TMI Blog1986 (9) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... from the inception, Neomer faced a number of difficulties and it appears that the production of RSF after the commissioning of the Newcomer plant in 1977 never proved to be a profitable proposition on account of numerous reasons. Against the installed capacity, the actual production remained at a much lower level and Neomer incurred heavy losses. As on May 31,1985, its liabilities were ₹ 721.82 lakhs as against tangible assets of ₹ 537.01 lakhs. Thus the liabilities far outweighed the assets. Under these circumstances, the financial institutions who were secured creditor of Neomer submitted a proposal for amalgamating Neomer Ltd. with the petitioning company, that is, Alembic. It was hoped that the proposed amalgamation would enable Neomer to engage in diversified of activities and apart from manufacturing PSF, the production of multifilament yarn and non-woven products, can conveniently be undertaken with the existing infrastructure of Neomer. the financial institutions have also agreed if the proposed amalgamation is seen through, certain other concessions like waiving of compound and penal interest and phased out repayment of terms loans can be provided to the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id report is at annexure A. 1,414 equity shareholder of the comp-any attended the meeting either in person or by proxy and the total of their shares was 2,05,191 equity shares of the nominal value of ₹ 2,05,19,100. At the said meeting, the scheme of amalgamation was read and explained by chairman, Shri Ramabvhai Amin, and Mr.Chirayu Amin, managing director of the company, and by a majority vote of 99.78% the said proposed scheme of amalgamation was approved. At the meeting of the preference shareholders, 62 shareholders voted in favour of the scheme and at meeting of the depositors, out of 785 depositors who were present, 779 depositors voted in favour of the said scheme of amalgamation. The meeting of the trade creditors of the company was attended by 103 creditors either in person or by proxy and all of them voted in favour of the proposed scheme. Similarly, at the meeting of debenture- holders, all the 36 debenture-holders voted in favour of the scheme and at the meeting of the secured creditors attended by three persons, all the three voted in favour of the scheme. In view of the above circumstances, the petitioning company has prayed that the said scheme of amalgamation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not workable. (6) Mr.Pujara has urged that the persons present at the meeting were not true representatives of the body of the shareholders of Alembic and hence even if a large majority have voted for the scheme of amalgamation, it cannot be considered to be the true voice of the shareholders. (7) Lastly, Mr.Pujara urged that as per the proposed scheme, the shareholders of Neomer will be getting dividend from 1983 as effective date of amalgamation is from 1983 and when there was not profit in Neomer undertaking, they cannot get such benefit. If neomer had made any such profit, then it that case they would be getting double dividend for the same period. In short, Mr.Pujara argued that there is no provi-sion for retrospective membership of the company. As against the above contentions raised by Mr. Punjara, Mr. G. N. Desai, appearing for the petitioning company, urged that the objections raised are not tenable for the following reasons. (1) That the scheme of amalgamation has been necessitated by a compulsion of circumstances inasmuch as if Neomer were to be closed down, about 200 persons would be rendered jobless and an industry which can revived in a backward are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipulates that where a compromise or arrangement is proposed between a company and its creditors or between a company and its members, the court has order a meeting of the class of creditors or members, as the case may be. The meeting is to be called and if a majority representing three-fourths in value of the creditors or class of creditors, or members or class members as the case may be, present and voting either in person or be proxy, vote in favour of such a scheme, the court may sanction the same provided it is satisfied that true and correct facts have been disclosed to the court. section 393 of the Companies act provides that with every notice calling such meeting, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect. 10. Mr.Pujaaa's contention is that despite the fact that 99 per cent of the shareholders and creditors had voted for the scheme of amalgamation, the said vote in favour of the scheme never represented a correct picture inasmuch as the explanatory statement sent with the notice of the meeting never contained the details which ought to have been incorporated therein in order that the shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 12. Mr.Pujara's contention that proxies were collected by unfair methods is also not born out by the affidavits and the affidavit-reply of Mr.Kapadia is clear on the said point. the allegations that one Geetaben Patel was never a shareholder of the company has been accepted by Mr.Kapadia and she had voted only as a creditor and not as a shareholder. 13. The next contention of Mr.pujara is that the break-up value of shares of Neomer as arrived at by the chartered , M/s. Dalal end Shah, has no nexus with reality and the report of the chartered accountants on that score is of a dubious character inasmuch as no reasons for arriving at the said value have been given. There are various methods for arriving at a break-up value, but it is universally accepted that the quotation of a share on the stock market would usually provide a largely reliable index. While the quotation on the stock market is not the be-all and end-all, it can very well be a springboard for arriving at a correct conclusion. The break-up value arrived at by the charted accountants is ₹ 4 per share and as the quotation on the stock market for the particular period suggests, the said value arrived at b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket, and where a large majority of shareholder have approved of a valuation, the burden would be upon the objector to prove that the break-up value either inadequate or that it is overrated. While at a valuation of a particular share even of a consistently losing concern, neither stock market quotation nor the intangible assets can be overlooked and the court would usually accept a valuation accepted by the majority as fair and reasonable unless the contrary is proved and merely because a different method of valuation could have been adopted that would be no reason for the court to dub the valuation as unfair. I, therefore, feel that the break-up value arrived at by the chartered accountants is not which can be termed as grossly exaggerated and the contention of Mr. Pujara that the transfer company is only taking over a contingent liability without any corresponding benefit either to the shareholders of the Alembic or the employees of the Alembic is not sustainable. 15. Mr. Pujara's contention that this is a scheme largely for revival of Neomer is partially true but when mr.Pujara contends that it is not likely to result in any corresponding benefit to the Alembic, it does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of amalgamation whenever proposed takes a long time to get sanctioned on account of procedural requirement. 16. The last contention of Mr.Pujara was that the scheme of amalgamation, if it is sanctioned, is likely to result in material disadvantage to the employees of Alembic. This seems to be real grievance of the objector as he is the secretary of the workers union of the Alembic and the apprehension which the objector seems to be harboring is that perhaps to work at the site where Neomer is located may entail the transfer of some employees. It may also be his apprehension that some of the workers of the Alembic may have to be retrenched as the personnel of Newcomer would now be in the employment of the transference company. the apprehensions , to say the least, are not justified on any score. the activities of the two units would be in totally different fields and on behalf of the Alembic a statement was made that the transfer company has no intention of utilising the services of any employee of the transferor company at the unit of the transfer company. No employee of Alembic is going to be retrenched on account of the amalgamation and the apprehension which was not voiced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia dated November 28, 1985. 21. It is further ordered that all the property, rights and powers of the transferor company specified in the first, second and third part of Schedule II hereto and all other property, rights and powers of the transferor company are transferred without further act or deed to the transfer company and accordingly the same shall, pursuant to section 394(2) of the Companies Act, 1956, be transferred to and vest in the transfer company for all the estate and interest of the transferor com-pany therein but subject nevertheless to all charges now affecting the same and. It is further ordered that the liabilities and duties of the transferor company are transferred without further act or deed to the transfer company and accordingly the same shall, pursuant to section 394(2) of the Companies Act, 1956, be transferred to and become the liabilities and duties of the transfer company ;and It is further ordered that all proceedings now pending by or against the transferor company are continued by or against the transferee company and It is further ordered that the transferee company shall without further application allot to the members of the transfero ..... X X X X Extracts X X X X X X X X Extracts X X X X
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