., (2007) 1 SCC 33.
53. Siemens Ltd. v. State of Maharashtra and Ors., 2006 (12) SCC 33.
54. Singer India Ltd. v. Chander Mohan Chadha and Ors., (2004) 7 SCC 1.
55. Sri Santosh Kumar Agarwal v. State of Orissa and Ors., AIR 1973 Orissa. 217.
56. State of Madhya Pradesh v. Bhailal Bhai, (1964) 6 SCR. 261.
57. State of Madras v. V.G. Row, 1952 SCR 597; Shreya Singhal v. Union of India, (2015) 5
SCC 1.
58. State of Maharastra v. Jalgaon Municipal Council, (2003) 9 SCC 731.
59. State of U.P. and Ors. v. Renusagar Power Co. and Ors., AIR 1988 SC 1737.
60. State of West Bengal v. Bela Banerjee, AIR 1954 SC 170.
61. State of West Bengal v. Subodh Gopal Bose, AIR 1954 SC 92.
62. Surinder Singh Brar and Ors. etc. v. Union of India, (2013)1SCC 403.
63. The Commercial and Ahmedabad Mills Co. Ltd. and Anr. v. Union of India, AIR 1993
Guj 20.
64. The Government of India and Ors. v. The National Tobacco Co. of India Ltd., Calcutta,
AIR 1977 A.P. 250.
65. Union of India and Ors. v. Ambalal Sarabhai Enterprises Ltd., (1983) 55 CompCas 623
(Guj).
66. V.C., Banaras Hindu University and Ors. v. Shrikant, AIR 2006 SC 2304.

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67. Vodafone International Holdings v. Union of India (UOI) and Anr. (2012) 107 CLA 63
(SC).
68. Salomon v. A. Salomon and Co. Ltd., (1897) AC 22.
69. United States v. Bestfoods, 524 US 51 (1998).

______________________________________________________________________________
STATEMENT OF JURISDICTION

The Respondent humbly submits to the jurisdiction of this Honble Supreme Court of Pentos in
response to a Special Leave petition filed under Article 136 of the Constitution which confers
upon this Court the jurisdiction to issue any directions, orders or writs for the enforcement of any
of the rights conferred by Part III of the Constitution.

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______________________________________________________________________________
STATEMENT OF FACTS

1. Situated in the Republic of Pentos, Mojo is a public listed multinational oil and gas
company, while Dreamzz is a public unlisted company dealing in real estate. Mr. Karl
Singh is a common promoter and is on the Board of Directors of both companies.
2. In 2010, Dreamzz launched a collective investment scheme called Durga Scheme to
invite investments for INR 5,00,00,00,000/-. The main objective of the scheme, as
promised, was to raise and invest monies in volatile sectors like real estate. The scheme
promised only principal protection to investors with no commitment on interests.
Dreamzz entered into a trust deed with M/s GRU Trusteeship Services Pvt. Ltd. who
were to act for and on behalf of all the unit holders of Durga Scheme.
3. In 2013, Mojo became a majority shareholder of Dreamzz when they got 65% equity
share after the conversion of the Compulsorily Convertible Debentures (CCDs) into
shares, which were acquired in 2009. Now, Mojo and Dreamzz share a parent-subsidiary
relationship.
4. For the first two years of the scheme, in 2011 and 2012, before Mojo became a parent
company, the unit holders were receiving high interests @ 17.5% p.a. Then, in 2013, the
interests dropped to 9% p.a., before multiple delays and defaults in payment of interests
were there in 2014 and 2015.
5. Investigating into a complaint filed by a unit holder against such default of payment,
SEBP found that Durga Scheme is one of those schemes where the proceeds raised from
this scheme is used to pay off investors of older schemes. The scheme money is not being
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used in the manner promised. Such fraud committed by Dreamzz was alleged to be worth
INR 2,000 crores, by the reports.
6. The alleged irregularities by Dreamzz were known to some of the Board of Directors of
Mojo, who also played an influential role in the day to day activities of Dreamzz.
7. In view of such irregularities and fraudulent conduct, the Trustee issued a default notice
to accelerate payment obligations and demand repayment of entire amount due. Upon
Dreamzzs failure to make payment on notice, the Trustee initiated arbitration
proceedings for the fraud perpetuated.
8. Meanwhile, Dreamzz is in the process of initiating formalities for voluntary winding up
of the company.
9. In view of the reports of fraud and the opinions of SEBP, the Central Government
invoked its power under section 396 of the Companies Act and issued a Draft
Notification to amalgamate the two companies, i.e. Mojo and Dreamzz. The said Draft
Notification has invited objections from the public at large. The purpose of this
amalgamation is to protect the interests of the lakhs of investors who have invested in
Durga Scheme, and to serve the interest of public at large.
10. Mojo and its shareholders opposed this Draft Notification at the High Court of Santos by
way of a Writ Petition under Article 226 of the Constitution. The High Court summarily
dismissed the Writ Petition by saying that this is only a Draft Notification.
11. Aggrieved by said summary dismissal, Mojo and its shareholders have moved to the
Supreme Court of Pentos by way of special leave to appeal. The Trustee also decided to
implead itself to the appeal from the respondents side, as the amalgamation is believed to
be in public interest.

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STATEMENT OF ISSUES

WHETHER THE SLP IS MAINTAINABLE OR NOT?

1.1 Whether the Writ Petition was rightly summarily dismissed or not?

WHETHER THE IMPUGNED NOTIFICATION IS VALID IN LAW OR NOT?

2.1 Whether Section 396 of the Companies Act, 1956 is constitutionally valid or not?
2.3 Whether the impugned order is valid in law or not?

WHETHER THE CORPORATE VEIL SHOULD BE PIERCED AND THE TWO

COMPANIES SHOULD BE AMALGAMATED IN PUBLIC INTEREST OR NOT?
3.1 Whether the corporate veil should be pierced to make the parent company liable?
3.2 Whether amalgamation is in public interest or not?

______________________________________________________________________________
SUMMARY OF ARGUMENTS
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1. THE SLP IS NOT MAINTAINABLE UNDER ARTICLE 136
A petition under Article 136 is not maintainable as it neither raises an important question of law
nor leads to any injustice. The Respondent has not issued a final order of amalgamation, in the
absence of which the Appellants rights and interest remain unaltered. The mere issuance of a
draft notification does not provide sufficient ground for the Appellant to move the court under
Article 226. The writ petition filed is premature, in the absence of an accrual of cause of action,
and was therefore rightly summarily dismissed.
2. THE IMPUGNED ORDER IS VALID IN LAW
Respondents contend that the impugned draft notification is valid in law. Section 396 of the
Companies Act, 1956 is constitutionally valid since it provides an adequate right to hearing,
thereby complying with the requirements of natural justice and Articles 14, 19 and 21. Further, it
is in consonance with the Right to Property under Article 300A. Respondents also argue that the
impugned notification is based on due application of law and does not violate Appellants rights
under Article 19(1)(g).
3. THE CORPORATE VEIL SHOULD BE PIERCED AND THE TWO COMPANIES
SHOULD BE AMALGAMATED IN PUBLIC INTEREST
The necessary elements for piercing the corporate veil is met in this case, (a) impropriety or
fraud, (b) control and participation of the parent company in the wrong complained of. Making
the parent company liable is seeking remedy for the wrong and protecting investor rights. At the
same time, amalgamating the two companies benefits the public at large. For the sake of public
interest, the two companies should be amalgamated.

______________________________________________________________________________
ARGUMENTS ADVANCED
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1. THE SLP IS NOT MAINTAINABLE UNDER ARTICLE 136
1. A petition under Article 136 lies when there is a question of general public importance, or a
decision which shocks the conscience of the court.1 This power under article 136 is to be
exercised sparingly and in exceptional cases only.2 This provision cannot be used to shotcircuit the legal procedure prescribed in overriding power.3
2. Under Article 136 the Apex Court only intervenes with an order of the High Court where
justice, equity, and good conscience requires such intercession, 4 or where a grave injustice is
shown to be caused to the party by way of the impugned order 5, or where grave miscarriage
of justice has resulted from illegality, misapprehension, mistake in reading evidence or from
ignoring, excluding or illegally admitting material evidence.6
3. It is humbly submitted to this honourable court that a petition under Article 136 would not be
maintainable in the instant case as it fails to satisfy any of the aforementioned criteria. The
writ petition which was lawfully dismissed by the High Court in no way violates any of the
Appellants rights.

1.1 The Writ Petition was rightly summarily dismissed

4. The existence of a right and the infringement thereof is the foundation of the exercise of the
jurisdiction under Article 226 of the Constitution7. An infraction of a right gives rise to a
1Kettlewell Bullen and Co. v. Commissioner of Income Tax, Calcutta, AIR 1965 SC 65.
2 Mathai v. George, (2010) 4 SCC 358; Pritam Singh v. The State, AIR 1950 SC 169.
3 Manish Goel v. Rohini Goel, (2010) 4 SCC 393.
4 A.V. Papayya Sastry v. Govt. of AP,(2007) 4 SCC 221.
5 Mohammad Laiquddin v. Kamla Devi Misra, (2010) 2 SCC 407.
6 Shambhu Das v. State of Assam, (2010) 10 SCC 374.
7 State of Punjab v. Suraj Prakash Kapur, AIR 1963 SC 506.
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cause of action.8 In the absence of a cause of action, a writ petition shall be liable to be
rejected summarily9.
5. A writ court would usually not interfere with a draft notification, as the Appellant has the
option of making all averments against a proposed action before the concerned authority in
response to the notice.10 A writ petition may be dismissed summarily when on its face it does
not raise any triable issue of the ground of prematurity.11
6. A writ petition opposing a draft notification is premature as it is still at the stage of receiving
objections. A draft notification is not the law as it can come into operation only after
consideration of objections, and issuance of the final order. Until such transformation
completes, there is no cause of action. 12 All impositions, prohibitions or restriction, as the
case may be, come into force only after a final order is made.13
7. The appropriate remedy at the instant stage is for the Appellant to raise objections and
grievances against the government order, if any, through the mechanism provided for by the
draft notification.14 It has been held by the Apex Court that a draft notification is not an
empty formality and its utility cannot be undermined by circumventing the mechanism
provided by it.15

8Anirudh Prasad Yadav v. Union of India and Ors., AIR 2004 All 123.
9 Kusum Ingots v. Union of India, AIR 2004 SC 2321.
10 Budha Ram v. State of Rajasthan, AIR 1985 Raj 104; Executive engineer, Bihar State Housing Board v. Ramesh
Kumar, AIR 1996 SC 691; ITC Ltd. v. Union of India, AIR 1989 Cal 294; Polam Veerabhadra Rao v. Government
of A.P., AIR 1996 A.P. 308.

11 Himanshu Bose v. Jyoti Prokash Mitter, AIR 1964 SC 1636; Union of India v. S.P. Anand, AIR 1998 SC 2615.
12Association of Planters of Kerala v. State, ILR 1996 (3) Ker. 451; C.S. Kuppuraj v. State of T.N., (2004) 2 LW
554.

13 C.S. Kuppuraj v. State of T.N., (2004) 2 LW 554.

14 Sarungbam Joykumar Singh and Ors. v. State of Manipur and Ors., 2006 (3) GLT 310; State of
Jharkhand and Ors., 2006 (3) JCR 525 (Jhr).

15Avinash Ramkrishna Kashiwar v State of Maharastra, 2015 (2) Bom CR 754; Union of India v. Mukesh Hans,
AIR 2004 SC 4307.

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8. It is submitted to this court that the Respondent has not issued a final order of amalgamation,
in the absence of which the Appellants rights and interest remain unaltered. No right of the
Appellants has been abrogated at this stage. The mere issuance of a draft notification does
not provide sufficient ground for the Appellant to move the court under Article 226. The writ
petition filed is premature, in the absence of an accrual of cause of action, and was therefore
rightly summarily dismissed.
2. THE IMPUGNED DRAFT NOTIFICIATION IS VALID IN LAW.
2.1 Section 396 is constitutionally valid.
A Article 31A preclude Appellants from challenging Section 396 for violation of Articles 14
and 19.
9. Article 31A(1)(c) of the Constitution mandates that no law, which provides for the
amalgamation of two or more corporations either in public interest, or to secure proper
management of the corporations shall be deemed to be void on grounds inconsistency with
Articles 14 and 19.16 In view of this, Respondents contend, Section 396 of the Companies
Act is immune from being challenged for being violative of the aforestated articles.17
B Section 396 provides for an adequate opportunity of hearing.
10. Principles of natural justice function as safeguards against undue exercise of administrative
authority.18 All executive action, whether administrative or quasi-judicial, must be in
compliance with them.19 Natural justice mandates that, where Government discretion is
exercised, interested parties be afforded an opportunity of hearing. Those interested may be
afforded a pre-decisional, or in exceptional circumstances, a remedial, post-decisional

16 Article 31A (1)(c), The constitution of India, 1950

17 KT Plantation (P) Ltd v. State of Karnataka (2011) 9 SCC 1.
18 Maneka Gandhi v. Union of India, AIR 1978 SC 597.
19 MS Gill v. Chief Election Commissioner, AIR 1978 SC 851; Maneka Gandhi v. Union of India, AIR 1978 SC
597.

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hearing.20 Non-compliance with these principles has severe implications; it results in the
violation of Articles 14, 19 and 21 of the Constitution.21
11. For the hearing requirement to be met, it is sufficient for objections to be invited and taken
into consideration by the concerned authority.22 The rule of hearing being a flexible justice, it
may be modified and the measure of its application cut short, in cases of emergency, as per
convenience.23 Such practice would only amount to molding the applicability of the natural
justice requirement, not doing away with it completely.24 Pragmatism and realism, not
rigidity and inflexibility, should be relevant factors in a given fact situation. 25 Importantly,
where a violation of natural justice is alleged, some real prejudice must be caused to the
complainant; there is no such thing as mere technical infringement of natural justice.26
12. Respondents contend, that, Section 396 adequately provides for the rule of hearing, thereby
complying with natural justice. Section 396(4)(b) provides for suggestions to be made and
objections to be raised by the affected companies against the draft notification. A final order
is passed only after such suggestions have been considered and where necessary, relevant
modifications are made. This, it is urged, amounts to sufficient compliance with the
principles of natural justice.
13. Further, in the interest of exigencies, the rule of hearing may be molded, as necessitated by
existing circumstances. Section 396 functions as an exception to the ordinary procedure of
court regulated amalgamations under sections 391-394 of the Act. This ensures expediency
in the amalgamation of companies, in cases where the Central Government so deems fit. In
furtherance of this objective, therefore, the procedure under Section 396 has been molded to
ensure expediency and that the ends of public interest are served. The legislature has ensured
that the rule of hearing is substantially compiled with. While it may be urged that the
20 Maneka Gandhi v. Union of India, AIR 1978 SC 597.
21 Raja Ram Pal v. The Hon'ble Speaker, Lok Sabha and Ors, (2007) 3 SCC 184.
22 Mohd. Ibrahim Khan and Ors. v. State of Madhya Pradesh and Ors, AIR 1980 SC 517.
23 Swadeshi Cotton Mills v. Union of India (UOI), AIR 1981 SC 818.
24 MS Gill v. Chief Election Commissioner, AIR 1978 SC 851.
25 Ahmedabad Municipal Corporation v. Nawab Khan Gulab Khan and others, AIR 1997 SC 152.
26 WADE & FORSYTH: Administrative Law, 8th Edn., 2000, pp.491-492.
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procedure only provides for modification, it is contended that, no real prejudice is caused to
those aggrieved. Objections on extremely technical grounds form insufficient basis to justify
infringement of these principles.
14. It is humbly submitted, therefore, that Section 396 in not violative of the principles of natural
justice and is, thus, constitutionally valid.
C Section 396 does not violate Article 300A.
15. Article 300A of the Constitution grants all persons the right to enjoyment of property. The
Sovereign may, however, deprive such persons of their private property, in the interest of
achieving a public purpose. Such deprivation may only be done by the authority of law.27
This implies that administrative authority can interfere with an individuals right to property
only if there is law giving it necessary power.28
16. Public purpose includes the general interest of the community, as opposed to the particular
interest of individuals.29 Any purpose that benefits the public or a section of the public falls
under the ambit of public purpose.30 It is a concept that varies with time and the prevailing
conditions in a given community.31 Even a purpose which benefits individuals does not lose
the character of public purpose, if such individuals are benefited not as individuals but in
furtherance of some scheme or plan aiming at welfare or utility.32
17. Amalgamation under Section 396, respondents contend, amounts to deprivation of property
in public purpose and is, therefore, in consonance with Article 300A. The Government, in
the larger interest of the community, is empowered to force companies to amalgamate
towards ensuring better management of the amalgamating entities and as a step towards
attaining greater operational efficiency. It also ensures pooling of assets and ensures that the
amalgamating entities gain access to a larger set of consumers.
27 Jilubhai Nanbhai Khachar v. State of Gujarat, 1994 Supp(1) SCR 807
28 State of Mysore v. K.C. Adiga, A.I.R. 1976 S.C. 853.
29 Hamabai Framjee Petit v. Secretary of State, 1914 LR 42 I.A. 44
30 Smt. Venkatamma and Ors. v. City Improvement of Trust Board, Mysore and Ors, (1973) 1 SCC 188.
31 Kamshwar v. State of Bihar, AIR 1953 Pat 167
32 V.N. Shuklas Constitutional Law of India, (Mahendra P. Singh, revd. Eastern Book Company,12th ed. 2008)
pp 315.

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18. It is urged, therefore, that restriction imposed are permissible since they ensure attainment of
a larger public purpose.

2.2 The impugned notification is valid in law.

A. The impugned notification is based on adequate application of mind and is non-arbitary.
19. Article 14 of the Constitution strikes at arbitrariness in administrative action. Arbitrary
action being considered unequal according to both political logic and constitutional law, it
results in a violation of Article 14.33 Non-arbitrariness necessitates due of application of mind
prior to the exercise of administrative discretion, the absence of which, renders the order
unconstitutional.34
20. Due application of mind entails the authority duly addressing the matter before it and must
not act under the dictates of another body.35 Where an authority is required to form an
opinion on a question, it must be formed objectively, based on relevant considerations. 36
Government action, therefore, must be in consonance with some principle that meets the test
of reason and relevance.37 If power has been exercised on non-consideration or nonapplication of mind to relevant factors, the exercise of power will be regarded as manifestly
arbitrary and erroneous.38
21. In the facts of the present case, Respondents contend that the determination on amalgamation
has been made based on due application of mind. The Government, taking suo-moto
cognizance of the media reports on fraud and opinions expressed by the SEBP, decided to
initiate the procedure for amalgamation. Such a determination arose out of the need to ensure
protection of the defrauded investors of the Durga Scheme. Such a step would also ensure
33 E.P. Royappa v. State of Tamil Nadu, AIR 1974 SC 555.
34 AIR 2003 SC 2652.
35Indian Railway Construction Co. Ltd. vs. Ajay Kumar (27.02.2003 - SC), Indian Railway Construction Co. Ltd.
v. Ajay Kumar AIR 2003 SC 1843.

36 Union of India and another v. M/s. Jesus Sales Corporation, AIR 1996 SC 1509.
37 Kasturi Lal Lakshmi Reddy, Represented by its Partner Shri Kasturi Lal, Jammu and Ors. vs. State of Jammu
and Kashmir and Anr., AIR 1980 SC 1992; Noida Entrepreneurs Association v. NOIDA and Ors, AIR 2011 SC 2112

38Indian Railway Construction Co. Ltd. v. Ajay Kumar , AIR 2003 SC 1843; State of U.P. and Ors. v. Renusagar
Power Co. and Ors, AIR 1988 SC 1737.

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continuity of both entities and ensure responsible management of Dreamzz. The move would
also hold precedential value, since, it would work as a deterrent against a large number of
other fraudulent schemes. It would also ensure that limited liability is not used as a cloak
behind which to hide in an attempt to defraud innocent investors.
22. In light of this, respondents contend, the impugned order is based on due application of
mind.
B. The impugned draft notification is in consonance with Article 19(1)(g).
23. Article 19(1)(g) of the Constitution bestows on all citizens, the fundamental right to freedom
profession, occupation, trade or business.39 This right is subject to reasonable restrictions
liable to be imposed by the State in the interests of the general public.40
24. Article 19 also mandates that restrictions imposed must be reasonable. This implies that the
limitation as to the right must not be arbitrary or excessive in nature, beyond what is in the
interest of the public.41 Reasonability implies intelligent care and deliberation, leading to a
course of action dictated by reason. 42 Further, restrictions must possess a direct and
proximate nexus to the object they seek to achieve. In adjudicating reasonableness, Courts
must ensure that the imposition is in proportion to the prevailing conditions.43
25. Companies, being legal persons, are not accorded the status of citizens and, therefore, cannot
claim any rights under Article 19.44 Being incorporated bodies, they must be judged on that
footing alone and cannot be judged on the assumption that they are rights attributable to the
business of individual citizens.45

39 Article 19(1) (g), The Constitution of India, 1950.

40 Article 19(6), The Indian Constitution, 1950; Ramchand Jagadish Chand v. Union of India (UOI) and Ors, AIR
1963 SC 563.

41 The Commercial and Ahmedabad Mills Co. Ltd. and Anr. v. Union of India (UOI) and Ors, AIR 1993 Guj 20.
42 Chintaman Rao v. The State of Madhya Pradesh, AIR 1951 SC 118.
43 VG Row v. State of Madras, and Union of India, AIR 1952 SC 196; Shreya Singhal v. Union of India, AIR 2015
SC 1523.

44The State Trading Corporation of India Ltd. and Ors. v. The Commercial Tax Officer, Visakhapatnam and Ors,
AIR 1963 SC 1811.

45Dharam Dutt and Ors. vs. Union of India (UOI) and Ors, AIR 2004 SC 1295.
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26. It is argued, therefore, that companies cannot claim rights under Article 19. Individual shareholders,
however, may still avail of the rights afforded under Article. While restrictions have been placed on
the rights of the shareholders, respondents contend that such restrictions are reasonable. The order for
amalgamation was passed in order to cater to the interests and the needs of the general public. Such a
determination was necessary towards ensuring the protection of those defrauded through the Durga
Scheme and also secures the future of Mojo. This is an extremely relevant consideration, since, it also
grants protection to large number of employees, investors and creditors. Further, such a decision
would act to the deterrence of all those seeking to hide behind the safety net of limited liability in
order to indulge in unscrupulous business conduct.
27. It is contended, therefore, that initiation of amalgamation proceedings is reasonable and does not
violate appellants rights under Article 19(1)(g).

3 . THE CORPORATE SHOULD BE LIFTED AND THE TWO COMPANIES SHOULD

BE AMALGAMATED IN PUBLIC INTEREST

28. The doctrine of 'piercing the corporate veil' stands as an exception to the principle that a
company is a legal entity separate and distinct from its shareholders or its parent company
with its own legal rights and obligations. This doctrine seeks to disregard the principle of
limited liability of shareholders and the separate personality of the company, and attribute
the acts of the company to those who are allegedly in direct control of its operation.46
29. By amalgamating two companies, the parent company takes over all the assets and
liabilities of the subsidiary company, among other implications.47 Therefore, the element
of lifting a corporate veil is fulfilled through amalgamation as it serves the purpose of
making the parent company take over liabilities of the subsidiary.
3.1 Pierce the corporate to make the parent company liable

46 Balwant Rai Saluja v. Air India Ltd., AIR 2015 SC 375; Salomon v. A. Salomon and Co. Ltd. (1897) AC 22 .
47Caltex Oil Refining (India) Ltd. and Hindustan Petroleum Corporation Limited Amalgamation Order, 1978;
National Spot Exchange Limited and Financial Technologies (India) Limited (Amalgamation in Public interest)
Order, 2014; Manohar Singh & Anr. V. Caltex Oil Refining (India) Ltd. Bombay, AIR 1981 MP 123.

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30. The corporate veil can be pierced and the parent company can be held liable for the
conduct of its subsidiary, if the corporal form is misused to accomplish certain wrongful
purposes, when the parent company is directly a participant in the wrong complained of. 48.
Where circumstances exist indicating that the holding-subsidiary relationship is a mere
faade concealing true facts which lead to be fraudulent, sham, circuitous or a device
designed to defeat the interests of the shareholders, investors, parties to the contract and
also for tax evasion, the Court can always examine the substance of the transaction and lift
the corporate veil.49
31. The corporate veil can be pierced only if there is some impropriety. The impropriety in
question must be linked to the use of the company structure to avoid or conceal liability.
To justify the test for piercing the corporate veil, there must be both control of the
company by the wrongdoer and impropriety, that is use or misuse of the company by them
as a device or facade to conceal their wrongdoing; and the company may be a 'facade' even
though it was not originally incorporated with any deceptive intent, provided that it is
being used for the purpose of deception at the time of the relevant transactions. 50 The
Court would, however, pierce the corporate veil only so far as it was necessary in order to
provide a remedy for the particular wrong which those controlling the company had done.
There is no exhaustive enumerated list of the classes of cases where lifting the veil is
permissible, since that must necessarily depend on the relevant statutory or other
provisions, the object sought to be achieved, the impugned conduct, the involvement of
the element of the public interest, the effect on parties who may be affected etc. Therefore,
the application of this doctrine is fact specific and differs from case to case.51
a Impropriety in the scheme against interest of investors
48 Vodafone International Holdings V. Union of India and Anr. [2012]107CLA63(SC); United States v.
Bestfoods 524 US 51 (1998).

49 Vodafone International Holdings V. Union of India (UOI) and Anr. (2012)107 CLA 63 (SC); Commissioner of
Income Tax v. Sri Meenakshi Mills Ltd., Madurai AIR 1967 SC 819; Suhhra Mukherjee and Anr. Vs. Bharat Coking
Coal Ltd. and Ors., (2000) 3 SCC 312; Saurabh Exports vs. Blaze Finlease and Credits Pvt. Ltd., 129 (2006) Delhi
Law Times 429.

50 Balwant Rai Saluja v. Air India Ltd., AIR 2015 SC 375; Ben Hashem v. Ali Shayif (2008) EWHC 2380 (Fam);
Prest v. Petrodel Resources Limited and Ors. (2013) UKSC 34.

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32. If the intention of the companies is to deceive a party by using the corporate form to deny
them a legal right, then it is a valid claim for fraud. 52 Acts which deliberately deny or
infringe upon the interests of investors or shareholders in an unlawful manner can lead to
cause of action for lifting the corporate veil. Deceiving tax authorities for tax evasion or
fraudulently obtained loans where concealment of true facts is fraudulent to defeat the
interests of investors and creditors, can also lead to lifting of the corporate veil. 53 Deceiving
the investors and creditors by siphoning and misappropriating funds of the company is
another common case for lifting the corporate veil.54
33. The Durga Scheme, launched in 2010 by Dreamzz, invited investments worth INR
5,00,00,00,000 (Indian Rupees Five Hundred Crores Only). The purpose of this scheme was
always ambiguous, since inception, as it was a promise to invest monies in volatile sectors
such as real estate. Such investments are always risky by virtue of being volatile. Also,
Dreamzz had not made the nuances of the investment very clear as the investments could
have ranged from various sectors which may be considered volatile. To cover up for such
lack of clarity and ambiguity in the scheme, the scheme was made to look lucrative to
investors by marketing the scheme with personalities from various walks of life. Such lack of
clarity about the investment is further manifested in the Trust Deed, where the proceeds of
the scheme is said to be utilized for meeting the general day to day requirements of the
Company for carrying out its various construction and development activities. 55 Such nature

51 Life Insurance Corporation of India v. Escorts Ltd. and Ors. (1986) 1 SCC 264; Balwant Rai Saluja v. Air
India Ltd., AIR 2015 SC 375; State of U.P. and Ors. V. Renusagar Power Co. and Ors., AIR 1988 SC 1737.

52 Hilton v. Plustile Ltd. (1989) 1 WLR 149; Gilford v. Horne (1933) Ch. 935; Jones v. Lipman [1962] 1 WLR 832;
Hystro Prods., Inc. v. MNP Corp., 18 F.3d 1384, 1390 (7th Cir. 1994).

53 Vodafone International Holdings v. Union of India (UOI) and Anr. (2012) 107 CLA 63 (SC); VTB Capital v.
Nutritek, (2012) EWCA Civ 808.

54 Ali Jawad Ameerhasan Rizvi & Ors. v. Indo French Biotech Enterprises Ltd. & Ors., (1999) 95 Comp Cas 373;
Col. M.R. Bhakshi v. Fintra Systems Ltd. & Anr., 2008 (106) DRJ 166.

55 Statement of Facts.

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of ambiguity indicates some sort of impropriety or inconsistency in the actions of the
company, where the motive is to deceive the investors.
34. During the SEBP inspection of the scheme, the main point of contention was the utilization
of funds of such schemes. SEBP chairman Mr. Kishore Parikh, in a press conference, pointed
out a default in the industry, where investment schemes are launched promising very high
returns. Such returns are paid out by accepting further deposits from a different set of
investors. SEBP reports believe that Durga Scheme is one such scheme. In support of such a
claim, facts of the case also suggest that Dreamzz had floated other schemes too. Therefore,
SEBP reports and the outbreak of news alleging fraud is evidence proving some sort of
misappropriation or siphoning of funds in the functioning of the investment scheme. Such
conduct by the company is active misrepresentation of material facts, and the purpose of
such impropriety is to deceive the investors at the detriment of their interests.

Control and participation of parent company in the subsidiarys conduct

The control of a company vests in the voting power of its shareholders. Shareholders holding a
controlling interest determine the nature of the business, its management, enter into contract,
borrow money, buy, sell or merge the company.56 The holder of the majority of the stock in a
corporation has the power to appoint, by election, Directors of their choice and the power to
regulate them by a resolution for their removal. 57 The corporate veil can be pierced when the
parent company is directly a participant in the wrong complained of.58
It was already known to Mojo, by virtue of the SSA, with assurance, that it would be a parent
company in the future. The Durga Scheme was only launched in 2010. Therefore, by virtue of
the scheme launched after 2009, Mojo was aware that the utilization of such scheme monies
would be of direct impact and consequence to the business of Dreamzz under its parenthood.
When the scheme was launched, though Mojo was not a parent company, Mr. Karl Singh was a
56 Vodafone International Holdings v. Union of India (UOI) and Anr. (2012) 107 CLA 63 (SC).
57 Life Insurance Corporation of India v. Escorts Ltd. and Ors. (1986) 1 SCC 264.
58 Vodafone International Holdings v. Union of India (UOI) and Anr. (2012) 107 CLA 63 (SC); United States v.
Bestfoods 524 US 51 (1998).

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common promoter and also a common member of the Board of Directors. It was known to all
other Directors that Mojo would be a parent company soon. Therefore, beyond just the
knowledge of the importance of the scheme, Mojo also had an important and influential role to
play in the inception of the scheme in the first place.
Mojo, subsequently became the holding company with 65% stake in the subsidiary company,
Dreamzz. Such a portion of the stake entails a majority voting rights, by which Mojo has the
power and ability to influence and control the decision making of Dreamzz. It is also noted in the
facts, that the alleged irregularities in Dreamzz were known to some of the directors of Mojo.
These directors are said to have an influential role in the day-to-day activities of Dreamzz.
Therefore, despite having separate legal status, the operations of Dreamzz can be directly
attributed to Mojos control and participation over decision making.
The default in payments can also be directly attributed to Mojos control over Dreamzz. Mojo
attained majority voting rights in 2013, after the CCDs had been converted to equity shares.
Before that, in 2011 and 2012, for the first two years of the scheme, the investors had been
receiving interests at the rate of 17.5% per annum. In 2013, the interests dropped to 9% p.a., and
subsequently, 2014 onward there were delays and defaults in payment of interest. Therefore,
before Mojo took over, the scheme was running without any issues. Only after Mojos control,
Durga Scheme started to adversely impact investor rights.
Therefore, there is impropriety by way of deception of the investors, which is directly controlled
by the parent company. Mojo is exploiting the corporate veil to perpetuate fraud. The parentsubsidiary relationship seems to be a faade, as Mojo has full dominance and control over
Dreamzzs improper conduct. The parent company should be made liable for its actions, and the
corporate veil should be lifted to remedy the wrong done by such a fraudulent act. The investors
rights and funds would be secured, and the wrong would be remedied by making the parent
company, Mojo, liable.

3.2 Amalgamate the two companies in public interest

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The concept of public interest is a dynamic concept which must take its colour and content
from the content in which it is used. 59 The expression "public interest" standing by itself is likely
to appear to be vague without any specific connotation. It is capable of more than one meaning.
Therefore, in order to ascertain the true meaning of "public interest" used in a given statute, it is
to be construed in the context of the legislation in which it is used, provision in which it is used,
and the purpose sought to be achieved and the mischief it seeks to suppress by the use of the
expression. Where alternative constructions are equally open, that alternative is to be chosen
which will be consistent with the smooth working of the system.60
A wide definition of public interest would include anything in which the public, the community
at large, has some pecuniary interest, or some by which their legal rights or liabilities are
affected.61
"Public interest" is a positive check on unhindered exercise of private right whether by
management or stock-holders. Our company law has recognized the importance of public policy
over the freedom of management and stockholders to carry on business subject to condition that
autonomous decision making in these areas must not override the concept of the public interest.62
Public interest during amalgamation includes efficient administration of the company, coordination in policy, gainful settlement of rights and liabilities of shareholders and creditors and
leveraged use of combined assets and capital reserves.63 A scheme must consider its implications
on all the parties that it would affect like the two independent companies, their respective
shareholders, the resulting company, the new shareholding structure, financial viability of the
resulting company, investors and their investment decisions and flexibility of the growth of
59 Union of India and Ors. v. Ambalal Sarabhai Enterprises Ltd., (1983) 55 CompCas 623 (Guj).
60 In Re: Wood Polymer Limited, In Re: Bengal Hostels Pvt. Ltd.; (1977) 109 ITR 177 (Guj).

61 Blacks Law Dictionary 4th edition, p. 1393; In Re: Teck-man Tools (P.) Ltd., (2009) 150 CompCas800 (AP).
62 In Re: Wood Polymer Limited, In Re: Bengal Hotels Pvt. Ltd. (1977) 109 ITR 177 (Guj).
63 National Spot Exchange Limited and Financial Technologies (India) Limited (Amalgamation in Public interest)
Order, 2014; Orissa Mining Corporation Ltd. v. Commissioner of Income Tax, (2007) 208 CTR (Ori) 380.

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business operations.64 Interest of the investing public is interest of general public which
expression would be covered by "public interest. 65
After the reports of alleged fraud and the outbreak of such news, the company has suffered a
tarnished reputation because of which it will be difficult for Dreamzz to continue smooth
business operations. Also, Dreamzz is having financial issues as it is unable to pay back the
investors of the Durga Scheme, and the other schemes that were floated earlier. Dreamzz has
initiated a petition for voluntary winding up. This indicates the inability and unwillingness of
Dreamzz to continue with doing business. If the company winds up, then all these investors,
shareholders and creditors will be adversely impacted in monetary terms, as Dreamzz would be
unable to pay back all its dues. Also, the employees of the company and other public benefitting
from the business of Dreamzz will be suffering abrupt losses. Existing shareholders of Dreamzz
will have to take the risk of bearing the losses. Mojo already holds 65% stake in Dreamzz.
Therefore, winding up would also result in huge losses for Mojo as a stakeholder.
While Mojo is already considering providing for a parent company guarantee, and is also a
probable victim of the major losses of winding up, it is beneficial for Mojo to take over Dreamzz
as a company, get control of the assets, the business and the employees in a set organization
structure. On amalgamation, market operations of Dreamzz are not hindered and the public
benefitting from Dreamzzs business remains unaffected. At the same time, the investor and
shareholders of Dreamzz are saved from taking an unnecessary financial burden. The interests of
the employees are also secured. There is no change in functionality of the two companies too, as
they have already been behaving a single entity under the complete control of Mojo. Therefore,
amalgamation of the two companies is a better option than letting Dreamzz wind up.

______________________________________________________________________________
PRAYER

64 In Re: Teck-man Tools (P.) Ltd., (2009) 150 CompCas800 (AP).

65 In Re: Wood Polymer Limited, In Re: Bengal Hotels Pvt. Ltd. (1977) 109 ITR 177 (Guj).
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Wherefore in light of issues raised, arguments advanced and authorities cited, it is humbly
requested that this Honble Court may be pleased to:
1. The Special Leave Petition is not maintainable under Article 136.
2. Section 396 is constitutionally valid.
3. Impugned draft notification is valid in law.

And pass any such order as it deems fit and proper, for this the Respondents shall duty bound
pray.

All of which is respectfully submitted

Counsel for Respondent

______________________________________________________________________________

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