Fairness in amalgamation schemes requires dissenting shareholders' cash option to reflect the value offered to approving shareholders.

A scheme of amalgamation under the Companies Act was sanctioned because it had overwhelming shareholder support and the objections to its commercial merits were rejected. The court held that dissentients carry a heavy burden where a very large majority approves the scheme, but the court's power to make provision for dissenting shareholders requires the cash option to be fair and reasonably correlated with the value available to accepting shareholders. The proposed cash payment was found too low, so the court modified the scheme and fixed a higher per-share amount for dissenting shareholders.

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Issues: Whether the scheme of amalgamation under section 391 of the Companies Act, 1956 should be sanctioned, and whether the cash option payable to dissenting shareholders required modification to ensure fairness under the court's power to make provision for dissentients.

Analysis: The scheme had overwhelming shareholder support and the objections raised to the commercial merits of the amalgamation were rejected. The court held that where a very large majority approves a scheme, the dissentients bear a heavy burden to show that the scheme is unfair or should not be accepted. However, the cash amount offered to dissenting shareholders had to bear a fair correlation to the value available to accepting shareholders. The court found that the proposed payment of Rs. 110 per share was too low in comparison with the package value of Rs. 145 per share and that fairness was implicit in the court's power under section 394(1)(v) to make provision for persons dissenting from the scheme. Balancing comparable schemes and business considerations, the court fixed Rs. 120 per share as the fair amount.

Conclusion: The scheme was sanctioned, but only after modification of the cash option so that dissenting shareholders would receive Rs. 120 per share instead of Rs. 110 per share.

Ratio Decidendi: In sanctioning an amalgamation scheme, the court may modify the terms to ensure that the provision for dissenting shareholders is fair and bears a reasonable relationship to the consideration available to approving shareholders.

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