TMI Blog2006 (1) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... vided into 72,000 equity shares of Rs. 100 each fully paid up including 44,400 equity shares fully paid up by way of bonus shares by capitalising the general reserve. The authorised capital of the transferee company is Rs. 25,00,00,000 dividend into 1,50,00,000 equity shares of Rs. 10 each and 1,00,00,000 unclassified shares of Rs. 10 each. The issued capital of the transferee company is Rs. 9,96,38,120 divided into 99,63,812 equity shares of Rs. 10 each. The subscribed capital of the transferee company is Rs. 9,95,98,120 divided into 99,59,812 equity shares of Rs. 10 each subscribed and fully paid up. An amount of Rs. 22,500 is paid up on forfeited shares of the transferee company. Thus the aggregate issued, subscribed and paid up capital of the transferee company is Rs. 9,96,20,620. 4. One of the objects of the transferee company is to manufacture, process, import, export, buy, sell, distribute and/or otherwise deal inter alia in various chemicals, pharmaceuticals, intermediates, drugs and medicines and all by-products thereof. The main objects of the transferor company include similar activities as is evident from the Memorandum of Association of both the companies. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pen market before the Effective Date. ( e ) For the purpose as aforesaid, the Transferee Company shall, if and to the extent required, apply for and obtain the consent of the Securities Exchange Board of India, the National Stock Exchange, the Stock Exchange, Bombay the Reserve Bank of India and other concerned authorities, for the issue and allotment by the Transferee Company to the respective members of the Transferor Companies, of the Equity shares in the said share capital of the Transferee Company in the ratio aforesaid." 7. Company Application Nos. 432 of 2005 and 433 of 2005 were filed by the transferor and transferee companies respectively seeking usual directions inter alia regarding holding of the requisite meetings inter alia of the equity shareholders. By separate orders both dated 15-7-2005 in each of the Company Applications, directions were passed regarding convening and holding of the meetings of the equity shareholders. As far as the transferor-company is concerned the holding of the meeting of the equity shareholders was dispensed with in view of the consent given by all the equity shareholders to the scheme. Convening and holding of the meetings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as tabulated in the minutes is as under: "After receiving the scrutinizers report and perusing the same, the Chairman read out the number of votes cast in favour of the Resolution, number of votes cast against the resolution and votes considered invalid as under : Nos. No. of Votes (Shares) Total Number of Ballot Papers 62 45,65,591 In Favour of the Resolution 51 45,64,531 Against the Resolution 6 340 Invalid ballot papers 5 720 Thus the aforesaid special resolution was declared passed by the Chairman of the Meeting by an overwhelming majority of about 89.47 per cent (in terms of number of shareholders casting valid votes) and 99.99 per cent (in terms of value of valid votes) of the members present and voting." 10. Thereafter the company filed the present petition on 12-9-2005. By an order dated 3-10-2005, usual directions were issued by this Court for advertisements to be published and notice to be served on the authorities and fixed deposit holders. 11. The Official Liquidator has filed his report dated 7-10-2005 in which he has inter alia stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on) Act, 1956, the Depositories Act, 1996 and the provisions of the Companies Act, 1956 which are administered by SEBI under section 55A thereof, the rules, regulations, guidelines etc. made under these Acts and the Listing Agreement. ( h ) The company agrees that in the explanatory statement forwarded by it to the shareholders under section 393 or accompanying a proposed resolution to be passed under section 100 of the Companies Act, it shall disclose the pre and post-arrangement or amalgamation (expected) capital structure and shareholding pattern." The objection is that the transferee company failed to disclose the pre and post-arrangement or amalgamation (expected) capital structure and shareholding pattern in the explanatory statement under section 393 of the Companies Act forwarded to the shareholders. 15. Admittedly the explanatory statement under section 393 of the Companies Act did not disclose the said particulars. Three questions arises in this regard. Firstly does non-compliance with the aforesaid provisions of the Listing Agreement render a petition for amalgamation under sections 391 and 394 of the Companies Act not maintainable. Secondly what is the scope of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act. Further so far as the provisions of sections 391 and 394 relating to amalgamations are concerned the Companies Act does not distinguish before listed and unlisted Companies. Listing has its own advantages for a company. The SCR Act does not however make listing compulsory for companies. If the Legislature intended treating listed and unlisted companies differently for the purposes of sections 391 and 394 it would have provided the same either in the Companies Act or in the SCR Act or by way of some other law. No such provision has been brought to my notice. This is a further reason negating the intervenor s contention. 21. The consequence of non-compliance with any of the provisions of the Listing Agreement would entail action by the relevant exchange under the provisions of the Listing Agreement and SCR Act. For instance, the BSE may initiate action against a defaulting member including by delisting the member. Such non-compliance does not ipso facto entail consequences under the Companies Act of the nature submitted by the Intervenor. 22. Thus non-compliance with the provisions of clause 24( f ), ( g ) and ( h ) of the Listing Agreement does not by itself bar a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid up capital of the transferor and the transferee companies. Admittedly the transferor company is a part of the group of the transferee company. Admittedly the shares of the transferor company are owned by the promoters/their relatives/directors of the transferee company. Further the scheme also indicates the names of the directors of the transferor and the transferee companies interested in the scheme. It is true that this by itself does not amount to strict compliance with the provisions of clause 24( h ). It is however a relevant factor while considering whether there was any intention on the part of the company to withhold or suppress any information. 28. The correspondence between the transferee company, the BSE and the NSE is extremely relevant in this regard. By identical letters both dated 7-6-2005 addressed to the BSE and the NSE, the company submitted the scheme of amalgamation under clause 24( f ) of the Listing Agreement. Annexed to the letters is a table which gives the pre-amalgamation and post-amalgamation position regarding holding of the shares of the transferee company by the promoters, Indian and Foreign and non-promoters holding including of mutual funds a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 24 of the Listing Agreement is considered sufficient the Company has more than satisfactorily met the test. 33. While considering the intention and bona fides of the company, it is also relevant to read the notice convening the Annual General Meeting which, as stated above, was also forwarded under cover of the same letter forwarding the scheme and explanatory statement under section 393 of the Companies Act. The notice convening the Annual General Meeting contained an explanatory statement under section 173(2) of the Companies Act. The Director s report expressly states that the transferor company is a group company and has also been a closely held company. The same also discloses that the transferee company s investment of 16,200 shares of the transferor company will get cancelled and the shareholding of the transferee company will increase nominally by about 2,79,000 by issue of shares to the shareholders of the transferor company. 34. Moreover the transferee company by its letter dated 6-6-2005, ad-dressed to the BSE and the NSE stated that its board of directors had approved the scheme of amalgamation with the transferor company : "owned by the Promoters and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect, it would make no difference to the ultimate result. The result would ultimately alter by only a fraction of a percentage. The resolution was passed by the shareholders to the extent of 89.47 in number and 99.99 per cent in value. 39. The intervenor also contended that the Chairman ought to have appointed some other persons as scrutineers in view of the objection to the scrutineers appointed by him. The report of the Chairman indicates that there was no objection to the scrutineers appointed by the Chairman per se . There are no allegations of mala fides against the scrutineers. The objection at the meeting was of one Ms. Masceranhas who "felt she was more suited to be the scrutinizer and she found support from Mr. Lakhani (Intervenor)". The suitability of the scrutineers was a matter to be decided by the Chairman. The Chairman found that all other shareholders accepted one J.P. Maheshwari and A.R. Chary as scrutineers. The exercise of discretion by the Chairman cannot be faulted in this regard. 40. The intervenor then submitted that the ballot box had no locking facility. The objection is without any substance. There is no suggestion that the ballot box was tampered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that this is not so. The articles of association of the Company place the matter beyond doubt." 43. There is no dispute that if this judgment is correct there was the requisite majority. The judgment is however binding on me. It is not permissible for me to question the judgment. It is not necessary therefore to ascertain whether on a mere head-count the requisite majority had been obtained. The contention is therefore rejected. 44. The intervenor suggested that there has been double voting by some shareholders. The intervenor further stated that he desired to inspect certain records of the Company. The matter was part heard on 13-1-2006. Though the matter was part heard, Mr. Tulzapurkar stated that with a view not to leave any room for grievance, he was willing to give inspection of the record requested for by the intervenor. Each of the documents of which inspection was sought by the intervenor was specified in the order dated 13-1-2006. The company also agreed to state the names of all the joint holders of the said shares and to specify the folio numbers of the said shares/DPIT and client ID in respect of the said shares. The company has given inspection and filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 . "3. But what 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 to 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.... But since admittedly more than 95 per cent of the shareholders who are the best judges of their interest and are better conversant with market trend agreed to the valuation determined it could not be interfered by courts as, certainly it is not part of the judicial process to examine entrepreneurial activities to ferret out flaws. The court is least equipped for such oversights. Nor, indeed, is it a functio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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