TaxTMI 
TaxTMI 
2008 (8) TMI 556
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.... shares could not be treated on the floor of the Stock Exchange. Due to the repeated enquiries from shareholders it decided to grant liquidatory options to all the shareholders except the promoter company i.e., Hoganas A.B. Sweden for consideration. Accordingly it offered three alternatives : (i)The shareholders could sell their shares for a consideration of Rs. 177. (ii)That the shares could be exchanged for an unsecured fully paid debenture of Rs. 177. (iii)If the shareholders did not opt for the above two, he would be paid a sum of Rs. 177 in lieu of share, which would then be deemed to have been vested in the Company's name. In short, under the proposed Scheme of Arrangement, the Company decided to reduce its shareholding of all shares except those held by its holding Company Hoganas. It accordingly made an application to this Court for sanction. 5. By an order dated 31-8-2007 a meeting of all the members other than the promoters, viz., Hoganas A.B. Sweden, all the members of the applicant other than the promoters, viz. Hoganas A.B. Sweden was held on 14-11-2007, and a report has been made to this court. At the meeting : "17. shareholders holding 109086 equity....
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....lding under section 100 of the Companies Act held for consideration. This court observed that there were two distinct groups amongst the paid up equity shareholders, one belonging to the promoters and other of non-promoters and therefore separate meetings ought to have been convened of these two groups. The court observed that since a meeting of both groups was held together, the promoters could virtually bulldoze the minority shareholders and purchase their shares at the price dictated by them. The court found that therefore and also because the minority shareholders were not given any meaningful option, the reduction of share capital was unjust and unfair. 10. There is no doubt that if, amongst the members whose meeting has been convened, it is found that there are two distinct classes with differing rights and interest, it would not be proper to uphold the convening of a meeting of two such classes together. In a given case that would allow the majority having a common interest to ride rough shod over the minority representing a distinct interest but as has been averred, the moot question has always been what constitutes a "class". Buckley on the Companies Act, 13th Edition, ....
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....tially different compromises each will form a different class. 12. The object of the company was to reduce the shareholding of all its members, except its holding company. Having become declared de-listed, the company's shares became incapable of trading. Therefore company has proposed to get back his shares from the shareholders at a certain consideration. The decision is to get back all those shares from all its shareholders who could not trade in its shares except the promoter i.e., Hoganas AB Sweden. Accordingly the meeting that is convened is that of its members and shareholders. 13. Admittedly, the meeting that was called for considering the resolution included all the shareholders i.e., 14 members including Hoganas Hogap a subsidiary of Hoganas AB Sweden and 3 other members. 14. According to the objectors, Hoganas Hogap AB, but for whose votes resolution would not have been passed by 3/4th majority, could not have been included in the same class of members as others because they were a subsidiary of the holding company and were liable to be treated as promoters and in fact have been indirectly referred to as promoters in the Advocates' letter. They could therefore n....
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.... have been held for them because they were interested in supporting the interest of Swedish holding company and permitting their shares to be reduced. Then nothing on record to indicate that the reduction of the shares of its subsidiary was objective of the holding company. Moreover, if one looks at the percentage of the shareholders who voted in favour of the resolution, excluding Hoganas Hogap AB, the percentage is as high as 65.72 per cent since 13 shareholders in the category of the members of the public voted for reduction of the shares by accepting payment. 16. In Miheer H. Mafatlal v. Mafatlal Industries [1997] 1 SCC 579^1, the Supreme Court relied on the following observations of the Calcutta High Court in the case of Maknam Investments Ltd., In re [1995] 6 SCL 93 : "...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 merger is manifestly unfair or is being proposed unfairly and/or to defraud the other shareholders. Whether the merged companies will be ultimately benefited....
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.... the Act is placed before the Court by the applicant concerned 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 nay 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 of 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 commercial decision beneficial to the class represented by them for whom the scheme is meant. 9. Once the aforesaid broad parameters about the requirements of a scheme for getting sanct....
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....n the Affidavit dated 30-1-2008 that the Scheme is not prejudicial to the interest of creditors, shareholders and the public except that the petitioner company has not passed a special resolution as required by section 100 of the Companies Act, 1956. Section 100 requires a special resolution for reducing share capital. Section 189 of the Companies Act, 1956, contemplates two kinds of resolution. Sub-section (1) contemplates an ordinary resolution which requires a simple majority of the members from amongst those who are present for the meeting and who vote. When a resolution is passed at a meeting where the number of votes cast in favour of the resolution exceeds the number of votes cast against it, it is known as ordinary resolution. A resolution for reduction of share capital requires a special resolution. A special resolution is defined by sub-section (2) as one which is passed by a majority of not less than 3/4th of such members as being entitled so to do, vote in person or by proxy at a general meeting of which a notice specifying the intention to pass a special resolution has been duly given. There is no doubt that the resolution in question has been passed as a special resol....