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TMI Blog2009 (9) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... ice at Moti Khavdi in the State of Gujarat. A scheme of amalgamation of the transferor company and the transferee company was proposed and was approved by the board of directors of the transferor company. Under the proposed scheme, it was resolved, inter alia, that against 16 shares in the transferor company, on amalgamation, a member would receive one share in the transferee company. 4. The transferor company filed Company Application No. 65 of 2009 before the learned company judge for a direction under section 391.(1) of the Act to hold the meeting of the secured creditors (class I), secured creditors (class II), unsecured creditors and members of the company. By order dated March 5, 2009, made by the learned company judge, the meetings of the equity shareholders, secured creditors (class I), secured creditors (class II) and unsecured creditors of the transferor company were directed to be held on April 9, 2009, at the registered office of the transferor company under the chairmanship of Mr. Justice S.D. Dave (retired). Accordingly, the meetings were held. The proposed scheme of amalgamation was approved by the secured creditors (class I), secured creditors (class II) and unsecu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the respective appellant, several affidavits filed before the learned company judge and the documents produced before the learned company judge. The learned advocates have taken particular exception in respect of the valuation report presented before the learned company judge to justify the proposed exchange ratio of the shares ; perused by the learned company judge but not offered to the appellants for their comments. It is vehemently argued that the learned company judge has acted in violation of the principles of natural justice in as much as the materials relied upon by the learned company judge were not furnished to the appellants. Thus, the appellants are deprived of a fair opportunity to respond to the petition filed by the transferor company. 8. Mr. Hemang Shah, has also relied upon several complaints against the proposed scheme of amalgamation received by the Registrar of Companies and the report made by the Registrar of Companies. He has submitted that the report made by the Registrar of Companies is perfunctory and is not accurate. Similarly, the fairness report (page 326) is also neither accurate nor it is made by an independent expert. He has also submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heless, it was produced before the learned company judge. The learned company judge was satisfied about the fairness of the scheme particularly the proposed exchange ratio of the shares. He has submitted that at the time of filing of the petition the latest audited balance-sheet available was as of March 31, 2008. The unaudited balance-sheet as of March 31, 2009, was also placed on the record. Mr. Soparkar has further submitted that mere allegation that the proposed scheme is not fair is not enough. The appellants must be able to demonstrate before the court how unfair the scheme is or what would be the just exchange ratio of the shares of the transferor company and the transferee company. He has submitted that the secured and the unsecured creditors of the transferor company and majority of its shareholders have, in their wisdom, approved the exchange ratio proposed in the scheme of amalgamation. The learned company judge, therefore, had no reason not to sanction the proposed scheme of amalgamation. Mr. Soparkar has also submitted that the objection raised by the appellants in respect of share exchange ratio is frivolous and unsustainable. He has submitted that these appellants al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies. It is to be noted that even in such a situation, the book value method has been described as 'more of talking point than a matter of substance'." 11. In the matter of Miheer H. Mafatlal [1996] 87 Comp. Cas. 792 ; AIR 1997 SC 506 ; [1997] 1 SCC 579, the hon'ble Supreme Court had occasion to consider identical argument. The court observed (pages 812, 813 and 814) : "... the company court which is called upon to sanction such a scheme has not merely to go by the ipse dixit of the majority of the shareholders or creditors or their respective classes who might have voted in favour of the scheme by requisite majority but the court has to consider the pros and cons of the scheme with a view to finding out whether the scheme is fair, just and reasonable and is not contrary to any provisions of law and it does not violate any public policy. This is implicit in the very concept of compromise or arrangement which is required to receive the imprimatur of a court of law. No court of law would ever countenance any scheme of compromise or arrangement arrived at between the parties and which might be supported by the requisite majority if the court finds that it is an unconscionable or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt under section 391 of the Act. In respect of the proposed exchange ratio of shares in two companies, the hon'ble court was pleased to observe : "The ordinary law would suggest that the market price of the shares of the amalgamating company would be the proper basis for determining the ratio of exchange. So the quotation of the stock exchange would be a safe and proper basis for fixing the ratio, unless it is demonstrated that the stock exchange quotation is not reliable and does not represent the true value. The absence of a valuation on the basis of quotation on the stock exchange and the absence of any explanation why the quotations should be disregarded vitiates the auditor's report fixing the ratio". The court took note that the auditors had not filed affidavit in support of the valuation made by them ; the auditors relied upon the materials prepared and supplied by the company and the oral instructions given by the officers of the company. In the circumstances, the court was of the opinion that the valuation made by the auditors was vitiated. For that, the court was pleased to dismiss the application for sanction made under sections 391 to 394 of the Act. 15. Bank of Baro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange ratio proposed is unfair, it is not demonstrated before us that how the said ratio is unfair or what should be the fair proposal. 19. In the absence of a genuine or real objection, we would not interfere with the proposed scheme of amalgamation approved by the board of directors of the transferor company and the transferee company, approved by the secured and unsecured creditors and approved by the vast majority of the shareholders. Though it is vehemently argued that the transferor company did not produce the latest balance-sheet and the financial statement, it should be noted that along with the petition, the transferor company did produce the latest audited balance-sheet, i.e., as of March 31, 2008. The unaudited balance-sheet as on March 31, 2009, had also been produced before the learned company judge. In our view, the allegation that the material informations have been kept back from the shareholders is not justiciable. It should be noted that the petition was heard within months of the date of the petition ; unlike in the matter of Bharat Synthetics Ltd. [1995] 82 Comp Cas 437 (Bom), where the petition was heard couple of years after the date of the filing. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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