TaxTMI 
TaxTMI 
2006 (3) TMI 344
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....transferor company is 3,79,23,448 equity shares of Rs. 10 each fully paid-up 53.70 per cent, of such paid-up shares, i.e., 2,03,64,871 equity shares of Rs. 10 each fully paid-up of the first transferor company are held by the transferee company which is also holding company of the first transferor company. Subsequent to March 31, 2004, the issued, subscribed and paid-up equity capital was reduced and consolidated in respect of the first transferor company pursuant to the orders passed by this court on January 14, 2005, under sections 78 and 104 of the Act. The issued, subscribed and paid-up share capital was reduced from Rs. 37,92,34,480 divided into 3,79,23,448 equity shares of Rs. 10 each fully paid-up to Rs. 7,58,46,900 divided into 3,79,23,448 equity shares of Rs. 2 each fully paid-up. Such reduced share capital was consolidated into fully paid-up share capital of Rs. 2 fully paid-up to Rs. 7,58,46,900 divided into 75,84,690 equity shares of Rs. 10 each fully paid-up. The equity shares of the first transferor company are listed on Bombay and Calcutta Stock Exchanges. The transferee company was incorporated under the Act on November 19, 1975, under the name and style of Pu....
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....company for 10 shares of the transferee company. The amalgamation is being considered for carrying out the business of all the companies under one common umbrella, by way of pooling of interests, so as to derive the benefits of synergies and economies of scale, from amongst others. The meetings of the equity shareholders, unsecured and secured creditors of the first transferor company was convened on July 23, 2005, in pursuance of the summons for directions sought by it in Company Petition No. 80 of 2005 vide order dated May 26, 2005. This court appointed a chairman and an alternate chairman for such meetings convened in terms of the directions of this court. As per the report of the chairman, the meeting of the equity shareholders of the first transferor company was held on July 23, 2005. The said meeting was attended by 22 equity shareholders. The scheme was approved by 20 equity shareholders. Two equity shareholders voted against the proposed scheme, i.e., 8.69 per cent, of equity shareholders of the first transferor company. The meeting of unsecured creditors of the first transferor company was attended by 20 unsecured creditors and the scheme was adopted unanimously by the uns....
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....clauses of the memorandum of association of a company can be permitted to be altered after following the procedure under the relevant provisions of the Act. Referring to paragraph 11.2 of the scheme, it was pointed out that the balance in reserve and surplus accounts of the transferor companies, after giving effect to the reduction of share capital and premium in the first transferor company are proposed to be transferred to the corresponding reserves in the transferee company. In other words, identity of reserves, except as mentioned above, of the transferor companies shall be preserved. It is pointed out that the balances of amalgamation reserve, capital reserve and capital redemption reserve cannot be considered as general reserves as the general reserves are free for distribution to the shareholders of a company in the form of dividends/bonus shares, whereas amalgamation reserve, capita] reserve and capital redemption reserve cannot be utilised for distribution to the shareholders. The petitioner has filed an affidavit dated February 16, 2006, in response to the affidavit filed by the Regional Director. It has been pointed out that the working documents prepared by the value....
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....ion No. 114 of 2005. It has been explained by the Corporation that the Corporation is a wholly owned State Government undertaking of the Government of Punjab set up with the objective of promoting medium and large scale industry in the State. In furtherance of its objectives, the Corporation makes investment by way of equity as well as term loans in industrial ventures in the State. It has been pointed out that the first transferor company has been promoted by the Corporation jointly with one Shri V.K. Garg, the private promoter, after a financial collaboration agreement dated August 19, 1986, had been entered into between the Corporation and the private promoter. The original cost of the project was Rs. 28.62 crores which was finally revised to Rs. 45.82 crores. In the year 1995, 14.12 per cent, shares of the company were acquired by M/s. DSM Andeno B. V. (hereinafter to be referred as "DSM"). An agreement was executed by M/s. DSM with private promoter on October 2, 1995, to acquire 30,72,580 shares at Rs. 15.50 per share. In the year 1997, 1,61,62,713 additional shares were acquired by M/s. DSM for Rs. 10 each through an agreement dated July 3, 1997. With the acquisition of these....
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.... The results of both companies were declared on April 27, 2005, but this strange phenomena was happening immediately after re-listing of the first transferor company shares on April 5, 2005. It has been pointed out that share prices of the transferee company and the first transferor company which were in the ratio of 1: 2 on April 6, 2005 drop to 1: 2.5 on April 13, 2005 and 1: 2.8 on April 21, 2005. It further dropped to 1: 3.6 on April 28, 2005 and 1 : 3.9 on May 9, 2005. On May 11, 2005, the ratio was down further to 1: 4.19. It is alleged that the rise in the share value of the transferee company and fall of the share value of the transferor company was a clear case of insider trading. The Corporation enumerated violation of corporate governance/ ethics on the following four counts : "I. Not informing stock exchange about board meeting by both companies. II. Misleading of shareholders by changing the name of PC and CPL and capital reduction of ADIL. If the intention was to amalgamate both companies they should not have done all this. III. Possible insider trading by people close to management. IV. Action detrimental to minority shareholders of ADIL." Since the....
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....rporation are not sustainable. Even otherwise, the valuers are well known professionals. In Hindustan Lever Employees' Union v. Hindustan Lever Ltd. [1995] 83 Comp. Cas. 30 (SQ, while considering the scope of the jurisdiction of the company court in respect of the valuation arrived at by the valuer, it was found that the jurisdiction of the court in sanctioning a claim of merger is not to ascertain with mathematical accuracy if the determination satisfied the arithmetical test. A company court does not exercise an appellate jurisdiction. It exercises a jurisdiction founded on fairness. It is not required to interfere only because the figure arrived at by the valuer was not as good as it would have been if another method had been adopted. What is imperative is that such determination should not have been contrary to law and that it was not unfair for the shareholders of the company which was being merged. The High Court has found that the chartered accountant who performed this function of valuation though was a director of the petitioner-company, he did so as a member of a renowned firm of chartered accountants. It was further found that it was not part of the judicial process to e....
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....ite materials 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 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 a....
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....ourt as well. Reference is made only to annexure P12 wherein the board of directors was considering the option for enhancing shareholders worth by the organisation of business by way of acquisition/ merger. Though a note of dissent has been given but the Corporation has not produced any valuation by any other chartered accountants for the consideration of this court to show that the valuation report given by the chartered accountants appointed by the transferee company is incorrect either in law or on facts. Therefore, the argument raised that the valuation report cannot be accepted is not tenable in law. There is nothing on the record to doubt the credibility of the firms of the chartered accountants or that they have not carried out their professional duties in a fair and reasonable manner. In the absence of any counter report or in the absence of any allegation of not handling the valuation aspect in a fair and professional manner, it will not be reasonable for the court to infer that such report is not just, fair and reasonable. The other argument raised by the Corporation was that the scheme of amalgamation is contrary to the public policy as it affects the State Government....