2002 (10) TMI 433 - HC - Companies Law

Summary

Issues Involved:
1. Sanction of the scheme of amalgamation under sections 391 to 394 of the Companies Act, 1956.
2. Objections to the scheme by certain shareholders and creditors.
3. Compliance with statutory requirements and classification of shareholders and creditors.
4. Valuation and swap ratio fairness.
5. Jurisdiction of the Company Court versus BIFR.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The petitioners, transferor companies, sought the sanction of a scheme of arrangement for amalgamation with the transferee-company, APIL, effective from 31-3-2001. The scheme envisaged the merger of Alstom Transport Ltd., Alstom Systems Ltd., and Alstom Power Boilers with APIL. The Regional Director and the Official Liquidator conveyed no objections to the scheme, stating it was not prejudicial to the interests of creditors and shareholders.

2. Objections to the Scheme by Certain Shareholders and Creditors:
Some shareholders, including Mrs. Darshana Kenia, her father Shri Damji Ghalla, and her husband Mr. Prafulkumar Kenia, opposed the scheme but did not attend the shareholder meeting. The State Bank of India (SBI) and the Industrial Development Bank of India (IDBI) also opposed the scheme through affidavits but did not participate in the shareholders' meeting. The objections included allegations that the scheme was unfair, not bona fide, and violated public policy.

3. Compliance with Statutory Requirements and Classification of Shareholders and Creditors:
The Court examined whether the statutory procedures under sections 391 to 394 were followed, including the convening of requisite meetings and the classification of shareholders and creditors. The Court found that the meetings of equity and preference shareholders, secured and unsecured creditors were properly convened. It rejected the contention that separate meetings for different classes of preference shareholders were required, stating that the classification was reasonable and proper.

4. Valuation and Swap Ratio Fairness:
The swap ratio determined by M/s. A.F. Ferguson & Co. was based on methodologies including discounted cash flow, capitalized maintainable earnings, and market value. The Court noted that valuation is a technical issue best left to experts and that the majority of shareholders had approved the scheme. It found no evidence of fraud or mala fides in the valuation process and held that the commercial wisdom of the shareholders should not be questioned.

5. Jurisdiction of the Company Court versus BIFR:
The Court addressed the argument that the scheme should have been presented to the Board for Industrial and Financial Reconstruction (BIFR) for modification. It held that since the petitioners were no longer sick industrial companies and had successfully implemented the BIFR scheme, the present scheme of amalgamation should be sanctioned by the Company Court, not the BIFR.

Conclusion:
The Court found that the scheme was fair, just, and in the interest of all shareholders and creditors. It emphasized that the overwhelming majority had approved the scheme and that the objections raised were not sufficient to deny sanction. The scheme was sanctioned, and the petitions were made absolute with costs awarded to the Regional Director and the Official Liquidator. The request for a stay of the order was refused.