TMI Blog1995 (2) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to an order dated 19-9-1994 made by this Court at the petition of the said transferee and transferor companies, meetings were held under the different Chairmen appointed by this Court. The said meetings were held on 26-10-1994. At the meeting of the shareholders of Maknam 99.98 per cent of the shareholders attended the meeting and they all voted in favour of the scheme and no one voted against the scheme. At the meeting of equity shareholders of Namtok 99.90 per cent of the share-holders attended the meeting and they all voted in favour of the scheme. At the meetings of the preference shareholders of Maknam and Namtok, the preference shareholders who attended the meeting, voted in favour of the scheme. At the meeting of India Foils Limited, out of holders of 66,68,898 shares, holders only of 33,16,051 shares attended the meeting. Out of the shareholders attending and voting at the said meeting, holders of 33,10,950 shares, voted in favour of the scheme and holders of 723 shares, voted against the scheme. The percentage of the persons who voted against the scheme so far as IFL is concerned, works out to .02 per cent and of those who voted in favour of the scheme comes to 99.98 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 163 of the Act provides that the company shall keep the register of members open during business hours subject to such reasonable restriction as the company may impose to the inspection of any member, without fee. There is no allegation that any such inspection was sought to be taken. Under section 163(2)( b ) a member may require a copy of such register on payment of such sum as may be prescribed for every 100 words or fractional part thereof required to be copied. This provision, in my opinion, envisages that the member on payment of such sum obtain copies of the register of members. This envisages a prior payment to the company of the prescribed sum and it is only upon such payment that a copy is to be supplied as provided under section 163(4). A mere request to the Chairman by letter is, in my opinion, insufficient. I am not satisfied that the objector complied with the requirements of section 163(3)( b ). Furthermore, the petitioner did not even make any attempt to take any inspection of the register of members which he could do under the said section 163. It was up to the objector to take appropriate steps for obtaining of the list of members or for inspection thereof if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in consultation with Calcutta Stock Exchange with reference to equity shares. By another special resolution of the same date, the Board of Directors was authorised to issue and allot such number of equity shares as may be required to be issued and allotted whether to the members of the company or not or an aggregate amount not exceeding Rs. 150 crores. In short, it cannot be said that there has been any violation of the special resolutions passed at the annual general meeting held on 23-8-1994 since the date of issue of rights shares has been left to the discretion of the Board of Directors. 10. It was also submitted on behalf of the objector that the word 'private' has not been removed from the certificate of registration and/or respec- tive documents in spite of the fact that both the transferor companies have become public limited companies. The certificate of registration was produced before this Court and it appears that the name private has in fact been deleted from the certificate by the Registrar of Companies, West Bengal in respect of both the transferor companies pursuant to letter written in that respect. Unfortunately the copies supplied to the objector did not sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If three companies are amalgamated, certainly there will be some economies in the matter of maintaining accounts, filing of returns and various other matters. However, the Court is really not concerned with the exact details of the matter and if the shareholders approved the scheme by the requisite majority then the Court only looks into the scheme so as to find out that it is not manifestly unfair and/or is not intended to defraud or do injustice to the other shareholders. I do not find that there is any material before me to hold that the proposed scheme of amalgamation is manifestly unfair or is intended to defraud any shareholders or to do injustice to other shareholders. 14. It was also submitted that the exchange ratio of shares has not been fixed properly. The exchange ratio has been fixed by a reputed firm of Chartered Accountants, namely, Price Water House, and I do not think that it can be said that the same is unfair or unreasonable, simply because the objector says so. It was also submitted that the said Price Water House did not fix the valuation on proper basis as required under the guidelines issued by the Central Government. The guidelines relied on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hindustan Commercial Bank as to what attitude he took up at the meeting held on December 11, 1957. Mr. Pai's suggestion is that he voted against the scheme for reduction resolution which was passed at the meeting of February 14, 1957 when this resolution was placed before the meeting of December 11, 1957. It is, however, clear from the report of the Chairman that those resolutions which were passed on February 14, 1957 were not put to vote at all in the meeting of December 11, 1957. It was only the modified scheme which was put to vote but Mr. Pai expressed his intention to remain neutral in respect of this matter. He did not vote either in favour or against the modified scheme. In other words, he did not take part in the voting at all. All the other preference shareholders present voted in favour of the resolution." Section 391(2) of the Indian Companies Act is as follows : " 'If a majority in number representing three-fourths in value of the creditors, or class of creditors or members or class of members, as details may be, present and voting either in person, or, where proxies are allowed, by proxy, at the meeting agreed to any compromise or arrangement, the compromise or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many loopholes in it. That amounts to this: the scheme is open to criticism; but does that go far enough ? That is the difficulty in the present case. It has not been suggested on behalf of the applicant that there has been any bad faith or any intentional misleading of the applicant, but although the scheme is open to a good deal of criticism, which might be enlarged on at great length in one or more circulars, what exactly the effect on the mind of the shareholders would have been I do not pause to inquire. That the scheme is open to criticism I have no doubt but can it be said therefore to be unfair? I think it rather difficult to predicate unfairness in any case in which there has been perfect good faith on the side of the person who is alleged to have been unfair. I think that the applicant is faced with the very difficult task of discharging an onus which is undoubtedly the heavy one of showing that he, being the only man in the regiment out of step, is the only man whose views ought to prevail. That is the difficulty he is faced with in the present case. I agree that certain criticisms set out in the applicant's affidavit show that a good case could be made out for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been used in the reported cases has been established. It must be affirmatively established that, notwithstanding the view of the majority, the scheme is unfair, and that is a different thing from saying that it must be established that the scheme is not a very fair or not a fair one : a scheme has to be shown affirmatively, patently, obviously and convincingly to be unfair." [Emphasis supplied] The learned counsel on behalf of the respondent-objector relied on the judgment in In re, Alembic Chemical Works Co. Ltd. [1988] 64 Comp. Cas. 186 (Guj.). The objections taken in the said case may be summarised as follows : "( a ) that the explanatory statement sent along with the notice of the meeting did not give enough details to enable the shareholders to properly comprehend the ramifications of the scheme; ( b ) that the shareholders of Neomer were to get dividend for a period for which they were not members of Alembic and during which Neomer had not made profits inasmuch as the scheme had to be deemed to have effect from an earlier date from 1983; ( c ) that the value of the shares of Neomer arrived at by the Chartered Accountants for the purpose of amalgamation had no nexu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be subjected to the disadvantages, if any, of being members of the transferee company from the said effective date. The provisions of section 205 of the Companies Act, 1956, therefore could not be said to have been violated, by making a provision for payment of dividend from the effective date. ( iv ) That the prospect of reviving the unit and making it financially viable could not be totally disregarded. Moreover, the court also could not be oblivious to the fact that an industry started in a backward area and generating employment in such a backward area did not require to be obliterated if it could be resuscitated with assistance from a Magna Corporation like the transferee-company. It would be trite to say that when two alternative courses were presented to the Court, and while following one, an established industry would be wiped out and by following the other it could be revived, the court would lean in favour of the second alternative. ( v ) That as a result of the amalgamation, a sizable amount of almost three crores of rupees by way of tax benefit would also result to Alembic. While sanctioning a scheme of amalgamation, a duty is cast upon the court to find out wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess it was found to be unfair. In the instant case also it was sought to be suggested that the explanatory statement did not disclose full facts. The said explanatory statement was settled by an officer of this Court and I do not think that the same can be challenged by simply saying that the same did not disclose full facts. So far as the requirements of the statute are concerned the same have been complied with. As in the case before the Supreme Court here also overwhelming members of the company have supported the claim and have not complained about the lack of notice and/or the insufficiency of notice or lack of understanding of the same and it will not be right to hold that the explanatory statement was not proper or was lacking in any material particulars. In the said case it was the Supreme Court, inter alia, held as follows : "Section 394 casts an obligation on the court to be satisfied that the scheme of amalgamation or merger was not contrary to public interest. The basic principle of such satisfaction is none other than the broad and general principles inherent in any compromise or settlement entered between parties that it should not be unfair or contrary to pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olakia that a foreign company was being given a large interest in the assets of Tomco at a gross undervalue. We are unable to uphold this argument. The shareholder has no interest in the assets of the company while the company is in existence. It is only at the stage of liquidation of the company that the shareholders become interested in the assets of the company. The shares of any member in a company is movable property and transferable in the manner provided by the articles of the company. This is provided by section 82 of the Companies Act. The definition of 'goods' in the Sale of Goods Act, 1930, specifically includes stocks and shares. A share represents a bundle of rights which includes, inter alia, the rights ( i ) to elect directors; ( ii ) to vote on resolutions at meeting of the company; ( iii ) to enjoy the profits of the company, if and when dividend is declared and distributed; and ( iv ) to share in the surplus, if any, on liquidation. In the case of Bacha F. Guzdar v. CIT AIR 1955 SC 74, the position of a shareholder was explained. A similar question came up for consideration before a Division Bench of Gujarat High Court in the case of Jitendra R. Sukhadi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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