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TMI Blog2012 (5) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... randum and Articles of Association of the Petitioner in paragraph 4 of the petition the details of the authorized, issued, subscribed and paid-up share capital of the petitioner as on 24/5/2011 are set out. Annexue "B" to the petition is a certified true copy of the audited accounts of the petitioner as on 31/3/2011. 5. In paragraph 5 it is stated that the equity shares of the petitioner are listed on the Bombay Stock Exchange and the National Stock Exchange of India. Both Stock Exchanges have given their No Objection to the scheme and the no-Objections are at Anneuxres "C-1" and "C-2" 6. As far as the Transferee Company Zuari Holdings Limited is concerned, it is incorporated on 10/9/2009. It has is registered office within the State of Goa. 7. The objects of the Transferee company are also set out and Annexure "D" to the petition is a certified true copy of the Memorandum and Articles of Association of the Transferee. 8. After setting out its capital structure at Annexure "E" what has been stated is that the Board of Directors at its Board meeting held on 24/5/2011 approved the scheme. The board of Directors of the Transferee Company have also held a meeting and accordingly ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensing with the requirement of convening the meetings of its Secured Creditors and Unsecured Creditors, to consider the Scheme. 14. This Hon'ble Court by order dated 07th July 2011 was pleased to direct that a meeting of the Equity Shareholders of the Petitioner Company shall be convened on 17th August 2011 at the Registered Office of the Petitioner Company, to consider and if though fit, approve with or without modification(s), the Scheme. This Hon'ble Court further, by order dated 14th July 2011 was pleased to- (i) dispense with the requirement of convening the meetings of the Secured Creditors in view of the No Objection Certificates received from 100% of the Secured creditors and (ii) dispense with the requirement of convening the meetings of the Unsecured Creditors of the Petitioner Company in view of the No-objection certificates received from 75% of the unsecured creditors to whom the petitioner company owes an amount of Rs. 10 lakhs and above each and further undertaking given by the Petitioner Company that individual notice of date of hearing of the petitioner would be given to the balance Unsecured Creditors to whom the Petitioner company owes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and Demerger between Zuari Industries Limited and Zuari Holdings Limited placed on the table and initiated by the Chairman for the purposed of identification, upon the scheme becoming effective the fertilizer undertaking shall stand demerged and transferred by the transferor company to the transferee company and be vested in and managed by transferee company without any further deed or act together with all properties, assets, rights, benefits and interest therein subject to existing charges, liens or lispendens, if any, upon and subject to the terms and conditions contained in the said Scheme of Arrangement and Demerger, be and is hereby approved and that the Board of Directors of the Company, be and are hereby authorised to take all such steps as may be necessary or desirable and do all such acts, deeds and things as are considered requisite or necessary to effectively implement the said Scheme of Arrangement and Demerger and this resolution and to accept such alterations, modifications and/or conditions if any, which may be proposed, required or imposed by the Court while sanctioning the Scheme." 12. It is stated that the net result of voting by poll at the meeting of the Equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and therefore it is not possible to adopt the name of the other company. Besides the proposed swapping of names would invariably confuse and mislead the mind of the stakeholders of both the companies and therefore it is not just and proper to allow this scheme. In view of the above it is suggested that the said clause may be deleted from the scheme. As far as Clause 4.1 of the scheme, it is stated that the scheme provides for increase in the Authorized Share capital of the Transferee Company to Rs. 42,06,00,000. and therefore the Transferee company may be directed to comply with provisions of section 94/97 read with Schedule IX of the Companies Act 1956, in respect of filing of necessary forms with the Registrar of Companies after payment of necessary filing fee and stamp duty. Thereafter, reference is made to Clause 4.8 of the Scheme and it is stated that this clause be deleted because like other shareholders of the Transferee company the promoters of Transferor company become promoters of the transferee company pursuant to issuance of new shares as provided in Clause No.4.2.2 of the scheme. In this regard it is submitted that like the other shareholders of the Transferor comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the said scheme. 20. As far as the other objections or comments of the Regional Director are concerned, he has stated that the petitioner will file necessary forms with the Registrar of Companies and pay filing fee and stamp duty. 21. It is stated that the promoters of the Transferor Company would necessarily, as per the provisions of law including various regulations framed by the Securities and Exchange Board of India, be the promoters of the transferee company. The suggestion of the Regional Director regarding deletion of clause 4.8 of the scheme is not only misconceived but is contrary to the provisions of law. 22. As far as the other objections are concerned it is stated that the Transferor and Transferee companies are agreeable that the business reconstruction reserve would not be utilized for declaration of dividend of the transferee company. 23. As far as the objections of Mr. R.G. Furtado are concerned he has filed an affidavit. His affidavit states that he is a shareholder and has a right therefore to object to the scheme. He states that there is a circular of Ministry of Corporate Affairs dated 26/7/2011 issuing guidelines and the Registrar of the Companies is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid-up capital of the petitioner company. The scheme was approved by an overwhelming majority of the equity shareholders. The meeting was attended by 89 equity shareholders of the petitioner company, 86 out of of 89 equity shareholders who attended the meeting voted in favour of the scheme. Their value is enormous and only three shareholders including the Objector objected the scheme. Though the Objector remained present at the meeting he did not chose to address the other shareholders or to raise any pertinent objections to the scheme. Admittedly, all that the Objector chose to do was to ask the Company Secretary of the petitioner company as to when the petitioner would respond to his letter dated 11/8/2011. It is in such circumstances that the petitioner firstly states that the shareholders who remained present for the meeting and voted in favour of the scheme included several foreign institutional investors/foreign sovereign funds amongst others. The overwhelming majority having voted in favour of the scheme, it is not permissible for this Court to sit over in judgment over the decision of the equity shareholders who are supposed to be men of the world and reasonable, they kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court. It is denied that any procedure for change of name as contemplated under the companies Act, 1956 will be required to be independently followed. It is denied that the question of availability of names will arise. It is denied that this Hon'ble Court has no jurisdiction to permit change of names or interchange of names. It is denied that there will be any listing through any backdoor method. It is submitted that apart from raising vague and baseless objections, the Objector has failed to make out any case as to how the interests of the shareholders or the general public would be adversely affected by the change of name as contemplated under the said scheme. 17. With reference to paragraph No.4(i) of the said objections, I repeat and reiterate what is stated by me with respect to the accountants' report and deny all that is inconsistent therewith and/or contrary thereto. It is submitted that as stated by the expert accountants in the report dated 21st May 2011, since the ultimate ownership of the transferor and transferee company lies with the same set of shareholders in the same ownership interest, question or aspect of adjusting the equities between two or more disparate gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree (resulting company) would be obliged to conduct themselves in the manner desired by the general body of the transferor company. The shareholding pattern post demerger will not affect the interest of the public shareholders in any manner. On the other hand, it will create an opportunity for the public shareholders to continue to hold shares in the transferee company or to exit therefrom by selling the shares allotted to them. It is to be noted that the public shareholders will continue to directly hold 45.94% of shares in the transferee company and will get representation to the extent of 19.69% on account of the 30% of shares held by the transferor company and its subsidiary in the transferee company. It is significant that shareholders of the transferor company have by overwhelming majority in their commercial wisdom approved the scheme. It is thus submitted that it is not open for the Objector to raise any of the purported objections particularly in regard to the shareholding patterns. It is denied that the promoters have increased their control as alleged or at all. It is denied that the share held in wholly owned subsidiaries are under the control of the promoter group. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g foreign institutional investors and buyers have objected either to the valuation or to the manner in which the shares would be allotted post demerger. Each of the aspects thereof were put for investigation and scrutiny of the shareholders. It is not the case where the promoters have not disclosed the true state of affairs of the company and have framed the scheme to benefit itself at the cost of the other shareholders. This is not a case of minority being forced to accept something against its wishes and because of lack of bona fides on part of the majority. This is a case where one may have a different view of the matter. However, once in commercial wisdom, the decisions have been taken by the majority and all particulars as to how the shareholders would stand post demerger are on record, then, this Court should not up-hold the objection but reject the same. The petition therefore be made absolute. 32. Shri Rajadhyaksha has relied on the following decisions: (i) You Telecom India (P) Ltd., In re [2007] 77 SCL 161(Bom.) (ii) Intertek Testing Services India (P) Ltd., In re [2009] 93 SCL 157 (Bom.). 33. On the other hand, learned Assistant Solicitor General Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y virtue of direct holding which is 24.06%, as well as their stake in ZIL. On the other hand, the non-promoters shareholders will face a decline in their combined holding in ZHL and their percentage will come down from 65.63% to 45.94%. Thus, stake of the promoter group will increase by 54.06% and it may go up to more than 75%, if the holding of the promoter Transferor company is taken into account. All this shows that the scheme is not fair and the approval thereto is by all interested parties such as promoters and employees. The public shareholders did not attend the meeting and major financial Institutions/Investors such as M/s. Franklin Templeton Mutual Fund has disapproved the Scheme. Therefore,this is nothing but a rear-door route by the promoters to raise their shareholding and tighten their grip in the transferee Undertaking, which is now given to ZHL. The 95.46% shareholders who voted in favour of the scheme belonged to the promoters group and therefore they knew that they are the beneficiaries of the demerger. In these circumstances, that the majority have approved the scheme is no answer to the objections to the scheme. The Court must independently find out by applying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same. 7. That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors as the case may be, 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. 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 would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill come into force only upon compliance with the provisions of the Companies Act, 1956 and particularly the procedure laid down in the Affidavit of Furtado. Equally this Court putting its seal of approval and sanction to the scheme does not mean that the Registrar of Companies would not exercise independent power under the Companies Act, 1956 in relation to change or swapping of names. Therefore, by clarifying that clause 3.8 would be subject to the provisions of the Companies Act, 1956, the scheme can be sanctioned. 39. Mr. Rajadhyaksha, learned Senior counsel reliance upon the decision of this Court in the case of Intertek Testing Services India (P) Ltd. (supra) is well placed. The learned Single Judge while relying upon the judgment of this Court dated 11/4/2007 in Company petition no.64/2007 You Telecom India (P) Ltd. (supra). has found that the provisions of Section 21 of the Companies Act by itself do not prohibit this Court from making an order of swapping of names. It is not as if for the first time any company has approached this Court for swapping of names. In case of Bajaj Auto Limited, the companies in the same group with the same name had approached this Court earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication from the Company Secretary as to what is the response by the company to his letter dated 11/8/2011. The said Furtado was present at the meeting and particularly till the end. He has also voted against the scheme along with 2 others equity shareholders. However, other shareholders have approved the scheme by voting at the said meeting . The statements made in report of the Chairman are not denied. In fact Shri Furtado's affidavit would reiterate the position and the factual basis in the report. As far as his contention that the circular of the Ministry of Corporate Affairs dated 26/7/2011 is not adhered to by the Regional Director is concerned, I am of the opinion that the report of the Regional Director forwarded to this Court upon the scrutiny and verification of the Report of the Registrar of Companies shows that the scheme has been verified in terms of the circular. Therefore, it is not as if this circular has been ignored or given go by, as apprehended. 44. The principal contention and objection is that the stake of the promoters has been increased by demerger. The adoption of demerger group is nothing but tightening of the grip by the promoters and they would togethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which they are specialized. It is in such circumstances and for better coordination and efficiency the said scheme is envisaged, the decisions which are essentially commercial cannot be set aside merely because on some of the objections raised by the objector another view is possible The test that has been laid down by the Hon'ble Supreme Court and followed from time to time would not enable me to exercise an appellate power. In these circumstances, I do not see how the objections of the sole objector can be taken note of. 46. Besides the said objection it has been also pointed out by the sole objector that the scheme of Bajaj Auto Ltd. was being scrutinized by this Court. The learned Single Judge has found that the objection of the identical nature cannot be accepted and no prejudice has been established. In this behalf the learned Single Judge has held in paras 22,23,24 and 25 thus: "22. As aforesaid, the main grievance of the objector was that the process adopted by the company would result in sucking the real value of the equity shares held by the shareholders and increasing percentage of holding of the promoters. Insofar as increasing percentage of the holding is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judice will be caused to any shareholder or there would be a situation of reduction of valuation of all shares, as is contended." The chart that has been handed over by Shri Rajadyaksha is nothing but reiteration of shareholding pattern emerging from the books to demonstrate that the promoter grouping being made shareholders of the transferee company does not show that non-promoters shareholders, who are sizable in number and more than 65%, would be adversely affected. The entire attempt appears to cast a shadow of doubt and question the bonafides of the promoters group. However, making such allegations by themselves would not be of any assistance to the sole objector. His objections have been referred to by me in great details. He has reiterated them in paras 10 to 15 of his rejoinder. However, the affidavit that is filed of Shri R.Y. Patil and the statements which I have reproduced above would go to show that the promoter group has not increased their stake in the transferee company, but the statement which is relied upon and referred to in para 18 of the affidavit in rejoinder would show that the position is otherwise. 47. It is in these circumstances that I am of the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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