TMI Blog1973 (7) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of paid up capital is Rs. 7,00,000. The objects of the company for which the company was incorporated were, inter alia, as follows : "This company is established for taking settlement of land for producing tea or any other crop or for purchasing a tea garden where plantation has commenced and for doing all other necessary acts relating thereto within the district of Jalpaiguri, at the western part of Bhutan or in any other part of this district or in any other district under the Lieutenant Governor of Bengal or the Chief Commissioner of Assam". Petitioner No. 2 was incorporated on 24th June, 1925, under the provisions of the Indian Companies Act; registered office was also situate at No. 11, Government Place East; authorised capital is Rs. 20,00,000 divided into 80,000 equity shares of Rs. 25 each and the amount of paid up capital is Rs. 8,69,125. The objects of this company are various and have been set out in the memorandum annexed to the petition. I need not refer in detail to the said objects except the clause which provides, inter alia , as follows: "To enter into partnership or into any arrangement for sharing profits or into any union of interest, joint adventure, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two companies. Such meetings have been held on 30th September, 1972. The meeting of the ordinary shareholders of the petitioner No. 1, that is to say, Jalpaiguri Tea Co. Ltd., was attended by ten ordinary shareholders in person and thirteen ordinary shareholders by proxy and/or through their authorised representatives and the total number of their shareholdings was 18,060. 12 shareholders of the company holding in the aggregate 3,780 ordinary shares had appointed one Mr. Rabindra Nath Mitra as their proxy to attend the said meeting, The chairman of the said meeting rejected the said proxies inasmuch as these were not in accordance with the prescribed forms of proxy sent to the shareholders. The chairman, however, permitted the said Mr. Rabindra Nath Mitra to participate in the voting at the said meeting. The scheme of amalgamation was read out and explained by the chairman as appears from the report of the chairman annexed and filed in this proceeding and was approved, according to the chairman, by requisite majority. The meeting of the shareholders of Bijoynagar Tea Co. Ltd. was held on 30th September, 1972, and was attended by twenty ordinary share holders in person and eight ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs") by or against Jalpaiguri be pending, the same shall not abate, be discontinued or be in any way prejudicially affected by reason of the transfer of the undertaking of Jalpaiguri or of anything contained in this scheme, but the proceedings may be continued, prosecuted and enforced by or against Bijoynagar in the same manner and to the same extent as it would or might have been continued, prosecuted and enforced by or against Jalpaiguri as if this scheme had not been made". The scheme further provided for the continuance of the proceedings against Jalpaiguri Tea Co. Ltd. in the same manner as against Bijoynagar Tea Co. Ltd. and for survival of all contracts and commitments of Jalpaiguri Tea Co. Ltd. against 'Bijoynagar Tea Co. Ltd. The scheme further stipulated that upon the transfer of the undertaking of the Jalpaiguri Tea Co. Ltd. the said Bijoynagar Tea Co. Ltd. should allot at par to those shareholders of the former one holding 13,860 ordinary shares of Rs. 25 each in the share capital of Jalpaiguri Tea Co. Ltd. excluding 14,140 ordinary shares held by Bijoynagar Tea Co. Ltd. on the order of the High Court sanctioning the scheme, in the ratio of one equity share of Rs. 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, it was submitted that the court should not sanction such a scheme. It was pointed out that though there was alteration of the memorandum bringing within its objects clause the power to amalgamate, such alteration did not become effective until the certified copy was filed under section 18(3) of the Companies Act, 1956, and until that was done, such alteration was not effective. As in this case the certified copy was filed on the 3rd May, 1973, which is long after the date when the scheme for alterations had been approved by the shareholders, the act of the shareholders was ultra vires and could not be sanctioned. The question, therefore, is, whether in sanctioning a scheme under sections 391 and 394 of the Act, the court is circumscribed by the objects of the company. On the one hand, it was contended that it was not necessary to have the power when the court was sanctioning a scheme by the powers given to the court under the statute. On the other hand, it was contended on behalf of the respondents that the court could only give sanction to a compromise proposed and approved by the shareholders and a scheme which had not been approved or proposed by the shareholders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also was not actually dealing with the question of sanctioning an amalgamation where an amalgamation had been proposed and approved by the share holders without any express power; the decision was concerned with an application under section 17 and according to counsel for the respondents, the observations made by the learned judge were obiter in the context of the facts of that case. Learned judge had relied on the decision of the Privy Council, as mentioned hereinbefore. Counsel for the respondents not without justification, in my opinion, pointed out that the decision of the Privy Council dealt with the power of the voluntary liquidator and the observations of the Privy Council must be confined to the facts of that case. Counsel for the respondents also pointed out, in my opinion rightly that the Privy Council decision was given in 1928 while the section relating to power to amalgamate was incorporated in the Act in 1936. There fore, the said observation should not be construed as holding that the court had power to amalgamate under section 391 of the present Act. The question was again considered by K. L. Roy J. in the case of Associated Hotels of India Ltd. [1968] 2 Comp. L.J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hoolungooree Tea Co. Ltd. [1970] 40 Comp. Cas. 458 ; A.I.R. 1969 Cal, 312 clearly laid down, according to the learned judge, that even if there was no express power in the memorandum of the company to amalgamate with another company by virtue of the statutory power under section 391 of the Companies Act, the court could sanction a scheme of amalgamation if the statutory requirements had been complied with in view of the specific provision of the statute. The learned judge was unable to accept the English law as being valid in India on this aspect in view of the aforesaid decisions. My attention was also drawn to the passages in Buckley's Company Law, 13th edition, page 404, Palmer's Company Law, 25th edition, page 698, Halsbury's Laws of England, 3rd edition, volume VI, page 614, Pennington's Company Law, 2nd edition, page 438, and the decision in the case of In re Crown Bank [1890] 44 Ch. D. 634 (Ch. D.). My attention was drawn to the decision of Simonds J. in the case of In re Oceanic Steam Navigation Company Ltd. [1939] 1 Ch. 41; [1939] 9 Comp. Cas. 229 , 233 (Ch. D.) There the learned judge referred at page 44 of the report to the fact that the counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d approved was a scheme upon anticipation and which was dependent upon the companies acquiring the power before dissolution and amalgamation. I am not faced with the case where the company did not at all have any power to sanction or to sell its entire undertaking to another company or to dissolve. I am faced with the situation where the company did not have the power when it passed the resolution but when the scheme, which was conditional upon the companies acquiring this power which acquisition had been made by the subsequent events, whether the court would sanction such an alteration. I am of the opinion, therefore, that I need not consider the extreme case where the company did not have such a power at all. I am concerned with the case where at the time of sanctioning the scheme the company had acquired such power for alteration and I find that the company had such power when the scheme is proposed to be implemented. Sanction of the shareholders of the respective companies had been upon the condition of the companies' having their powers. Sanctioning of such scheme would not be sanctioning ultra vires acts on the part of the companies concerned. For these reasons, I am unable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and according to the balance-sheet of the two companies of 1970 the fair exchange ratio appears to be 15 shares of Jalpaiguri Tea Co. Ltd. in exchange of two shares of the Bijoynagar Tea Co. Ltd. In my opinion, this is a fair valuation. The next contention was regarding the feasibility of the scheme and the onus of the parties in seeking sanction of a scheme. In this connection reliance was placed on Palmer's Company Law, 21st edition, page 702, which provides that, in order to confirm a scheme, first, it is necessary to see whether the statutory requirements have been complied with. These, in my opinion, have been complied with. Secondly, all the classes must have been properly represented. This again, in my opinion, seems to have been done. Thirdly, though the fact that the scheme is approved by a statutory majority is an indication that it is a fair one, this indication is reversed if a substantial proportion of the members the members of the class by reason of the interest in some capacity are opposing the scheme. This is not the case here. Fourthly, the arrangement must be such that a prudent man would reasonably approve. This, however, does not mean that actual workabili ..... X X X X Extracts X X X X X X X X Extracts X X X X
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