1999 (3) TMI 483 - HC - Companies Law

Summary

Issues Involved:
1. Proposed amalgamation of three companies with Consolidated Coffee Ltd.
2. Objections by a shareholder regarding share allotment ratio.
3. Compliance with statutory procedures.
4. Evaluation and fairness of share valuation.
5. Objections by the Regional Director, Department of Company Affairs.

Issue-Wise Detailed Analysis:

1. Proposed Amalgamation:
The petitions concern the proposed amalgamation of Veerarajendra Estates Ltd., Charagni Ltd., and Coffee Lands Ltd. with Consolidated Coffee Ltd. The rationale behind the amalgamation is that the business activities of the transferor companies and the transferee company are similar, and merging them would be mutually advantageous. The Court issued the necessary notice, and the Regional Director raised certain objections.

2. Objections by Shareholder:
A shareholder of Coffee Lands Ltd. objected to the share allotment ratio of 1:1 proposed by the transferee company. The shareholder argued that Coffee Lands Ltd. is smaller, and its shares have not been properly evaluated. He contended that shareholders of Coffee Lands Ltd. should receive two shares for every one share held. Allegations were also made against the firms of Chartered Accountants who conducted the valuation, claiming bias due to their regular auditing of Tata Companies. The shareholder requested that the valuation be referred to an independent authority and that the scheme not be sanctioned in its present form.

3. Compliance with Statutory Procedures:
The Court found that all requisite procedures had been duly and properly complied with. No objections were raised by secured creditors, and the shareholders' meeting approved the scheme. The Court noted that while the majority approval is significant, it must also consider the grounds of dissent. In this case, the statutory compliance was met, and there was no technical bar to sanctioning the scheme.

4. Evaluation and Fairness of Share Valuation:
The valuation was conducted by A.F. Furgueson & Co. and N.M. Ranji & Co., Chartered Accountants, and supported by A.N.Z. Investment Bank. The Court emphasized the reputation and competence of these firms. The shareholder's accusations were deemed unsubstantiated, and the Court found the valuation process to be fair and professional. The Court also referenced the Supreme Court decision in Miheer H. Mafatlal v. Mafatlal Industries Ltd., which outlines the principles for such evaluations. The Court concluded that the evaluation was scientifically and professionally conducted, and there was no need to refer the matter to SEBI.

5. Objections by Regional Director:
The Regional Director raised minor objections, including the holding of shares by a subsidiary company in its holding company, which was overruled based on a similar precedent from the Delhi High Court. Another objection regarding the pending petition before the Andhra Pradesh High Court was rejected as it did not affect the current case. The objection about the reduction of share capital was also dismissed, referencing rule 85 of the Company Court Rules and decisions from the Calcutta and Andhra Pradesh High Courts.

Conclusion:
The objections by the shareholder were overruled, and the application was dismissed. The Court accorded approval of the proposed scheme of amalgamation, finding it fair and beneficial. The petitions were allowed, and the Official Liquidator had no objections to the sanction of the scheme. The Court acknowledged the assistance from Mr. Raghavan and his team.

Order:
The Court formally sanctioned the scheme, directed the office to draw up individual orders, and granted two weeks for filing the schedule of assets. No order as to costs was made.