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Issues Involved:
1. Compliance with statutory procedures and rules. 2. Bona fide nature of the scheme. 3. Accuracy and legality of the valuation report. 4. Fairness of the swap ratio. Detailed Analysis: Re: Compliance with Statutory Procedures and Rules The petitioner, a company incorporated under the Indian Companies Act, 1913, sought approval for a scheme of amalgamation with Cadila Health Care Limited. The High Court of Gujarat had already sanctioned the scheme for other companies involved. The petitioner convened a meeting of equity shareholders as directed by the court, where the scheme was approved by an overwhelming majority. The petitioner then filed for sanction under sections 391/394 of the Companies Act. Notices were duly served and published, and affidavits proving service and publication were filed. The Official Liquidator and the Regional Director stated that the scheme was not prejudicial to the interests of creditors and shareholders. Re: Bona Fide Nature of the Scheme Objectors claimed the scheme was a facade for the transferee company to seize the transferor company's properties. However, the court emphasized that its jurisdiction is supervisory, not appellate. The court must ensure the scheme is just, fair, and reasonable to all affected parties. The court cannot reject a scheme merely based on the majority's approval but must ensure it is not unconscionable or illegal. The court found no evidence supporting the objectors' claims and noted that the properties would remain with the transferee company, benefiting all shareholders, including the objectors. Re: Accuracy and Legality of the Valuation Report Objectors argued the valuation report was flawed as it did not account for the closure of the Andheri plant and the valuation of its real estate. However, the court noted that the valuers had indeed considered the closure and potential real estate value. The valuation was based on Net Asset Value, Profit Earning Value, and Market Value, and the swap ratio was determined through a weighted average of these methods. The court found the valuation report to be accurate and in compliance with standard practices. Re: Fairness of the Swap Ratio Objectors contended the swap ratio of 7 equity shares of Rs. 5 each in the transferee company for 4 equity shares of Rs. 10 each in the transferor company was unfair. The court reiterated that the swap ratio falls within the commercial wisdom of the shareholders, who approved it by a significant majority. The court's role is to ensure the ratio is not grossly erroneous or oppressive. The court found the ratio fair and reasonable, noting that the valuers had considered all relevant factors. Conclusion The court sanctioned the scheme of arrangement and merger, finding it just, fair, and reasonable. The objections were dismissed as they lacked legal and factual basis. The petitioner was directed to pay costs to the Official Liquidator and the Regional Director.
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