2002 (9) TMI 761 - HC - Companies Law

Summary

Issues Involved:

1. Sanction of the Scheme of Amalgamation between Reliance Petroleum Limited (RPL) and Reliance Industries Limited (RIL).
2. Objections to the share exchange ratio and valuation report.
3. Jurisdiction and procedural concerns.
4. Public interest and potential monopoly.
5. Role of the Securities and Exchange Board of India (SEBI) in the amalgamation process.
6. Validity of objections raised by shareholders.
7. Compliance with statutory provisions and fairness of the scheme.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Amalgamation:
The petitioner, Reliance Petroleum Limited (RPL), sought the court's sanction for the Scheme of Amalgamation with Reliance Industries Limited (RIL). The court noted that the scheme was approved by the Board of Directors of both companies and was placed before the shareholders, who voted overwhelmingly in favor of the scheme.

2. Objections to the Share Exchange Ratio and Valuation Report:
The primary objections raised by shareholders pertained to the fairness of the share exchange ratio recommended by S.B. Billimoria & Co. and Price Waterhouse. Objectors argued that the valuation report was vague, lacked detailed data, and was biased towards the promoters' interests. However, the court found no evidence of fraud or mala fide intentions in the valuation process and emphasized that the commercial wisdom of shareholders, who had approved the scheme by a significant majority, should be respected.

3. Jurisdiction and Procedural Concerns:
One objection was that RIL, the transferee company, was not before the court, potentially leading to conflicting decisions. The court dismissed this concern, noting that RIL had rightly petitioned the High Court of Mumbai, and any implementation difficulties were not relevant to the approval of the scheme.

4. Public Interest and Potential Monopoly:
An objection was raised that the amalgamation would create a monopoly, adversely affecting public interest. The court found no evidence that the scheme would harm public or economic interests and reiterated that it is the shareholders' prerogative to decide what is in the best interest of the company.

5. Role of SEBI in the Amalgamation Process:
Objectors argued that SEBI should be a necessary party to the petition. The court found no statutory requirement to include SEBI in the amalgamation process and concluded that its presence was not necessary for the court to exercise its jurisdiction.

6. Validity of Objections Raised by Shareholders:
The court reviewed objections from shareholders, including concerns about the adequacy of disclosures and the fairness of the share exchange ratio. The court noted that none of the objectors attended the shareholders' meeting, and the overwhelming majority of shareholders who did attend voted in favor of the scheme. The court emphasized that it is not its role to scrutinize the valuation report like an appellate authority but to ensure that the scheme is not unconscionable, illegal, or unfair.

7. Compliance with Statutory Provisions and Fairness of the Scheme:
The court ensured that statutory provisions were complied with, and the class of persons attending the meeting was fairly represented. The court found that the valuation report was based on relevant financial data and discussions with management, and there was no evidence to suggest that the share exchange ratio was unfair or unjust. The court concluded that the scheme was approved by the requisite majority of shareholders and was in line with the commercial wisdom of the parties involved.

Conclusion:
The court sanctioned the Scheme of Amalgamation between RPL and RIL, finding no merit in the objections raised. The court emphasized the importance of respecting the commercial decisions of shareholders and ensuring compliance with statutory provisions. The petition was disposed of, and the request for a stay of the judgment was rejected.