TMI Blog1973 (6) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... situate at No. 24, Park Street, Calcutta. The authorised capital of the petitioner-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire undertaking of the petitioner-bank including all assets, rights, powers, authorities 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 nationalisati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lities of the petitioner-bank will be transferred to and/or vested in and/or acquired by the petitioner company. The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferee-company on payment of the principal moneys and interest thereon then outstanding on the 1st day of the 30th year from the date of issue of the said debentures. (4)For the purpose of 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 yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that no investigation proceedings are pending against the petitioners under the provisions of sections 235 to 251 of the Companies Act, 1956, or any other provisions thereof. It is further alleged that 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, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the opposing shareholders of the petitioner-bank (sic) ground of challenge of the said scheme of amalgamation mainly are : (1)no notice of the said meeting has been served on the Pakistani shareholders; (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 af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion takes place by the shareholders of the petitioner-bank who will become the shareholders of the petitioner-company if the scheme of amalgamation is sanctioned. There is no question of producing the letters of consent of the 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 whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany, in purchasing shares of the petitioner-bank of the face value of Rs. 25 lakhs has violated the provisions of section 372 of the Companies Act, 1956, Mr. Mukherjee submitted that the said provision of section 372 does not apply in the instant 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 Bankin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which will carry interest. The debenture of Rs. 5 will ensure interest being paid every year and if the amalgamated company does good business, then there is no reason why dividend should not also be paid on the shares. He rightly submitted that it is 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 conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scheme has been stated. The principles applicable to an explanatory statement under section 173 of the Companies Act, 1956, are not the same as that applicable to an explanatory statement under section 393 of the Companies Act, 1956, is the submission 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, submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not carry on any business and it is a new mushroom company and as such no intelligent and honest shareholders would approve the said scheme of amalgamation of the said petitioner-company. He submitted that the scheme is highly speculative and the prospects of 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 Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, 21st edition, page 24. Thereafter, Mr. Bachawat submitted that the meeting of the shareholders is not properly held for reasons: ( a ) pandemonium on 30th March, 1972, as referred to in the report of the chairman, para. (1)( a )( i ) and affidavit-in-opposition of Rajaram Sharma and others, para. 51; ( b ) order 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, fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said statutory organisations. Mr. Bachawat referred to paragraphs 24 and 25 of the affidavit of Rajaram Sharma and others. Mr. Bachawat submitted that the object of the transferee-company is of multifarious and varied nature and it can carry on all kinds of conceivable business. The object clause of the transferee-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 paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the petitioner-bank are proposed to be paid back an insignificant part of their own money in the garb of dividend proposed to be declared by the transferee-company. The proposal to pay dividend is merely an eye-wash to have the scheme sanctioned by the court. Mr. Bachawat submitted that as the business possibility 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, 1972, which forms part of the report of the chairman for the meeting held on 8th of May, 1972. He submitted that from the said report it clearly demonstrates that there is also intrinsic evidence in the report of the chairman to show that pandemonium was caused by the persons interested in the petitioner. The said pandemonium 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner-bank would continue to be a going concern and would cease to exist by virtue of any amalgamation. That sub-clause, therefore, does not authorise the petitioner-bank to effect the proposed amalgamation. The proposed amalgamation involves dissolution of the petitioner-bank. Thereafter, Mr. Bachawat referred to the decisions in Parashwam 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, oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70. The "undertaking" of the bank has been denned in section 36AE and sub-clause (3) of the Banking Regulation Act, 1949. Therefore, Mr. Chakraborty submitted that the United Bank of India Ltd. was completely denuded and was paid the compensation money for being so denuded. He submitted, therefore, that the United Bank of India Ltd. has been completely wound up statutorily by the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial facts relating to the company such as the latest financial position of the company and the latest auditors' report on the accounts of the company. If there is a failure of compliance of the said requirements of the statute the court has no jurisdiction to sanction the scheme. He submitted that there is no allegation in the petition even disclosing the latest financial position of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt should not exercise its discretion in passing the scheme inasmuch as the purported majority at the meeting was not truly representative of class for which they voted. Thereafter, he analysed the votes cast in the said meeting and submitted that the majority was acting not for the benefit or the interest of the class they were representing but for the personal interest and aggrandisement 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 affor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferee-company, that is, the Central Bank, was concerned, it had power to amalgamate in its memorandum. Mr. Nag, thereafter, cited the decision in In re Oceanic Steam Navigativn Co. Ltd. [1938] 3 All ER 740 at 743; [1939] 9 Comp. Cas. 229 (Ch D), where the ratio of the said decision was not the absence of power to amalgamate but absence of power in the company's memorandum to sell and dispose of its whole undertaking 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 (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1969 Cal 312 at page 314, para. 7; [1970] 40 Comp. Cas. 458, 461 (Cal.). Mr. Nag, thereafter, referred to Wienburg on Takeover and Amalgamation, at pages 1 and 2, where it has been stated that incorporation of a new company to effect amalgamation is permissible. He also referred to Chapter 7, page 7, article 701 of the said book where a new company was initially formed even as a private company with very small capital has been referred. Mr. Nag thereafter cited Moon's Business 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 set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment under section 393 failed. Regarding the contention that no notice was served on Bangladesh shareholders, Mr. Nag rightly submitted that notice on Custodian of Enemy Property was sufficient under the Enemy Property Act, section 2( c ), section 7(3), section 8(1) and section 2( i ). Thereafter, he dealt with the decision cited by the contesting shareholders on the question of non-service of notice on the Pakistani shareholders, now Bangladesh shareholders, being In the matter of Calcutta Industrial Bank Ltd. [1948] 18 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Lopez LJ., Mr. Nag submitted that proper statutory majority can bind the minority. Reasonableness of a scheme is to be judged in the light of the alternative. Referring to London Chartered Bank of Australia, In re [1893] 3 Ch 540 at 545 (Ch D), Mr. Nag submitted that a scheme should be sanctioned unless there is something ex facie wrong about it or material over-sight or miscarriage of justice. Thereafter, referring to the decision in Alabama, New Orleans and Texas Railway Co., In re [1891] 1 Ch 213 (CA), Mr. Nag submitted that objection to scheme must be reasonable 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 sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retion in a technical sense but is a matter to be decided on evidence Test being whether it is for the interest of future commercial interest of the company, court cannot substitute its own views for the directors and experts. Unanimous opinion of directors is a relevant factor. He rightly submitted that predominant combined holdings of shares by directors are irrelevant consideration for the court. He also referred to Hindustan General Electric Corporation, In re [1959] 29 Comp. Cas. 46; AIR 1959 Cal 679 on the same proposition that onus is on persons opposing the scheme to show that the scheme 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s". He read out articles 16.3 at page 395 of the said report, 16.6 at page 397 and 16.10 at page 398 which are as follows: "16.3 Merchant banking type of institutions in foreign countries are financial intermediaries which offer varied services like the promotion and syndication of industrial projects, investment management and advisory services. In the U.K. they also undertake acceptance business to enable the bills of their clients to be discounted at low rates of interest. The questions which required examination are whether such institutions are required in India and if so, what should be their functions and the best form of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anction of the scheme are mere speculators who have acquired the shares from the market at a low price and trying to get a higher amount by way of compensation and thereby earn a huge profit, if possible. He rightly submitted that the objections are not bona fide and neither tenable in law or in fact. The scheme should be sanctioned as it is in conformity with the statute and the policy of our country in the present set up. Mr. D. P. Gupta with Mrs. Ruma Pal appearing for the State of West Bengal has also supported the said application for sanction of the scheme. Various other shareholders also supported the said application for sanction 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 ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violent interruption make it unsafe, or seriously difficult for the voters to tender their votes; nor of adjourning the place of polling, if the ordinary place used for that purpose be insufficient, or greatly inconvenient. In most of such cases, the question will turn upon the intention and effect of the adjournment, if the intention and effect were to interrupt and procrastinate the business, such an adjournment would be illegal; if, on the contrary, the intention and effect were to forward or facilitate it, and no injurious effect were produced, such an adjournment would, it is conceived, be generally supported". And then again in page 293 it is observed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse left open to the chairman and he was right in doing so and as that was a statutory meeting to be held under an order of the court, a fresh order was required or at least thought to be proper for holding the adjourned meetings. In fact in such an application being made by the petitioners, which was opposed by Mr. S. B. Chakraborty, I have made an order on the 7th of January, 1972, overruling the identical contention of Mr. Chakraborty. Regarding the power of adjournment by the chairman and court's jurisdiction to direct fresh meetings or the adjourned meetings to be held, I am not setting out the reasonings again which I have given for the said order in my 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on money. That seems to me the only effect of the said Act taking over the banking companies mentioned in column 1 of the First Schedule of the said Act. Further, the decision in the case of Central Bank of India Ltd. and United Bank of India Ltd. regarding amalgamation with existing companies of the Bombay High Court which has been referred to at the bar by both the parties clearly indicates that there is no question of the United Bank of India Ltd. ceasing to exist as a company under the Companies Act, 1956. On the other hand, from the said decisions it is quite clear that those existing banks continued to be governed by the Companies Act, 1956, as existing companies 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 schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut, in my view, assuming it is so, even then it has a binding force, if not, certainly a guiding principle for other courts to follow. Therefore, I hold that both the petitioner-companies have power to amalgamate and if the statutory requirements are fulfilled; the court will have no difficulty in sanctioning the scheme of amalgamation in this application. On the question whether the procedure followed in this case is unwarranted as the object could have been achieved by the United Bank of India Ltd. changing its name and altering its memorandum and articles and commencing new business, I also find no substance in the said contention that where there are several legitimate alternatives, means and procedure 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), section 7(3), section 8(1) are sufficient notice and in due compliance with the provisions of the Act. In my view, the decisions cited by the opposing group of shareholders have no application to the facts of this case. Further, even assuming that the Bangladesh shareholders have not been served with the notice, it constitutes only a negligible portion of the shareholders. On the next question regarding the conduct of the meeting resulting in no fair representation of class and as such no statutory majority, in my view, the analysis of the members present and actually voted even excluding the interested voters gives a clear majority and the statutory requirements are duly complied with. I accept the contention 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 petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asible having potentiality in the facts and circumstances of this case. In my view, prima facie, I am satisfied that in the present set up and conditions, particularly as it appears from the Report of the Banking Commission, the relevant articles of which I have quoted before, that there is nothing wrong or objectionable in the scheme of amalgamation being put through. In fact, the State of West 'Bengal appearing before me through Mr. D.P. Gupta is supporting the said scheme so also the Life Insurance Corporation of India and other statutory bodies. I have no hesitation in holding that the business of the amalgamated company is highly potential and conducive to the economy and development of the State of West Bengal 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the exception under section 372(13) and (14) of the Companies Act, 1956, Regarding the service of the notice on shareholders Mr. Mukherjee rightly contended with reference to section 53 of the Companies Act, 1956, wherein the modes of service of documents on the members of the company are provided. In cases where a member has no registered address in India such notice may be served, if any address within India was supplied by him. Sub-section (3) of section 53 also provides that a document advertised in the newspaper in the neighborhood of the registered office shall be deemed to be duly served on the date on which the advertisement appeared on every shareholder of the company who has no registered address in India and 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 opposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pposing group of shareholders are not applicable to the facts of the present case which seems to me a case, in substance, of reconstruction of a company following the procedure of scheme of amalgamation by incorporating a new company specifically for the said purpose. This is a well-recognised method of reorganisation and reconstruction of a company and I do not find there is anything wrong in the said scheme of shareholders approving the said scheme and the directors are actuated by any sinister motive as sought to be imputed by the opposing group of shareholders. On the other hand, some of the objecting group of shareholders are mere speculators and based their objections on mere speculation and conjecture as to what would happen 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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