TMI Blog2004 (4) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... he shareholders of the petitioner-company." The scheme of arrangement in question is revolving around the above objective of the Companies. 1a. This is a company petition under sections 391 to 394 of the Companies Act, 1956 in the matter of scheme of arrangement between Larsen Toubro Ltd. (for short L T or demerged company or petitioner-company or transferor company ) and UltraTech CemCo Ltd. (for short CemCo or resulting company or transferee-company ) and their respective shareholders, creditors and Grasim Industries Ltd. (for short Grasim ) as a shareholder of L T, and L T Employees Welfare Foundation (for short Trust ). 2. Companies (A) Larsen Toubro Ltd. - Larsen Toubro was incorporated on 7th February, 1946, under the Indian Companies Act, 1913, having its registered office at L T House, Ballard Estate, Mumbai, Maharashtra. The present capital structure of the petitioner-company is as follows: Authorised Rs. in crore 32,50,00,000 equity shares of Rs. 10 each Issued 325.00 24,90,59,412 equity shares of Rs. 10 each subscribed and paid-up 249.00 24,87,39,591 eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme of arrangement are under the Companies Act, 1956 and the Companies (Court) Rules, 1959 [for short Companies Act / the Act and Company Rules ]. Sections 390 to 394 are the basic sections which deal with the scheme of compromise or arrangement or amalgamation or demerger or such other schemes. The other relevant sections of the Companies Act referred are sections 78 and 100 to 104. The other provisions which deals with meetings of the creditors or the members or companies or shareholders and procedural requirement for convening and holding such meanings are also essential to note. The Company Rules, which are relevant for the purpose of sanction of scheme of arrangement or amalgamation or demerger, are Rules 6, 7, 9, 10 and 59 to 87. Facts and statutory compliances 4. A Board meeting was held, after due notice to the directors of the respective companies as per section 286 of the Act, to prepare and finalise the draft scheme of arrangement in question. On 4th September, 2003, after due deliberation on the proposals, the Board of directors of the petitioner-company and the demerged company approved the scheme of arrangement in question. 5. On 3rd November, 2003, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully paid-up. All the above meetings were chaired by Mr. Anil Manibhai Naik, the person appointed by the hon ble court, in the absence of Mr. S.S. Marathe. 7. By a special resolution in the said meeting, issue of reduction of share capital was also passed unanimously. In the meeting of the shareholders, the scheme and the special resolution relating to the reduction of share capital were passed with an overwhelming majority of votes. 8. The chairman of the meetings filed his report as per the rule 78 of the Company (Court) Rules in the court in respect of the result of the said meetings, dated 3rd February, 2004. The report of the chairman provides the details of the meeting of the secured creditors, unsecured creditors, equity shareholders and about transactions of business resolved in the said meetings. Various modifications and suggestions made by the shareholders to the scheme were discussed. The details of the basic ingredients of the scheme and respective modifications and its decisions by majority have been placed on record (ex. H). Basically, 3 shareholders suggested 3 modifications in the meeting. Those are Mr. V.M. Raaste, Mr. Mustafa Kargaluiala and Mr. Nalin V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abilities as mentioned in the opening financial statements of CemCo, the shareholders fund of the petitioner-company comprising of the share capital and the reserve, will no longer be fully represented by the assets, and, therefore, to reflect the same as an integral part of the scheme, the equity share capital and certain reserves comprising of the shareholders fund is proposed to be recognised, as set out in the scheme restrachun? The creditors have supported the proposed share capital of the petitioner-company. The proposal of the reduction of share capital in the present scheme, involves neither diminution of liability in respect of unpaid share capital nor payment to any shareholder of any paid-up capital. The financial position of L T is sound and its assets are far in excess of its liabilities. There is no default in the statutory dues. Therefore, the reduction of the share capital of the petitioner-company in L T has been an integral part of the scheme and the equity shareholders, secured creditors and unsecured creditors approved the scheme and the reduction of the share capital and passed the resolution accordingly. This hon ble court, therefore, after considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as required as per the procedure, have been made therein with necessary prayers. Both the company petitions are, therefore, inter-connected and interlinked for all the purposes, including of facts, scheme of arrangement and all related consequences and result. 14. By order dated 13th February, 2004, the present company petition was admitted and fixed for hearing on 18th March, 2004. The notices of the hearing was ordered to be advertised and to be given to the Regional Director, Department of Company Affairs under section 394A of the Act. In view of the averments made in paragraph 26 of the petition, the application of the provisions and the procedures to be followed under sections 100 to 102 of the Act and Rules framed thereunder for convening of the meetings of the creditors was dispensed with. 15. By affidavit dated 20th February, 2004, of one Mr. Prabhakar Yevle, an employee of advocates of L T, the company averred about the service of the notice of hearing of the petition and the petition on the Regional Director. An affidavit dated 17th March, 2004, proving publication of the notice of hearing of the Petition in the Free Press Journal, Times of India and Navshakti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Ltd. [unreported]. (B) Mr. Goolam Vahanvati, Advocate General of Maharashtra, appearing for Grasim Industries Ltd., has also supported and referred and read the following cases in addition to the cases cited above : (1) Sussex Brick Co. Ltd., In re [1961] 1 Ch. D. 289 1 (2) Maknam Investment Ltd., In re [1995] 19 CLA 305 (Cal.) (3) Grierson Oldham Admas Ltd., In re [1967] 1 WLR 385 1 (C) Mr. Janak Dwarkadas, senior counsel appearing on behalf of Swastik Trading Investment Ltd. and also supported the petition by the following decisions: (1) Brooke Bond India Ltd. v. U.B. Ltd. [1994] 79 Comp. Cas. 346 (Bom.) (2) Hindusthan Commercial Bank Ltd. v. Hindusthan General Electrical Corpn. [1960] 30 Comp. Cas. 367 (Cal.) (3) Guardian Assurance Co., In re [1917] 1 Ch. D. 431. 18. Mr. Virendra Tulzapurkar, senior counsel for the petitioner-company laid the foundation by referring to Miheer H. Mafatlal s case ( supra ), Hindustan Lever Employees Union s case ( supra ), and Nicholas Piramal (India) Ltd. s case ( supra ), Renuka Datla s case ( supra ), Piramal Spg. Wvg. Mills Ltd. s case ( supra ). He further referred to Investment Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom they purported to represent. (8) That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. (9) Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the court are found to have been met, the court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the court there could be a better scheme for the company and its members or creditors for whom the scheme is framed. The court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. The aforesaid parameters of the scope and ambit of the jurisdiction of the company court which is called upon to sanction a scheme of compromise and arrangement are not exhaustive but only broadly illustrative of the contours of the court s jurisdiction." (p. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative of public interest. No such provision exists in the English law. What would be public interest cannot be put in a straitjacket. It is a dynamic concept which keeps on changing. It has been explained in Black s Law Dictionary as : something in which the public, the community at large, has some pecuniary interest, or some interest by which their legal rights or liabilities are affected. It does not mean anything so narrow as mere curiosity, whereas the interest of the particular locality which may be affected by the letters in question. Interest shared by citizens generally in affairs of local, State or National Government. It is an expression of wide amplitude. It may have different connotation and understanding when used in service law and yet a different meaning in criminal law than civil law and its shade may be entirely different in company law. Its perspective may change when merger is of two Indian companies. But when it is with subsidiary of foreign company, the consideration may be entirely different. It is not the interest of shareholders or the employees only, but the interest of the society which may have to be examined. And a scheme valid and good may yet b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult of the amalgamation, if it is found that the working of the company is being conducted in a way which brings it within the mischief of the MRTP Act, it would be open to the authority under the MRTP Act to go into it and decide the controversy as it thinks fit." (p. 293) 18e. This Apex Court decision further crystallised the submission of the objectors that a large share of the market will be captured by a particular company and, therefore, the scheme is unfair and unlawful or illegal. No case of illegality of fraud has been pointed out in the present matter, except bald allegations and general statement by a shareholder like the obejctors. The Supreme Court has further crystallised the effect of unanimous decisions by the shareholders secured creditors, unsecured creditors and preferential shareholders of the related companies. There are no strong reasons made out to reject the sanction, as prayed. The relevant para 84 is very clear to support the case of the petitioner in the present case also. "An argument was also made that as a result of the amalgamation, a large share of the market will be captured by the HLL. But there is nothing unlawful or illegal about this. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isite statutory formalities have been duly observed, that the scheme which is put up for sanction of the court is backed up by the requisite majority; that the concerned meeting of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question, that the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy and; that the members or class of members or creditors or class of creditors were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising of the same class whom they purported to represent. 12. In this case there is no dispute about the position that the requisite statutory procedure has been followed and that the resolution has been passed by a requisite majority. The court has no material to come to the conclusion that the majority of the shareholders were coercing the minority of shareholders in order to promote any interest adverse to that of the minority. All the existing shareholders of the petitioner ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was made to Renuka Datla s case ( supra ) whereby a Division Bench of this hon ble court, based on Miheer H. Mafatlal s case ( supra ) overruled the objections and sanctioned the scheme and resisted an overwhelming majority of the shareholders. The relevant paragraphs 15, 16 and 17 are relevant even for the purpose of approving the scheme in question. 15. The contention, namely, that disparate interests were lumped together for seeking approval of the resolution and, therefore, the approval of the resolution is invalid, is sought to be buttressed by relying on the judgment of the Supreme Court in Miheer H. Mafatlal ( supra ). In our view, Miheer H. Mafatlal ( supra ) affords no support to the appellant.... ****** ...this clearly pre-supposes that if the scheme of arrangement or compromise is offered to the members as a class and no separate scheme is offered to any sub-class of members which has a separate interest and a separate scheme to consider, no question of holding a separate meeting of such a sub-class would at all survive . . . . Consequently when one and the same scheme is offered to the entire class of equity shareholders for their consideration and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the approval of the shareholders once again. In our view, this contention is unsound. When a scheme is put before the company court for approval, the company court may approve it wholly or with or without modification or reject the same. If the modification consists merely of deletion of certain clauses which do not affect the rest of the scheme, and if the scheme together with these clauses has already been approved by an overwhelming majority of the shareholders, we do not see why such a scheme minus the deleted clauses, should once again be resubmitted for approval of the shareholders. Section 392 of the Act, gives wide power to the company court to make addition to the scheme or omission therefrom solely for the purpose of making it workable. In fact, in S.K. Gupta v. K.P. Jain AIR 1979 SC 734, the Supreme Court went so far to say that strictly speaking omission of the original sponsor and substituting another one would not change the basic fabric of the scheme. The Supreme Court in S.K. Gupta ( supra ), quoted with approval, the observations of the Gujarat High Court in Mansukhlal v. M.V. Shah [1976] 46 Comp. Cas. 279 as under: ****** . . .The court has a cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 the formulation of a better scheme, of a fairer scheme, of one which would have been more attractive to the shareholders if they could have understood the implications of the criticisms. I have no doubt at all that a better scheme might have been evolved, but is that enough ? Is it necessary to establish the validity of such an offer as put forward in the present case ? Is there any point in the scheme on which a better view might have prevailed, and rather more generous treatment might have been offered to persons whose shares are sought to be expropriated ? A better and fairer offer might have been made, possibly, but I do not think that because a scheme is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Maknam Investment Ltd. s case ( supra ) to elaborate further that the case of Sussex Brick Co. Ltd. s case ( supra ) as referred above has been followed and reappreciated in this judgment and in that case also, after considering the merits of the objection, the court has dismissed the objection and sanctioned the scheme. 18j. Mr. Goolam Vahanvati further pointed out that in reference to Grierson Oldham Adams Ltd. s case ( supra ), opposition by minority shareholder or individual shareholders cannot be considered against the majority of the shareholders who have accepted the scheme in question. He referred at page 391, the following paragraph : "The third general observation which arises out of the arguments that have been put forward concerns the question whether the test of the fairness of the offer is fairness to the individual shareholder or fairness to the body of shareholders as a whole. In my judgment, the test of fairness is whether the offer is fair to the offerees as a body and not whether it is fair to a particular shareholder in the peculiar circumstances of his own case. Mr. Burney Champion suggested that the contrary was the true view, and he referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills Ltd. s case ( supra ) and granted the scheme, as prayed, by observing as under in para 14 of the said judgment : "In the present case, it is clear that the valuers appointed by the companies together have given their detailed report and have adopted various methods for arriving at the fair exchange ratio. The Reserve Bank of India, which is an independent body even, without the knowledge of the petitioner-company and bank, called for the report and it is clear from the contents of the affidavit quoted above that the report submitted to the Reserve Bank of India is also on the similar lines to the report submitted by the valuers appointed by the two companies. Considering the jurisdiction of the court in considering the question of sanction to amalgamations scheme, in my opinion, unless and until the objectors who are challenging the valuation, produce material before the court that the valuation arrived at is grossly unfair, the court will not be justified in withholding its sanction. In the present case no such attempt was made by the objectors." (p. 8) Objectors and objections 19. The objections have been raised to the present scheme of arrangement by Mr. Rasik S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r at least after closing of the matter by the learned counsel for the said objector. Mr. Jain, advocate for the objector insisted to consider this additional affidavit to be taken on record in view of para 1 of the said affidavit. After considering the merits of the matter and the grounds and objections already raised in the first two affidavits of Mr. Rasik S. Poladia as well as, in the gist of submissions filed by his advocate, I see no reason to allow this additional affidavit on record. The counsel for the petitioner-company have referred and pointed out the provisions of the Companies Act and Rules made thereunder to show that such affidavit are impermissible and, therefore, must be rejected. 19b. One Mr. V.M. Raaste has filed his affidavit dated 12th March, 2004, and resisted through the grounds of objection, the scheme of arrangement in question. Mr. Raaste is a shareholder of L T and of Narmada Cement. His shareholding is only 2 shares of L T and 4 shares of NCCL. Mr. Raaste participated in the meeting and suggested some modification along with Mr. Rasik S. Poladia. Those modifications were rejected by the majority. Mr. Raaste appeared throughout the hearing of the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that contents of the additional affidavit dated 19th April, 2004, which was rejected by order, are same, Mr. Raaste s conduct and whole attitude is only to prolong and postpone the matter and now judgment. Therefore, it was also rejected by an order. It may be noted that Mr. Poladia and Mr. Raaste have common objectives and grounds of objections. Both are aware of each other s objections. Companies have exchanged and provided objection copies to respective objectors also. Pattern and grounds of objections are same. All knows respective objections to the scheme. Mr. Raaste s objections and suggestions, supported by Mr. Poladia, were rejected in the 3rd February, 2004 meeting. Now, both have gone beyond those objections for the first time in court and raised other objections which cannot be tested or approved by the other majority shareholders and companies and creditors. Therefore also, such objections are not acceptable and/or entertainable. The points of objection of the objectors are as under : Suppression of material facts and documents, false statements. Non-disclosure of all relevant facts and documents. Transfer of shares of NCCL is in valuation of SEBI (Takeover) Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sanjay Jain, learned counsel for the objectors, viz., Rasik S. Poladia has opposed the scheme of arrangement in question and relied on the following cases : 20a. Oil Natural Gas Corpn. Ltd. v. Saw Pipes Ltd. [2003] 5 SCC 705 - This judgment is a landmark judgment to interpret and explain the phrase "public policy of India" as contemplated under sections 34(2)( b ), 28( a ), 13(5) and 16(6) or the Arbitration and Conciliation Act, 1996. The enlarged meaning given to those phrases is not in dispute. Specific reliance was made of para 31 which is reproduced as under : "31. Therefore, in our view, the phrase public policy of India used in section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort as on the date when the matter is actually heard by the court specially when there is a gap between the date of the application and when the court considers the scheme for sanction. The court, in such circumstances, should call for latest possible information even at and during the course of hearing. In the said judgment, it was clearly observed further that on facts and circumstances of the case, all the material facts relating to the company including latest financial position had been on record. 20e. Rex v. Kensingtan [1917] KBD 486. This foreign judgment is referred and relied by the objectors counsel is totally misplaced. 20f. K.K. Modi v. SAT [2000] 2 Bom. CR 523. This judgment was referred by the objectors to explain the provisions of Security and Exchange Board of India Act, 1992 ( SEBI ) read with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. No one has disputed the provisions as well as the principle laid down in that judgment refers to SEBI law. Paragraph 4 of the said judgment deals with valuation report of scheme of arrangement. Discharge of burden of proof 21. In my view, the present scheme of arrangement is fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the matter of Maknam Investment Ltd. s case ( supra ). In view of this, in my opinion, the objections, as raised, have no substance. Those objections are frivolous and liable to be rejected. All the statutory compliances have been followed. The scheme of arrangement is not against the public policy or against the interest of the shareholders of the company or employees or workers. The scheme of arrangement falls within the parameters of the Apex Court s decision in the case of Mafatlal ( supra ) and Hindustan Lever Employees Union s case ( supra ) and other decisions of the High Courts ( supra ). 21a. A few shareholders cannot oppose such scheme of arrangement, which has been passed by majority and 99.99 per cent of shareholders and unanimously by the creditors or unsecured creditors. The burden is heavy on such objectors, to prove otherwise, with material and evidence on record. Mere vague and bald averments are not sufficient. Interest of workers and employees, creditors, unsecured creditors, financial institutions have been taken care of and approved. In this background, objectors or others, unable to place on record any contrary material. The objectors have f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fectiveness of which, the demerged company would hold 20 per cent of the paid-up capital of the Resulting company the balance 60 per cent would be held by the shareholders of the demerged company in the same proportion in which shares are held by them in the demerged company; ( b )the occurrence, on the effective date, of all of the following concurrently: ( i )deposit of the CemCo shares and the L T shares by each of L T and Grasim/Samruddhi respectively in escrow in accordance with the share escrow arrangement (as defined hereunder); ( ii )deposit of the purchase consideration (as defined hereunder) and the sale consideration (as defined hereunder) by each of Grasim and the Trust respectively in escrow in accordance with the share escrow arrangement; and ( iii )the announcement to the public of the open offer. ( c )the open offer; ( d )the occurrence of all of the following concurrently upon the shareholding of Grasim (along with that of its associates) in CemCo amounting to at least one share more than 41.5 per cent of the shares of CemCo : ( i )release of escrow in relation to the CemCo shares and the purchase consideration in accordance with the share escrow arra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offer consideration together with the interest, if any, accrued on the same till the making of the public announcement shall be appropriated to an escrow account maintained by a designated investment banker or such other person nominated by Grasim (to be appointed in terms of the open offer escrow agreement) on an interest earning basis, and shall be held in escrow by such person until the completion of the open offer, and shall be distributed to the successful offerees of the open offer in accordance with the terms of the offer letter. ( c ) The amounts held in escrow pursuant to sub-clauses ( a ) and ( b ), above shall be invested as provided in the open offer escrow arrangement. ( d ) The interest earned on the amount of the open offer consideration held in escrow or invested in accordance with the open offer escrow agreement shall accrue on a proportionate basis to the successful offerees of the open offer. In the event that the open offer is not fully successful, the distribution of interest to the successful offerees will be limited pro rata to the extent of subscription to the open offer. It is clarified that such interest shall not be considered as an increase in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated liabilities, etc., including tax and such other provision. Care of the employees and its concerned Trust is specifically taken. From the scheme, it is also clear that care is taken of various significant aspects of all concerned companies, their respective obligations and liabilities and procedure during the transitional period. Basic accounting process and all its necessary details have been placed on record. Arrangement 24. First and foremost issue is meaning, scope and purpose of arrangement . The scheme of arrangement in question falls within the ambit of the provisions of sections 391 to 394 of the Companies Act and the Rules made thereunder. The word arrangement is not specifically defined under the Companies Act. This scheme of arrangement has the ingredients of demerger and reduction of share capital and scheme of arrangements with the concerned companies and Trust, cannot be said to be beyond the purview of sections of the Companies Act, the scheme of arrangement in question, therefore, is maintainable. The word arrangement , though not defined specifically, has a wide range and ambit. The present scheme of arrangement is between the petitioner-companies a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of this, the petitioner would not be entitled to come under section 391 and hence no relief can be granted on this score. I am unable to accept this contention. The word arrangement as set out in section 390( b ) is an inclusive definition and contemplates all arrangements and not only reorganisation of the share capital. This is all the more clear, because the word used is includes . Coming to the case of Hindustan Commercial Bank Ltd. v. Hindustan General Electrical Corporation Ltd. [1960] 30 Comp. Cas. 367 (Cal.)/AIR 1960 Cal. 637, I do not see how this case can assist Mr. Bulchandani, for in paragraph 27 it has been stated as follows (page 381 of 30 Comp. Cas.): The word "arrangement" in section 391 is of wide import. By section 390 "arrangement" includes reorganisation of the share capital of the company by the consolidation of shares of different classes or by the division of shares into shares of different classes or by both those methods. The court has the power to sanction a scheme of arrangement though the scheme modifies the special rights attached to a class of shares. These observations on the contrary support the position that the word arrangement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the proposed scheme of arrangement. Therefore, in the circumstances, I see no reason not to consider the present scheme of arrangement on merits. The objectors have been unable to point out any other provisions whereby such scheme can be objected or rejected. Mere general allegations are not sufficient. In the facts and circumstances of the case, the scheme of arrangement, in absence of any specific bar or limitation, falls within the ambit of sections 391 to 394 of the Companies Act and is maintainable. These company petitions were already admitted and parties have already acted on that basis and further all legal formalities have also been completed. Therefore, now there is no reason to accept any objection to the effect that the present scheme of arrangement cannot be sanctioned under the provisions of sections 391 to 394 of the Companies Act. 24a. The word arrangement has a very wide dimension. It is a term of wider connotation. Section 390 of the Companies Act itself provides that the arrangement includes reorganisation of the shares, share capital of the company by the consolidation of shares of different classes. Unanimous and/or majority decisions 25. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot, in the facts and circumstances of the case, halt or intend to halt such scheme of arrangement for their respective profit or gain or sentiments. A shareholder s rights under the company law is well established. The scheme and purpose of the company law and affairs of the company governed by the same provisions which provides that any such decision which is in the interest of the company and its shareholders and members, has to be taken by majority by following due process of law. Once the requisite formalities have been complied with, the due notices and material were placed before the respective shareholders and, after due deliberation, decision has been taken by majority, which is admittedly overwhelming in the present case (99.99 per cent), court cannot interfere or suggest or accept the objections of the nature as raised by the objectors in the present case. It is difficult to believe that the objectors have no knowledge of the materials which were placed on record, to demonstrate that the whole scheme of arrangement is bad, unjust or unfair or against public policy or interest. Full opportunity was available to the shareholders like objectors to raise their respective obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e such scheme in majority has to be respected. Mere bald allegations that scheme is not in the public interest, without material or justification for the said allegation, cannot be accepted. The majority shareholders have taken into consideration the total scheme of arrangement in question. The share exchange ratio which has been fixed after the valuation report of the professional and expert auditors, the effect of shares of Narmada Cement Co. Ltd. or transfer of cement division or the alleged monopoly or concentration needs to be rejected and for that reason, such scheme of arrangement cannot be interfered with. It is necessary to consider that the objectors like Mr. V. Ranganathan and Mr. R. Shekar, who have admittedly not attended the meeting and have not participated in any proceedings now, cannot be allowed to raise any objection in such a cryptic manner. As per the practice and procedure of the Company Rules, Mr. V. Ranganathan and R. Shekhar have not even filed affidavit or application in prescribed form and no leave of any kind was obtained from the court. The allegations made in their so-called objections are vague, bald and without any supporting material and the same ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing agreement, report dated 24th September, 2003, of Earnst Young (P.) Ltd. and N.M. Raiji Co., chartered accountants, memorandum of articles of association of L T and CemCo, audited balance sheets and profit and loss accounts of L T and CemCo for financial year ended 31st March, 2003, no objection letters dated 19th November, 2003 and 25th November, 2003 from Stock Exchange, Mumbai and National Stock Exchange of India Ltd. respectively, certified copy of the order of Bombay High Court dated 12th December, 2003 directing the conveying of the meetings, etc., were made available for inspection for the shareholders even prior to the date of the meetings at its registered office. The scheme of arrangement itself provides the various details of all the concerned companies and there is full disclosure in respect of Narmada Cement Co. Ltd. and its status which is necessary for the scheme. It is not disputed by the objectors or by any other parties that the substantial material were available on the website of the company. The objectors, despite having full knowledge of those basic documents have raised these unsupported objections to oppose the scheme. The restructuring agree- men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to support the scheme of arrangement as placed for sanction. There is nothing on record to substantiate that the scheme is a device to defraud the public or some shareholders. Even otherwise, mere allegations are not sufficient to substantiate such contention. The present scheme of arrangement is sound, reasonable, fair and equitable and accepted by the shareholders in thumping majority and unanimously by all classes of creditors. In such circumstances, no case is made out to pierce the corporate veil, as alleged. No suppression of material or false statements 27. The materials on record, as well as documents filed in support of the scheme by the concerned companies, are sufficient to consider the scheme of arrangement in question. Once the majority has taken a decision which includes financial institutions, secured creditors and unsecured creditors read with majority of shareholders, that too, after following the due statutory procedure, there is nothing to suggest that there were suppression of facts or there were false statements made by the petitioner at any stage of the proceedings of the sanction of the scheme. All the relevant materials and documents are perused a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd for the company s benefit. In this background and in the facts and circumstances of the case, the decision cited by the objectors in Badrock Ltd. s case ( supra ) (Nijjar, J.) is totally distinguishable and cannot be made applicable to the present case. There is no such great irregularity, illegality, fraud or suppression of facts or material placed on record or proved by any contrary material by the objectors. No other competent authority or regulatory authority have even raised such allegations of suppression of facts and/or of false material placed on record by the companies concerned, as alleged by the objectors. It appeared in the present case that on the contrary the objectors have twisted the figures, accounts and misread the Balance Sheet and Schedule to the scheme, just to obstruct and create hurdle in the sanctioning of the scheme in question. Not against public interest or public policy and law 30. Public interest or public policy is a vital element which is required to be considered while sanctioning any kind of scheme. Public interest or public policy has to be read in the content in which it is used or referred. The general principle of public interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on the record to justify the allegations of breach of the public policy or public interest or that the scheme is unfair and contrary to the laws. After perusal of the scheme and after hearing all the counsels for the respective companies and after considering the objections filed on record, there was nothing to show that the present scheme is against public interest or public policy. The corporate purpose and object of the scheme of arrangement as a whole is fair, just and reasonable on all material aspects. Transfer of shares of [NCCL] 31. There is nothing demonstrated from record to show that the shareholders of L T or shareholders of NCCL are in any way prejudiced or will be affected by the present demerger, as the very same Cement Division or Undertaking which was part of L T would now vest in the resulting company in which also the shareholders of L T and NCCL would have the same right of participation, if they so desire and wish to retain their shares in the resulting company, CemCo. There is nothing material to show that Grasim is not competent to manage the cement business. It is worth to note that after the scheme of arrangement, the shareholders of L T will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 293(1)( a ) of the Companies Act read with judgment in Brooke Bond India Ltd. s case ( supra ) at pages 358/359 cannot be overlooked in this reference. Methodology of demerger makes the theory clear that instead of L T being the holding company of NCCL, CemCo will become the holding company. It is difficult to accept that the shareholders can raise objection on the ground that the valuation of those shares (NCCL) were not made separately, in the facts and circumstances of the case, apart from the fact as observed in Nicholas Piramal India Ltd. s case ( supra ) that such objection of valuation of shares cannot be the ground to interfere with the scheme. Anyhow, that cannot be agitated in the present proceedings as it is outside the scope of the present enquiry also. Therefore, all the objections of the shareholders of Narmada Cement is totally irrelevant as raised by Mr. Poladia and/or Mr. Raaste and others in the present case. It may be noted that Mr. Tulzapurkar, learned senior counsel for the petitioner-company has also made a statement that the shares in NCCL are offered at a price of Rs. 34 per share till October 2004. Therefore, Mr. Poladia or Mr. Raaste or such other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d related or concerning other alterations or changes which may be made effectively to implement the sanctioned scheme. PMP Auto Industries Ltd. s case ( supra ) has declared that these provisions are in the nature of single window clearance system to ensure that the parties are not put to avoidable or unnecessary cumbersome procedure for making a representation or application to the court for various other alterations or changes which may be essential or necessary or consequential to implement the sanctioned scheme. In view of this, on this ground also, scheme cannot be halted. Shares listing of transferor-company 35. The Regional Director of Company Affairs in its affidavit submitted that as per the Bombay Stock Exchange order or letter dated 19th November, 2003 transferor-company should get the shares listed before making public offer. It is worth to note that the Bombay Stock Exchange has not put any such condition. It is stated only that it was recommending the open offer after the listing. As submitted by the learned senior counsel for the petitioner-company that the open offer will be made as per the scheme only if the scheme is sanctioned by the court and not other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders of the transferor-companies are also issued shares in the transferee-company. In a way, no exchange ratio is required in the present scheme as the shareholders of the transferor-company continue to remain as its shareholders. 36a. In the present case, no objection of any irregularity in accounts or under-valuation or under-valuation of shares has been raised by the Regional Director and substantiated by others. 36b. In reference to valuation of shares in case of scheme of amalgamation reliance was placed in Piramal Spg. Wvg. Mills Ltd. s case ( supra ), thereby the object in respect of valuation of shares alleged to be unfair to the shareholders of the transferor-company was rejected by observing as under : "The Regional Director has next pointed out that the shares of the transferor-company, according to him, have been undervalued for the purpose of determining how many shares of the transferee-company could be given to the shareholders of the transferor-company.... However, it is not possible for the court to examine the various methods of valuation which are available for valuing the shares of a company. The valuation of shares is a technical matter which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther reliance is also made on the unreported judgment, i.e., Reliance Industries Ltd. s case ( supra ) whereby, after considering Miheer H. Mafatlal s case ( supra ), Piramal Spg. Wvg. Mills Ltd. s case ( supra ), Grierson Oldham Adams Ltd. s case ( supra ), it was observed as under: "Placing reliance in the judgment Grierson, Oldham Adams Ltd., In re [1968] 1 Ch. 17/[1967] Comp. Cas. 357 (Ch.D.) the learned Judge observed as under : ...It is possible in cases like this to criticise figures, offers and balance sheets and argue about matters of fairness and unfairness. Unless the person who challenges the valuation satisfies the court that the valuation arrived at is grossly unfair, the court will not disturb the scheme of amalgamation which has been approved by the shareholders of the two companies. The English case dealt with the right of dissident shareholders to challenge the scheme of amalgamation." There is no case for inspection under section 209A of the Companies Act, as alleged. Concentration of cement business 37. The answer to this objection has been clearly decided in the following words also : "There is nothing shown under any Act, Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch objection or suggestion were raised or made by the majority of the sharehold- ers including all class of creditors. Once due notices were issued and published and notified in accordance with the law and requisite meetings were held accordingly, such objection of different classes, as raised, cannot be accepted. Welfare of employees - employees Trust 40. As per the scheme of arrangement, the employees scheme will acquire the holding of Grasim in L T to the extent of 14.95 per cent which shares were acquired by the employees Trust would achieve the ultimate aim and object of the scheme which is to demerge cement business into a company eventually controlled by Grasim and leave L T and its management to concentrate on its core business, i.e., engineering and construction with the aid and assistance and participation and involvement of its employees who would be the beneficiaries of 14.95 per cent shares of L T held by the employees Trust. This submission of Mr. Dwarakadas who appeared on behalf of Samruddhi Synthetic in support of the petitioner cannot be overlooked. There is nothing on record to show that such scheme which is in favour of Employees Welfare Foundation Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jority shareholders if against the minority shareholders or case of oppression or coercion, has a different forum to invoke. While sanctioning the scheme of arrangement, this aspect of coercion or oppression cannot be considered in such a company petition at the instance of such objectors with no material or no justification in support of their allegations of oppression or monopolization or concentration of cement industry, as such. No other objectors/interveners investors have filed any written objection or submission and not argued in person or through advocate, except the objections referred to in the judgment. ( a ) A shareholder who, in spite of notice and knowledge, does not attend any meetings and/or participates and suggests his opinion or places before all other shareholders, his point of view with material to support and/or never participates in voting, but still, without attending the proceedings, sends written objections without supporting evidence to court at the last stage. ( b ) A shareholder who, attends, without sufficient material, participates in the discussion and suggests modifications also, but other majority shareholders, by overwhelming majority, refuse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angement) unanimously by overwhelming majority of shareholders in proportion to 99.99 00.1, and also approved the scheme after due and effective deliberation on all issues and satisfied by all the classes, in my view also, such determination and/or commercial merits of the scheme need not be gone into or interfered with as a fault finder and/or to pick holes in it, merely because some objections have been taken or raised by some shareholders. There are no strong and cogent reasons made out and pointed out by any one, to disapprove such scheme. No other objectors have pressed their objections or appeared in court to support such objections. ( g ) No illegality of any other law has been placed and proved with supporting material, in reference to the scheme in question. Companies are bound to comply with all legal formalities. ( h ) The objections are frivolous, unfair and mala fide and are not within the framework of the law. No evidence or material have been placed to justify to show that the scheme is illegal, unjust or against public policy or interest. Such objectors are estopped from raising such frivolous objections. Their whole object is to halt and to hinder the schem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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