TMI Blog1996 (3) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... a representing group of shareholders of the transfer- ee company. After the matter was heard for two days the learned counsel on behalf of the said Narayan Prasad Lohia submitted that he has instruction not to oppose the application. His further submission is recorded in the minutes of the order dated 27-2-1996 which is set out hereinbelow: " The Court: Mr. S.K. Gupta learned advocate on behalf of Mr. Narayan Prasad Lohia and his group submits that talks of settlement is going on between the family members and he expects that amicable settlement will be achieved and good relationship may be established between the members of the family and as such he does not oppose this application. Mr. Anindya Mitra, leaned advocate submits that the company is not aware nor concerned with such settlement between the members of Narayan Prasad Lohia family and the same is not relevant for deciding this matter. He further submits that the company does not admit that any talks of settlement is going on. This matter stands adjourned till 4th March, 1996 when it will appear at the top of this list." 3. The learned advocate for the Central Government who appeared originally submitted that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transferor companies are having the creditors and they should be informed that the order of amalgamation should be binding upon them. In the present case the creditors were never consulted us no meeting of creditors was held. The further contention of Mr. Kundu is that the share-ratio of 10:1 between the transferor companies and the transferee company requires scrutiny. The Equity share of Rs. 10 each of the Transferee Company has been valued at Rs. 79.09 per Equity Share by Bhuteria Co., Chartered Accountants and the said Chartered Accoun- tant has valued the Equity Share of Rs. 10 each of the transferor compa- nies below Rs. 10, that is, Rs. 9.88, Rs. 7.86, Rs. 9.89, Rs. 9.96, Rs. 9.98 and Rs. 9.95 respectively and their earning per share is also different. Mr. Kundu has further submitted that there is no rationale behind the fixation of share-ratio at 10:1. Every case is to be decided on its own merits as the facts would be different in different cases. It has accordingly been submitted by Mr. Kundu that the fixation of share-ratio is unjust and unfair. 8. While considering an application for sanction under section 391(2) it has to be considered if the statutory requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at was lost sight of (was) that the jurisdiction of the Court in sanctioning a claim of merger is not to ascertain with mathematical accuracy if the determination satisfied the arithmetical test. A company Court does not exercise an appellate jurisdiction. It exercises a jurisdiction founded on fairness. It is not required to interfere only because the figure arrived at by the valuer was not as better as it would have been if another method would have been adopted. What is imperative is that such determination should not have been contrary to law and that it was not unfair for the shareholders of the company which was being merged. The Court's obligation is to be satisfied that valuation was in accordance with law and it was carried out by an independent body. The High Court appears to be correct in its approach that this test was satisfied as even though the chartered accountant who performed this function was a director of TOMCO, but he did so as a member of renowned firm of chartered accountants. His determination was further got checked and approved by two other independent bodies at the instance of shareholders of TOMCO by the High Court and it has been found that the determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho oppose the sanction of the scheme to show that the scheme is unfair, unreasonable or fraudulent. In this connection the following decisions relied upon by the learned advo-cates for the petitioners may be taken note of: Hindustan General Electric Corpn. Ltd, In re AIR 1959 Cal. 679 and Sussex Brick Co. Ltd., In re 1961 (1) Chancery 289. The duty of Court in an application for consideration of an application under section 391(2) was considered by this Court in the case of Hindustan General Electric Corpn. Ltd., In re ( supra ) . In the aforesaid decision it was held that the function and duties of the court in the matter of the sanctioning of schemes are well known. Any scheme which is fair and reasonable and made in good faith will be sanctioned if it could reasonably be supposed by sensible people to be for the benefit of each class of the members of the creditors concerned. It is also the duty of the Court to see that the resolutions were passed by the statutory majority. The majority of the three-fourth value must be of persons who were present and who took part in the voting. Mere presence would not be enough. The onus of proving unreasonableness or unfairness about t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised notwithstanding the fact that the memorandum of association of a particular company may not contain express power to amalgamate with another company. Accordingly, the contention of the learned advocate of the Central Government on this point fails. The other contention of the learned advocate Mr. Kundu for the Central Government with reference to the Directors' Reports on the Balance Sheet and profit loss account of the transferor companies for the year ended 31-3-1994 that these companies are not profit making companies and they have not recom-mended any dividend to the shareholders. In the premises, inasmuch as these companies are not faring well the proposed scheme of amalgam- ation should not be sanctioned. 16. It has been submitted that this contention is devoid of any merit and is contrary to facts. Full details of the financial position of each of the petitioner companies has been set out in the petition. The transferee company is admittedly a very solvent and profit-making company. The summary of the financial position of EITA, the transferee company, shows that a sum of Rs. 23,59,72,637 is in excess of its liabilities. 17. So far as the transferor compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustan Lever Employees Union's case ( supra ) . It is also well-settled when the majority of the shareholders accepted the valuation and there is no reason why their business decision should be interfered with and the Court would proceed on the basis of that the ratio of exchange as fair ratio of exchange. Section 394(1)( v ) of the Act provides that the provision may be made for any person who within such time and in such manner as the Court directs dissented from the compromise or arrangement. 23. A minority group cannot hold the majority to ransom. In the instant case, however, the scheme was approved at the meeting of the members. There is no dissent, the Central Government, therefore, cannot raise such objection at this stage. 24. The judgment and decision in the case of Bengal Tea Industries Ltd. v. Union of India 93 CWN 542 relied upon on behalf of the petitioners may also be taken note of In the aforesaid decision it was held by the Division Bench to which I was a party that in the absence of any challenge from the shareholders of the transferor company who are primarily and exclu- sively interested the question of ratio of exchange of shares, the Court is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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