1997 (4) TMI 457 - HC - Companies Law

Summary

Issues:
1. Scheme of amalgamation between two companies.
2. Valuation of shares and exchange ratio.
3. Objection regarding exchange ratio.
4. Approval of scheme by shareholders and court.

Analysis:

1. Scheme of Amalgamation: The judgment deals with two company petitions seeking sanction for the proposed scheme of amalgamation between a transferee-company and a transferor-company. Both companies are under the same management and have similar objects, aiming for more efficient resource utilization. The scheme involves the transfer of assets, liabilities, and employees of the transferor-company to the transferee-company without affecting pending legal proceedings.

2. Valuation of Shares and Exchange Ratio: The exchange ratio proposed in the scheme is 2:1, with the transferee-company issuing two fully paid-up equity shares for every one share held in the transferor-company. The objection raised by the Regional Director questioned the realism of this ratio based on a valuation report. However, the transferee-company defended the ratio, stating that it was determined by chartered accountants following valuation guidelines. The valuation considered factors like land appreciation and goodwill, making the proposed ratio fair and reasonable.

3. Objection Regarding Exchange Ratio: The objection to the exchange ratio was refuted based on the Supreme Court precedent in Miheer H. Mafatlal v. Mafatlal Industries Ltd., emphasizing that court intervention is not warranted if the valuation is conducted by experts and accepted by shareholders. In this case, since the exchange ratio was supported by the majority of shareholders and based on professional valuation, the objection was deemed unsustainable.

4. Approval of Scheme: The judgment concludes that the proposed scheme of amalgamation is in the interest of all stakeholders and does not prejudice any shareholder or the public. Consequently, the court sanctions the scheme, directing the transfer of assets and properties to the transferee-company as per the Companies Act, 1956. The remuneration for legal counsels involved in the petitions is also quantified.

In summary, the judgment approves the scheme of amalgamation between the two companies, dismisses objections to the exchange ratio, and emphasizes the importance of professional valuation and shareholder consensus in such matters.