1949 (4) TMI 14 - DSC - Companies Law

Appeal allowed, dissenting shareholders' application dismissed, affirming fairness of acquisition offer by Metal Box Co.

Re: Press Caps Ltd.

The appeal was allowed, and the application by the dissenting shareholders was dismissed, affirming the fairness of the offer made by Metal Box Co. to ... Shares of shareholders dissenting from scheme or contract approved by majority – Power and duty to acquire Issues Involved:1. Interpretation and application of Section 209 of the Companies Act, 1948.2. Fairness of the offer made by the transferee company.3. Valuation of freehold property in the balance sheet.4. Onus of proof on the dissenting shareholders.5. Exercise of judicial discretion.Issue-wise Detailed Analysis:1. Interpretation and Application of Section 209 of the Companies Act, 1948:The case revolves around an originating summons taken out under Section 209 of the Companies Act, 1948, which allows a company to acquire shares from dissenting shareholders if a scheme is approved by holders of not less than nine-tenths in value of the shares affected. The section's relevant parts were discussed, emphasizing that if the scheme is approved by the majority, the transferee company can give notice to dissenting shareholders to acquire their shares unless the court orders otherwise.2. Fairness of the Offer Made by the Transferee Company:The main contention was whether the offer by Metal Box Co. to acquire shares of Press Caps Ltd. was fair. The appellants argued that the offer was fair, citing that the valuation provided was above the market price. The respondents contested this, focusing on the undervaluation of freehold property in the balance sheet. The court ultimately found that the offer was fair, noting that the majority of shareholders had accepted it and that the valuation was reasonable given the market conditions.3. Valuation of Freehold Property in the Balance Sheet:A significant point of contention was the valuation of freehold property listed in the balance sheet at cost less depreciation, which was significantly lower than its market value. The court noted that this method of valuation was common practice and did not mislead shareholders. The judge in the lower court had erred by treating this as a valuation, leading to his conclusion that the offer was unfair.4. Onus of Proof on the Dissenting Shareholders:The court emphasized that the onus was on the dissenting shareholders to prove that the offer was unfair. Referring to the principle established in Re Hoare & Co., Ltd., the court reiterated that unless it is affirmatively established that the scheme is unfair, the court should not oppose the views of the majority of shareholders. The dissenting shareholders failed to meet this burden of proof.5. Exercise of Judicial Discretion:The respondents argued that the judge's discretion should not be interfered with. However, the appellate court found that the judge had misdirected himself by considering the balance sheet figure as a valuation. The court concluded that the judge's exercise of discretion was based on an incorrect understanding of the facts and evidence, warranting the appellate court's intervention.Separate Judgments:Somervell, LJ:Somervell, LJ, discussed the statutory framework and the fairness of the offer, ultimately concluding that the offer was fair and the appeal should be allowed.Evershed, LJ:Evershed, LJ, agreed with Somervell, LJ, emphasizing the importance of the majority's acceptance of the offer and the misdirection by the lower court judge regarding the balance sheet valuation.Wynn Parry, J:Wynn Parry, J, concurred with the views of his colleagues, stressing the correct application of the burden of proof and the misdirection by the judge in the lower court.Conclusion:The appeal was allowed, and the application by the dissenting shareholders was dismissed, affirming the fairness of the offer made by Metal Box Co. to acquire shares of Press Caps Ltd.