Court sanctions Scheme of Arrangement, rejects shareholder objections. Share exchange ratio approved based on expert advice.

The court rejected objections raised by a shareholder and sanctioned the Scheme of Arrangement as proposed by the Petitioner Company. The court found no evidence of oppression of minority shareholders and approved the share exchange ratio based on expert advice and majority shareholder approval. The Registrar of Companies had no objections, and the petition was granted in terms of the specified prayer clauses, except for one relief not pressed for by the petitioner.

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Issues Involved:
1. Amendment to the Scheme
2. Sanction of the Compromise or Arrangement
3. Transfer of Specialty Chemicals Business
4. Transfer of Debts, Liabilities, Duties, and Obligations
5. Allocation of Equity Shares
6. Objection by a Shareholder
7. Conduct of the Shareholders' Meeting
8. Share Exchange Ratio
9. Allegations of Oppression of Minority Shareholders

Detailed Analysis:

1. Amendment to the Scheme
The court allowed the draft amendment submitted by the Petitioner Company, marking it for identification and requiring it to be carried out within two weeks.

2. Sanction of the Compromise or Arrangement
The petitioners sought a court direction to sanction the compromise or arrangement, making it binding on all members and creditors of both the Petitioners and SC Co. from 1-4-1996.

3. Transfer of Specialty Chemicals Business
Under section 394 of the Companies Act, 1956, the petitioners requested the transfer and vesting of their entire Specialty Chemicals business, including all related assets and rights, to SC Co. as a going concern from 1-4-1996.

4. Transfer of Debts, Liabilities, Duties, and Obligations
The petitioners also sought an order under section 394 for the transfer and vesting of all debts, liabilities, duties, and obligations pertaining to the Undertaking to SC Co. from the Appointed Date, making them the responsibilities of SC Co.

5. Allocation of Equity Shares
The petitioners requested that each member holding equity shares as of a Record Date be allotted one fully paid-up equity share of Rs. 10 each in SC Co. for every two fully paid-up equity shares of Rs. 10 each held in the Petitioner Company.

6. Objection by a Shareholder
Shri Lakhani, a shareholder, objected to the Scheme of Arrangement, arguing that the proposed share exchange ratio of 1:2 was unfair and should be 1:1. He claimed that his amendment to this effect was improperly dismissed by the Chairman without reason, which he argued was against the principles of natural justice and amounted to oppression of minority shareholders.

7. Conduct of the Shareholders' Meeting
The meeting was conducted as per court directions, with the Chairman submitting a verified report. The report indicated significant support for the Scheme, with 91.13% of shareholders in number and 99.88% in value voting in favor. The Chairman explained the rationale behind the 2:1 share exchange ratio, which was based on future equity servicing capacity, avoiding fractional entitlements, and meeting stock exchange listing guidelines.

8. Share Exchange Ratio
The court noted that the share exchange ratio was fixed based on a Chartered Accountant's report and approved by a majority of shareholders. Citing precedents, the court emphasized that it would not disturb the ratio unless there was manifest unreasonableness or fraud, neither of which was demonstrated by the objector.

9. Allegations of Oppression of Minority Shareholders
The court found no evidence of oppression of minority shareholders. The objection raised by Shri Lakhani, who held only 9 equity shares, was not supported by any other shareholders. The court rejected his claims, noting that the majority's decision, based on expert advice, should prevail.

Conclusion
The court rejected the objections raised by Shri Lakhani and sanctioned the Scheme of Arrangement as proposed by the Petitioner Company. The Registrar of Companies had no objections, and the petition was made absolute in terms of the specified prayer clauses, except for one relief that the petitioner did not press for.

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