Amalgamation scheme sanction upheld where RBI approval was unnecessary and valuation was not shown to be grossly unfair.

Absence of RBI approval under section 44A did not bar sanction of the amalgamation scheme because that provision applies only where both the transferor and transferee are banking companies, and the transferors here were not banking companies. The share exchange ratio was upheld because it had been fixed by independent valuers using recognised methods, the record disclosed no illegality or gross unfairness, and the Court in sanction proceedings does not reassess valuation as an appellate forum. On those facts, the scheme was treated as fair and legally unobjectionable, and sanction was granted.

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Issues: (i) whether the absence of RBI approval under section 44A of the Banking Regulation Act barred sanction of the amalgamation scheme; (ii) whether the share exchange ratio fixed in the scheme was so unfair as to justify refusal of sanction.

Issue (i): whether the absence of RBI approval under section 44A of the Banking Regulation Act barred sanction of the amalgamation scheme.

Analysis: Section 44A applies where both the transferor and transferee are banking companies. Here, only the transferee was a banking company, while the transferor companies were not. The objection based on want of RBI approval therefore had no statutory foundation.

Conclusion: The objection failed and no RBI approval under section 44A was required on the facts of the case.

Issue (ii): whether the share exchange ratio fixed in the scheme was so unfair as to justify refusal of sanction.

Analysis: The exchange ratio had been determined by independent valuers using recognised valuation methods, and the material on record did not show that the valuation was contrary to law or grossly unfair. The overwhelming majority of shareholders approved the scheme, and the Court's role in sanction proceedings is confined to examining fairness, not revaluing shares as an appellate authority would. In the absence of material demonstrating gross unfairness, the Court found no basis to withhold sanction.

Conclusion: The objection to the valuation and exchange ratio was rejected.

Final Conclusion: The scheme of amalgamation was held to be fair and legally unobjectionable, and judicial sanction was granted.

Ratio Decidendi: In sanctioning a scheme of amalgamation, the Court does not sit in appeal over the valuation; it will not interfere unless the valuation is contrary to law or shown to be grossly unfair to shareholders.

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