2004 (5) TMI 314 - HC - Companies Law

Issues Involved:
1. Invocation of sections 391 to 394 of the Companies Act for sanctioning a Scheme of Amalgamation.
2. Details and business activities of the Transferor-Companies and Transferee-Company.
3. Salient features and objectives of the Scheme of Amalgamation.
4. Financial structure and share capital of the involved companies.
5. Legal formalities and compliance for the Scheme's approval.
6. Judicial review and approval of the Scheme.

Issue-wise Detailed Analysis:

1. Invocation of sections 391 to 394 of the Companies Act for sanctioning a Scheme of Amalgamation:
The petition was filed by De Beers India Minerals Pvt. Ltd. (DBIMPL) to invoke sections 391 to 394 of the Companies Act to obtain sanction for the Scheme of Amalgamation involving five Transferor-Companies (DBIMPL, DBIEPL, DBIGPL, DBISPL, and DBIPPL) with De Beers India Private Ltd. (DBIPL/Transferee Company).

2. Details and business activities of the Transferor-Companies and Transferee-Company:
- DBIMPL (Transferor-Company No. 1): Incorporated on 30-5-1997, engaged in prospecting and exploration of diamonds, precious stones, and other minerals.
- DBIEPL (Transferor-Company No. 2): Incorporated on 30-10-1998, intended for prospecting, exploring, mining, and quarrying but had not commenced activities as of the Appointed Date.
- DBIGPL (Transferor-Company No. 3): Incorporated on 15-11-1994, engaged in the business of prospecting and exploration of diamonds and precious stones.
- DBISPL (Transferor-Company No. 4): Incorporated on 15-11-1994, engaged in reconnaissance activities and established a treatment plant in Bangalore.
- DBIPPL (Transferor-Company No. 5): Incorporated on 16-6-1994, engaged in reconnaissance activities and established a treatment plant in Bangalore.
- DBIPL (Transferee-Company): Incorporated on 15-11-1994, providing services of geologists and other qualified technicians, as well as mining-related and corporate services.

3. Salient features and objectives of the Scheme of Amalgamation:
The Scheme involves the transfer and vesting of all assets, properties, debts, liabilities, and obligations of the Transferor-Companies to the Transferee-Company without further acts or consent of third parties. The Scheme aims to:
- Achieve efficient utilization of capital and create a stronger base for future growth.
- Result in administrative and operational rationalization, organizational efficiencies, and reduction in overhead and other expenses.
- Strengthen the Transferee-Company's position in the competitive market and enhance shareholder value.

4. Financial structure and share capital of the involved companies:
- DBIMPL: Authorized capital of Rs. 50,000,000, issued, subscribed, and paid-up capital of Rs. 31,815,000.
- DBIEPL: Authorized capital of Rs. 2,500,000, issued, subscribed, and paid-up capital of Rs. 1,41,430.
- DBIGPL: Authorized capital of Rs. 5,000,000, issued, subscribed, and paid-up capital of Rs. 3,049,210.
- DBISPL: Authorized capital of Rs. 140,000,000, issued, subscribed, and paid-up capital of Rs. 124,754,730.
- DBIPPL: Authorized capital of Rs. 80,000,000, issued, subscribed, and paid-up capital of Rs. 68,417,830.
- DBIPL: Authorized capital of Rs. 23,000,000, issued, subscribed, and paid-up capital of Rs. 19,441,350.

5. Legal formalities and compliance for the Scheme's approval:
The Scheme is conditional on:
- Approval by the requisite majority of the respective members.
- Sanctions and orders under sections 391 and 394 of the Act.
- Approval from the Government of India and/or Reserve Bank of India under the Foreign Exchange Management Act, 1999.
The Scheme becomes effective upon obtaining all necessary consents, approvals, permissions, resolutions, and orders.

6. Judicial review and approval of the Scheme:
The Court reviewed the Scheme, noting that it is sound, fair, reasonable, and not prejudicial to the interest of shareholders or public interest. The Scheme was unanimously approved by the respective shareholders and creditors, and no objections were raised. The Court allowed the petition in terms of the prayer clauses (a) to (h), with liberty to proceed in accordance with the law. The costs of Rs. 2,500 each were to be paid to the Regional Director and the Official Liquidator within four weeks.

The judgment emphasized the limited scope of judicial review in such matters, focusing on whether the Scheme is unfair, unreasonable, contrary to law, or public policy. As all necessary formalities and legal compliances were met, the Scheme was sanctioned.

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