2009 (8) TMI 702 - HC - Companies Law

Amalgamation scheme sanction seeked - Held that - None of the grounds exists in the present case which have been laid down as grounds for rejecting of scheme. Appeal dismissed.

Summary

Issues Involved:
1. Sanction of amalgamation of Reliance Petroleum Ltd. with Reliance Industries Ltd.
2. Objections raised regarding the undue haste in the amalgamation process.
3. Fairness and validity of the valuation and fairness reports.
4. Scope of court's jurisdiction in sanctioning the scheme of amalgamation.

Issue-wise Detailed Analysis:

1. Sanction of Amalgamation:
The company petition sought the sanction of the amalgamation of Reliance Petroleum Ltd. (transferor-company) with Reliance Industries Ltd. (transferee-company). The scheme was approved by the Board of Directors on 2-3-2009 and received approval from the Bombay Stock Exchange and National Stock Exchange on the same day. The requisite meetings of equity shareholders, secured creditors, and unsecured creditors were convened and held on 4-4-2009, where the scheme was overwhelmingly approved by equity shareholders and unanimously by both secured and unsecured creditors.

2. Objections Regarding Undue Haste:
Objectors claimed undue haste in the amalgamation process, arguing that the valuation and fairness reports were prepared too quickly between February 27 and March 2, 2009, which included a weekend. The court noted that with advancements in computer and communication technology, quick preparation of such reports is feasible. The court found no evidence of non-application of mind by the experts, and the process was deemed urgent but legitimate.

3. Fairness and Validity of Valuation and Fairness Reports:
The court examined the objections regarding the valuation and fairness reports, which were criticized for not disclosing specific adjustments made. The court emphasized that the methods used (net asset value method, manageable profit basis method, history and current market price method, and discounted cash-flow method) were standard. The court deferred to the expertise of the valuers, noting that the petitioner failed to show any material contradiction in the conclusions reached by the experts.

4. Scope of Court's Jurisdiction:
The court's jurisdiction in sanctioning a scheme of amalgamation is limited to ensuring that the scheme is reasonable, fair, and not oppressive to the minority. The court referenced previous judgments, including German Remedies Ltd., In re, which stated that the court should not sit in appeal over the commercial judgment of equity shareholders unless the scheme is grossly unfair. The court also considered the judgment in Miheer H. Mafatlal v. Mafatlal Industries Ltd., which highlighted the technical and complex nature of share valuation, best left to experts.

Conclusion:
The court dismissed the appeals, finding no merit in the objections raised. The court upheld the amalgamation, emphasizing the overwhelming majority approval by shareholders and creditors and the absence of any material evidence contradicting the experts' reports. The court also denied the prayer for continuing the status quo, given the two courts' approval of the amalgamation.