TMI Blog2003 (7) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... companies. The petitioners on the basis thereof filed applications in this court under sections 391(1) and 394 of the Companies Act praying for directions convening of the meetings of the shareholders and the secured and unsecured creditors of all the three companies for the purpose of considering the scheme of arrangement. 3. The application filed by HCL Infosystems Ltd. was registered as CA(M) 21 of 2003. This Court after considering the records and the averments made in the application was satisfied that it was not necessary to hold separate meetings of the unsecured creditors of the said company to whom the debt due is below Rs. 10 lakhs. Accordingly, the requirement of convening the meeting of 3137 unsecured creditors of the said company to whom the debt due was below Rs. 10 lakhs was dispensed with. However, the meetings of the shareholders, secured creditors and the unsecured creditors to whom the debt due was above Rs. 10 lakhs were directed to be convened for the purpose of considering and approving the proposed scheme of arrangement. In terms thereof certain directions were issued by this Court on February 3, 2003 directing for convening the meetings of the sharehold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferred to the resulting company, namely, M/s. HCL Technologies Limited, have not been stated either in the scheme of arrangement or in the joint valuation report submitted by M/s. Price Waterhouse Coopers Pvt. Ltd., New Delhi, and M/s. Bansi S. Mehta Co., Chartered Accountants, Mumbai. In the said report another statement is made by the Regional Director to the effect that detailed calculations and the basis on which the share entitlement ratio of 2:9 has been worked out have not been stated in the valuation report. It is stated that in absence of said detailed calculations the Central Government is not in a position to form an opinion on the reasonableness of the share entitlement ratio. In paragraph 5 of the said report, reference is also made by the Regional Director to a letter filed by one of the shareholders of the company, namely, Shri Pawan Kumar Dalmia. It is pointed out that the said letter was submitted to the Regional Director alleging that the scheme of arrangement was illegal, wrong and contrary to the provisions of the Companies Act. It is, however, stated that the allegations made in the said letter could not be substantiated with relevant facts and evidence and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... One of the objectors, namely, Pawan Kumar Dalmia in his objection as also during the course of his arguments sought to refer to incidents and alleged conduct of the company to the period even much prior to the proposed scheme of arrangement. The aforesaid effort clearly proves and establishes the inimical attitude of the objector towards the said company. Even Rupan Khosla during the course of his arguments tried to refer to some of such incidents which were incidents and happenings of the company much prior to the date the aforesaid scheme of arrangement was proposed. The present petitions revolve around the scheme of arrangement in which the first meeting was held on December 18, 2002 whereas the allegations of at least two objectors, as referred to above, pertain to incidents and occurrences much prior to the said date and have no proximity and relevance to the present scheme. This Court is not considering a case of mismanagement and oppression of the company and is only considering the matter regarding the grant of sanction to a scheme of arrangement proposed. The jurisdiction of this Court is limited only to the merit of the present scheme and none of the issues raised beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the valuation report and the register of members. Certified copies of various documents as required by the objectors were also given as is indicated from the report of the Local Commissioner. It also could not be pointed out during the course of arguments that any of the documents, access to which was disallowed, was required to be shown to a shareholder like the objectors. All the three objectors have filed detailed objections and have also advanced lengthy arguments in support of their objections and therefore, they are in no manner prejudiced in contesting the scheme of arrangement. The power of this Court also cannot be sought to be invoked for making a fishing and roving enquiry. In Tata Oil Mills Co. Ltd. In re [1994] 3 Comp. L.J 46, it as held by the Bombay High Court that as far as disclosure of information is concerned, it will not suffice for the dissenting shareholder merely to show that he was not provided with all the informations and materials on which he could come to a just conclusion in accepting and rejecting the scheme. In that view of the matter, one of the objections raised that the objectors were denied inspection of the relevant documents and of the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y High Court has held that section 393(1)( a ) does not require disclosure of all the material facts, it only requires explanation of the material interests involved. I also cannot accept the contention that there is no attempt to disclose the shareholdings of the Directors as their shareholding is reflected in the register of members maintained at the registered office of the company. It is also brought out on record that a promoter s shareholding is also published quarterly in the newspapers and such disclosures are also made on quarterly basis to all the stock exchanges where the company s shares are listed. The objectors have failed to prove that any material interest involved is not reflected in the explanatory statement appended to the notice. The court would accept the bona fides of the explanatory statements appended to the notice and would not investigate into such bona fides until and unless it could be shown by the objectors that there is a fraudulent intention involved in not disclosing the material interest. In United Bank of India Ltd. v. United India Credit Development Co. Ltd. [1997] 47 Comp. Cas. 689 , the Calcutta High Court has held that unless and unti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. Acme Mfg. Ltd., In re [1997] 47 Comp. Cas. 503 (Bom.), inter alia , held that section 393(1)( a ) does not ordain disclosure of all material facts. Clause ( a ) not only enumerates the categories of particulars, but it deliberately makes a departure by omitting any reference to material facts. It was further held that the Legislature having used a different phraseology in the said two provisions, it must be held that the legislative intent under the said section 393 was not to provide for disclosure of all material facts. Similar view is taken by learned single judge of the Calcutta High Court in the matter of United Bank of India Ltd. v. United India Credit Development Co. Ltd. [1977] 47 Comp. Cas. 689 (Cal.)" In All India Blue Star Employees Federation v. Blue Star Ltd. [2000] 27 SCL 265 the Division Bench of the Bombay High Court has held that there is no obligation on the part of the company to disclose such shareholding of each individual director as can be discovered from the register of members. No such grievance could be made and, therefore, the objections raised by the objectors in that regard in the present case also stand negatived even according to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.P.C. upon each of the shareholders, secured creditors and unsecured creditors of the companies. Notices of the meetings were also published in two newspapers of February 28, 2003. The reports of the Chairperson containing an affidavit prove and establish the aforesaid facts. One of the objections raised is that only half an hour time was given for the meeting of the shareholders which was inadequate in view of the capacity of the hall and the attendance. The timings of the three meetings were fixed by this Court in the order dated February 3, 2003. While fixing the time schedule of the aforesaid three meetings, this Court considered all the factors and thereafter fixed the schedule of timings of the three meetings and, therefore, no such objection could be raised by the objec- tors alleging that time given for the meeting was inadequate. Section 391(2) requires the scheme to be passed by 3/4th of the value of the creditors or the class of creditors, present and voting in person or through proxy at the meeting. In the present case, 151 shareholders of the company were present and the scheme has been unanimously approved by 99.99 per cent of the shareholders present and voting. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modification but except for the three objectors the same did not receive any approval from any other shareholders. Therefore, it is established that although no amendment or modification seeking to amend the resolution was circulated in advance, yet the shareholders had the benefit to consider the same but did not approve of and rejected the said modification/amendment. The Chairperson was also satisfied that the amendment raised by Rupan Khosla was not only not proper but was also satisfied to the extent that the same would alter the basic structure of the scheme. Even in spite of the aforesaid satisfaction the Chairperson allowed the members who wanted to vote on the proposed amendment, but the said amendment was not approved by the shareholders present and voting, and the said amendment stood defeated by the house itself which is apparent from the percentage of voting as 99.99 per cent of the members present and voting rejected the aforesaid amendment and approved the scheme of arrangement as proposed. It is also established that the aforesaid amendment proposed by Mr. Rupan Khosla was not seconded by any other shareholder. The aforesaid position is proved by the report of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an employee of the company but as member. When the Chairperson was satisfied that he was not an employee of the company and thereafter was appointed as one of the scrutinizers, no objection can be raised against his appointment as a scrutinizer. In the present case there is no violation of the provision of section 184 of the Companies Act. 14. The next allegation raised is that no debate and discussion took place during the course of meeting of the shareholders. The Chairperson has submitted a detailed report with regard to the conduct and the manner in which the meeting was held. On perusal of the same it is apparent and established that the Chairperson followed the due process and procedure of law. The Chairperson called the meeting in order. Thereafter the Chairperson gave the welcome address wherein he stated that the scheme of arrangement is accepted as already read in view of the fact that a copy of the scheme of arrangement was sent and individually served on each of the equity shareholders along with the notice. As directed by the Chairperson, the notice convening the meeting was read and thereafter the scrutinizers were appointed by the Chairperson. The Chairperson ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how the polling has to be done. Except for the three objectors none of the shareholders who were present and voting in favour of the resolution has taken up a stand in support of the allegations raised by the objectors herein. The resolution was passed by a majority of shareholders present and voting, the value of which was 99.99 per cent. The objection with regard to manner and mode of holding the meetings is without any merit and rejected. All the allegations in that regard are found to be baseless. 18. It was also contended that the company did not comply with the provisions of section 293(1)( a ) of the Companies Act. I have given my anxious consideration to the aforesaid submission. I am, however, constrained to hold that the provision of section 293(1) is not applicable to the facts and circumstances of the present case. Sections 391 to 394 of the Companies Act is a complete code in itself and, therefore, there is no requirement to comply with the provisions of section 293(1)( a ). In PMP Auto Industries Ltd., In re [1994] 80 Comp. Cas. 289 (Bom.), it was held that once a scheme of arrangement falls squarely within the ambit of aforesaid sections, namely, sections 391 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say that the shareholders in their collective wisdom could not have accepted the said exchange ratio on the ground that it would be detrimental to their interest." 19. In Hindustan Lever Employees Union s case ( supra ), the Supreme Court observed thus : ". . . The valuation of shares is a technical matter. It requires considerable skill and experience. There is bound to be difference of opinion among accountants as to what is the correct value of the shares of a company, it was emphasized that more than 99 per cent of the shareholders had approved the valuation. The test of fairness of this valuation is not whether the offer is fair to a particular shareholder.... [who] may have reasons of his own for not agreeing to the valuation of the shares, but the overwhelming majority of the shareholders have approved of the valuation. The Court should not interfere with such valuation. ****** In the absence of it being shown to be vitiated by fraud and mala fide , the mere fact that the determination done by slightly different method might have resulted in different conclusion would not justify interference of court." 20. It is also settled position of law that once the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he objectors as also by the Regional Director cannot be entertained, and rather required to be rejected which I hereby do. 22. Mr. Rupan Khosla appearing in person also made an objection to the scheme of arrangement on the ground that the company is siphoning of the profitable business. He also referred to the interview in C.N.B.C. on December 19, 2002. So far the said interview is concerned, it is only to be noted that different interviewer may have different opinion with regard to the scheme. It is also not understood as to whether or not the interviewer had studied and understood the scheme properly. The opinion of the interviewer, in my considered opinion, cannot be given due weightage in considering the question of grant of sanction to the scheme of arrangement. It is the shareholders company and, therefore, the views of the shareholders is paramount and not that of the interviewer. Since in the present case the overwhelming majority of the shareholders has approved the scheme, the same cannot override the opinion of the interviewer. The allegation of the objector that there is an effort to siphoning of the profitable business of the company in which case the minority sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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