TMI Blog1995 (7) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of shares of the petitioner No. 2 which are to be allotted to the shareholders of the petitioner No. 1 as specified in the said scheme. 2. The meeting of the shareholders of the two petitioner companies was directed to be held under the Chairman appointed by this court and it appears that the said meeting was attended by 52.7 per cent of the equity shareholders of Rossell Industries Ltd., i.e., the petitioner No. 1. The total paid up capital of Rossell Industries Ltd. is Rs. 10,11,90,550 out of which shareholders holding shares of the nominal value of Rs. 5,33,19,010 attended the meeting. Out of the said shareholders attending the meeting the shareholders holding shares of the nominal value of Rs. 5,30,70,110 voted in favour of the scheme and shareholders holding shares of the nominal value of Rs. 1,02,550 voted against the scheme. The scheme was, thus, approved by about 99.18 per cent of the shareholders attending and taking part in the meeting. 3. The Scheme of Arrangement was also approved by all the shareholders of Rossell Tea Ltd., the petitioner No. 2. This is to be noted that the only paid up capital of the petitioner No. 2 is Rs. 8,000 and all of them voted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound up as well as to a company which is not being wound up. It cannot, however, apply to a company which is in a sound financial condition. In this connection, a reference may be made to clause ( a ) of section 390 of the Act, which says that the expression 'company' in section 391 "means the company liable to be wound up under this Act". A provision corres-ponding to clause ( a ) of section 390 was found in section 153(6) of the Indian Companies Act, 1913. 6. Mr. S.B. Mukherjee, the learned counsel appearing on behalf of the petitioners, have relied on a large number of cases including subsequent cases of the Bombay High Court where the decision in Seksaria Cotton Mills Ltd. 's case ( supra ) was not followed or was rather dissented on the ground that the observations made by the learned Judge were unneces- sary and/or in the nature of obiter. The petitioners have relied on the case in Sm. Bhagwantiv. New Bank of India Ltd. [1950] 20 Comp. Cas. 68. This is a Full Bench judgment of the East Punjab High Court. In the said judgment it has been held as follows : "Now, in the English Companies Act, 1862, there was no sufficient provision corresponding to section 153 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him to go further and state that section 391 cannot apply to a company which is in a sound financial condition. His observation to that effect is, in my opinion, therefore, nothing more than an obiter dictum and is not binding upon me. Moreover, I do not agree with the same. To accept that contention would mean, as Mr. Advani has rightly submitted, that two prosperous companies could never amalgamate for their mutual benefit, which is contrary to well-established law and practice. In my opinion, the definition in clause ( a ) of section 390 merely states that a company which seeks to resort to the provisions of the said chapter must be one which is liable' to be wound up under the Act, and not that it should be one which is in such a financial condition as to be 'capable' of being wound up under the Act. Mr. Sorabjee's contention based on the definition in section 390( a ) that the provisions of section 391 cannot apply to a transferee company, since it would be in a sound financial condition must, therefore, also stand rejected." (p. 221) In the above noted case, the case of Seksaria Cotton Mills Ltd. ( supra ) was considered, and the relevant observations relied on by Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take advantage of the accumulated losses ? The definition of the expression 'amalgamation' in section 2(1A) of the Income- tax Act leads one to the same conclusion. The expression 'company' must, therefore, be held to mean a company whether financially sound or otherwise, which, if conditions for winding-up were satisfied, could be wound up under the Act." (p. 941) 9. Mr. Mookerjee also relied on the decision in Khandehval Udyog Ltd. Acme Mfg. Ltd., In re [1977] 47 Comp. Cas. 503 wherein Justice Mridul of Bombay High Court considering the judgment in Seksaria Cotton Mills Ltd. s case ( supra ) inter aliaheld that the expression "any company liable to be wound up under this Act", in section 390( a ) did not mean companies which are in financial difficulties and are, therefore, liable to be wound up under the Act. The expression "any company liable to be wound up under this Act" meant all companies to which the provisions relating to winding up apply. That expression took in its sweep all companies registered under the provisions of the Act as also all companies which came within the purview of the provisions of the Act and could be wound up by a Court under the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application under sections 391 to 394. In my opinion as on the date of making of the application for merger or amalgamation the company may be quite prosperous and a profit making company. All that is meant to be included by the words 'liable to be wound up' is that it must be a company which is subject to the laws of winding up as provided in the Act, i.e., it must be liable to be wound up as and when the circumstances so arise. 13. The next submission of Mr. A.P. Chatterjee appearing on behalf of the objectors, was that the role of the Court is not only inquisitorial but also pragmatic which requires forming of an independent and informal judgment as regards the feasibility of proper working of the scheme and making suitable modification in the scheme and issuing appropriate direction with that end in view. His submission is that the Scheme should be in accordance with the principles of public and commercial morality and that the same should be reasonable which can be supported by sensible people and should be for the benefit of the class which they represent. He submitted that a scheme must be fair and reasonable and must be made in good faith and it could be supported by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Full particu- lars of the alleged improper conduct have not been given. Once a scheme has been passed by the statutory majority and the requirements of the statute have been carried out, the onus to show unfairness or unreason-ableness is very heavy on the objectors. 16. In the case of Hindusthan General Electric Corpn. Ltd., In re AIR 1959 Cal. 679 Justice H.K. Bose, as his Lordship then was, held that the onus of proving unreasonableness or of unfairness about the scheme or of want of good faith is on those who object to the sanction of the scheme. This onus is not discharged by vague and general assertions devoid of any particular. 17. In the case of [1961] (1) Chancery Division 289 it was held as follows : "A scheme must be obviously unfair, patently unfair, unfair to the meanest intelligence. It cannot be said that no scheme can be effective to bind a dissenting shareholder unless it complies to the extent of 100 per cent, with the highest possible standards of fairness, equity and reason. After all, a man may have an offer made to him and, although he would prefer something better, would be quite prepared to accept it because it was good enough in all the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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