2000 (11) TMI 1143 - HC - Companies Law

Issues Involved:
1. Sanction of the scheme of arrangement for demerger.
2. Allegations of fraud and unfairness in the scheme.
3. Legality of the meeting of shareholders.
4. Valuation report and share exchange ratio.
5. Transfer of valuable properties and brand names.
6. Objections to specific clauses (5.8, 5.9, and 9.3) in the scheme.
7. Shareholding interests and objections by certain shareholders.
8. Compliance with formalities under the Companies Act, 1956.
9. Bona fides of the objections raised.

Detailed Analysis:

1. Sanction of the Scheme of Arrangement for Demerger:
The petitioners, Duphar-Interfran Ltd., sought sanction for a scheme of arrangement for the demerger of their pharmaceutical division to Duphar Pharma India Ltd. Notices were published in newspapers and sent to the Regional Director, who had no objections to the scheme.

2. Allegations of Fraud and Unfairness in the Scheme:
Shareholder Renuka Datla opposed the scheme, alleging it was designed to benefit specific shareholders, Vasant Kumar and his family, and the foreign collaborators, Solvay BV. Interveners claimed the scheme was unfair and unjust, pushed through by a brute majority.

3. Legality of the Meeting of Shareholders:
Interveners argued that the meeting convened for considering the scheme was illegal and improper as different classes of members with conflicting interests participated in the same meeting.

4. Valuation Report and Share Exchange Ratio:
Interveners contended the valuation report, which formed the basis for the share exchange ratio, was unacceptable and mala fide. They argued that the scheme aimed to transfer unspecified properties of the petitioner-company, including valuable pharmaceutical products, to Solvay BV.

5. Transfer of Valuable Properties and Brand Names:
Interveners argued that products like 'Vertin' and 'Colospa' originally belonged to the petitioner and were being transferred unjustly. The petitioners countered that these products were owned by Dupen Laboratories (P.) Ltd., a company wholly owned by the Vasant Kumar family.

6. Objections to Specific Clauses (5.8, 5.9, and 9.3) in the Scheme:
Serious objections were raised to clauses 5.8, 5.9, and 9.3, which involved the transfer of shares and brand names between Vasant Kumar's family and Solvay BV. Petitioners argued these clauses would only become operative post-sanction of the scheme and were included to inform shareholders.

7. Shareholding Interests and Objections by Certain Shareholders:
Interveners, claiming to be members of the Raju family, objected to the shareholding interests being acquired by Vasant Kumar's family. The court noted that Renuka Datla had previously filed a suit in Hyderabad, which was dismissed, and her appeal was also rejected.

8. Compliance with Formalities under the Companies Act, 1956:
The court observed that the petitioners had complied with the necessary formalities under sections 391 to 394 of the Companies Act, 1956. A meeting of shareholders was held, and the scheme was approved by a majority.

9. Bona Fides of the Objections Raised:
The court concluded that the objections raised by the interveners were not bona fide and were intended to gain personal shareholding rights. The court rejected the argument that the scheme needed to be rescheduled and placed before shareholders again, as the deletion of clauses 5.8, 5.9, and 9.3 did not alter the scheme substantially.

Conclusion:
The application opposing the scheme was rejected. The court found the objections to be unwarranted, motivated by personal gain, and not in the interest of the company or its shareholders. The scheme of arrangement for demerger was sanctioned, with the deletion of the contentious clauses.

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