1996 (9) TMI 488 - SC - Companies Law

Whether the respondent-company was guilty of hiding the special interest of its director Shri Arvind Mafatlal from the shareholders while circulating the explanatory statement supporting the Scheme and whether thereby the voting by the equity shareholders got vitiated?

Whether the Scheme is unfair and unreasonable to the minority shareholders represented by the appellant?

Whether the proposed Scheme of Amalgamation was unfair and amounted to suppression of minority shareholders represented by the appellant and hence, liable to be rejected?

Whether separate meeting of minority shareholders represented by the appellant was required to be convened on the basis that the appellant's group represented a special class of equity shareholders?

Whether the exchange ratio of two equity shares of MIL for five equity shares of MFL was ex facie unfair and unreasonable to the equity shareholders of MIL and consequently, the Scheme of amalgamation on that account was liable to be rejected?

Held that:- Appeal dismissed. Management of the company is not at all a germane consideration for the Scheme. Conse-quently, whether the management remains with Arvind Mafatlal or in future may get changed and go in the hands of the appellant is not a consideration which has any linkage or nexus with the Scheme. Conse-quently, the interest of Arvind Mafatlal in the shareholding or likely future impact thereon by the litigation was de hors the Scheme in question and was not required to be placed before the voters. The first point for determination is, therefore, answered in the negative.

The appellant's own conduct, therefore, belies his apprehension that the Scheme as proposed was in any way unfair to him or that there were any mala fides behind the Scheme attributable to Shri Arvind Mafatlal who is the director of the transferee-company. The second point for determination, therefore, also is found to be factually not sustainable. It is, therefore, held that the Scheme of Compromise and Arrangement is neither unfair nor unreasonable to the minority share-holders represented by the appellant.

When the Scheme of Compromise and Arrangement was cleared and proposed by the board of directors of both the transferor and transferee-companies and also at the stage when the Scheme was put to vote before the meeting of equity shareholders forming a common class of which the appellant was also a member though a minority member. Consequently, point No. 3 will also have to be answered in the negative on the same lines and for the same reasons on the basis of which point No. 2 is answered.

Unless a separate and different type of Scheme of Compromise is offered to a sub-class of a class of creditors or sharehold-ers otherwise equally circumscribed by the class no separate meeting of such sub-class of the main class of members or creditors is required to be convened. On the facts of the present case the appellant has not been able to make out a case for holding a separate meeting of dissenting minority equity shareholders represented by him. The fourth point for determination therefore, is answered in the negative

There is no substance in this contention canvassed on behalf of the appellant that the exchange ratio was ex facie unfair to the equity shareholders of the transferee-company. The fifth point for determination is also, therefore, answered in the negative.