1983 (7) TMI 224 - HC - Companies Law

Meetings and Proceedings Ordinary and special resolutions Power to compromise or make arrangements with creditors and members Amalgamation Amalgamation of companies in national interest Power of Central Government to provide for

Issues Involved:
1. Leave under Article 133 of the Constitution.
2. Sanctioning of the scheme of amalgamation.
3. Objections by the Central Government.
4. Objections by the Commissioner of Income-tax.
5. Objections by Mr. Shodhan.
6. Objections by Albright Morarji & Pandit Ltd.
7. Fairness of the exchange ratio of shares.
8. Public interest and the scheme of amalgamation.
9. Statutory requirements and procedural compliance.

Issue-wise Detailed Analysis:

1. Leave under Article 133 of the Constitution:
The appellants applied for leave under Article 133 of the Constitution. The court rejected the application, stating, "We do not think that any substantial question of law of public importance is involved and that too required to be decided by the Supreme Court in this group of appeals."

2. Sanctioning of the Scheme of Amalgamation:
The learned company judge granted sanction to the scheme of amalgamation of Ambalal Sarabhai Enterprises Ltd. (the transferee-company) with Standard Pharmaceuticals Ltd. (the transferor-company) with effect from 1st April 1980. The court held that the scheme was fair, reasonable, workable, and beneficial to those affected by it.

3. Objections by the Central Government:
The Central Government opposed the scheme on the ground that the scheme could not be sanctioned without prior approval under section 23 of the Monopolies and Restrictive Trade Practices Act (MRTP Act). The court held that the scheme fell within the exceptions provided in sub-section (3) of section 23 of the MRTP Act, and thus no prior approval was necessary. The court stated, "In order to attract the application of section 23(3), what is required is that the interconnected undertakings must produce the same goods."

4. Objections by the Commissioner of Income-tax:
The Commissioner of Income-tax objected to the change in the effective date of amalgamation from 1st July 1981 to 1st April 1980, arguing it was to take advantage of the carry forward loss for tax purposes. The court found no oblique motive in shifting the date and stated, "It was not with the purpose or object of evading tax or reducing tax liability that the date from which the amalgamation is to become effective has been changed or shifted."

5. Objections by Mr. Shodhan:
Mr. Shodhan, a shareholder, raised several contentions, including the fairness of the exchange ratio and the statutory requirements. The court found no substance in his objections, stating, "The exchange ratio has been fixed in accordance with the recognised method of valuation which appears to be quite fair."

6. Objections by Albright Morarji & Pandit Ltd.:
Albright Morarji & Pandit Ltd., a creditor, opposed the scheme, arguing that a meeting of creditors should have been called. The court held that the interest of the creditors was in no way affected by the scheme and stated, "We do not find any substance in the contention that a meeting of the creditors should have been called."

7. Fairness of the Exchange Ratio of Shares:
The exchange ratio was determined by M/s. S. V. Ghatalia & Co., chartered accountants, using recognised methods. The court found the exchange ratio fair and reasonable, stating, "There is nothing on record, nor is any factor pointed out, which would indicate that the determination of the fair market value of the shares of the two companies by the valuers is not proper."

8. Public Interest and the Scheme of Amalgamation:
The court examined whether the amalgamation was in public interest and found it beneficial, particularly in the context of manufacturing life-saving drugs and saving foreign exchange. The court stated, "The amalgamation of the two companies appears to be in the public interest."

9. Statutory Requirements and Procedural Compliance:
The court found that all statutory requirements were duly complied with and that the scheme was properly scrutinised. The court stated, "The notice, in the present case, clearly indicates the possibility of modification being proposed and approved at the proposed meeting."

Conclusion:
The court dismissed all four appeals, finding no substance in the objections raised by the Central Government, the Commissioner of Income-tax, Mr. Shodhan, and Albright Morarji & Pandit Ltd. The scheme of amalgamation was sanctioned as it was found to be fair, reasonable, and in public interest. The court also ensured that all statutory requirements were met.

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