1999 (8) TMI 859 - HC - Companies Law

Summary

Issues Involved:
1. Locus Standi of Kamani Employees Union to object to the amalgamation scheme.
2. Disclosure of the latest financial position.
3. Disclosure of material particulars, including directors' interests.
4. Prior written consent from financial institutions.
5. Proper notices to partly paid-up shareholders.
6. Proper individual notices to fully paid-up shareholders.
7. Approval of the amalgamation scheme by the requisite majority.
8. Validity of the proposed amendment resolutions.
9. Valid authorisation of representatives by corporate shareholders.
10. Fairness of the share exchange ratio.
11. Fairness and reasonableness of the amalgamation scheme.
12. Public interest considerations.

Summary of Judgment:

1. Locus Standi of Kamani Employees Union:
The court held that Kamani Employees Union has the right to object to the scheme of amalgamation as many employees are shareholders. The employees' interests should be protected, and they have a right to oppose the scheme if it prejudicially affects them.

2. Disclosure of Latest Financial Position:
The court determined that the petitioner-company failed to disclose the latest financial position at the time of the final hearing, which is a mandatory requirement u/s 391(2) of the Companies Act. The financial position disclosed was as of March 31, 1997, which was not sufficient.

3. Disclosure of Material Particulars:
The petitioner-company did not disclose all material particulars, including the interests of directors as required by section 391(1)(a) of the Companies Act. The court upheld the objection regarding non-disclosure of directors' interests.

4. Prior Written Consent from Financial Institutions:
The court noted that the petitioner-company filed an affidavit at a belated stage showing letters from LIC, GIC, and UTI approving the amalgamation scheme. Thus, this objection was not sustained.

5. Proper Notices to Partly Paid-Up Shareholders:
The court found that the petitioner-company did not release any public advertisement inviting notices of partly paid-up shareholders. The explanations given were not satisfactory, and the objection was upheld.

6. Proper Individual Notices to Fully Paid-Up Shareholders:
The court found discrepancies in the resolutions purportedly passed by 19 corporate shareholders, indicating that many resolutions were fabricated. The meeting held on November 17, 1997, was a sham, and the objection was upheld.

7. Approval by Requisite Majority:
The court concluded that the meeting held on November 17, 1997, did not have the requisite majority support for the amalgamation scheme due to fabricated resolutions. The objection was upheld.

8. Validity of Proposed Amendment Resolutions:
The court found discrepancies in the voting procedure and the manner in which votes were counted, leading to the conclusion that the resolutions were not properly voted on. The objection was upheld.

9. Valid Authorisation of Representatives:
The court found that the purported resolutions of 19 corporate shareholders authorising representatives were fabricated and concocted. The objection was upheld.

10. Fairness of Share Exchange Ratio:
The court did not find any substantial reason to hold that the share exchange ratio was unfair or unjust. This objection was not sustained.

11. Fairness and Reasonableness of the Amalgamation Scheme:
The court found that the manner in which the meeting was held and the approval obtained was bogus and concocted. The objection was upheld.

12. Public Interest Considerations:
The court did not find clear and concrete material to hold that the scheme was against public interest. However, due to the fabricated resolutions and improper meeting procedures, the amalgamation scheme was not approved.

Conclusion:
The petition for the amalgamation scheme was dismissed with costs. The court directed the Prothonotary and Senior Master to keep the file containing the purported resolutions in a sealed cover and issued show-cause notices to certain individuals for possible criminal prosecution u/s 193 of the Indian Penal Code for fabricating false evidence.