2011 (2) TMI 1263 - SC - Companies Law

Supreme Court upholds amalgamation, emphasizes shareholder approval, rejects challenges to disclosure and statutory compliance. Official Liquidator criticized for non-disclosure.

The Supreme Court upheld the scheme of amalgamation between the appellant company (SIL) and Sesa Goa Limited (SGL), emphasizing shareholder approval and ... Amalgamation - holder of 0.29 per cent of the shares in SIL, filed an affidavit on 18-1-2006 intervening in the aforementioned company petitions - Shareholders of appellant and SGL approved proposed scheme and respondent No. 1 was sole shareholder who objected to said scheme - Registrar on behalf of Regional Director stated that he had no objection to scheme of amalgamation. - Official Liquidator had failed to discharge the duty cast on him in terms of the second proviso to section 394(1) of the Act, Issues Involved:1. Validity of the scheme of amalgamation.2. Disclosure of material facts to shareholders.3. Compliance with statutory provisions under the Companies Act.4. Role and conduct of the Official Liquidator.5. Public interest and fairness of the scheme.Issue-wise Detailed Analysis:1. Validity of the Scheme of Amalgamation:The Supreme Court upheld the scheme of amalgamation between the appellant company (SIL) and Sesa Goa Limited (SGL), reversing the Division Bench's decision that had set aside the Single Judge's sanction. The Court emphasized that the scheme had been approved by a 99% majority of the shareholders and that it is not the role of the court to sit in judgment over the commercial decisions made by shareholders unless the scheme is shown to be unfair, unjust, or unreasonable.2. Disclosure of Material Facts to Shareholders:The Court addressed whether sufficient information was provided to shareholders to make an informed decision. It concluded that the information supplied was adequate, particularly in light of the Single Judge's order mandating the inclusion of specific observations from the inspection report. The Court noted that both the Single Judge and the Division Bench had found the disclosure to be sufficient, and there was no demonstrable perversity in these findings.3. Compliance with Statutory Provisions under the Companies Act:The judgment scrutinized compliance with sections 391 and 394 of the Companies Act. It was noted that the proviso to section 391(2) requires disclosure of ongoing investigations, which, in this case, included inspections under section 209A. The Court held that such inspections should be disclosed as they could lead to further investigations under sections 235 and 237. The Court also clarified that the first proviso to section 394(1) applies to companies being wound up, while the second proviso applies to the dissolution without winding up.4. Role and Conduct of the Official Liquidator:The Court criticized the Official Liquidator for failing to disclose the inspection report under section 209A in his affidavit. It was emphasized that the Official Liquidator's role is to assist the Court by providing a comprehensive report on whether the company's affairs were conducted in a manner prejudicial to the interests of its members or the public. Despite this lapse, the Court found that the Company Judge had considered all material facts, including the inspection report, before sanctioning the scheme.5. Public Interest and Fairness of the Scheme:The Court reiterated that the scheme must be fair, just, and reasonable, and not contrary to public policy. It highlighted that the scheme had been approved by an overwhelming majority of shareholders and that the benefits of the amalgamation included consolidation of management and reduction of administrative expenses. The Court also noted that the scheme would not impede any civil or criminal proceedings arising from the inspections or investigations under sections 209A or 235 of the Act.Conclusion:The appeals were allowed, and the impugned judgment of the Division Bench was set aside, thereby restoring the Company Judge's order sanctioning the scheme of amalgamation. The Court clarified that the scheme would not affect any ongoing or future legal proceedings against the companies involved.