1996 (12) TMI 314 - HC - Companies Law

Issues Involved:

1. Approval of the scheme of amalgamation.
2. Representation of shareholders.
3. Transfer of tenancies.
4. Fairness of the exchange ratio.
5. Public interest considerations.
6. Objections by minority shareholders.

Issue-wise Detailed Analysis:

1. Approval of the Scheme of Amalgamation:
The application sought approval for the amalgamation scheme between Brooke Bond Lipton India Ltd. (transferor) and Hindustan Lever Ltd. (transferee), both subsidiaries of Unilever plc. The High Court of Calcutta noted that the scheme had already been approved by the Bombay High Court without objections from the Regional Director. The scheme was overwhelmingly approved by the shareholders of the transferor company, with 99.5% voting in favor.

2. Representation of Shareholders:
Objectors argued that Unilever's significant shareholding should place them in a different class, suggesting improper representation of shareholders. The court found this objection insignificant as the amalgamation did not change Unilever's position. The court cited the Supreme Court's observation that if the majority of shareholders approve the valuation, the court should not interfere unless there is fraud or unreasonableness.

3. Transfer of Tenancies:
Objectors argued that monthly tenancies could not be transferred without the landlord's consent, citing the West Bengal Premises Tenancy Act, 1956. The court dismissed this objection, stating that the question of transfer arises only after the scheme becomes effective and the court cannot assume that consent will not be granted. The court emphasized that such a proposition would imply that no scheme involving monthly tenancies could be sanctioned.

4. Fairness of the Exchange Ratio:
Objectors challenged the exchange ratio, alleging that the valuation report was flawed and did not account for valuable brands. The court noted that the valuation was conducted by reputed firms and independently reviewed by ANZ Grindlays Bank and ICICI Securities & Finance Co. Ltd., who found it fair and reasonable. The court emphasized that the Supreme Court had approved the same valuation method in a previous case and that no fraud was alleged against the valuers.

5. Public Interest Considerations:
Objectors and the Central Government raised concerns that the amalgamation was against public interest, potentially harming indigenous small companies. The court dismissed these objections, noting that the scheme complied with statutory requirements and was overwhelmingly approved by shareholders. The court reiterated that it is not within its jurisdiction to question the commercial wisdom of shareholders unless there is evidence of fraud or unreasonableness.

6. Objections by Minority Shareholders:
The court observed that the objectors held an insignificant number of shares and did not attend the meeting or inspect the valuation report. The court highlighted that the objections were raised at the meeting and rejected by the majority. The court offered to purchase the objectors' shares at the price they paid or any other price fixed by the court, emphasizing that the wishes of the majority shareholders could not be ignored.

Conclusion:
The court found no impediment to sanctioning the scheme, provided that the shares held by Brooke Bond Lipton India Ltd. in Hindustan Lever Ltd. were sold by 31-12-1996. The court ordered the Official Liquidator to file a report within eight weeks and assessed costs at 250 grams to the Central Government. The judgment emphasized compliance with statutory requirements, fairness of the scheme, and the overwhelming approval by shareholders.

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