TMI Blog1998 (3) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... classes of shareholders and creditors of transferor Company. 2. The transferor Company, as referred to in the prayer, is ITC Classic Finance Ltd. 3. It is alleged in the petition that the board of directors of the petitioner-company approved the scheme on 1-12-1997. Company Application No. 620 of 1997 was filed on 4-12-1997 to convene for equity shareholders, convertible debentureholders, etc. and on 5-12-1997, necessary directions were given by this Court to convene the meeting. Accordingly, the meeting of the shareholders, debentureholders, etc. was held on 12-1 -1998 and the result of the meeting, as borne out by the petitioner, can be summarised as follows: " ( a ) Meeting of the Equity Shareholders 896. Equity Shareholders holding 28,90,05,433. Equity Shares attended and voted. 762. Shareholders holding 28,88,95,632. Equity Shares voted in favour of the Scheme. 45. Equity Shareholders holding 69,026. Equity Shares voted against the Scheme. The votes of 89 'Equity Shareholders holding 40,775. Equity Shares were invalid. ( b ) Meeting of the Convertible Debentureholders 39. Convertible Debentureholders holding Rs. 9,63,834 in value of Converti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Institution is also creditor of the transferor Company and is interested in securing their dues. 5. The third intervention is on behalf of Bombay Electric Supply and Transport Undertaking (BEST). The intervention is filed as a result of notice received from the petitioner-Company to the said Undertaking intimating them about the pendency of the present petition and intention of the present petitioner to proceed with the scheme of amalgamation. It was also intimated to the BEST Undertaking by the letter dated 27-1-1998 written by the present petitioner that if the said Undertaking is interested in opposing the petition then they should send to the Advocates of the petitioner a notice in that behalf. It appears that as a result of this intimation, the present intervention is filed. 6. At the time of hearing, Miss Ghone appearing for the said intervenor-BEST, has also made it clear as is done on behalf of the other creditors of the transferor Company that the BEST Undertaking is not really con- cerned with the merits and demerits of the scheme of amalgamation, but it is only in interested in ( sic ) safeguarding their dues. Mr. Tulzapurkar, the learned counsel for the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eror Company who are entitled to know as to against whom they should proceed and who should be made responsible for payment of their dues since they cannot be left in the lurch and should not be made to run after the company which would not be after amalgamation, financially sound to bear and satisfy their claims. Therefore, to the extent to secure and safeguard the dues payable to them by transferor Company, they have right to be heard even in this proceeding though they are neither the shareholders nor the creditors of the transferee Company. The learned counsel has also vehemently sub-mitted that the scheme being one as approved by the directors of the transferee Company as also the transferor Company, it is essential that the transferee Company be made to accept their outstandings and dues and should be made to abide to a condition of taking over their liabilities and, therefore, to safeguard that the creditors of transferor Company should be heard in the proceeding. 11. The Counsels for the intervenors, however, have not indicated that the present petitioner would be financially unable to satisfy their claims but insist on a clause to safeguard their dues and further state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferor Company and the transferee Company. The provisions of the Act do not make it obligatory that the scheme though one and the same should be considered by anyone Court having jurisdiction. The proceed-ings have to be governed by section 10 in so far as the jurisdictional aspect is concerned. The resultant final order would obviously be dependent on both transferor and transferee Company obtaining necessary sanction from the Court of competent jurisdiction. 14. It is necessary first to appreciate the scope of inquiry by this Court exercising jurisdiction under sections 391 and 393. The Apex Court while dealing with this issue, has crystallised with precision the scope of the inquiry under these sections. Mr. Tulzapurkar has rightly placed reliance on the said ruling in the matter of Miheer H. Mafatlal v. Mafatlal Industries Ltd. AIR 1997 SC 506. On considering the said judgment and the ratio as laid down therein, it is obvious when the Company Court is called upon to sanction the scheme, though, the Court is not to go by, ipsi dixit of the majority of shareholders or the creditors, the Court has to consider pros and cons of the scheme to find out whether it is fair, just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before 1st December 1997." 16. Clause 6 of the scheme also provides for continuance and initiation of suits and actions for the dues of transferor Company against the transfer- ee Company. The financial stability of the petitioner Company is not doubted and hence, the material as is placed before the Court, there is nothing to warrant any additional directions and/or order while sanction- ing the present scheme. 17. However, in the light of the prayer in the petition to the effect 'that the Arrangement as embodied to the Scheme of Amalgamation being Exhibit 'E' to the Petition be sanctioned by Hon'ble Court so as to be binding on all parties concerned including the Equity Shareholders, Convertible Debentureholders, 9.3 per cent Redeemable Preference Shareholders and 9.5 per cent Redeemable Preference Shareholders and Creditors of the petitioner Company and all classes of Shareholders and Creditors of the Transferor Company'. Whether it is necessary to hear the intervenors on the question of sanctioning the scheme will have to be considered in the light of submissions of the counsels. 18. Section 391 speaks of a compromise or arrangement between Compa- ny and its credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner, both for its expansion as well as for its liquid finances, would undoubtedly be a scheme which is such as a man of business applying its commercial judgment, from his own narrow personal angle, would approve. This Court is not concerned with examining the scheme from the point of view of the members of the transferor company. That aspect must have been examined by the Bombay High Court, while sanctioning the scheme, at the request of the transferor company. I would, therefore, conclude by saying that, from the point of view of the transferee company, the scheme is such a man of business would readily approve." (p. 499) 20. This question also came up for consideration in the context of an application made by transferee Company before the Delhi High Court in the matter of Telesound India Ltd. In re [1983] 53 Comp. Cas. 926. The landlord styling himself as a creditor of the transferor Company sought to intervene in the petition. The question that was posed was as follows: "Whether the creditors of a transferor-company, and any other persons having interest in the transferor-company, or interested in its business assets or any contract with it, other than the members o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Udyog (P.) Ltd. [1974J 44 Comp. Cas. 359 and I wish to quote the observations of the learned Judge with a concur-rence and complete agreement with view expressed therein since I am also of the opinion that the position emerging from the existing provisions disentitling the persons, who are otherwise vitally affected by the scheme of amalgamation, from participating inter se in the proceedings initiated at the instance of transferor or transferee company needs to be suitably remedied. It is an accepted fact that the scheme on its sanction is one and the same. It is also an accepted fact that as observed in the case of Telesound India Ltd. ( supra ) that when the transferor company and the transferee company are under the jurisdiction of different Courts, there is no requirement that both the Companies should go to the same Court for sanction of the Scheme. It is essential that the persons who are adversely affected by such scheme should have an option to agitate their grievances irrespective of the fact whether they are members or creditors of the transferor company or transferee company. This is more so, since the scheme is one and the same. Such scheme since asked to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... become the creditors of another company whether an existing company or a new company that may come into existence even though the creditors or some of them may have had no dealing with such new entity and may have, therefore, no confidence in its management. The appropriate authorities should consider the desirability of remedying the situation, inter alia, by incorporating a provision which may entitle the creditors of the company concerned to be suitably associated with the proceedings so as to better secure the interests of the creditors." (p. 361) It has to be mentioned here with some anxiety that though such a view is expressed in a judgment delivered as back as on 19-12-1973, no wheels seem to have moved in that direction. In the days when the concept of locus has travelled much beyond its bounds as experienced by the Courts in 1973 and when the Courts have gone to the extent of permitting the workers to be heard in the proceedings for winding up since they are considered as persons vitally affected in the proceeding in the case of National Textile Workers Union v. P.R. Ramakrishnan AIR 1983 SC 75 there is no reason why there should not be suitable amendments permit- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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