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of <h1>Court dismisses challenge to company amalgamation due to lack of shareholder standing and upholds procedural compliance.</h1> <h3>Sant Chemicals (P.) Ltd. Versus Aviat Chemicals (P.) Ltd.</h3> Sant Chemicals (P.) Ltd. Versus Aviat Chemicals (P.) Ltd. - [2000] 25 SCL 473 (BOM) Issues Involved:1. Setting aside the order dated 17-12-1998.2. Allegations of fraud and suppression of facts by the petitioner-company.3. Locus standi of the applicants.4. Jurisdiction of the company court to set aside orders under section 394 of the Companies Act.5. Validity of the transfer of shares and membership status of the applicants.6. Bona fide purchaser status of Aviat.7. Compliance with procedural requirements for amalgamation.Detailed Analysis:1. Setting Aside the Order Dated 17-12-1998:The applicants sought to set aside the order dated 17-12-1998, which allowed the amalgamation of Sant Chemicals (P.) Ltd. (Sant) with Aviat Chemicals (P.) Ltd. (Aviat), on the grounds that it was passed without their knowledge despite being 50 percent shareholders and directors of Sant. They claimed the order was obtained through fraudulent means by suppressing their shareholder status.2. Allegations of Fraud and Suppression of Facts:The applicants alleged that the petitioner-company defrauded the court by not disclosing that the applicants held 50 percent shares in Sant. They claimed that Sant obtained consent letters from a single shareholder, Mrs. Geeta Tushar Thakkar, and misrepresented this to the court to avoid notifying the applicants about the amalgamation proceedings.3. Locus Standi of the Applicants:Aviat contested the locus standi of the applicants, arguing that they were neither members nor creditors of Sant and thus had no standing to challenge the amalgamation. Aviat claimed to have purchased 100 percent shares from Chawlas and asserted that the register of members did not list the applicants as members.4. Jurisdiction of the Company Court:Aviat raised a preliminary objection, asserting that the company court lacked jurisdiction to set aside orders passed under section 394 of the Companies Act. They argued that the appropriate remedy for the applicants was to file an appeal under section 391(7) of the Act. The court agreed, referencing the Calcutta High Court's judgment in Bank of Mymensing Gouripur Ltd., which held that the only way to challenge a sanctioned scheme was through an appeal.5. Validity of the Transfer of Shares and Membership Status:The court examined the applicants' claim that they held 50 percent shares in Sant. It found that the applicants were not recorded as members in the register of members or the records of the Registrar of Companies (ROC). The court held that a shareholder does not become a member until their name is entered in the register of members, and thus, the applicants had no standing to challenge the amalgamation.6. Bona Fide Purchaser Status of Aviat:Aviat claimed to be a bona fide purchaser of Sant's shares without notice of any defect in title. They argued that they had conducted due diligence and found no record of the applicants being members of Sant. The court found no evidence of fraud or misrepresentation by Aviat and held that Aviat had acquired good title to the shares.7. Compliance with Procedural Requirements for Amalgamation:The court reviewed the procedural compliance for the amalgamation and found that all necessary notices were given, and consents were obtained. The court noted that the official liquidator and the regional director had no objections to the scheme. The court also observed that the applicants had not taken any steps to assert their rights as members for several years and had not responded to public notices about the amalgamation proceedings.Conclusion:The court dismissed the application, finding no merit in the applicants' claims. It held that the applicants were not members of Sant and had no standing to challenge the amalgamation. The court also found no evidence of fraud or misrepresentation by Aviat or Sant. The application was dismissed with costs, and the request for a stay of the order was rejected.
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