9911796707
TMI Blog1973 (6) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner-bank is Rs. 4,00,00,000 divided into 5,00,000 ordinary shares of Rs. 20 each and 30,00,000 shares of Rs. 10 each. The amount of capital of the petitioner-bank paid up or credited as paid up is Rs. 2,68,77,119. The objects of the petitioner-bank for which it was incorporated as appears from the memorandum of association of the company was mainly for carrying on banking business. The petitioner-bank commenced its business since its incorporation and was carrying on banking business until 18th of July, 1969, when the undertaking of the petitioner-bank was taken over under the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. The petitioner No. 2, United India Credit and Development Company Ltd., (hereinafter referred to as the "petitioner-company") was incorporated on the 28th July, 1970, under the Companies Act, 1956. The registered office of the petitioner-company is situate at No. 41, Free School Street, Calcutta. The authorised capital of the petitioner-company is Rs. 5,00,000 divided into 1,00,000 equity shares of Rs. 5 each. The amount of capital of the petitioner-company paid up or credited as paid up is Rs. 6,600. The objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and privileges and all property movable and immovable, cash balances, reserve funds, investments and all other rights and interests in or arising out of such property as were immediately before the commencement of the said Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, under the ownership, possession, power or control of the petitioner-bank in relation to the undertaking, whether within or without India and all books of accounts, registers and records and all other documents of whatever nature relating thereto including all borrowings, liabilities and obligations have been taken over and/or acquired under the said Acquisition Act. (c)In the circumstances, the petitioner-bank started new books on and from July 19, 1969, and has prepared its balance-sheets for the years ended 31st December, 1969, 31st December, 1970, and 31st December, 1971. The said balance-sheets and profit and loss accounts for the said years have been approved and adopted by the shareholders of the petitioner-bank in its annual meetings. (d)The petitioner-bank by reason of the nationalisation of the banking business has either to diversify its business and change its name to carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initially proposed scheme of amalgamation, a copy of which is annexed to the petition and marked with the letter "C", provided, inter alia: (1)The transferee-company shall take over the assets and liabilities of the transferor-company as per the balance-sheet of the transferor-company as at 31st of December, 1969. The reserves and surplus as shown in the balance-sheet of the transferor-company as at 31st of December, 1969, amounting to Rs. 1,51,22,881 is proposed to be. reallocated as specified below prior to the scheme of amalgamation coming up for consideration by the shareholders: Rs. (i) To dividend fund (1969) ... 20,10,889.50 (ii) To deferred annual distribution reserve for payment to shareholders in proportion to the share held for the years 1970-1975 in six equal instalments. ... 60,32,668.50 (iii) To general reserve, subject to payment of capital gains tax or any other tax the receipt of compensation may attract ... 70,79,323.00 Such reallocation as aforesaid being approved by the shareholders of the transferor-company the same shall form part of this scheme. (2)(i)The transferee-company shall all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f giving effect to the provisions of clause 2 above, the transferee-company will increase its authorised share capital and obtain the necessary sanction of the Controller of Capital Issues as also of the Central Government. Allotment of the shares and debentures as mentioned above will be made by the transferee-company within six months from the date of transfer without any further application from the shareholders of the transferor-company. The basis of amalgamation is that the shareholders of the petitioner No. 1 will get for every share of Rs. 10 each held by them in the capital of the petitioner No. 1: - I.One fully paid-up share of Rs. 5 in the capital of the petitioner No. 2, and II.One unsecured debenture of Rs. 5 carrying interest at such rate as the Central Government may approve but not exceeding 9% per annum payable annually. These debentures are convertible to equity shares of the petitioner No. 1 at the option of the debenture-holders after the 12th year and before 15 years from the date of issue of debentures and such of the said debentures as might not be so converted into equity shares of the petitioner No. 1 will be redeemed by the petitioner No. 2 on the 1st da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the proposed amalgamation is not within the mischief of the Monopolies and Restrictive Trade Practices Act, 1969. By an order made on the 28th of August, 1970, in the said Company Application No. 256 of 1970, meeting of the shareholders of the petitioner-bank was directed to be held on 29th September, 1970, under the chairman as provided in the said order. The said order also provided for a separate meeting of the shareholders of the petitioner-company to be held on 29th September, 1970, under the chairman as provided in the said order. It is alleged that notices of the said meetings were sent individually to each shareholder concerned as required by the said order together with the copy of the scheme and the statement required under section 393 of the Companies Act, 1956, and the proxy form. Notices of the said meetings were duly advertised in the newspapers as directed by the said order dated the 28th of August, 1970. It is alleged that the meeting on the 29th of September, 1970, was duly held but a pandemonium was created at the said meeting and as such the same was adjourned by the chairman without transacting any business thereat. Copies of the reports of the said meeting b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs; (2)the petitioner No. 2, that is, the petitioner-company, is a worthless company; (3)the shareholders of the petitioner-bank are now entitled to the compensation money payable under the said Banking Company Acquisition Act, 1970; (4)the ratio of exchange is unfair; (5)the explanatory statements under section 393 of the Companies Act, 1956, are tricky and untrue; (6)the petitioner-bank has no power under its memorandum of association to amalgamate with other companies; and lastly (7)the application is not bona fide. Regarding the question raised by the opposing shareholders as to the notice to the Pakistani shareholders which is alleged by them to be about 25% of the shareholding of the petitioner-bank, Mr. Mukherjee submitted that notices of the meetings were duly served on the shareholders of the petitioner-bank at their respective addresses when the meeting was originally convened to be held on the 28th of September, 1970, and he referred to the affidavit of service and certificate of posting filed in court in respect of such service. Mr. Mukherjee, thereafter, submitted that correspondence was exchanged between the Custodian of Enemy Property and the petitioner-bank b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed directors of the petitioner-company; if necessary, such letters of consent can be produced as Mr. Mukherjee alleged. Mr. Mukherjee submitted that there are various procedures of amalgamation: one of them is by the method which is sought to be adopted in this case, that is, by floating a new company and amalgamating the old company with the new company. Mr. Mukherjee submitted that the procedure adopted in this case has a good deal of justification, because, by following such procedure, several objects can be attained at once, viz. (a) alteration of name, (b) alteration of memorandum and articles, and (c) alteration of capital structure. Further, Mr. Mukherjee submitted that if the same thing can be done by several methods, the fact that the parties have chosen a particular method is no reason why it should be construed as a factor against the petitioners. There is no secret about the fact that the petitioner-company is only a new company which has beer; incorporated solely for the purpose of taking over the shares of the petitioner-bank under the said scheme of amalgamation. Mr. Mukherjee further referred to In re Mackinnon Mackenzie & Co. Pvt. Ltd. [1967] 37 Comp. Cas. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and the purchase of shares of Rs. 2 lakhs by the petitioner No. 2 of petitioner No. 1 is not within the mischief of section 372 and in any event it is within the exception mentioned in section 372(13) and (14) of the Companies Act, 1956. In short, Mr. Mukherjee submitted that the petitioner No. 2, that is, the petitioner-company, with whom the petitioner-bank is sought to be amalgamated being a new company floated for the said purpose of taking over the petitioner-bank, cannot be said to be a worthless company because it will depend entirely on the future working of the company after it is amalgamated-an entirely speculative aspect which cannot be gone into by the court at this stage. Regarding the question that the shareholders of the petitioner-bank are entitled to the compensation money as the banking business which was the only business of the petitioner-bank before it was acquired by the Central Government under the said Banking Company Acquisition Act, 1970 (Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970) and there is no other business which the petitioner-bank used to carry on before such acquisition, Mr. Mukherjee rightly submitted that by such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not possible in any event to demonstrate the future working of a company in a court of law. He referred to In re Mackinnon Mackenzie & Co. Pvt. Ltd.'s case [1967] 37 Comp. Cas. 516 (Cal.), again on this aspect of the matter. He further submitted that the idea that unless a company has vast resources, it cannot act as a financial institution is misleading and unreal and is not the proper approach to the problem. He submitted that apart from financing, the merchant-banking organisations render various types of advice to their constituents which are very paying propositions. He further submitted that, in any event, the charge that surplus funds will evaporate is absolutely baseless because, according to Mr. Mukherjee, the surplus funds would stand transferred to the transferee-company. The shareholders of the petitioner-bank will become shareholders of the new company and they will be the persons who will elect the directors to conduct the business of the new company to be formed after such scheme of amalgamation is sanctioned. Mr. Mukherjee submitted that the terms "the debentures will rank after the loans of the transferee-company" obviously means the existing loans as on the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Mr. Mukherjee. He further submitted that the interest of all the directors also has been disclosed and in any event it is not shown as to any of the shareholders who have been misled or prejudiced. Further, if the fact relating to the pandemonium created in the first meeting has been stated in the explanatory statement, that would have been a factor deterring the shareholders from attending the meeting. Mr. Mukherjee also contended that one who is aware of the business to be transacted at the meeting and is aware of the material facts cannot complain about the notice or the explanatory statement. For the said proposition he referred to the decision in Parashuram Detarm Shamdasani v. Tata Industrial Bank Ltd. AIR 1928 PC 180, head-note, b. Therefore, Mr. Mukherjee submitted that there is no substance in the said contention that the explanatory statement is tricky and misleading and not true. Mr. Mukherjee, therefore, submitted that the scheme should be sanctioned as all the requirements of the statute have been complied with and it has been sanctioned and approved by requisite majority of the shareholders of the petitioner and the court should grant the relief as asked for and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of the petitioner-company is dubious. He referred to Alabama's case [1891] 1 Ch D 213 (CA), In re Hindustan General Electric Corporation [1959] 29 Comp. Cas. 46 (Cal.), In the matter of Patiala Starch and Chemical Works Ltd. [1958] 28 Comp. Cas. 111 (Punj.) and In re Sidhpur Mills Co. Ltd. AIR 1962 Guj. 305. Relying on those decisions he submitted that applying the principles deduced from the said decisions to the facts of this case, the scheme cannot he approved by the court and should be rejected. Mr. Bachawat referred to paragraph 13 of Rajaram Sharma's affidavit-in-opposition and also paragraphs 24, 25 and 32 of the petition and affidavit-in-opposition of Rajaram, paragraphs 4, 7,14, 18, 19 and affidavit-in-reply, paragraph 56(1) and paragraph 134 in support of his contention. Mr. Bachawat thereafter submitted that the ratio of exchange is not fair and he referred to paragraph 14 of the petition and Rajaram Sharma's affidavit-in-opposition, paragraphs 23 to 25, para. 29(b), 34 and 47. He also referred once again to the passage at pages 239 and 247 of Lindley J., in Alabama's case [1891] 1 Ch D 213 (CA) on the question, to decide as to what is fair and reasonable. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for police help was not circulated and as such a proper notice was not served to the shareholders who were scared away by the rowdy and unruly elements in the infructuous meeting dated the 30th of March, 1972. Thereafter, Mr. Bachawat submitted that the scheme cannot be sanctioned as there was no valid and proper meeting of the shareholders sanctioning the scheme of amalgamation according to the provisions of the statute. Mr. Bachawat thereafter submitted that the original scheme framed in 1970 is unfair and resolution for modification of the said scheme clearly showed that the original scheme is unfair. Relying on those contentions, Mr. Bachawat submitted on behalf of Rajaram Sharma and others that the scheme cannot be sanctioned by the court. Thereafter, Mr. Bachawat submitted written notes on the arguments put forward by him at my request by which he contended, firstly, that the scheme is unfair and no intelligent and honest man can support the scheme. Analysing the said contentions he pointed out that the petitioner-bank received compensation in 5½% bonds of the value of Rs. 4,19,83,100 as would appear from the balance-sheet of the bank for the year ending 31st Decembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferee-company is extravagant. Unless the members can ascertain the precise nature of the business of the transferee-company it should not be called upon to invest their money in it. Mr. Bachawat also submitted that the proposed directors of the transferee-company has no business experience whatsoever. A number of respectable persons have been named as proposed directors of the transferee-company but materials have not been produced in spite of challenge in that behalf to show that they would have been ready and willing to act as directors of the transferee-company. He referred to paragraphs 32 and 47 of the petition and paragraph 134 of the affidavit-in-reply. Mr. Bachawat submitted that no reason whatsoever has been shown in the petition for the proposed scheme of amalgamation and the grounds put forward for amalgamation are all spurious and unreal. He referred to paragraphs 13, 15, 16 and 22 of the petition. He analysed the said reasons set out in paragraph 13 and its sub-paragraphs as merely imaginary and he referred to the affidavit-in-opposition of Rajaram Sharma in support, of his contention. He submitted that the other banks which have been nationalised have been amalgama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of the transferee-company is unreasonable, it cannot be predicatable at all if the transferee-company would earn any profit in future. On the materials placed before the court it is apparent that the transferee-company have no prospect to earn profit at all in future. Mr. Bachawat submitted that the debentures proposed to be issued are unsecured and no fixed rate of interest is being proposed to be paid. The company may not grant any interest at all. The scheme proposes that an interest not exceeding 9% per annum would be paid. He referred to the petition, paragraph 14(2)(i) and (g). According to the scheme the debenture-holders would take only after the creditors of the transferee-company which, as mentioned above, is more than Rs. 25 lakhs and the debenture is redeemable after 12 years. Therefore, the debenture-holders would not get anything if the transferee-company is wound up, of which there is every possibility in the meantime. Mr. Bachawat also submitted that the members of the petitioner-bank would be compelled to invest their money in a mushroom company which has not commenced any business and has no business prospect. As such no reasonable and intelligent investors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nium and disturbance at the meeting held on 30th of March, 1972, was widely reported in the press. He submitted that by the order dated the 3rd of May, 1972, the court directed the directors of the bank to obtain police protection at the said meeting. The said order was not communicated to the members or advertised in the press and in view of the violence and pandemonium in the meeting held on 30th of March, 1972, a very small percentage of the members attended the meeting held on 8th of May, 1972. A very large number of persons opposing the scheme stayed away. Only 6 lakhs and odd shares out of 35 lakhs issued shares voted, thus representing only about 16% to 18% of the total shareholding of the petitioner-bank. He referred to paragraphs 51 and 52 of the affidavit-in-opposition of Rajaram Sharma and others. He submitted that there is a complete lack of candour and suppression of material fact on the part of the petitioner-bank and the proposed scheme of amalgamation is not bona fide. Mr. Bachawat lastly submitted that the scheme of amalgamation is not bona fide as there has been a complete lack of candour and suppression of materials on behalf of the petitioner as the facts relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Detaram Shamdasani v. Tata Industrial Bank Ltd. AIR 1928 PC 180, Nagaisuree Tea Company Ltd. v. Ramachandra Karnani [1966] 2 Comp. LJ 208 (Cal.), In the matter of Carton Tea Co. Ltd. [1966] 2 Comp. LJ 278 (Cal.), Associated Hotels of India Ltd., In re [1968] 2 Comp. LJ 292 (Cal.), Hari Krishna Lohia v. Hoolungooree Tea Co. Ltd. [1970] 40 Comp. Cas. 458 (Cal.), Oceanic Steam Navigation Co. Ltd. [1938] 3 All ER 740; [1939] 9 Comp. Cas. 229 (Ch D). Relying on those decisions Mr. Bachawat submitted that the scheme of amalgamation in the present application cannot be sanctioned as the same is not authorised by the object clause of the petitioner-bank. Making those submissions Mr. Bachawat contended that the present application must be dismissed. Mr. S.B. Chakraborty, appearing for Mr. Niranjan Das Mohan and others, opposing the application for sanction of the scheme of amalgamation submitted, firstly, that the chairman of the meeting had no power of adjournment and he referred to regulation 53A of Table A to the Companies Act, 1956, and regulation 91 of the articles of association of the petitioner-bank and also drew my attention to Buckley on the Companies Acts, 13th edition, page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statute of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, except it was not dissolved. In the premises, Mr. Chakraborty submitted that on or after 19th July, 1969, the United Bank of India Ltd. had two alternatives (a), to liquidate or dissolve the company by payment to the shareholders of the sum of Rs. 4,20,00,000 which works out at Rs. 15.61 per share, or (b) to commence business agreed to by shareholders after alteration of the object in its memorandum of association and after changing its name suitably to the altered business with the consent of the shareholders. This would mean commencement of a business by a new company. The petitioner-bank in clause 3 of the statement issued under section 393 of the Companies Act, 1956, along with the notice dated the 31st of August, 1970, has admitted the said alternatives. Mr. Chakraborty submitted that the petitioner-bank has not done either of the two alternatives up to date. It has not engaged itself in any business since 19th of July, 1969; yet it has shown annual report with balance-sheet and profit and loss account declaring dividends for the years 1969-70 and 1970-71. Mr. Chakraborty submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company or auditors' report on the accounts of the petitioner-bank. Profit and loss account of 31st December, 1971, has been annexed and so far as the United Credit and Development Company Ltd. is concerned the balance-sheet as at 30th September, 1971, has been annexed. He pointed out that in the balance-sheet there is a remark of the auditor "in terms of our attached report of even date". The said report has not been annexed to the petition and no reference has been made. Mr. Sen submitted that in any event the said balance-sheet does not disclose the latest financial position of the company as there is no auditors' report at all on the accounts of the petitioner No. 2 company. Therefore, ex facie, the scheme cannot be sanctioned. Secondly, Mr. Sen submitted that section 393 of the Companies Act, 1956, enjoins that with every notice calling the meeting there shall be sent also a statement setting forth in particular any material interests of the directors, managing directors or managers of the company. He submitted that Mr. S.N. Sen is a director of the petitioner No. 2 and he is also a solicitor of the petitioner-bank; as such he is materially interested both professionally a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the delinquent management. Thereafter, Mr. Sen submitted that the scheme admittedly purports to bind the shareholders all over the country as well as the shareholders residing outside India. He submitted that Bangladesh shareholders have not been served either by advertisement or otherwise according to law. He referred to rules 76 and 78 of the Companies (Court) Rules, 1959. Mr. Sen submitted that the application for the scheme is based on the chairman's report which is conclusive on the point of service of notice. He contended that from the chairman's report nothing appears which shows any notice has been served on the Bangladesh shareholders or to the Custodian of Enemy Property or by advertisement. He submitted that notice to the Custodian of Enemy Property is illusory and would not afford protection to the numerous shareholders in Bangladesh. Thereafter Mr. Sen submitted that the ratio of exchange is extremely inequitable and unfair and there is no auditors' report or a report of the valuer recommending that the exchange ratio is fair. He submitted that the new company proposed to carry on business of merchant-cum-development bank. For the said business sanction of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking whereas in the instant case Mr. Nag rightly pointed out that the object, clauses (j), (k ), (i) of the memorandum of the United Bank of India clearly empowers the company to do so. Then he referred to Crown Bank, In re [1890] 44 Ch D 634 at. 664 (Ch D) and submitted that the same was a case for winding up of a company on the shareholders' application that the company carried on ultra vires business. The present case is not a case where winding-up petition being presented. Mr. Nag submitted that even then the court has jurisdiction. Merchant-cum-development business is authorised by sub-clauses (f) and (m) of the United Bank of India Ltd.'s memorandum of association. Referring to the decision in Carron Tea Co. [1966] 2 Comp. LJ 278 at 296-297 (Cal) Mr. Nag submitted that in that case the transferee-company had no power to amalgamate whereas in the present case it is not so. That is the transferee-company has power to amalgamate. He submitted that the observation of the learned judge at page 296 of the said report regarding Tata decision in AIR J928 PC 180 was per incuriam. Mr. Nag, thereafter, referred to Nagaisuree Tea Company's case in [1966] 2 Comp. LJ 208 at 218 (Cal) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mergers and Take-over Bids, at page 173, where it has been stated that a new company may be formed for amalgamation and take over of an old company. Mr. Nag thereafter dealt with the contention of the contesting shareholders that the notice and explanatory statement under section 393 of the Companies Act, 1956, are defective. He submitted that complaint as to invalidity of the notice cannot be taken at the hearing unless the objection is taken at the meeting. He referred to the decision in In re Rivers Steam Navigation Co. Ltd. [1967] 71 CWN 854, 889, 890 (Cal.). He also referred to rule 69 of the Companies (Court) Rules and Form 35 and also rule 73 and Form 36 and submitted that the notices are settled by the court under the provisions of the said rule. He, thereafter, referred to Palmer's Company Law, 21st edition, pages 705-706 and footnote 12 at page 706 and rightly submitted that the dual capacity of Mr. S.N. Sen, the solicitor of the petitioner-bank, is immaterial having no effect on the scheme. He submitted that section 391(1) provides that only "material interests" of directors are required to be disclosed. He referred to Buckley on the Companies Acts, 13th edition, page 33 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Comp. Cas. 144 ; 52 CWN 425 at 430 (Cal.), In re Indian Crescent Bank Ltd. [1949] 53 CWN 183 (Cal.), Bengal Bank Ltd. v. Suresh Chakravarthy [1951] 21 Comp. Cas. 315; 55 CWN 206 (Cal.) and submitted that those are all distinguishable on the facts and not applicable to the instant case. Regarding the contention of the opposing creditors that there was no fair representation of "class" of shareholders after excluding interested votes and as such no statutory majority, he rightly submitted, on analysing the votes cast, that there is no substance in such contention. The total votes cast is 6,75,836 from which deducting the interested votes being 2,90,397, the total comes to 4,75,439 from which the votes cast against the scheme being 13,381 being deducted, the balance votes in favour of the scheme is 4,02,058 which is more than 75% of the votes cast. He rightly submitted that persons supporting the scheme cannot and do not constitute a different class from those opposing the scheme. He referred to the meaning of "class" in Sarkar and Sen Companies Act, page 397, and United Provident Assurance Co. Ltd., In re [1910] 2 Ch 477, 480 (Ch D). He referred to the passage "shareholders who hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable and not hypothetical or problematical. The whole test is whether a scheme in a commercial sense is extremely advantageous to the majority approving the scheme. He thereafter referred to the decision in Carruth v. Imperial Chemical Industries Ltd. [1937] 2 All ER 422 to 423, 460; [1938] 8 Comp. Cas. 181 (HL), where it has been held that there could be waiver of irregularity at meeting. Relying on the said decision Mr. Nag rightly submitted that it is always open to the shareholders of the company to waive the irregularities at a meeting. If it is held that there was any irregularity in holding the said meeting that has been clearly and unequivocally waived. Regarding the contention that the scheme is unfair on merits, impracticable, conditional, hypothetical, illegal in violation of sections 149 and 372 of the Companies Act, 1956, Mr. Nag rightly submitted that it is for the businessmen to judge the said scheme and they are the best judges. He referred to Palmer's Company Law, 21st edition, page 705. He submitted that the merchant-cum-development banking is not radically different from the United Bank of India's, i.e., the petitioner-bank's, actual business at the date of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is unfair. Mr. Nag contended that the court will not judge commercial merits of a scheme. He referred to Palmer's Company Law, 21st edition, page 705. He contended that the initial onus on the petitioners is discharged by obtaining directions from court for holding the statutory meetings after placing all material facts and if the scheme is sanctioned at the meeting held under the directions of the court under section 391(1) of the Companies Act, 1956, and is sanctioned by statutory majority, the onus that the scheme is not fair shifts on to the dissentient shareholders and creditors. He referred to the decision in Sewa Singh v. Tata Chand AIR 1956 Punjab 30 at pages 34-35, where scheme of amalgamation was sanctioned after a fresh meeting with modification of exchange ratio in view of obvious defect in evaluation of shares. The decision in Mohanlal Saraf v. Cuttack Electric Supply Co. Ltd. AIR 1964 Orissa 191, head-note (a ), was referred to by Mr. Nag, where it has been held that the substratum of the company did not disappear merely because the entire undertaking was sold. Mr. Nag also rightly submitted that if there are alternative modes of achievement of the same object there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their organisation. 16.6 These institutions which should give their services to Indian Companies and to Indian joint ventures abroad would be required to perform the following functions. On the basis of examination of a project, the institutions should design and negotiate a financial package which would meet the specific type and terms of financing needed by the client. In appropriate cases, they may also agree to guarantee the loans obtained by a company. They should also offer various services involved in the syndication of projects like assisting in the reorganisation of companies, negotiation about mergers, making feasibility studies of a project and giving advice on the rules and regulations of stock exchanges. The proposed institutions will be particularly useful to medium-sized business which finds it very difficult to float an issue in the market. In such cases merchant banking institutions can help by placing issues privately with financial institutions at reasonable terms. 16.10 Once the need for setting up merchant-banking institutions is accepted the questions of their structure and administration arise. In the Commission's view, initially there could be four merch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the scheme and appeared through Mr. Sankardas Banerjee, Mr. M.A. Latif, Mr. Somnath Chatterjee with Mr. Dipankar Ghosh and Mr. S.K. Acharya with Mr. J.N. Haldar. Various other shareholders appeared through their respective counsel and opposed the application for sanction of the scheme and adopted the arguments of Mr. Bachawat, Mr. Prabir Sen and Mr. R.C. Deb. I have set out before the arguments in support of the petitioners and also arguments of the opposing group as and when through their respective counsels. Considering the matter very carefully and without going into the details of the mass of the decisions cited by both the groups before me, I am of the view that the court in this application is only to consider before sanctioning the scheme whether the three conditions are satisfied. Firstly, statutory requirements under section 391 of the Companies Act, 1956, have been complied with; secondly, there is a fair and free representative voting at the statutory meeting held under the directions of the court and, lastly, whether the scheme is such which an intelligent and honest man of business would reasonably approve. On the first question whether the statutory requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved as follows (See [1969] 2 All ER 274; [1969] 2 WLR1317): "The first duty of the chairman of a meeting is to keep order if he can. If there is disorder, his duty, I think, is to make earnest and sustained efforts to restore order, and for this purpose to summon to his aid any officers or others whose assistance is available. If all his efforts are in vain, he should endeavour to put into operation whatever provisions for adjournment there are in the rules, as by obtaining a resolution to adjourn. If this proves impossible, he should exercise his inherent power to adjourn the meeting for a short while, such as 15 minutes, taking due steps to ensure so far as possible that all present know of this adjournment. If instead of mere disorder there is violence, I think that he should take similar steps, save that the greater the violence the less prolonged should be his efforts to restore order before adjourning. In my judgment, he has not merely a power but a duty to adjourn in this way, in. the interests of those who fear for their safety. I am not suggesting that there is a power and a duty to adjourn if the violence consists of no more than a few technical assaults and batteries. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment dated the 7th of January, 1972, directing the adjourned meeting to be held. And pursuant to which the meetings have been finally held on the 8th of May, 1972, where the scheme of amalgamation has been passed by requisite majority with certain modifications and the chairmen have duly filed their reports. Therefore, I have no hesitation in holding that the chairman had implied power to adjourn the meetings and, in any event, the order dated the 7th of January, 1972, gave clear mandate to the chairman by the court in terms of section 391(1) of the Companies Act, 1956, to hold the statutory meeting which was finally held on the 5th of May, 1972, pursuant to the said order. There is no substance in the contention of Mr. S.B. Chakraborty that the chairman had no power to adjourn the meetings and held the same pursuant to the order of the court. Regarding the next contention of Mr. Chakraborty that from the appointed day under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the banking company, viz., United Bank of India Ltd., ceased to exist as its entire undertaking being the banking business was taken over by the Central Bank under the said Act, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es being the existing banks under the said Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. Therefore, in my view, there is no substance in the said contention of Mr. Chakraborty that the United Bank of India Ltd. ceased to exist as a company on and from the appointed day, i.e., 19th July, 1969. The other question seriously argued was whether the United Bank of India Ltd. had power to amalgamate under the object clauses of its memorandum of association as, if there was no such power, the scheme of amalgamation cannot be sanctioned without the amendment of the object clause incorporating a clause giving power to amalgamate with the petitioner-bank. Firstly, in my view, the combined effect of clauses (j), (k), (m) and (n ) of the memorandum of association of the United Bank of India Ltd. clearly gives a power to the company to amalgamate. It is true that in the said two clauses the word "amalgamate" has not been used and whether the company can be taken over, to take over other company is not specifically mentioned. But if the said four clauses are read as a whole, in substance it gives a power to the company to amalgamate with another company. I cannot accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for attaining the same object there is no bar in choosing any one of them, according to the views of the directors and shareholders of a particular company. The method of floating a. new company with the power to carry on a desired business and then amalgamating the existing company with the new company is a well-known procedure of the take-over or an amalgamation. The passage of Wiendur on Takeovers and Moon on Business Mergers and Take-over Bids referred to by Mr. Nag and Mr. S.C. Sen clearly set out the said method by which the object of amalgamation is attained. In my view, there is nothing wrong in the petitioner incorporating the petitioner No. 2 solely for the purpose of taking over the petitioner-bank. Therefore, I cannot accept the contention that the petitioner-bank should have followed the other method of changing its name and objects clause in the memorandum for the purpose of attaining the same objects as it is sought to be attained by the present scheme of amalgamation with the newly formed company being the petitioner No. 2. Then, on the question of sufficiency or adequacy of explanatory statement under section 393 of the Companies Act, 1956, I am of the view that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Mr. Nag and his analysis of the votes cast in the said meeting and hold that the scheme was sanctioned by reasonable and statutory majority. I need not discuss in detail the law on the subject as that is well settled, the whole question in fact in each case. Mr. Nag has referred to the relevant principles in his usual thoroughness and erudition. Further, in my view, most of the opposing shareholders are mere speculators who have purchased the shares of the petitioner-bank either from the market or from weak-holders at a lower price and are trying to get the scheme approved by the shareholders set aside so as to realise the higher compensation money, if possible. Regarding the question of the scheme being unfair on merits, hypothetical, conditional, etc., I do not find any substance in the same save and except such contentions as have been raised relying on various decisions which are entirely on different background and different facts having no relevancy whatsoever in the facts and circumstances of the case. All of the said decisions relate to taking over or amalgamation of a company with an existing company, whereas, here, a new company has been incorporated for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the present set up, when funds are urgently needed for the growth and development of existing and new enterprises. Further, the shareholders of the petitioner-bank never complained of the management of their company by its directors so far and suddenly they cannot have any reasonable and bona fide grievances against the said management and the scheme. It is true that names of eminent, well-known industrialists and respectable persons of integrity and honesty have been referred as prospective directors of the amalgamated company and they have not yet signified their consent of acceptance of such office but that in my view is not required at this stage, being premature. But the suggestion and intention as shown by the petitioners to appoint respectable, reliable and honest persons of high reputation as directors is enough for me at this stage to take into consideration the bona fide intention and object of the petitioner-companies. Regarding the exchange ratio being unfair I hold that there is no substance in it as, firstly, the shareholders have approved by overwhelming majority the said exchange ratio and I accept the contention of Mr. S.B. Mukherjee and Mr. Nag who analysed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Las not supplied any address in India. On that ground also the service of the notice on the Bangladesh shareholders should be deemed to be in due compliance with the Act as there is no dispute that the advertisement has been duly issued by the chairman of She said meeting. After careful consideration of the entire matter and after considering decisions and authorities cited both on behalf of the petitioners and their supporters and also on behalf of the opposing shareholders, 1 agree with the contentions of Mr. S.B. Mukherjee, Mr. R.C. Nag and also Mr. Samarendra Chandra Sen, who reinforced the arguments of Mr. S.B. Mukherjee which I have noted before. In my view, the present application must be judged in the light of prevailing circumstances in our country particularly in the State of West Bengal where the business of the amalgamated company is sought to be carried on after sanction is accorded to the said scheme of amalgamation, the subject-matter of this application. As I have already held the scheme of amalgamation has been approved by the requisite majority of the shareholders present and voted at the statutory meeting convened and held under the order of this court dated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in future and so on. This is not a case of two existing companies amalgamating and as such the principle applicable to such cases has no bearing in the instant case. And after careful consideration of the scheme. I cannot find anything wrong with the same; on the other hand, it may prove very beneficial to the shareholders having regard to the present business climate in our country and particularly in the State of West Bengal. As all the requirements have been duly complied with I accept the contention of Mr, Samareiidra Chandra Sen, Mr. S.B. Mukherjee and Mr. R.C. Nag in support of the sanction of the scheme of amalgamation approved by the requisite majority of the shareholders in the duly held statutory meetings pursuant to an order of this court, and I reject the contention raised by Mr. R.C. Deb, Mr. B.S. Bachawat and Mr. Prahir Sen on behalf of the opposing group of shareholders as they have no application to the facts of this case. Therefore, I am making the following order: There will be an order in terms of prayer (a) subject to further modification that all the dissenting shareholders of the petitioner No. 1 should be paid for their shares by the petitioner No. 2 at t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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