2001 (2) TMI 969 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the writ petition.
2. Validity of the swap ratio in the scheme of amalgamation.
3. Compliance with procedural requirements under the Banking Regulation Act.
4. Allegations of proxy solicitation and coercion.
5. Allegations of insider trading.
6. Adequacy of notice and disclosure to shareholders.
7. Appointment of chartered accountants for valuation.
8. Request for probe into the merger.
9. Conduct of the petitioner-association.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:
The writ petition was filed to postpone the extraordinary general meeting (EGM) and to inspect the auditor's report. However, the EGM was held on 19-1-2001 before the writ petition could be taken up for admission, rendering the main prayer infructuous. The petitioner association failed to establish that its President or office-bearers were shareholders of Bank of Madura Ltd. at the relevant time, which challenged the maintainability of the writ petition.

2. Validity of the Swap Ratio in the Scheme of Amalgamation:
The petitioner argued that the swap ratio of 2:1 was unfair. However, the valuation was conducted by Deloitte Haskins and Sells, considering various financial metrics. The court emphasized that the Reserve Bank of India (RBI) is the authority to determine the market value of shares under Section 44A of the Banking Regulation Act, and the court should not interfere in this matter.

3. Compliance with Procedural Requirements under the Banking Regulation Act:
The court noted that Section 44A of the Banking Regulation Act is a self-contained provision for the amalgamation of banking companies. The scheme must be approved by the shareholders and sanctioned by the RBI. The court held that the RBI is empowered to determine the market value of shares and to sanction the scheme, and thus, the court should not express any opinion on the valuation of shares.

4. Allegations of Proxy Solicitation and Coercion:
The petitioner alleged that proxies were solicited and shareholders were coerced. However, the court found no evidence to support these claims. The Chairman's report of the EGM did not indicate any protest from shareholders regarding coercion. The court held that such allegations should be examined by the RBI.

5. Allegations of Insider Trading:
The petitioner claimed heavy insider trading in the shares of Bank of Madura Ltd. However, the court found no material evidence to support this claim. The mere fact that the Bombay Stock Exchange called for certain particulars did not establish insider trading.

6. Adequacy of Notice and Disclosure to Shareholders:
The petitioner contended that the notice of the meeting was not published in newspapers with adequate circulation. The court rejected this claim, as evidence showed that the notice was published in 'The Hindu' and 'Daily Thanthi'. The petitioner also argued that shareholders were not furnished with the valuation report, but the court found that the notice included an explanatory statement and listed documents available for inspection.

7. Appointment of Chartered Accountants for Valuation:
The petitioner questioned the appointment of Deloitte Haskins and Sells, arguing they were the chartered accountants of ICICI Bank Ltd. The court held that it was appropriate to appoint the same chartered accountants for both banks to ensure a comprehensive evaluation, considering the confidential nature of banking transactions.

8. Request for Probe into the Merger:
The petitioner requested a probe into the merger. The court rejected this request, stating that it is for the shareholders to accept or oppose the scheme, and the requisite majority had approved the amalgamation. The court found no grounds to order a probe.

9. Conduct of the Petitioner-Association:
The court noted that the petitioner-association had issued misleading notices and telegrams suggesting that the matter was sub judice and contempt proceedings would be taken, even though the court had not issued any such orders. This conduct indicated an attempt to delay the RBI's consideration of the scheme.

Conclusion:
The court dismissed the writ petition at the admission stage, finding no prima facie case for interference. The court emphasized that the RBI is the appropriate authority to determine the market value of shares and to sanction the scheme of amalgamation. The petitioner's various allegations were rejected due to lack of evidence or relevance.