TaxTMI 
TaxTMI 
2009 (7) TMI 791
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.... creditors (class 1), secured creditors (class 2) and all unsecured creditors. The meetings, pursuant thereto, have been held and the chairman of the meetings has filed the report. As per the said report of the chairman, following position has emerged at the meetings of the equity shareholders : (10)(i) 4,700 equity shareholders holding in aggregate 338,71,45,604 equity shares, constituting 99.745 per cent. in number and representing 99.9999 per cent. in holding of the equity shares, present in person or by proxy and voting at the meeting, voted in favour of the scheme. (ii) 12 equity shareholders holding in aggregate 4.588 equity shares constituting 0.255 per cent. in number and representing 0.0001 per cent. in holding of the equity shares, present in person or by proxy and voting at the meeting, voted against the scheme, and (iii) votes of 339 equity shareholders present in person or by proxy holding 1,55,94,583 votes were declared invalid. 11. The joint report of the scrutineers appointed for the abovementioned meeting is annexed hereto and marked as annexure A. A Compact Disk (CD) containing a list of equity shareholders with their names, addresses and number of shares held....
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....sent in person or by proxy and voting at the meeting, voted against the scheme. (iii)The votes of 83 unsecured creditors having outstanding value of Rs. 27.95 crores were declared invalid. 9. It is accordingly reported by the chairman that the scheme of amalgamation was approved unanimously by unsecured creditors present and voting either in person or by proxy at the meeting. 10. The affidavit in support of the aforesaid reports has been filed by the chairman at the meeting together with the report for the proceedings of the meetings. The aforesaid shows that the statutory requirement for consideration of the scheme by the equity shareholders, secured creditors (class 1), secured creditors (class 2) and unsecured creditors has been followed and the scheme has been approved by the requisite majority of the shareholders at the meeting and unanimously approved by the secured creditors of class 1 and class 2 and unsecured creditors of the company. Thereafter, the present petition before this court for seeking sanction. 11. This court (Coram : K.A. Puj J.), on April 17, 2009, had passed the order for admission and notice was issued to the Regional Director, Western Region, and also ....
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....gamation. As the complaints were received by the Registrar of Companies, it appears that the Registrar of Companies did call for the explanation of the transferor company on the allegations made in the complaint. 15. The Registrar of Companies has found that the explanation of the transferor company as satisfactory and has not found further case to resist the petition on behalf of the Central Government in the present proceedings, nor a further investigation based on such complaint. It further appears that thereafter a report has been forwarded to the Regional Director for review and the Regional Director has concurred with the view of the Registrar of Companies. 16. The aforesaid takes me to examine the fairness of the scheme of amalgamation, the scope of judicial review and the maintainability of the objections raised by the objectors to the scheme of amalgamation. 17. It may be recorded that at the first instance, when the petition for seeking sanction to the scheme of amalgamation was presented before this court, report of Ernst and Young and Morgan and Stanley for recommendation of equity share exchange ratio to the proposed scheme of merger-amalgamation dated March 2, 2009....
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....udicating the rights of private parties. The company in a matter of scheme of amalgamation, though may be working through the persons, who may be in management or having majority of the shareholding, but when the petition is presented and moved before this court, such is to be treated as petition by the company and whether moved by majority or there is dissentment by a fraction of shareholders would not assume much importance, more particularly when the statute expressly requires approval of the scheme by majority in numbers representing three-fourths for the value. Therefore, when the statute requires approval of the scheme by majority representing three-fourths in value, there may be dissent of the minority representing value less than one-fourth or the remaining group or any individual person, but at that stage, even if such objection exists, the court while exercising power for sanctioning the scheme is not required to decide the inter se rights of the majority versus the minority or the rights of any individual shareholders as against requisite statutory majority group. The role of the court is to consider the fairness in the scheme and also to oversee the operation of the sch....
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....hod ; (iii)Net asset value method. 21. The material produced goes to show that if the market prices method is applied taking the basis of average prices of three methods of both the companies in the respective stock exchange, the ratio would come to 1 : 15 between RIL and RPL. In the second method of comparative companies multiples' method, if the figures are considered, the ratio would come to 1 : 15 for RIL and RPL. If the third net assets value method is considered based on the figures, it would come to 1 : 26 for RIL and RPL. It further appears that the experts have given less weightage to NAV method and has given more weightage to the market price method and comparative companies multiples' method. To be specific, 40 per cent. weightage has been given to market price method and 40 per cent. weightage has been given to comparative companies multiples' method and 20 per cent. weightage has been given to net assets value method. Therefore, keeping in view the aforesaid weightage the experts have arrived at the average and then the ratio of 1 : 16 for RIL and RPL. If the net assets value method is to be accepted as it is, the ratio as observed earlier is to be 1 : 26 and the sha....
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.... cases whenever scheme of amalgamation is moved for sanction every time it must be supported by the expert's opinion. Generally it is the commercial wisdom of the requisite shareholders to be considered while considering the aspects for grant of sanction. But thereby it does not mean that the court cannot further scrutinise the said aspect. In a given case, if the court finds, the court may insist for the report of the expert on the said aspects. In the present case, the expert's opinion and the reports are produced, based on the same, the scheme is approved by the board and further approved by the requisite majority of the shareholders and others. Therefore, in absence of any other opinion of any expert produced by any of the objector and in view of the facts and circumstances mentioned hereinabove, it appears that the objections as sought to be canvassed that the scheme is unfair by the suggested ratio of 1 : 16, cannot be accepted. 24. At this stage and before the other objections are considered as sought to be canvassed by the objectors, it would be profitable to refer to the decision of the apex court in the case of Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Com....
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.... 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 sanction of the court are found to have been met, the court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the court there could be a better scheme for the company and its members or creditors for whom the scheme is framed. The court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction." 25. Keeping in view the aforesaid principles laid down by the apex court, the objections are required to be considered. Mr. V.K. Shah, learned counsel appearing for one Shri Shailesh Mehta, who is a shareholder of the company and Mr. Shalin Mehta, learned counsel appearing for one Shri Rathi, who is also one of the shareholders of the company mainly raised t....
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....as prepared and considered is already produced in the record of the present proceedings and ; secondly the attempt to contend that the balance-sheet as on March 31, 2009, is not produced and, therefore, there is non-compliance, would hardly be of any importance. Further, when the basis of the exchange ratio is produced, namely, the balance-sheet prior to the appointed date, it can hardly be said that there is no compliance to the statutory requirement as sought to be canvassed. Hence, the said objection cannot be maintained. 29. It was next contended by Mr. Maradia, who is appearing as party-in-person as well as by learned counsel Mr. V.K. Shah and Mr. Mehta for the respective objectors that there are lot of mismanagement in RIL as well as in RPL. It was also submitted that the prosecution has been filed against the managing director and other directors of the company by the respective authorities. It was also submitted that Shri Mukesh Ambani, who is holding command in RIL by utilising the funds of other sister companies has purchased the assets of RPL and the shares are purchased beyond his normal income as per the income-tax record and, therefore, if this court now accords sanc....
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.... misutilisation of the funds of sister company by the managing director of the company, Shri Mukesh Ambani and others. 32. It appears that the scope of judicial scrutiny in the present petition is whether to accord sanction to the scheme of amalgamation or not. This court is not exercising the power, sitting as a company court, as that of a petition under article 226 of the Constitution of India where the scope for exercise of the jurisdiction is much wider than that of the company court under the Companies Act. Further, merely because the Central Government has found the explanation satisfactory and the report is made to this court, it cannot be said that there is non-discharge of the statutory function by the Central Government. The role of the Central Government is undoubtedly to assist the court in the event if there is any breach of the statutory provision and also on the other aspects, but merely because a particular report is filed wherein the explanations are found satisfactory, it cannot be said that there is any shirking of the responsibility by the Central Government as sought to be canvassed. Further, in any case, as observed earlier, granting of the sanction by this c....
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....inable. But in view of the reasons recorded hereinabove, as it is found by this court that the objections do not deserve to be accepted on the merits, I find that the other aspects would be irrelevant and hence, no further observations or discussions. 35. It was also submitted by learned counsel for the petitioner that similar petition for sanctioning the very scheme of amalgamation was preferred by Reliance Industries Ltd., the transferee company before the High Court of Bombay, since the registered office of the said company is located within the jurisdiction of the Bombay High Court being Company Petition No. 296 of 2009 and it has been submitted that the High Court of Bombay has granted sanction to the scheme as per the order dated June 29, 2009 (Reliance Industries Ltd., In re [2009] 151 Comp Cas 124). 36. Whereas on behalf of the objectors, Mr. Shah as well as Mr. Mehta, learned counsel had contended that before the High Court of Bombay the petition was by RIL and their fairness in the scheme was to be considered, keeping in view the interest of the shareholders of the RIL and not the interest of the petitioner who are shareholders of RPL. It was also submitted that the Hig....