2003 (7) TMI 492 - HC - Companies Law

Summary

Issues Involved:

1. Validity of the proposed amendment to the share exchange ratio.
2. Method of counting votes at the shareholders' meeting.
3. Compliance with section 391(3) regarding the filing of a certified copy of the court order with the Registrar.

Issue-Wise Detailed Analysis:

I. Validity of the Proposed Amendment to the Share Exchange Ratio:

The Court examined whether the amendment proposed by Mr. Lakhani to alter the share exchange ratio was valid. The Court noted that the meeting convened under section 391(1) is for considering a specific compromise or arrangement, including a specified swap ratio. The swap ratio is an expert determination and an integral part of the proposed amalgamation. The Court held that an amendment to the swap ratio would nullify the basis of the Scheme of Amalgamation. Consequently, the Chairman's ruling that the amendment was not in order was justified. The Court also referenced past judgments, including Hindustan Lever Employees Union v. Hindustan Lever Ltd. and Miheer H. Mafatlal v. Mafatlal Industries Ltd., to support its decision. The Court emphasized that the shareholders' commercial wisdom should prevail, and the overwhelming support for the scheme (99.94%) further validated the decision.

II. Method of Counting Votes at the Shareholders' Meeting:

The appellant contended that the method of counting votes did not comply with section 391(2), arguing that each shareholder should have only one vote regardless of the number of shares held. The Court clarified that under section 391(2), the requirement is a majority in number representing three-fourths in value of the members present and voting. The Articles of Association of Parke-Davis (India) Ltd. and the Companies Act provisions allow for voting rights in proportion to the shareholding. The Court noted that joint holders with different folios are treated as separate members, which is consistent with company practice and the Articles of Association. The Court found no illegality in the Scrutineers' method of counting votes. The overwhelming support for the resolution further validated the process.

III. Compliance with Section 391(3) Regarding the Filing of a Certified Copy of the Court Order with the Registrar:

The appellant argued that all steps taken after the court's order and before the interim order by the Division Bench were without authority as a certified copy was not filed with the Registrar. The Court noted that the Company Judge had directed parties to act on an authenticated copy of the order, which is a valid procedure. The Supreme Court's order clarified that actions taken between the original order and the interim order should not be undone. The Court found no substance in the appellant's contention, emphasizing that the authenticated copy procedure complied with legal requirements.

Conclusion:

The Court dismissed the appeal, upholding the Scheme of Amalgamation. The Court emphasized the overwhelming support from shareholders, the proper procedural compliance, and the absence of any unfair or illegal actions. The Court extended the time to hold the Annual General Meeting till 30th September 2003, due to litigation delays. The interim order was extended until 12th August 2003 at the appellant's request.