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Issues:
1. Valuation of shares in the scheme of amalgamation. 2. Consideration of the exchange ratio of shares. 3. Compliance with legal requirements under the Companies Act, 1956. 4. Approval of the scheme by shareholders. 5. Transfer of assets and liabilities to the transferee-company. Valuation of Shares in the Scheme of Amalgamation: The judgment concerns the proposed scheme of amalgamation between two companies, focusing on the valuation of shares in this context. The valuation was conducted by professional chartered accountants, considering the unique nature of internet companies and the challenges in evaluating their stocks. The valuation methods included various factors like profit trends, cash flows, market price quotations, and future growth potentials. The court emphasized the complexity of valuing shares and accepted the valuation provided in the scheme as reasonable, given the future potential of the internet-based company involved. Consideration of the Exchange Ratio of Shares: A key issue raised was the exchange ratio of shares, specifically the concern regarding the high ratio proposed in the scheme. The Central Government highlighted this discrepancy, questioning the allotment of shares at a disproportionately high ratio. However, the court examined the valuation report and the basis for determining the exchange ratio, ultimately concluding that the proposed valuation was justifiable and in line with the future prospects of the companies involved. Compliance with Legal Requirements under the Companies Act, 1956: The judgment also addressed the compliance with legal provisions under the Companies Act, 1956. It was noted that the scheme had followed the necessary procedures, including convening a shareholders' meeting, advertising the petition, and obtaining approvals as required by law. The court confirmed that the statutory requirements, such as majority approval and disclosure of relevant facts, had been met, ensuring the legality of the amalgamation process. Approval of the Scheme by Shareholders: The court considered the approval of the scheme by the shareholders, highlighting the attendance at the shareholders' meeting and the unanimous approval received. Despite the relatively low attendance at the meeting, the court deemed the approval sufficient as it met the prescribed thresholds of the Companies Act, 1956. The lack of objections post-meeting further indicated the shareholders' acceptance of the scheme, leading to the court's approval of the amalgamation. Transfer of Assets and Liabilities to the Transferee-Company: Lastly, the judgment addressed the transfer of assets and liabilities from the transferor-company to the transferee-company as outlined in the scheme. Details regarding the share capital, reserves, investments, and other financial aspects were considered, ensuring a smooth transition of assets and services. The court found no objectionable features in the scheme and sanctioned the amalgamation, directing the necessary actions to be taken by the companies involved. In conclusion, the judgment thoroughly analyzed the valuation, legal compliance, shareholder approval, and asset transfer aspects of the proposed amalgamation scheme, ultimately approving the merger between the two companies.
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