TaxTMI 
TaxTMI 
2004 (4) TMI 306
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....pany) having its registered office at 102, Stephen House, BBD Bagh (East), Kolkata in accordance with the scheme of amalgamation annexed as annexure A to this company petition. 2. On hearing the company application No. 20 of 2003, this court on 28-8-2003, dispensed with the meeting of the shareholders of the transferee company for the purpose of considering, and if thought fit, for approving with or without modification, the scheme of amalgamation by which the transferor company was proposed to be amalgamated with the transferee company. Since there were no creditors in the transferee company consequently the meeting of the creditors was required to be called for. 3. The transferee company thereafter filed the present petition under r....
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....as quoted by the Kolkata Stock Exchange. It was contended that two different methods of the valuation should not be adopted for valuing the shares of the respective companies. The Regional Director contended that the price quoted at the Kolkata Stock Exchange of the transferor company could not be considered, as the fair value of the shares of the transferor company and that the book value of the shares of the transferor company should be taken as the fair value and on that basis the ratio of exchange should be made in the scheme of amalgamation. The Regional Director, Company Law Board, Northern Region, Kanpur suggested that the fair ratio of exchange should be two shares of Rs. 10 each of the transferee company for every one share of Rs. ....
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....e share of the company. The valuer further found that the transferor company was running in losses or very little profit in the last three years and therefore, the earning capitalisation method would also not give a fair value of the shares. In such circumstances, the valuer took the average quoted price of the shares of the company of the last three years in arriving at the value of the share of the transferor company. 9. On the other hand, the valuer found that the transferee company is an unlisted company and is also a closely held company. Since the value of the shares was not quoted by the stock exchange, the valuer took the net assets of the company against the fully paid up equity shares and arrived at the net asset value per shar....
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....o question the ratio of exchange of shares, the exchange ratio has to be considered as fair and reasonable. 13. A similar view was also taken by the Calcutta High Court in the matter of E.I.T.A. India Ltd. v. Narayan Prasad Lohia [2000] 99 Comp. Cas. 276 , and by the Madras High Court in Coimbatore Cotton Mills Ltd. and Lakshmi Mills Co. Ltd., In re [1980] 50 Comp. Cas. 623 and by the Bombay High Court in Govind Rubber Ltd., In re [1995] 83 Comp. Cas. 556 as well as by the Supreme Court in Hindustan Lever Employees' Union's case (supra). 14. In Operations Research (India) Ltd., In re [2000] 101 Comp. Cas. 101 ^1, the Gujarat High Court held that if the shareholders in their commercial wisdom have accepted the exchange ratio of shares ....
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....it should not be unfair or contrary to public policy or unconscionable. In amalgamation of companies, the courts have evolved, the principle of 'prudent business management test' or that the scheme should not be a device to evade law...." (p. 39) 17. The main reason why a notice is given to the Regional Director under section 394A of the Companies Act is to ensure that the public interest is safeguarded when companies propound a scheme of amalgamation. In the present case, the Regional Director in his affidavit has not stated that the exchange ratio is contrary to public interest. The Regional Director has only stated that the interest of the shareholders of the transferor company is likely to be a adversely affected by the exchange rati....