TMI Blog2003 (12) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that Kojam shall issue and allot shares to every member of NPIL holding fully paid-up equity shares in NPIL and whose name appears in the Register of members of NPIL on the record date. Kojam is to allot for four equity shares held in NPIL, one equity share of Kojam of the face value of Rs. 10 credited as fully paid-up. The scheme has also provided that NPIL Fininvest Pvt. Ltd., a wholly owned subsidiary of NPIL, shall subscribe for an additional 4,49,199 equity shares each of Rs. 10 of Kojam. 3. By an order dated 13-8-2003 passed by this Court a meeting of the equity shareholders of NPIL was directed to be convened and held on 19-9-2003. The secured creditors had given their consent to the proposed arrangement and the holding of their meeting was dispensed with. Similarly, the meeting of the preference shareholders was dispensed with in view of the fact that they have consented to the scheme. The holding of the meeting of unsecured creditors was dispensed with on the petitioners undertaking to issue a notice of hearing of the petition for sanctioning the scheme to the unsecured creditors as may be directed by this Court. 4. The Chairman of the meeting of the equity sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priate value in the stock market particularly because GGPL which is a capital intensive undertaking has not declared dividend for two years. 7. In considering the tenability of the objections which have been raised before the Court, it would be necessary to recapitulate the basic facts. The petitioner has an investment of 92 lakh shares in GGPL, representing 53 per cent of the total share capital of GGPL. GGPL as a result is a subsidiary of the petitioner. The scheme of arrangement contemplates that the investment of the petitioner in GGPL will vest in Kojam. Kojam will allot to all the existing shareholders of the petitioner one equity share for every four equity shares held in the petitioner. As a result of the scheme of arrangement, GGPL will cease to be a subsidiary of the petitioner since the holding of the petitioner in GGPL will vest in Kojam. The existing shareholders of the petitioner will continue to retain their share holding in the petitioner. In addition , each shareholder will be given one share of Kojam for every four equity shares held in the petitioner. The scheme which is before the Court is not a scheme of amalgamation but a scheme where the investment held b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligations of the petitioner, the accounts of the petitioner have to reflect the financial health of its subsidiary. The financial position of the subsidiary has a significant bearing upon the fortunes of the petitioner. It is an admitted position that for a period of two years GGPL has not declared dividend. GGPL carries on capital intensive activities and its Board of Directors perhaps considered it appropriate to plough back the returns in the existing business. The commercial wisdom of the Directors of GGPL in not declaring dividend does not fall for consideration in these proceedings. The benefit which the petitioner seeks to derive upon the transfer of its investment in GGPL to Kojam is to enable itself to focus on its core pharmaceutical business, improve its market position and enhance its own financial standing by divesting itself of the subsidiary whose financial position necessarily impinges upon the petitioner. From the Chart in paragraph 15 of the petition, it would appear that for the financial year ending 31-3-2003 the ratio of profit before tax to net sales would be 12.2 without GGPL and 10.7 with GGPL; the Debt/equity ratio would be 0.9 instead of 1.6; the return o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Kojam would be listed on the Stock Exchange and thus would provide an exit opportunity to a shareholder to sell his shares if he should choose to do so. The ratio of 1:4 in which the shares of Kojam would be issued to the shareholders of the petitioner would consume 95,00,801 shares. There would be a shortfall of 4,49,199 shares to make up the capital of Rs. 10 cores required for the listing of Kojam. The scheme provides that NPIL Fininvest (P) Ltd. which is a wholly owned subsidiary of NPIL would subscribe for these 4,49,199 shares for cash at par. 11. There is no reason to discard the explanation which has been furnished in the affidavit in reply filed on behalf of the petitioner to the objections. An overwhelmingly large body of shareholders has voted for the scheme sharing the perception of the petitioner that the transfer of the existing investment of the petitioner in GGPL will yield substantial benefits to the petitioner by enabling it to focus on its core pharmaceutical business and by improving the financial position of the petitioner. The benefit which accrues to the petitioner is that as a result of the scheme of arrangement it will no longer be affected by the flu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 14. 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 are being allotted shares in the transferee in the same proportion. The shareholders of the petitioner who claim to represent the minority will, therefore, have the same benefits as the other shareholders of the petitioner of the allotment of shares in the transferee company which would then be tradable i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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