1994 (3) TMI 280 - HC - Companies Law

Share capital - Further issue of, Meetings and proceedings - Explanatory statement to be annexed to notice, Presumptions to be drawn where minutes duly drawn and signed, Compromise and arrangement, Amalgamation

Issues Involved:
1. Adequacy of material provided to shareholders.
2. Chairman's absence during polling.
3. Cryptic explanatory statement.
4. Workers' leave to attend the meeting.
5. Chairman of the court convened meeting.
6. Exchange ratio.
7. Exclusion of certain assets and rights.
8. Treatment of specified properties.
9. Disposal of certain investments.
10. Exclusion of trade marks.
11. Workers' future and interests.
12. Preferential allotment to Unilever.
13. Pending inquiry before the Monopolies and Restrictive Trade Practices Commission.

Detailed Analysis:

1. Adequacy of Material Provided to Shareholders:
Objection: Mr. Hazari contended that no adequate material was provided to shareholders at the meeting.
Court's Finding: The court found that the scheme and explanatory statement provided necessary particulars. The chairman's report and the affidavit of Mr. Thorat confirmed that the scheme was adequately explained, and any additional information was unnecessary. The objection was dismissed as the court did not find any substance in it.

2. Chairman's Absence During Polling:
Objection: Mr. Hazari argued that the chairman's absence during polling nullified the proceedings.
Court's Finding: The court noted that the minutes recorded the meeting's termination at 10 p.m., and more than 99% of shareholders approved the scheme. The objection was dismissed as the court found no substance in it.

3. Cryptic Explanatory Statement:
Objection: Mr. Hazari claimed that the explanatory statement was very cryptic.
Court's Finding: The court held that the explanatory statement complied with section 393(1)(a) of the Companies Act, which does not require disclosure of all material facts. The objection was dismissed.

4. Workers' Leave to Attend the Meeting:
Objection: Workers contended that their request for half a day's casual leave to attend the meeting was refused.
Court's Finding: The court found no evidence of past practice allowing such leave and noted that several workers attended the meeting despite the refusal. The objection was dismissed.

5. Chairman of the Court Convened Meeting:
Objection: Workers argued that the chairman of the court convened meeting should have been nominated by the court.
Court's Finding: The court found no substance in this objection, noting that the practice followed by the court was sound and that the workers' concern should be about the scheme's impact on them, not the meeting's convening process.

6. Exchange Ratio:
Objection: The exchange ratio of two equity shares of HLL for every 15 shares of TOMCO was challenged.
Court's Finding: The court found the valuation by Mr. Malegam fair and confirmed by two eminent firms of auditors. The objection was dismissed as the valuation was approved by an overwhelming majority of shareholders.

7. Exclusion of Certain Assets and Rights:
Objection: The exclusion of certain assets and rights under clause 1.7(d) was opposed.
Court's Finding: The court held that the excluded assets were premises on leave and licence basis, not assets of TOMCO. The objection was dismissed.

8. Treatment of Specified Properties:
Objection: Clause 4's treatment of certain immovable properties was opposed.
Court's Finding: The court modified clause 4 to ensure that the properties would be valued by independent valuers before disposal. The scheme was approved subject to this modification.

9. Disposal of Certain Investments:
Objection: The disposal of investments under clause 5 was opposed.
Court's Finding: The court found that the investments had already been disposed of at fair market value. The objection was dismissed.

10. Exclusion of Trade Marks:
Objection: The exclusion of trade marks under clause 7 was opposed.
Court's Finding: The court held that HLL, being a large manufacturer of similar items, would not use the trade marks associated with the Tata name. The objection was dismissed.

11. Workers' Future and Interests:
Objection: Workers expressed uncertainty about their future and claimed that the amalgamation was contrary to the company's objects.
Court's Finding: The court found that clause 11 of the scheme adequately protected the employees' interests. The objection was dismissed.

12. Preferential Allotment to Unilever:
Objection: The preferential allotment of shares to Unilever and the price of Rs. 105 per share were opposed.
Court's Finding: The court found the preferential allotment and the price fair and reasonable, noting that the price was based on a revised formula and approved by an overwhelming majority of shareholders. The objection was dismissed.

13. Pending Inquiry Before the Monopolies and Restrictive Trade Practices Commission:
Objection: It was requested to reserve the decision due to a pending inquiry.
Court's Finding: The court held that the power to sanction the scheme under the Companies Act was independent of the Monopolies and Restrictive Trade Practices Act. The objection was dismissed.

Conclusion:
The scheme of amalgamation was approved with a modification to clause 4 regarding the treatment of specified properties. The court found the scheme fair and reasonable, dismissing all other objections. The orders were stayed for four weeks.

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