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1961 (6) TMI 22 - GUJARAT HIGH COURT

1961 (6) TMI 22 - GUJARAT HIGH COURT - TMI - Dated:- 26-6-1961 - N M. MIABHOY J. ORDER N.M. Miabhoy, J. 1. This is a petition under Section 394, read with Section 391, Indian Companies Act, 1956 (No. 1 of 1956), for amalgamating two textile Mills. The petitioner is The Sidhpur Mills Company Limited, having its registered office at Sidhpur, District Mehsana, in the State of Gujarat, (hereinafter referred to as 'the Sidhpur Company'). The petition is opposed by one of the Directors of the .....

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sRs.Maganlal Prabhudas and Company were the managing agents of the company. The firm consisted of eight partners, five of whom were Ravindra, Surendra, Bipinchandra, Hareshchandra and Krishnakumar, all sons of one Maganlal, (hereinafter referred to in this judgment as 'the five brothers'). The other three partners were Babulal Chunilal, Dineshchandra Chimanlal and Chandrakant Amrilal. The last three are the cousins of the five brotheRs.On 1st April 1959, the five brothers held 2086 ordin .....

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algamated with The Raghuvanshi Mills Ltd., having its head office at Bombay, (hereinafter called 'the Bombay company'). It was incorporated in 1923. The premises of this company were destroyed in a fire in 1944. New machinery was installed thereafter. Thus, the plant and machinery of the Bombay company is more recent and that of the Sidhpur company is, comparatively speaking, older. However, the evidence is that the latter has been kept in a more or less efficient condition. On 1st April .....

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tal share capital and the other three partners of Maganlal Prabbudas and Co. held 5934 shares roughly constituting 14.83 per cent of the share capital. 4. On the 1st of April 1959, Shri Ratilal Nathalal was the Chairman of the Sidhpur company. In paragraph 14 of his affidavit, dated 21st June 1960, he has given the background in which the scheme of amalgamation For which sanction is asked for in the present petition was formulated and approved by the directors of the two companies. He deposes th .....

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further deposes that, although this was so, the Sidhpur company was not able to alter its setup by reason of its capital structure and the storage of finances. Mr. Ratilal further deposes that a precipitous fall took place in the price of cotton yarn and cloth, of coarse and medium counts, and that, because of this, it was well-nigh impossible for the directors to run the Sidhpur company economically and profitably; and that, on account of the strain on the financial resources of the company, th .....

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suggestion for amalgamating the Sidhpur company with the Bombay company. He states that, at the relevant time, the Bombay company was in a more prosperous condition than the Sidhpur company. The Bombay company was engaged in the production of superfine cotton yarn and art silk fabrics which goods were either being sold locally or exported under the Export Promotion Scheme. Shri Ratilal further deposes that he and his co-director felt that, if a scheme was formulated for amalgamating the two comp .....

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g, under the scheme, the Sidhpur company purchases the entire estate, right, title and interest of the Bombay company and takes over all its existing assets, debts and liabilities. The scheme comes into effect from 1st April 1959, (hereinafter referred to as the relevant date). All the actions, suits and proceedings pending at the relevant date by or against the Bombay company are continued by or against the Sidhpur company. Services of the employees of the Bombay company are transferred to the .....

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essRs.Ravindra Maganlal and Company, Private Limited, its managing agents, and MessRs.Maganlal Prabhudas and Company shall not be paid any compensation for loss of employment. The scheme gives power to the Board of Directors of both the companies to assent to any variation, alteration or modification of the scheme and/or to any condition that may be imposed and/or any direction that may be given by the Court in respect thereof. 6. The petitioner contends that, by the aforesaid scheme, it will be .....

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ration payable to one set of managing agents will be far less than that payable to two sets. The main advantage of the scheme for the Sidhpur company is said to be that, whereas there is no reasonable prospect for the shareholders of the Sidhpur company to get any dividend in near future, by reason of the amalgamation of the two companies, they will have a reasonable prospect of getting dividends almost immediately, although the company had not Been able to pay any dividend for a number of years .....

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setting forth the terms of the scheme and certain other matters, to be presently mentioned. The Sidhpur company also summoned another meeting of its shareholders for the purpose of considering certain resolutions which it thought were required to be passed to carry out the scheme. On 19th February 1960, therefore, two meetings of the shareholders of the Sidhpur company were held. One was the official meeting at which a resolution was moved for approval of -the scheme. The second was an extraordi .....

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he Controller of Capital issues under the Capital Issues (Control) Act, 1947, the Board of Directors are empowered to allot such number of shares and/or Fractional Certificates to such persons as may be entitled thereto by virtue of the scheme of amalgamation of the Bombay company with the Sidhpur company when sanctioned by that company and all other interests concerned and sanctioned by the High Court of Judicature at Bombay. The resolution further added that the Board of Directors was thereby .....

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d "be filed by the Sidhpur company to the High Court of Bombay, some of the opposing shareholders filed a suit on 27th February 1960 in the City Civil Court at Bombay, in which they obtained a temporary injunction against the Sidhpur company, restraining it from taxing further action in pursuance of the resolution approving the scheme. That temporary injunction, however, was dissolved in an appeal to the High Court of Bombay, and it was thereafter that the present petition was filed on 1st .....

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Maharashtra. However, later on, the opposing shareholders raised a contention before that Court that, after the reorganization, the 'High Court of Maharashtra had no jurisdiction to (SIC) with the petition of the Sidhpur company and that the only Court which had jurisdiction to do so was the High Court of Gujarat. On this contention being raised, the learned Chief Justice of the High Court of Maharashtra, in exercise of the powers conferred upon him by the States Reorganization Act, transfer .....

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ons is about 899 share. Some of these shareholders were present at the official meeting of the company in person or by proxy and voted in favour of the resolution approving the scheme. The contention of these share-holders is that certain material facts affecting the amalgamation were not brought to their notice and w"re not known to them when the official meeting was (SIC) and the resolution was considered. They state that certains important facts have been brought to light which have a he .....

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mpany will be 49326 shares, constituting roughly 57.29 per cent of the total share capital of that company as against 13.57 per cent which they have in the Sidhpur company and that the total holding of the opposing partners will be 12769 shares in the amalgamated company, constituting roughly 15 per cent of the same capital as against 15.75 per cent at present held by them in the Sidhpur company. 13. The opponents oppose the scheme on various grounds. Their first contention is that the statutory .....

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ined that the result of the amalgamation would be that they would come to be allotted 47345 shares in the Sidhpur company which together with their existing shareholding would give them 57.29 per cent of the total number of shares of the amalgamated company, thereby giving them a majority vote at any meeting of the amalgamated company. The opposing shareholders contend that it was necessary not only for the aforesaid five brothers, but also for the directors of the company and the other three op .....

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hares of the amalgamated company, thus giving them almost 3/4th majority vote at any meeting of the company. The second contention is that the ratio of shares which was given to the Bombay company for transferring its assets and liabilities to the Sidhpur company was unfair and unreasonable and that the directors had not taken into consideration all the relevant circumstances bearing upon that ratio, and that, if all the material facts had bean properly considered and assessed, the ratio would n .....

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a petition under Section 394 of the Indian Companies Act, 1956. The main principles were not in dispute. However, there was considerable discussion as to on whom lay the burden of proving that the scheme was fair and reasonable. Both the sides relied upon two English cases. However, each one, in support of its contention, sought to emphasise different judgments delivered In those two cases and different passages therefrom. The learned Solicitor General relied upon the judgment of Vaughan Willia .....

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in fn re Alabama, new Orleans, Texas and Pacific Junction Rly. Co., (1891) 1 Ch 213. I do not now, any more than' I did in the course of the argument, agree with the suggestion made by Sir Horace Davey as to the meaning of the following words of Lord Justice Lindley (1) : "The Court must look at the scheme, and see whether the Act has been compiled with, whether the majority are acting bona fide, and whether they are coercing the minority in order to promote interests adverse to those o .....

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-with immediately preceding, "whether the majority are acting bonafide". But it seems to me that the words of lord Justice Lindley, which immediately follow those which I have read, shew that that is not what Lord Justice Lindley meant. He proceeds as follows: "And then see whether the scheme is a reasonable one or whether there is any reasonable objection to it, or such an objection to it as that any reasonable man might say that he could not approve of it". Then Lord justic .....

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by this scheme than you would be if things were felt alone. That is the view of the majority. Now can anybody say that this is not a reasonable view for the majority to take? Whether they have other interests or not, I think we ought to see whether anything can be said against the reasonableness of the view taken by the majority of the first debenture-holders, without reference to whether they are second debenture-holders, or whether they are shareholders or not. Can anybody say that this Scheme .....

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on the majority of the creditors who have supported it. These two judgments seem to me to hold that the duty of the Court is to approve of the scheme, unless there is something before it which shews it either that the scheme was not made in good faith, or that it is a scheme that, so far from being fair and reasonable, is one that an intelligent and honest man, acting alone in respect of his interests, could act approve of." Mr. Amin did not take any exception to the statement of law as to .....

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ors or members, was not justified by the judgments delivered by those two Lord justices. For this purpose, Mr. Amin read extensively from the judgments of those two Lord Justices in (1891) 1 Ch 213, at pp. 242 to 248. The judgments of both these learned Lord Justices were read extensively In my Court. I find nothing in any of the two judgments which bears out the observation at Lord Williams, J. that those two learned Judges had said down that the burden of proof was on the opposing erectors.The .....

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rs take the view that this commercial scheme will work, and that it is the best thing that can be done In the interest of themselves as holders, of first class debentures". I do not agree that the aforesaid passage bears out the contention of the learned Solicitor General. I have no doubt whatsoever that, in that passage, Bowen, L J. was not at all discussing the question of burden of proof. Some of the passages in the judgment of Lindley, L.J. are capable of being read as if the learned Ju .....

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a are in a decidedly better position by this schema than you would be if things were left alone. That is the view of the majority. Now, can anybody say that this is not a reasonable view for the majority to take? Whether they have other interests or not, I think we ought to see whether anything can be said against the reasonableness of the view taken by the majority of the first debenture-holders, without reference to whether they are second debenture-holders, or whether they are shareholders or .....

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d by Vaughan Williams in that sense; nor was it contended by the learned Solicitor General that it should be read or construed in that way. The learned Solicitor General, however, placed reliance upon 'the case In re, Hindusthan General Electric Corporation Ltd., reported in AIR 1959 Cal 679, in support of his contention. That is a decision of a single Judge of the Calcutta High Court. The learned Judge was considering a petition under Section 391, Sub-section (2) of the Companies Act. At pa .....

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rtions devoid of any particulars have been made in the affidavit in opposition." The observations of the learned Judge are entirely based upon his reading of the judgment of Bowen, L.J. As already stated, I have gone through the whole of the judgment of that learned Judge and specially that part which is reported at p. 399 which is referred to by the learned Judge of the Calcutta High Court. I am unable to discover anything therein which would even remotely show that Lord Bowen laid down or .....

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hich such a proposition was laid down. In fact, he stated that that was the solitary case reported In India under Section 391 of The Indian companies Act which he had been able to discover. In my judgment, Mr. Amin is right that, in Re Alabama's case, (1891) 1 Ch 213, it has not been decided that the burden of proof is on the opposing creditors or members.Having regard to the above considerations, in my judgment, it is not possible to say that there is authority for the proposition that the .....

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the approach to the case. Otherwise, both the sides relied upon the judgment delivered by Lord Lindley, J. as to the correct approach to a case of the present type. The function of the Court in a case of the present type is two-fold. The first function is to determine whether the statutory requirements as laid down in Section 391 of the Companies Act have been complied with. The requirements which have been laid down in Section 391 are the sine quo non for sanctioning the scheme. Those requirem .....

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ty has accepted it If this were the law, then, a petition to the Court would be a superfluous thing. The very fact that the Legislature has said that, even after the requisite majority has sanctioned a scheme, the Court must be approached and sanction obtained, itself, indicates that the Court should apply its judicial mind to the scheme and reach a conclusion of its own. Probably, this has been so done because the effect of a scheme which is not unanimously passed is likely to affect the intere .....

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flicting claims are to be adjusted. If, on the one hand, a minority were to take up an unreasonable attitude in the matter of the scheme, then, the interests of the majority will suffer if the scheme cannot be pushed through - a scheme which the majority considers to be reasonable and in the interest of the company and the class of persons whom it represents. In that case, the majority will suffer on account of the intransigence of the minority. On the other hand, if the majority has interests a .....

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the present kind is to bear in mind that the Court is neither called upon merely to register a decision of the majority, nor is it called upon to act in such a manner that the minority will create a statement and thereby retard the progress which the majority has legitimately and reasonably a right to expect and make. It is for the latter reason that the Judgments in Alabama's case, (1891) 1 Ch 213, point out that due weight must be accorded to the fact that the majority has recorded a decis .....

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The test in all such cases is to determine how a reasonable person, endowed with ordinary commonsense and acting honestly; will view the scheme having regard to all the circumstances' bearing reasonably and properly on it. When we are dealing with a company which is dealing in commerce or industry or with similar activities, then, the scheme has got necessarily to be looked at from the point of view of a prudent commercial man. Viewing the scheme in this way, if the Court comes to the conclu .....

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en, it is the duty of the Court to protect the minority from the tyranny of the majority. From this angle, the Court may have to consider whether the minority is or is not being over-ridden by a majority having interests of its own, clashing with those of the minority. In all such cases, the majority must act in the interests of the class whom it represents. If the majority has other interests in the matter, then, the Court must be satisfied that the majority in taking its decision is not influe .....

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on, the Court must also bear this point in mind that, after all, it is dealing with a compromise, and that, on the same subject, honest people are likely to entertain different opinions. The Court will not view the Scheme with a view to find out whether it is an ideal scheme. The Court will consider it bearing in mind the fact that commercial people, when they have got to deal with a number of points, some of them difficult to decide, are likely to emphasize some points on some occasions or in s .....

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e facts of the case, as prevailing at the time when the scheme was sponsored and approved, can regard it as beneficial for those whom the majority seeks to represent, then, unless there are some strong and cogent grounds to show that the scheme was conceived, designed or calculated to cause injury to others, the Court will ordinarily sanction it, rather than reject it. In this connection, one of the points which was brought out in the judgment of Bowen, L.J. has a relevance and needs to be menti .....

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t one person should be a victim, and that the rest of the body should feast upon his rights. Its object is to enable compromises to be made which ate for the common benefit of the creditors as creditors, or for the common benefit of some class of creditors as such. Now, it is very important to observe that creditors of the company may have other interests besides those of creditors, and that there may be a class of creditors composed of many individuals - some of whom have only interests as memb .....

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le class, would certainly be very much Influenced in its decision, if it turned out that the majority was composed of persons who had not really the interests of that class at stake." 15. Therefore, in my judgment, the correct approach to the present case is (i) to ascertain whether the statutory requirements have been complied with, and (ii) to determine whether the scheme as a whole has been arrived at by the majority bonafide and in the interests of the whole body of shareholders in whos .....

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accounting errors have crept in or what legal rights of one or the other sides have or have not been protected. It must be tested from the point of view of an ordinary reasonable shareholder, acting in a businesslike manner, taking within his comprehension and bearing in mind all the circumstances prevailing at the time when the meeting was called upon to consider the scheme in question. I am emphasizing the last point because an argument was made by Mr. Amin that certain circumstances or event .....

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the circumstances which were in existence at the time when the scheme was formulated, deliberated upon and approved. If any other approach were to be made, then, in that case, there would be no sanctity about business contracts. In fact, such an approach may induce interested persons to shape future events and circumstances in such a way as to convert a reasonable scheme into an unreasonable one. 16. Having considered the principles governing the correct approach, I propose to consider in detai .....

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a), I must bear in mind, not only the provisions of that clause, but also the other provisions of the section. Section 393 is as follows: "393. information as to compromises or arrangements with creditors and members - (1) Where a meeting of creditors or any class of creditors, or of members or any class of members, is called under Section 391,- (a) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement selling forth the terms of th .....

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e meeting which is given by advertisement, there shall be included either such a Statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of such a statement as aforesaid. (2) Where the compromise or arrangement affects the rights of debenture holders of the company, the said statement shall give the like information and explanation as respects the trustees of any deed for securing the issue of th .....

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y of the statement. (4) Where default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees; and for the purpose of this sub-section any liquidator of the company and any trustee of a deed for securing the issue of debentures of the company shall be deemed to be an officer of the company: Provided that a person shall not be punishable under this sub .....

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self as may be necessary for the purposes of this section; and if he fails to do so, he shall be punishable with fine which may extend to five hundred rupees". The Clause (a) may be divided into two principal limbs. Each limb will contain two parts. The first limb gives a direction that the notice calling the meeting must contain two things; (i) a statement setting forth the terms of the compromise or arrangement, and (ii) explaining its effects. The second limb directs that the statement s .....

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amely, that, along, with the notice, a statement, setting forth the terms of the scheme, were sent. Mr. Amin's contention, however, is that the second part of the first limb of the clause has not been complied with, namely, that which directs that the effect of the scheme must also be explained in the statement. Mr. Amin's contention is that two things should have been mentioned in the statement and that, as this. is not done, the effect of the scheme has not come to be explained to the .....

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As regards the second limb of Clause (a), the contention of Mr. Amin is that it was necessary that the shareholding of the five brothers In the Bombay company should have been mentioned in the statement. The: contention is that the statement should have mentioned that the five brothers held between them 27057 shares in the Bombay company, and that, as a result of the amalgamation, they would get 13/4 shares in the Sidhpur company for each of those shares. He also contends that the shareholding .....

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t, as a result of the allotment of new shares in the Sidhpur company, the five brothers would come to hold in the amalgamated company 49326 shares, and that, that share-holding represented 57.29% of the total share-capital of the amalgamated company. He further maintains that they should have also mentioned in the statement the number of new shares which would come to be allotted to their supporters and relatives and the total percentage or shares which all these persons combined together would .....

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8. Before I deal with the contentions which were urged by the learned Solicitor General which related to the construction of Section 393, Indian Companies Act, I propose to dispose of the contention of Mr. Amin that, under the aforesaid clause, it was necessary for the Sidhpur company to mention the share-holding of the friends and relatires, of the five, brothers and the directors the Sidhpur company in the Bombay company. The latter part of the Clause (a) deals with the material interests or o .....

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ts. 19. I may also dispose of another contention of Mr. Amin viz. that the details as to how the ratio Had been arrived at and the fact that the benefit which was likely to accrue to the amalgamated company on account of the unabsorbed depreciation was subject to the sanction of the Controller of Capital issues, should have been mentioned in the statement. Mr. Amin contends that these two things Were necessary to be mentioned for the purpose of explaining the effect of the scheme, I cannot agree .....

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ot to be explained are not the details of the scheme, but, the effect which the scheme will have obviously on such matters as the welfare of the company and the welfare of its shareholders or creditors, with whose interests the scheme purports to deal. "Effect" means consequence, a condition which arises as a result of a certain course of action. If there is anything in the scheme, compromise or arrangement, which is not quite obvious to a person, reasonably acquainted with the facts o .....

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of the above two things. The statement does mention that the shareholders of the Bombay company will be given 13/4 shares in the Sidhpur company for each share held in the Bombay company. That matter is self-evident and will be known to anyone who cares to read the statement. No further explanation on that particular point is called for. The details as to the way in which the ratio was arrived at is not a matter relating to the effect of the scheme. That is a matter of detail and pertains to thi .....

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wo facts should have been mentioned in the statement accompanying the notice. 20. Before I deal with the further submissions of Mr. Amin, it is necessary to dispose of questions raised by, the learned. Solicitor General, relating to the construction of Section 393(1), Clause (a) in so far as the second part of that clause is concerned. I may again mention that that part of the clause requires two things to be mentioned in the statement, viz. (i) the material interests of several persons, and (ii .....

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of the clause. He contends that interests of the concerned persons in the company atone are to be mentioned and not interests in anything' dehors the company. The effect of the construction which the learned Solicitor General seeks to place upon this part, of the clause will be that only Interests in the Sidhpur company should have been mentioned and not those in the Bombay company. Thus, the contention of the learned Solicitor General is that interests which are to be mentioned are those w .....

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he effect on the like interests of other persons. The contention is that the like interests mentioned In the last part of the clause means material interests spoken of in the first part of the clause. Therefore, the submission is that, in applying the section, the Court must have regard only to interests which the persons concerned have in the company of which they are holding the positions as mentioned in the section and not interests In any other company, corporation or body. The learned Solic .....

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of the second limb of Clause (a) as being confined only to the interests of the concerned persons in the company in respect of which the scheme is being propounded. I find it difficult to do so for more than one reason. In the first instance, the second limb of the clause appears to be a species of that which is provided for In the first limb of the clause. The main provision of the clause is to be found in the first limb and the second limb is only a particular illustration of that which is req .....

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ust follow that, as the first limb deals with the terms of a scheme, the second limb also must necessarily deal with the same topic, viz. the terms of the scheme. If the Legislature, after-having spoken in the first limb about the terms of the scheme, intended suddenly to switch off to some other topic, then, probably, the Legislature would have used appropriate language to convey the idea that the interests which it had in mind were interests which related to something else. Secondly, the provi .....

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rnish free of charge to the shareholder a copy of 'the statement' if an application happens to be made for the purpose by the shareholder. There cannot be any doubt that the term 'statement' used in both Clause (b) and Sub-section (3) refer to "a statement setting forth the terms of the compromise or arrangement proposed and explaining its effect." The first part of Sub-section (3) says so in express terms. In my judgment, both in Clause (b) and Sub-section (3), the exp .....

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y judgment, the Legislature has not done this because, in its view, the second limb of Clause (a) deals with only some of the particulars of the matters to be mentioned under the first limb thereof. In other words, in enacting Clause (a), the Legislature has envisaged the statement referred to therein as one whole statement and this is a clear indication of the fact that the interests mentioned in the second limb deal with the interests in the scheme referred to in the first limb of Clause (a). .....

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he interests which a director etc. has to mention in the statement is not only the interests which he holds or possesses as such director, but all the interests which he holds or possesses in any other capacity. In my judgment, the section is cast in the widest possible terms. It states in express terms that the interests which the director possesses not only as a member or a creditor but any other interests which he possesses in any other capacity has got to be mentioned in the statement under .....

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which requires the effect of material interests to be stated supports his submission. His contention is that the expression "like Interests of other persons" refers to the interests of those persons in the company itself and has no relation to the scheme referred to in Clause (a). This argument is untenable. The latter part of the clause says that what is to be mentioned is the effect of the scheme. In other words, the effect which has got to be explained is the effect on "those& .....

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n those mentioned as concerned persons in Clause (a) The comparison which is to be effected is between the material interests of the concerned persons and the material interests of the non-concerned persons. The argument of the learned Solicitor General is based upon the submission that the expression "like interests" in the last part of Clause (a) refers to the interests in the company and to no other interests. In other words, according to him, the interests of the other persons whic .....

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s the interests spoken of in the earlier part of Clause (a) and that earlier part refers to material interests. Therefore, the comparison which is to be effected is between the effect on the material interests of the concerned persons and the material interests of the non-concerned persons and in every case the interests which are to be compared are the interests in the scheme and not merely the interests in the company alone. Thus, in my judgment, the meaning of the latter part of the clause is .....

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on-concerned persons, then, that effect must also be mentioned in the statement. 25. The learned Solicitor General contends that even if I do not agree with his submission regarding the construction of Clause (a), there is one more question which requires to be considered. He contends that the true construction of Clause (a) aforesaid is that each concerned person is required to mention his own interest and nothing more. In other words, each concerned person is not required to mention the intere .....

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terests of the other concerned persons and it is highly Improbable that the Legislature can have intended to punish a person for a default committed by another person. He argues that, therefore, Sub-section (4) must be so construed that it will punish only those who actually fail to communicate their own interests and of none else. Thus, the learned Solicitor General contends that the interests which each of the five brothers possesses cannot be said to be a material interest. He contends that t .....

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A plain reading of Sub-section (4) makes it quite clear that that sub-section makes the company and every officer of the company criminally responsible for every default under the section. That sub-section punishes every default which arises out of non-compliance with the requirements of any part of Section 393. That sub-section casts a duty not only on persons who hold material interests to comply with the requirements of the sub-section, but, casts that duty also on the company and every offi .....

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any to acquaint himself or itself with the material interests of every other concerned person, such as the director, managing partner or manager of the company, and to mention that interest and to explain its effect in the statement. That is the primary duty which has been cast upon the concerned persons. If they fail in this duty, then, they are responsible for the breach of that duty and will be liable to be punished under Sub-section (4). But, the duty which is cast on these persons is not an .....

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ction (4) seems to have been enacted. That proviso enacts in specific terms that a person shall not be punishable under Sub-section (4) if he shows that default was due to the refusal of any other person being a director, managing director, managing agent, secretaries and treasurers, manager or trustee for debenture holders, to supply the necessary particulars as to his material interests. In other words, if Sub-section (4) is read together with the proviso, the effect is that every concerned pe .....

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necessary that ha should furnish that information to the company and the other concerned persons and if he fails to do so, then, he renders himself liable to be punished under Sub-section (5). This is an additional criminal liability of a Kind other than the one imposed by Sub-section (4) which is cast on all the concerned persons. Therefore, the scheme of the penal provisions in Section 393 appears to be that it is the duty of every concerned person to bring to the notice of the company and ot .....

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which every person concerned possesses, not only in the company, but also in the scheme, to be stated by all the other persons concerned and if the latter part of Clause (a) applies, then, the effect thereof must also be mentioned. Under the circumstances, in my judgment, the directors and the managing agents of the Sidhpur company should have mentioned in the statement all the interests which each one of them possessed in the scheme and if the effect of the scheme on those interests was differe .....

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older of the Bombay company has in the scheme itself. Under the scheme, he is to get 3/4ths shares more than the shareholder of the Sidhpur company. Therefore, the interest which the shareholder of the Bombay company will be acquiring in the Sidhpur company will be a material interest. Though the directors and the managing agents of the Sidhpur company are not interested in this matter as such directors and managing agents, but, they are interested therein only as shareholders of the Bombay comp .....

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