2004 (3) TMI 436 - HC - Companies Law

Court approves Jaypee Cement & Jaiprakash Industries amalgamation, dismissing objections and upholding capital reduction.

Jaypee Cement Ltd., In re

Jaypee Cement Ltd., In re - [2004] 52 SCL 801 (ALL.) Issues Involved:1. Scheme of Amalgamation between Jaypee Cement Ltd. (JPC) and Jaiprakash Industries Ltd. (JPI)2. Reduction of Paid-Up Share Capital of JPC3. Objections by H.B. Stockholdings Ltd. (HBSL)4. Objections by SEBI5. Objections by Other Shareholders6. Jurisdiction of the CourtDetailed Analysis:1. Scheme of Amalgamation between Jaypee Cement Ltd. (JPC) and Jaiprakash Industries Ltd. (JPI):Company Petition No. 26 of 2003 was filed to seek court sanction for the amalgamation of JPI into JPC. JPC, a wholly-owned subsidiary of JPI, proposed a scheme where JPI would merge into JPC. The procedural requirements for the amalgamation were completed, including meetings of creditors and shareholders, which overwhelmingly supported the scheme. The court noted that the amalgamation was in the interest of shareholders and creditors of both companies. The decision was commercially sound, and the objections raised by HBSL and other shareholders were not sufficient to deny the sanction.2. Reduction of Paid-Up Share Capital of JPC:Company Petition No. 25 of 2003 sought confirmation for the reduction of JPC's paid-up share capital from Rs. 418,00,00,000 to Rs. 176,21,69,810. This reduction was a consequence of the amalgamation scheme. The court noted that the reduction did not affect creditors as there was no outgo of funds or change of assets. A special resolution had been passed, and there were no objections. Therefore, the petition for reduction of share capital was allowed.3. Objections by H.B. Stockholdings Ltd. (HBSL):HBSL raised several objections, including allegations of oppression and mismanagement, non-disclosure of legal proceedings, and inquiries by SEBI. The court found that HBSL's objections were not bona fide, noting that HBSL had increased its shareholding in JPI after the scheme was approved, indicating a lack of genuine dissent. The court also found that the non-disclosure of SEBI inquiries was not material, as these inquiries were against certain shareholders and not the company itself. The objections related to legal proceedings were also dismissed as they did not affect the amalgamation.4. Objections by SEBI:SEBI had raised objections regarding the acquisition of shares by the promoter group in violation of SEBI regulations. The court found that SEBI's objections were not sufficient to defer the amalgamation proceedings. The court noted that SEBI had failed to provide adequate material to support its claims and had not shown that its intervention was necessary to protect small investors. The court also noted that the unanimous support for the scheme by creditors and the rise in share prices indicated that the amalgamation was beneficial.5. Objections by Other Shareholders:Other shareholders, including Bhavan Jain and Devendra Kumar Bansal, raised objections regarding the non-disclosure of the latest financial position of the companies. The court noted that the latest financial position available at the time of filing the petition was provided, and there was no evidence of any drastic deterioration in the financial position. The objections regarding the change of name and the increase in authorized share capital were also dismissed, as the procedural requirements were met, and there was no adverse impact on shareholders or creditors.6. Jurisdiction of the Court:An objection was raised regarding the territorial jurisdiction of the court, arguing that the matter should be heard by the Lucknow Bench as both companies had their registered offices in Lucknow. The court noted that this objection was raised belatedly and that no prejudice would result if the matter was heard at Allahabad. The Chief Justice had directed that the case be heard at Allahabad, and the court found no reason to transfer the proceedings to the Lucknow Bench.Conclusion:The court sanctioned the scheme of amalgamation between JPC and JPI, finding it to be in the interest of shareholders and creditors. The objections raised by HBSL, SEBI, and other shareholders were dismissed as they did not provide sufficient grounds to deny the sanction. The reduction of paid-up share capital of JPC was also confirmed.