TaxTMI 
TaxTMI 
TaxTMI 
1999 (12) TMI 754
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....getting approval of Scheme of Amalgamation as aforesaid. 2. The Scheme of Amalgamation placed at Exh. C might be referred to from Company Petition No. 69 of 1999, which is the first petition. The scheme provides for the amalgamation of AIL, APL and ACL into APRL pursuant to sections 391 to 394 and other relevant provisions of the Companies Act, 1956 ('the Act') from 1-10-1998 being the appointed date. The scheme is to take effect from the date on which all the conditions and matters referred to in clause 18 are fulfilled and approvals and consents referred to therein have been obtained. After reciting the respective share capitals the scheme proceeds to deal with transfer and vesting of the undertakings including assets and liabilities, debts and obligations, rights and duties, etc. and reorganisation of the capital in the following exchange ratio: (A)Equity Shares of Rs. 10 each, credited as fully paid-up, to the equity shareholders of the Intex whose names are recorded in its Register of Members on the Record Date in the ratio of the 4 equity shares of the face value of Rs. 10 each in the transferee-company for every 7 equity shares of the face value of Rs. 10 each in Intex; (....
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....the Transferee-Company, this Scheine shall become null and void and in that event no rights and liabilities whatsoever shall accrue to or be incurred inter se by the parties or their shareholders or creditors or employees or any other person. In such case each company shall bear its own costs or as may be mutually agreed." [Emphasis supplied] In respect of the aforesaid clause the transferee and transferors-companies moved Misc. Civil Application Nos. 55 to 58 of 1999 in all these petitions for placing on record the fact with regard to extension of time by the respective board of directors. The said miscellaneous civil applications were highly contested and by order dated 10-9-1999 all the said applications were granted in terms of following order: "All the four misc. civil applications are hereby granted, permitting to place on record in the respective company petitions true copies of the resolutions coupled with Pursises signed by all the Directors of the respective companies stating that the time for the Scheme to take effect is extended upto 31st December, 1999, on condition that each of the applicant-company shall deposit on or before 16-9-1999 in this Court a sum of Rs. 5,0....
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....grate business operations, introduce considerable synergies and reduce inter-company transactions; (b)The amalgamation will financially strengthen the transferee-company by capturing the intrinsic synergy between cotton yarn, gabardine and denim. (c )The consolidated financials arising upon the amalgamation of the transferor-companies will be significally larger and the financial statements will be able to present the strengths and operations of the group in a more effective way to its shareholders. The shareholders of all the companies will Benefit from this exercise. (d)If necessary, the amalgamation could pave the way for further restructuring/consolidation in the Group in its best interests." It has also been asserted in the respective petitions that AIL was incorporated by taking over the original Nagari Mills Ltd., and APL was constituted by taking over the original Saraspur Mills Ltd. It could be noticed from the submissions made that originally the said companies whose names have been respectively changed as AIL and APL went financially weak and Arvind Group having had taken them over as aforesaid, the financial condition of the said respective companies stood improved.....
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....itioner He has asserted that the affairs have not been conducted in a manner prejudicial to the interest of the members or of public interest. Since he was permitted to appoint Chartered Accountant from the penal of Chartered Accountants, he appointed Kiran Shah & Associates, C.A. for the purpose of investigation of the affairs of the company and upon report of the said C.A. he expressed his opinion as aforesaid. The report of the Chartered Accountant has been annexed with the Official Liquidator's report. In so far as the Company Petition No. 70 of 1999 filed by petitioner transferor-company APL is concerned, similar is the report dated 12-4-1999 of the Official Liquidator. In case of petitioner transferor-company ACL in Company Petition No. 71 of 1999 is concerned, such report dated 12-4-1999 has also been filed by the Official Liquidator. At the time of hearing of all these petitions neither the Official Liquidator nor his Chartered Accountant had anything to say against the scheme of amalgamation in question. They have not come out with any suggestion either amending or altering in any manner the proposed scheme of amalgamation. He has also not made any submission or suggestion....
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....nce was that he was not given notice of meeting of the shareholders, which was to be held on 5-3-1999 for according sanction to the scheme of amalgamation in question. The notices are sent under certificate of posting, but there might be cases of collusion between the persons from the Post and the persons from the concerned company and, therefore, actual dispatch of the notices under certificate of posting would require scrutiny. It is his case that only he received the notice and all his other relations did not receive the notice of the meeting. According to his say he informed about this fact to the APL. However, without taking into consideration this objection of the objector, meeting was held on 5-3-1999. It has next been submitted that required particulars/facts have not been communicated or informed to the shareholders and intentionally suppressed. Such particulars relate to the capital growth of the respective companies and the schemes whether present or prospective with regard to the business of the companies. He has also contended that immovable properties have not been valued at the market rate prevalent on the proposed date of amalgamation. He has, therefore, submitted t....
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....15 lakhs with reserves of Rs.5 lakhs, totalling to Rs. 20 lakhs being its capital worth. If the balance of profit and loss to the extent of Rs. 5.38 lakhs is deducted from the said capital, it would reflect total capital of Rs. 15 lakhs or less in so far as the transferee-company is concerned. The transferee-company has invested a sum of Rs. 78.30 lakhs on the quoted shares and the market price thereof was Rs. 22.33 lakhs as on 31-3-1998 as stated in the report. It has been asserted that there is no material to know the market value of unquoted investments in the sum of Rs. 13.19 lakhs. It has thus been submitted than there has been negative value of Rs. 30 per share in so far as transferee-Company is concerned. Besides, there is a debt in the sum of Rs. 115 lakhs which the transferee-company owes. There are no particulars for showing who would have to pay or who would have to bear this debt. It is a new company as compared to the other companies and it has no specific business. It is a highly indebted company. Thus, it is merely a company in name with some assets and with no tangible property. It has been asserted that upon being asked by the objector for supply of annual reports ....
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....t to have been filed in Company Petition No. 70 of 1999 in Company Application No. 19 of 1999. In order dated 7-5-1999, while making such observations, attention of the objector was drawn to the following facts in the affidavit setting out his objections appearing at pages 48 and 49 of the record of this petition: "B.... This is supported by wrong affidavits of sending the notices by Under Certificate of Posting by Chairman of petitioner-company, which is saleable commodity under our all corrupted departments for which small persons have to Suffer a lot. Not only this but also this Hon. Courts sanction such a wrong affidavit as a gesture. Knowing this fallacies of such certificate this Horn Courts accepts as legal documents? A separate public interest litigation shall be filed by the objector taking the matter of all earlier such petitions where in all this U.C.P. has been accepted and also in general. If this unscrupulous documents are accepted as legal document by this Hon. Courts, at the same time there shall also be a severe loss of Revenue to the Government also very big amount and encouragement of unscrupulous persons in gay and also the intermediaries who have got such fake....
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.... Rs. 10, 43, 48, 65, 66, 67, 70, 77 Rs. 2 not cancelled but page No. 70 separately cancelled. 125 Rs. 2 separately cancelled page No. 191 not cancelled but only by X mark only. Volume No. 4 pages 1,6,7,17,18,19,20,120 Rs. 2 stamped. On last pages wrongly pasted. Volume 5 page 199 Rs.2 not cancelled. Volume 23 Rs. 10 stamp Apt cancelled 42,47, 50 Rs. 2 not cancelled. Page No. 73 Defaced Stamp of Rs. 10 is used. Page 97 Rs. 10 cancelled affixed. Volume 24 pages 24, 26, 45 68, 92, 140, 168, 185, Rs. 2 not cancelled. Volume 6 Page 172 over stamped not cancelled. 147 Over stamp Rs. 2,148, 178,179,153,152,158,159,180,159 Rs. 2 not cancelled 166 Rs. 2 cancelled 184, 186 Rs. 2 not cancelled. 188, 190 Rs. 2 over stamped not cancelled. Volume 8 pages 3, 4, 5, 8, Rs. 2 stamp not cancelled. Page 9 Rs. 5 affixed cancelled. 35, 43, 46 Rs. 2 not cancelled 81 gather cancelled. Volume 9 Page 1, 7 Rs. 2 not cancelled. Volume 10 page 19 Rs. 10 stamp cancelled used. But in almost all the ledgers third column of side is not stamped as an ordinary mark of receipt of the articles" In the rest of the portion of the affidavit the objector has once again repeated his apology on oath. Turning to his ....
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.... not been disclosed in the scheme of amalgamation and explanatory statement annexed to it. Hence, the voters did not know what they were doing while voting in favour of the scheme of amalgamation. His grievance is that his objections were not considered by the Chairman and by any of the authorities to whom he has sent His objections. He has asserted that meeting of 13.5 per cent preference shareholders was not held and, therefore, it can be said that resolution were not passed by the statutory majority in value and in number at the meeting or meetings as contemplated by section 391. At this very stage it might be noted that as asserted in the affidavit of one Mr. Amar Merita of the transferor-company Industrial Development Bank of India, the sole 13.5 per cent Cumulative Redeemable Preference Shareholder of the petitioner-company has given its 'no objection' to the scheme of amalgamation in question and the report/communication dated 22-4-1999 issued from the said shareholder, namely, Industrial Development Bank of India appears at page 49 stating that the IDBI as preference shareholder has no objection to the proposed merger. It has further been asserted by the objector that, as ....
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....the scheme of amalgamation would be hardly fair to the shareholders of the petitioner-company (AIL). It has also been asserted that Valuers/Chartered Accountants had not computed value of the equity shares of any of the companies on the basis of intrinsic worth of net assets of the respective companies. Besides, APRL transferee-company does not have any fixed assets as on 30-9-1998. It has been asserted that authenticity of the information furnished to the Chartered Accountants is also doubtful. It has been alleged that the Chartered Accountants/Valuers C.C. Chokshi &Co. and Banshi Mehta & Co. have not performed their functions objectively and honestly and in accordance with financial norms and practice, they having acted in collusion with the management of the respective companies sought to be amalgamated. The valuation has been made on the basis of book value in contrast with the market value of the fixed assets in absence of valuation report in that respect and, therefore, intention to defraud the creditors is spelt out from this. Hence, while calling for the explanation of the Chartered Accountants/Valuers they should be directed to revise their report. There has been illegali....
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....not fair and just. The report is also qualified accordingly by the said Chartered Accountants/Valuers and unless such qualification is not removed, the report should not be relied upon. It has, then, been asserted that the objector mortgaged shares of other companies and got the loan from the bank to invest in AIL and the interest on the amount of loan of Rs. 63,000 is paid by the objector and, therefore, the interest of the company deserves to be protected. It has been asserted that by not disclosing any details of AML (Arvind Mills Ltd.) the petitioner is shrewdly misleading the Court. While admitting that there was required majority in approving the scheme of amalgamation it has been asserted that approximately 37 per cent of the equity shares of APL have been held by AML, 50 per cent of the equity shares of the ACL have been held by AML and 21 per cent of the equity shares pf the AIL, i.e., the petitioner transferor-company have been held by the AML. Only 17 per cent equity shares have been held by the public and thus in all these companies AML (Arvind Mills Ltd.) and Arvind Group of companies held major portion of equity capital of the transferor and transferee-companies and....
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....as would prejudice any one of the companies under amalgamation. It has been asserted that the Valuers have given adequate reasons for the method of valuation chosen by them and they are well known Chartered Accountants, whose expertise has been accepted by the Hon'ble Supreme Court of India. None of the valuers has been associated with any of the four companies or AML either as an Auditor or as Tax Adviser and their impartiality could not even otherwise be doubted. It has been asserted that valuation report of assets could have been relevant only if the valuation was being done on the basis of break-up value method and that method is not the only method for valuation. The valuers have not based their opinion only on that basis and, therefore, it was not necessary to obtain valuers' report. They have not proceeded to fix the exchange ratio on the basis of any of the assets of the company. In reality, three companies, viz., AIL, APL and ACL are being merged into APRL, which is a shell company and, therefore, a comparison of relevant financial strength of two companies is hardly needed. What is relevant, therefore, is the relevant strength of the three merging companies (Transferor-Co....
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....ven if the objectors holding 3,300 share of the transferor-company voted against the scheme, would have been assed by more than 99.9 per cent majority in value. It has been asserted that the objections with regard to report of the valuers are irrelevant apart from being misleading. Valuers were requested as per letter datedp-11-1998 to undertake the valuation. Further the report was available on22-1-1999. The same was placed in the meeting of the board of directors of the company held on 24-1-1999. Thereupon the work of drafting of the petitions was undertaken. The application was filed on 28-1 1999.Thus, there was no question of raising any suspicion with regard to report of the valuers. Referring to the earlier proceedings it has been asserted that the petition for sanction of the scheme of amalgamation of Arvind Intex Ltd. (transferor-company AIL) with Arvind Mills Ltd. (AML) was withdrawn because of the stand taken by the foreign investors holding large number of shares in Arvind Mills Ltd., and that small shareholders were likely to be prejudicially affected. In fact, there were no mala fides either in the proposed scheme or withdrawal thereof. The valuers' reports have been c....
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....dine particularly in the light of Gabardine production capacity being set up by the Arvind Mills Ltd. (15) The amalgamation of the transferor-companies into the transferee- company will integrate business operations and introduce considerable synergies in the business of the transferor-companies. The amalgamation is also expected to result in a structure elimination, the cross holdings between these groups companies and would also eliminate inter-company transactions and the inefficiencies arising as a result of such inter company dealings. The Group believes that upon merger the Group would reap the benefit of consolidation through focused management and lower costs and would reflect a better consolidated financial picture. Upon completion of the current restructuring exercise, the Group will have a more focused and leaned structure and would reflect a better consolidated financial picture." 15. With regard to the second objector Mr. Dipak J. Shah it has been asserted that he has been in habit of raising all sorts of frivolous disputes against the Lalbhai Group Companies and against large number of other companies, particulars whereof have been set out on page 56. They need not ....
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....ry, they were not able to point out any deliberate attempt made by any of the officers/employees of the transferor-company APL in seeing that some selected shareholders were deliberately prevented from attending the meeting. A faint effort was made by them to show that there was single stamping on the respective pages of the register by the Postal Authorities. This court had an occasion to examine the register even from that angle, but no direct or indirect attempt on the part of either the employees of the transferor-companies or the Postal Authorities could be spelt out. In that view of the matter, it cannot lie in the mouth of the objectors to say that the procedure of convening meeting of the shareholders has not been either duly or properly complied with. Same would be the position with regard to the objector in petitioner AIL, the transferor-company. However, Mr. Mahesh Bhavsar, the learned advocate appearing for that objector commenced his submissions by giving a list of decisions1!rom which he was to make his submissions. Mr. Soparkar, the learned advocate for the petitioner also referred to some decisions. It would, therefore, be necessary to briefly note down legal positi....
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....on disinterested opinion. On facts, therefore, the Punjab High Court did not sanction the Scheme. A single Bench of the Delhi High Court in Union of India v. Asia Udyog (P.) Ltd.. [1974] 44 Comp. Cas. 359 observed (in the context of tax liability) that the liability of a transferee-company to pay the creditors of the transferor-company would not be a step in aid of the amalgamation, but would be a consequence thereof. In Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd. [1964] 34 Comp. Cas. 405 (CA) Board's power to appoint Managing Director and Managing Director's authority to appoint an Architect was under consideration. Following observations appearing in Sussex Brick Co. Ltd, In re [ 1960] 30 Comp. Cas. 536 (Ch. D.) have also been read : "The matter has been considered m more than one case, and the governing considerations were well stated by Maugham, J. Hoare & Co. Ltd, In re [1933] 150 L.T. 374. Summarising his judgment, it really comes to this : That an applicant, taking advantage of section 209, has, in effect, to show that the scheme is to him unfair, and mat is the yardstick which is accepted and adopted as the criterion which enables a shareholder to get out ....
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....ons, to borrow the expressions of Chandrachud, J., in J.S. Davar's case (supra), it is not possible to enumerate exhaustively what material the Court is entitled to take into consideration, but the Court is required to examine each scheme on its merits and in the light of attendant circumstances. The Court has to view totality of scheme and its workability primely from the following points of view : (i) Whether it satisfies the statutory requirement. (ii)Whether it satisfies the lest of reasonableness and whether the scheme proposed is in good faith which a man of business would reasonably approve. There the Bench observed with regard to exchange ratio as under : "This principle was succinctly seated by the Calcutta High Court in the case of Maknam Investments Ltd., In re [1995] 4 CLJJ 300/[1996] 87 Comp. Cas. 689, 695, that it is a matter for the shareholders to consider commercially whether amalgamation or merger is beneficial or not. The court is really not concerned with the commercial decision of the shareholders until and unless the court feels that the proposed agreement is manifestly unfair or is being proposed unfairly and/or to defraud other shareholders. Whether the ....
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....a) is placed before the voters at the concerned meetings as contemplated by section 391(1). (5) That all the requisite material contemplated by the proviso to sub section (2) of section 391 of the Act is placed before the court by the concerned applicant seeking sanction for such a scheme and the Court gets satisfied about the same. (6) That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously x-ray the same. (7)That the company court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same class whom they purported to represent, (8) That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a co....
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.... the object cause is not such as would cover the business and affairs of the transferor-companies. It was then pointed out by the learned advocate appearing on behalf of the respective companies that mere was an amendment in the object clause of the transferee-company carried out as per the procedure prescribed under the relevant provisions of the Act. That object clause has been read before this Court and it might be reproduced : MEMORANDUM OF ASSOCIATION OF ARVIND PRODUCTS LTD. "I The name of the Company is "Arvind Products Limited". II The Registered Office of the company will be situated in the State of Gujarat. III The objects for which the Company is established are: [A] The main objects to be pursued by the company on its corporation: 1. To carry on the business of spinners, weavers, manufacturers, grinners, pressers, packers and balers of cotton, jute, hemp, silk, wool, and any other fibrous material and the business of weaving, manufacturing, bleaching, dyeing, colouring, printing selling" and buying and dealing as principals or agents in any of the above substances and yarn, cloth, linen and other goods and fabrics, whether textile, fabric, knitted or looped and o....
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....em calculated directly or indirectly to advances the interests of the Company, and to join with any other person or company in doing any of these things. 2. To apply for purchase, or otherwise acquire, and protect and renew in any part of the world any patents, rights, trade marks, designs, licences, concessions, and the like, conferring any exclusive or limited right to their use, or any secret or other information as to any invention which may seem capable or being used for any of the purposes of the company, or the acquisition of which may seem calculated directly or indirectly to benefit the company, and to use, exercise develop or grant licences in respect of, or otherwise turn to account the property, rights or information so acquired, and to expend money in experimenting upon, testing or improving of any such patents, inventions or rights. 3. To acquire and undertake the whole or any part of the business, property, and liabilities of any person or company carrying on or proposing to carry on any business which the company is authorised to carry on, or possessed of property suitable for the purposes of the Company, or which can be carried on in conjunction therewith or whic....
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....company of any obligation undertaken by the Company or any other person or company as the case may be. However, the Company shall not carry on any Banking or Insurance Business. 9. To draw, make, accept, endorse, discount, execute, and issue promissory notes, bills of exchange, bills of lading, warrants, debentures, and other negotiable or transferable instruments. 10. To apply for, promote and obtain any act of Parliament, charter, privilege, concession, licence or authorisation of any Government, State or municipality, or other authority for enabling the Company to carry any of its objects into effect or for extending any of the powers of the Company or for effecting any modification of the Company or for any other purposes which may seem expedient, and to oppose any proceedings or applications which may seem calculated directly or indirectly to prejudice the interests of the Company. 11. To sell, lease, mortgage or otherwise dispose of the property, assets or undertaking of the Company or any part thereof for such consideration as the Company may think fit, and in particular for shares, stock debentures, or other securities of any other company whether or not having objects a....
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....ablish and subsidies and subscribe to any institutions, associations, clubs or funds calculated to be for the benefit of or to advance the interests and well-being of the Company or of any such other company as aforesaid, and make payments to or towards the insurance of any such person as aforesaid, and do any of the matters aforesaid, either alone or in conjunction with any such other company as aforesaid. 18. To establish or promote or concur in establishing or promoting any company or companies for the purpose of acquiring all or any of the property, rights and liabilities of the Company or for any other purpose which may seem directly or indirectly calculated to benefit the Company and to pay all preliminary expenses of these companies including or any part of the cost and expenses of owners of any business or property acquired by the company and to place or guarantee the placing of, underwrite, subscribe for or otherwise acquire all or any part of the shares, debentures or other securities of any such other company. (C) Other objects: 1. To carry on all kinds of Agency businesses including that of Clearing Agents, Freight Contractors, Steamer Agents, Forwarding Agents, Lice....
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....racts, essences, food colours, solvents, plastics of all types, dyestuffs, intermediates, textile auxiliaries, cellophanes, colours, dyes, paints, varnishes, vat and other organic dyestuffs, chemical auxiliaries, disinfectants, insecticides, fungicides, deodrants, biochemical and pharmaceutical, medicinal, sizing, bleaching, phtographical preparations and articles. 7. To carry on in India or abroad the Business of producers, manufacturers, importers, exporters of and dealer in all kinds of paints, distempers, pigments, writing, printing and inks of all other kinds and raw materials used for the preparation of the above, and to carry on the business of manufacturing, fabricating, developing improving, repairing or otherwise dealing in all such machinery, plant, equipment and other related facilities for the production of the aforesaid. 8. To carry on the business of an investment company and to underwrite, sub-underwrite, to invest in, and acquire and hold, sell, buy or otherwise deal in snares, debentures, debentures stocks, bonds, units, obligations and securities issued or guaranteed by Indian or Foreign Governments, State, Dominions, Sovereigns, Municipalities, or Public Autho....
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.... and electrical industries. 12. To take part in the information, supervision or control of the business or operations of any company or undertaking and for that purpose to act as an Issue House, Registrars and Share Transfer Agents, Financial Advisers or Technical Consultants and to appoint and remunerate any directors, administrators or accountants or other experts or agents. 13. To manufacture, process, prepare, preserve, can, refine, bottle, buy, sell and deal whether as wholesalers or retailers or as exporters or importers or as principals or agents, in foods, meats, eggs, poultry, vegetables, canned and tinned and processed foods, protein, health and instant foods of all kinds including baby and dietetic foods, cereals, beverages, cordials, tonics, restorative and aerated mineral waters and foodstuffs and consumable provisions of every description for human or animal consumption. 14. To carry on any where in India and/or else where the business of manufacturers, importers and exporters, wholesale and retail dealers of and in men's, women's and children's clothing and wearing apparel and hosiery goods of every kind nature and description including and hosiery and dealers of ....
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....s or cooperative society or association of persons or body of individuals either at interest or without and/or with or without any security for construction, purchase, enlarge, or repair of any houses, hats, row houses, bungalows, rooms, huts used for residential purpose either in total or part thereof or to purchase any freehold or leasehold lands, estate or interest in any property to be used for residential purposes. 21. To carry on the business of dealers in machinery and plant of every description and kind and in particular machine, tools and implements, and to repair, alter, convert, recondition, prepare for sale, buy, sell, hire, import, export let out on hire, trade and deal in machine tools and implements, other machinery, plant equipments, articles, apparatus, appliances, component parts, accessories, fittings and things in any stage or degree of manufacture, process or refinement. 22. To manufacture, process, buy, sell, import, export or otherwise deal in all kinds of card board parking, plastic packing, polythene packing, gunny bags, containers, bottles, hollow wares, whether made or leather plastic, H.D.P., L.D.P. polypropylene, plastic P.V.C. and other man-made fibr....
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....as Films, sheetings and laminates, Chemicals, Additives, Fillers and reinforcement and all other Plastic materials of all kinds that may be in existence or may be developed in future. 29. To carry on the business of manufacturers, dealers in, exporters and importers of all varieties, kinds and grades of steel, and to carry on and (sic) engineers including (sic ) and dealing in steel billets, steel rods, steel rods, steel ingots, steel sheets, steel wires and in all kinds of steel products whether forged, rolled or drawn and consequently to manufacture, sell and deal in all or any or by-products which will be obtained in the process of manufacturing these steel products. 30. To carry on the business of miners, importers and exporters in and dealers in iron ores, chromium ores, magnesite ores, thorium, uranium, asbestos, nickel, copper, lead, tin, bauxite ores and all ferrous and non- ferrous ores of every description and grades whatsoever in any part of the country and to carry on the business of processing, cleaning, melting, forging, grading and machining to convert the ores into marketable metals. 31. To manufacture, deal, import and export pig iron, sponge iron, farrows silic....
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.... and spare parts, Engineering, Electrical and Electronic goods, Spares, Consumable, Colours, Chemicals, Dyes, Dyes intermediates, Petro-chemicals, Plastics, Packing materials of all kinds and description, their products and by-products or their convertors. 39. To undertake and carry on generally the business as Finance company and in particular Financing of Industrial enterprises, Housing finance, Bills discounting, Factoring, Financing to all kinds and description of Plants, Machineries, Equipments, Household appliances, Office equipments, Furniture, Computers and Vehicles. 40. To act as agents or brokers and as trustees for any person or company and to undertake and perform sub-contracts and to do all or any of the above things in any part of the world, as principals, agents, trustees, contractors and either alone or jointly with others, and, either by or through agents, sub-contractors, trustees or otherwise." 20. It would, therefore, appear that the objector, quite unmindful of the amendment in the aforesaid clause in the Memorandum of Association of the transferee-company, appears to have raised objection with regard to the said clause. 21. The second objection which would....
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....ransferee-company: (A)135 (one hundred and thirty five) 13.5% cumulative redeemable preference shares of Rs. 10 each redeem able at par at the end of ten years or earlier at the option of the transferee-company by giving three months notice; and (B)15 (fifteen) equity shares of Rs. 10 each. (ii) In the event that any shareholder of the transferee-company becomes entitled to a fraction of a share of a value not less than one-half shares, then such shareholder shall be entitled to one share. In the event that any shareholder of the transferee-company becomes entitled to a fraction of a share of a value less than one-half share, then such shareholder's entitlement shall be ignored and such shareholder shall not be entitled to be issued any share in respect of such fractional entitlement. (c)Upon the coming into effect of this Scheme the borrowing limits of the transferee-company in terms of section 293(1)( d) of the said Act, shall without further act or deed stand enhanced by an amount being the aggregate liabilities of the transferor-companies which are being transferred to the transferee-company pursuant to the Scheme, such limits being incremental to the existing limits of the....
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....ror-companies, none of whom had any quotation beyond its face value at any point of time at the relevant period could be said to have been placed at a disadvantage on account of the presence of AML in any of the four companies. All arguments revolving round presence of AML canvassed by tie objectors and on their behalf deserve to be discarded as obviously the presence of AML would be beneficial for the companies sought to be amalgamated. At this very stage the argument that the demand of the product 'Denim' of AML has reduced whereas demand of product 'Gabardian' of APL has increased might be considered. It has been submitted that all will be in the field of business operations and one or the other product might stand to gain at some or the other point of time. That apart, amalgamation would work to the benefit of the respective products as a result of more organised marketing. This is despite the fact that a company court is not concerned with such an internal working of the scheme of amalgamation, as it is settled law that it has to be left to the prudence of required majority of the shareholders. 24. Now it is the time to consider the objections with regard to valuation and rep....
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....l financial position/picture of the respective companies under amalgamation. This can be visualised from the report itself. In the forwarding letter dated 9-2-1999 of Chartered Accountants Bansi S. Mehta & Co. and C.C. Chokshi & Co. it has been stated that the report has been based upon the information furnished to them as set out in the report and as per the discussions they had with the concerned officers of the companies. The report runs into 41 pages divided into 10 heads. First head is 'purpose of the report'. Second head is 'sources of information and scope limitation'. Third head is 'company profile'. Fourth head is 'management'. Fifth head is 'shareholding pattern'. Sixth head is 'industry overview'. Seventh head is 'valuation of the shares of the companies' .Eighth head is 'rationale and justification of amalgamation'. Ninth head is 'fair basis of amalgamation' and Tenth head is 'Annexures (A to Q)'. Out of the aforesaid detailed report the objectors have chosen to pick up only absence of basis of valuation of fixed assets. They have not been able to answer the consideration of share return aspect, quotation of shares in the market, book values and other factors which have....
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....tification of the past working results of the companies and that the projected working results of the transferor-companies have been used in the valuation exercise carried out by the Chartered Accountants. They have recited that the fair basis of amalgamation has been arrived at as at 1-10-1998 on a consideration of relevant factors and had given their brief report on 22-1-1999 expressing their opinion on the fair and equitable exchange ratio for the amalgamation of the four companies. The shareholding pattern of the four companies has also been considered. Mr. Bhavsar read before this Court certain aspects of the valuation from the booklet of the Institute of Chartered Accountants. However, while reading the booklet it could not be pointed out as to upon application of the relevant methods/factors as read by Mr. Bhavsar, what would be the exchange ratio. As on today none of the objectors has either placed any contrary valuation opinion or report of any expert suggesting different propositions and different results as also different share exchange ratio. It would be appropriate at this stage to note what the Apex Court has said in Hindustan Lever Employees' Union's case (supra) a....
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....earing for Mr. Jajoo, one of the shareholders of TOMCO, has questioned the justification of the ratio of allotment of shares, 2 shares of HLL in exchange of 15 shares of TOMCO. Accordingko Mr. Dholakia, this ratio is entirely unsatisfactory and unfair to the TOMCO shareholders. It has been contended that the Board of Directors of TOMCO did not explain the Scheme of Amalgamation in the explanatory statement circulated among the shareholders. In particular, how the shark, exchange ratio 15 TOMCO shares to 2 HLL shares-was arrived at, was not stated in the explanatory statement. Instead of circulating the valuation reports, TOMCO informed the shareholders that the reports were available for inspection at the registered office of the company between 11.00 a.m. to 1.00 p.m. on 14 working days. The shareholders were not told that the joint valuer was none other than Mr. Malegam, a Senior Partner of S.B Billimoria & Co., and also a Director of TOMCO, Mr. Malegam could not be Appointed auditor of TOMCO under section 226(3) of the Companies Act, 1956. In that view of the matter, Mr. Malegam should not have been appointed valuer under the Indian Companies Act, 1956. 30. It was next contende....
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....ukhadia v . Alembic Chemical Works Co. Ltd. [1987] 3 Comp. LJ. 141 and in that case dealing with the amalgamation it was held that the exchange ratio of the shares of the two companies had to be stated along with the notice of the meeting and how this exchange ratio was worked out, however, was not required to be stated in the statement contemplated under section 393(1)(a). Even with regard to the future interest of consumers (future market condition) the Apex Court has observed in para 77 that 'public interest' which is to be taken into account as an element against approval of amalgamation would hardly include a mere future possibility of merger resulting in a situation Where the interests of the consumer might be adversely affected. The Court has said that no one can envisage what will happen in the long run, but, on such hypothetical question, the scheme cannot be rejected. It has finally been said that the argument that the company has large assets is really meaningless. It has been observed that very many cotton mills and jute mills in India have become sick and are on the verge of liquidation, even though they have large assets. Dealing with the scope of interference by th....
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....also read some portion of the booklet of the Institute of Chartered Accountants. However, having considered the submissions in the light of what the Apex Court has said as above and in the light of the report of Chartered Accountants C.C. Chokshi & Co., whose good repute has been acclaimed by the Apex Court and having noted a very salient feature about the absence of any other valuation or exchange ratio pressed for consideration before this Court, the objections and submissions made in respect of the valuation merit rejection thereof." Mr. Bhavs's submission that the valuation has been worked out by the experts only on the basis of the book values of the assets runs counter to the reading of the report of the Chartered Accountants as a whole. It is true that the market value of the fixed assets has not been considered and could not be considered as ascertainment of such market value would require a detailed investigation of the properties, vis-a-vis, their market values in the context of available sales of the nearby properties at the relevant point of time and so many other factors. That method might not be feasible in a given case and worth not undertaking or following in the ma....
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....ry to public policy. Interest of the workmen and employees of all the companies is also taken care of. None of the creditors, secured or unsecured, has come forward to object to the scheme of amalgamation in question inspite of public notices. The broad advantages of the scheme of amalgamation in question have been set out in the respective petitions also. The approvals of principal creditors ICICI and IDBI are also placed on record. For the purpose of testing the bona fides of the majority shareholders speaking through the learned advocate appearing for the petitioners a question was asked at the initial stage as to mow the transferee-company would work as a 'shell' company when their equity is so bifurcated as to allot to them 13.5 per cent redeemable preference shares. It was pointed out to the learned advocate that redemption would mean the quitting of the concerned shareholders to that extent meaning thereby there would be weakening of 'shell'. Mr. Soparkar then readily submitted after obtaining the instructions that the suggestion with regard to redeemable preference shares being altered to irredeemable preference shares would be acceptable. That is how the bona fides were te....
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....h transactions in law cannot be taken into consideration. The deponent has asserted that the transfer of shares has taken place between AML and its subsidiary and for all practical purposes the shares continued to be held by AML and makes no difference on either valuation aspect or the consequent exchange ratio. Such objections subsequently sent deserve to be rejected as aforesaid. Cost: Before passing the order, question of cost is required to be taken into consideration. At the initial stage the petitioners agreed for paying cost to the objectors, but it was obvious that objectors might accept the decision of this Court. However, since they have expressed before this Court that they would reserve their right of agitating the matter, the learned advo-cate for the petitioner submitted that their agreement for payment of cost might not be recorded or taken into consideration. Under such circum-stances, question of cost is required to be considered on merits. Ordinarily since the objections are not being accepted and since the prayer for sanction of the scheme of amalgamation in question is required to be granted the objectors would not be entitled to the cost, However, bearing in ....