TaxTMI 
TaxTMI 
2000 (7) TMI 901
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....he scheme of amalgamation. Even so far as the Official Liquidator is concerned, after the notice was served upon the Official Liquidator, he has submitted his report in terms of the second proviso to section 394(1) of the Companies Act, 1956. By the order dated 5-5-2000, S.J. Agarwal and Associates were appointed as chartered accountants. As per the report submitted by the chartered accountants, the Official Liquidator has submitted that the affairs of the transferor-company, namely Varuna Investments Limited have not been conducted in a manner prejudicial to the interests of its members or to the public interest and, therefore, on the basis of the report submitted by the auditors, who have scrutinised the audited accounts of the company for the period of five years from 1-4-1994 to 31-3-1999, the Official Liquidator has submitted that there is no objection to the sanction of the scheme of amalgamation. 2. However, despite the no objection received from the Regional Director, Department of Company Affairs, Mumbai, and the Official Liquidator, an application is made by one Chintan Textiles Private Limited, the applicant in Company Application No. 310 of 2000. By this application,....
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....ed its operations as a break company of Tata Chemicals and indulged in unfair market operations as by inducing private subsidiarisation by private placement of shares of subscription to the shares of Varuna Investments Limited, the said subscription moneys received from the subscription of shares were inducted into Tata Chemicals Limited by purchase of Tata Chemicals Limited shares. 4. In the course of the arguments advanced on behalf of the applicants, reference is made to the working of Varuna Investments Limited which, according to the applicants, did not come up to the expectation and representations made at the time when the applicants were induced to purchase the shares, as a result of which it is the case of the applicants that they decided to sell their shares. According to the applicants, in the year 1996, they had received an intimation from M.C. Shah Investments that they were interested in purchasing the shares of Varuna Investments Limited at Rs. 175 per share. It is contended on behalf of the applicants that the respondents have misquoted the value of the share and the offer of the shares of Varuna Investments Limited have been undervalued and the offer of four ord....
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....etermined by merging the values under different methods, namely, value per share of the company under merger, the net assets method, the earning capitalisation method, and the market price method. It is after considering the aforesaid values that N.M. Raiji and Company, chartered accountants have recommended four fully paid-up equity shares of Tata Chemicals for every one share of Varuna Investments Limited. 6. It is urged on behalf of the applicants that the applicants do not have the benefit of the report, the balance-sheet and on that count it is urged on behalf of the applicants that the respondent-company did not comply with nor did it follow the procedural formalities. However, so far as this argument is concerned, the same has no basis as the notice of the meeting was sent to all the shareholders of the respondent-company. In the explanatory statement that was appended to the notice, the documents were offered for inspection at the registered office of the company, i.e., memorandum and articles of association of the transferor-company and the transferee-company, the balance-sheet and profit and loss account as on 31-3-1994 of the transferor-company and the transferee-comp....
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....company did not act upon the representation made at the time when they purchased the shares. By this letter, the applicants have also recorded the grievance to the effect that in the year 1983, the company had declared dividend of 75 per cent on the share and no dividend has been distributed for the year 1984. By the letter of 12-9-1984, the applicants were informed of the value of the unquoted equity shares being at Rs. 95.85 per share. According to the applicants, by their letter of 7-8-1983, they accepted Rs. 300 per equity share and requested the company to send a counter offer. The basis of the valuation does not find place in the said letter. The applicants have relied upon the letter which they have received from M.C. Shah Investment, wherein the value of Varuna Investments Limited has been reflected at Rs. 200 per share. On what basis this letter was received and the identity of M.C. Shah Investment has not been established. Except for this circular, the applicants have not been able to furnish any details. 9. To the objections raised by the applicants with regard to the swap ratio, N.M. Raiji and Company, chartered accountants, have replied to the contention of the appl....
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....ional Director, Department of Company Affairs, Mumbai, has carried out his investigation. The Official Liquidator has also investigated into the matter. For that purpose, an independent chartered accountant has been appointed as per the order of the court, who has also given his opinion that so far as this scheme is concerned, the same is not prejudicial to the interests of the shareholders. Hence, there is no substance in the argument canvassed on behalf of the applicants that the scheme should be rejected. It is urged on behalf of the applicants that merely because a majority of the shareholders have accepted the scheme, the court should not grant it as a matter of course and the same requires to be considered. For that purpose, reliance is placed upon the ruling in the case of Bank of Baroda Ltd v. Mahendra Ugin Steel Co. Ltd. (decided by P.D. Desai, J. of the Gujarat High Court on 7-4-1975). So far as this ruling is concerned, the same does not apply to the facts of the present case as in the case under reference, an objection was raised on behalf of the Central Government that the scheme would affect the rights of the members of the transferee- company as between themselves an....
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.... like an appellate authority to minutely scrutinise the scheme and to arrive at an independent conclusion whether the scheme should be permitted to go through or not when the majority of the creditors or members or their respective classes have approved the scheme as required by under section 391 of sub-section (2). The court certainly would not act as a Court of Appeal and sit in judgment over the informed view of the concerned parties to the compromise as the same would be in the realm of corporate and commercial wisdom of the concerned parties. The court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the Scheme by the requisite majority. Consequently, the Company Court's jurisdiction to that extent is peripheral and supervisory and not appellate. The court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. The propriety and merits of the compromise or arrangement have to be j....