TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 1925
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.... to the domestic market at Khatraj (Demerged Undertaking) from Lincon Polymers Pvt. Ltd. and to merge it with Lincon Polyplast Pvt. Ltd. (Resulting Company). iii) The stated major benefit of the scheme of arrangement was that each unit will be benefited from a focussed management approach adopted to its specific market needs (domestic or export) which will allow better control and management of each unit. iv) Lincon Polymers Pvt. Ltd. was incorporated on 04.03.1996 whereas Lincon Polyplast Pvt. Ltd. was recently incorporated on 06.08.2024. Through application C.A.(CAA)/17(AHM)2025 the applicants sought following directions from the Ld. NCLT: a) Dispensation of meeting of equity shareholders of demerged company (Lincon Polymers Pvt. Ltd.) in view of the consent affidavits given by all the shareholders. b) Meeting of the secured and unsecured creditors of demerged company. c) Dispensation of the meeting of shareholders of Resulting Company in view of the consent affidavits given by the equity shareholders of Resulting Company (Lincon Polyplast Pvt. Ltd.). d) Since there were no secured creditors of the Resulting Company, no direction was sought. e) Meeting of unsecured ....
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....n his consent to the Scheme. ii) Details of assets and liabilities of the domestic and the export undertakings were furnished before Ld. NCLT. These details are again placed on record at page No. 349 to 359 of the Appeal Paper Book. iii) It was submitted that there is no proposal to issue additional 1794 shares. Since 9,38,206 shares were to be issued, the authorised share capital was increased by 9,40,000. The authorised capital was rounded to the nearest round figure. There was only increase in authorised share capital and no additional 1794 shares were proposed to be issued, as mistakenly assumed by the Ld. NCLT. iv) On valuation and swap ratio, the Learned Sr. Counsel referred to the following judgments of the Hon'ble High Court of Gujarat: (a) Mahavir Weaves Pvt. Ltd., In re (1994) SCC OnLine Guj 201: In the facts of this case, both the transferee company and the transferor company were Private Limited companies under the same management. It was noted that in the said case members were belonging to group of two families and they have consented to the sanctioning of the scheme without their being any exception. It was noted that it will not be necessary to go into valua....
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....present matters with the greater force. ........... 14. In the facts and circumstances emerging from the record of these three petitions and in view of what is stated above, it is ordered that the transferor companies be amalgamated with the transferee-company with effect from April 1, 1993, as per the proposed scheme of amalgamation placed on record annexure "C" in all these petitions. Consequently, all the rights, liabilities and duties of the transferor companies shall stand transferred to and vest in the transferee-company, namely, Mahavir Weaves Pvt. Ltd., without any further act or deed, and all the liabilities and duties of the transferor companies shall also become the liabilities and duties of the transferee-company and the transferor companies shall stand dissolved, without winding up, in view of the scheme of amalgamation as per annexure "C" being sanctioned." (Emphasis supplied) (b) Takshashila Gruh Nirman Pvt. Ltd., (2012) SCC OnLine Guj 2275: In this case it was noted in para 3 and 11 of the said judgment that transferee company and the transferor company are under the same management and are closely held companies and upon merger there is no interest of e....
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....e scheme. The court would not interfere. It cannot substitute with its wisdom the collective wisdom of the shareholders. 32. It was held in Aradhana Beverages & Foods Company Ltd. V Regional Director of Companies, 1998 (46) DRJ 228 where share exchange ratio is determined by experts, and shareholders are satisfied, no interference at the instance of Regional Director is called for. The relevant portion of the said judgment is reproduced below: "Since as a matter of fact and undisputedly the loan has been subsequently converted into shares, the grievance of the Regional Director in my view does not survive. The shareholders and creditors are better equipped to gauge the value of their shares with reference to market trends & if they have approved the amalgamation, the Regional Director cannot be heard to say that the merger would not be in interest of the shareholders and creditors & consequently in the public interest. To my mind in a given case, the interest of the shareholders may or may not be synonymous with the public interest. But in the instant case determination of the share exchange ratio does not affect public interest. Therefore, the submission of the learned couns....
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....the determination of valuation could have been a bit more in favour of the shareholders. But since admittedly more than 95% of the shareholders who are the best judges of their interest and are better conversant with market trend agreed to the valuation determined it could not be interfered by courts as, "[certainly, it is not part of the judicial process to examine entrepreneurial activities to ferret out flaws. The court is least equipped for such oversights. Nor, indeed, is it a function of the judges in our constitutional scheme. We do not think that the internal management, business activity or institutional operation of public bodies can be subjected to inspection by the court. To do so, is incompetent and improper and, therefore, out of bounds. Nevertheless, the broad parameters of fairness in administration, bona fides in action, and the fundamental rules of reasonable management of public business, if breached, will become justiciable." ( Emphasis supplied ) 34. It has been held by Hon'ble Supreme Court in the case of Miheer H. Mafatlal v Mafatlal Industries Ltd. (1997) 1 SCC 579, it is for the equity shareholders acting bona fide in the interest of their class as....
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....ndamentally erroneous basis, or that a patent mistake had been committed, or the valuer adopted a demonstrably wrong approach or a fundamental error going to the root of the matter. Where a method of valuation is prescribed the valuation must be made by adopting scrupulously the method prescribed, taking into account all relevant factors which may be enumerated as relevant for arriving at the valuation". ( Emphasis supplied ) 37. Hon'ble Bombay High Court in the case of Alstom Power Boilers Ltd. vs. State Bank of India & IDBI 2002 SCC Online Bom 1084 has held the Company Court has supervisory jurisdiction, and where Scheme is approved by overwhelming majority, the dissenting minority shareholders cannot tyrannise the majority. The relevant part of judgement is as under: "........ 28. The parameters of the jurisdiction of the Company Court under Sections 391 to 394 are well established. The limitations put on this jurisdiction can be equated with the jurisdiction of the judicial review under Articles 226 and 227 of the Constitution of India. It is not an appellate jurisdiction. The application under Section 391 for sanction of the scheme of amalgamation cannot be treated....
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....ty of the shareholders of the two companies, or the say of that the shareholders in their collective wisdom should not have accepted the exchange ratio on the ground that it will be detrimental to their interest. The Supreme Court precisely says so, In the petitions on hand there is absolutely no demur by any of the shareholders against the exchange ratio. On the contrary the shareholders of the transferor-companies and transferee-company also have accepted the exchange ratio proposed in the scheme of amalgamation. Therefore, it appears that, it would not be open to me to say that the exchange ratio accepted by the shareholders of the transferor-companies and the transferee company would be prejudicial or detrimental to their interest. Therefore, the above said communication should not come in the way of the petitioning companies. 14. Independently all of these, as a company court, I have been satisfied with the scheme proposed as a whole is just, fair and reasonable from the point of view of all concerned". ( Emphasis supplied ) 39. Hon'ble High Court of Calcutta in the case of Suresh Kumar Rungta vs. Roadco (India) Pvt. Ltd. & Ors. has relied upon a judgment of the English ....
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..... v. Mathew Philip. [1986] TLR 1753, in which the learned single Judge has taken a view that, when there was no evidence of fraud or mala fides on the part of the persons making the valuation and when the standard method of valuation is adopted, the objection to the valuation should be overruled. Here also, in the instant case before me, there is not only no evidence of fraud or mala fides on the part of the valuer, but even there is no such whisper in the affidavit-in-reply, filed on behalf of the Central Government. In view of this factual and legal position, the contention does not appear to be open to the Central Government. The exchange ratio, therefore, cannot be said to be unreasonable or unfair. This requires to be said and emphasised regard being had to the revaluation reserve of the assets of the transferor-company. 15. Thus, it appears that, the petitions require to be allowed and the scheme of amalgamation, as presented along with the same require to be sanctioned. The same is hereby accordingly allowed and sanctioned". ( Emphasis supplied ) 42. In the case of M/s Vodafone Essar Ltd. & Ors. and M/s Vodafone Essar Infrastructure Ltd. (Company Petition No. 334/20....
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....ies Act, 1956 on the aforesaid terms while reserving the right of the Income Tax Authorities to the extent stated above". ( Emphasis supplied ) 43. The Hon'ble Bombay High Court in Parke Davis (India) Ltd, In re [Company Petition No. 894 of 2002] while deciding the legality of swap share ratio discussed the judgement of Hindustan Lever (Supra) and held that: "It is clear from the observations that if any objection is raised before the company court to the swap ratio of shares, the enquiry that the court has to make is whether it is contrary to any law, whether the valuation is carried out by an independent body and to find out whether it can be said that the ratio is unfair. The court has to see how the members who are the best judges of their own interest have voted on the resolution. So far as the present case is concerned, it is nobody's case that the swap ratio is contrary to any law. It is also nobody's case that the experts who submitted the valuation report were not independent so far as the question of fairness is concerned. It is clear from the material produced on record that 99.94 percent of the shareholders have voted in favour of the resolution and....