1999 (9) TMI 754 - HC - Companies Law

Court approves merger between Asian Coffee Ltd. and Consolidated Coffee Ltd. under Companies Act

Asian Coffee Ltd., In re

The court approved the scheme of amalgamation under section 394 of the Companies Act, 1956, between Asian Coffee Ltd. (ACL) and Consolidated Coffee Ltd. ... Amalgamation Issues Involved:1. Approval of the scheme of amalgamation under section 394 of the Companies Act, 1956.2. Financial positions and business activities of the companies involved.3. Approval and consent from the Board of Directors and shareholders.4. Objections raised by shareholders regarding the exchange ratio.5. Reports and objections from the Regional Director, CLB, and the official liquidator.6. Valuation methods and fairness of the exchange ratio.7. Compliance with statutory procedures and overall fairness of the scheme.Detailed Analysis:1. Approval of the Scheme of Amalgamation:The petition under section 394 of the Companies Act, 1956, sought approval for the amalgamation of Asian Coffee Ltd. (ACL) with Consolidated Coffee Ltd. (CCL). The Board of Directors of both companies had unanimously approved the scheme.2. Financial Positions and Business Activities:ACL, incorporated in 1985, engaged in manufacturing and selling instant coffee, had an authorized capital of Rs. 12 crores. CCL, incorporated in 1943 and a subsidiary of Tata Tea Ltd. (TTL), was the largest coffee plantation company in Asia. Both companies had substantial financial standings with ACL having a total income of Rs. 3,620.93 lakhs and CCL Rs. 10,918.04 lakhs for the year ending 31-3-1998.3. Approval and Consent from the Board of Directors and Shareholders:The scheme received unanimous approval from the Boards of ACL and CCL. The shareholders' meeting of ACL, held on 23-10-1998, saw 233 equity shareholders voting, with a majority of 76,74,443 votes in favor of the amalgamation against 61,536 votes.4. Objections Raised by Shareholders Regarding the Exchange Ratio:Several shareholders, including Challa Rajendra Prasad, objected to the proposed exchange ratio of one equity share of CCL for every six shares of ACL. They argued that the ratio was unfair and undervalued ACL's shares. They suggested that the valuation was biased as it was conducted by auditors associated with TTL and CCL.5. Reports and Objections from the Regional Director, CLB, and the Official Liquidator:The Regional Director, CLB, Chennai, highlighted that the exchange ratio was unfair and would benefit TTL at the expense of minority shareholders. The official liquidator, however, found no misconduct in ACL's affairs.6. Valuation Methods and Fairness of the Exchange Ratio:The valuation was conducted by N.M. Raiji & Co. and A.F. Ferguson & Co., using three methods: net asset value, earning capitalization, and market price. ANZ Investment Bank reviewed and confirmed the fairness of the proposed exchange ratio. The court found no reason to doubt the integrity of the valuers or the fairness of the exchange ratio.7. Compliance with Statutory Procedures and Overall Fairness of the Scheme:The court ensured that all statutory procedures were followed, including the convening of meetings and the provision of necessary material to shareholders. The scheme was found to be fair, just, and reasonable, benefiting both companies and their stakeholders. The objections regarding the exchange ratio were dismissed as the valuation was conducted by reputed firms and confirmed by an independent body.Conclusion:The court dismissed the objections raised by the shareholders regarding the exchange ratio and approved the scheme of amalgamation. The amalgamation was deemed to be in compliance with all statutory requirements and beneficial to the companies involved. Consequently, ACL was ordered to be dissolved without winding up, and its rights, liabilities, and duties were transferred to CCL.