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Issues Involved
1. Scheme of Amalgamation 2. Requisitioned Meeting 3. Statutory Obligations under Section 391 of the Companies Act, 1956 4. Change of Circumstances and Subsequent Change of Mind 5. Legal Validity of Requisitioned Meeting 6. Jurisdiction of the Company Court Detailed Analysis 1. Scheme of Amalgamation The petitioner company, Centron Industrial Alliance Limited, filed a petition under Section 391 of the Companies Act, 1956, for sanctioning a scheme of amalgamation with Brooke Bond India Ltd. The company has faced financial difficulties since 1975 and has not paid any dividends since becoming a public limited company in 1974. The scheme of amalgamation was approved by 97.30% of the shareholders, 100% of the secured creditors, and 98.50% of the unsecured creditors in a statutory meeting held on January 27, 1981. An application for approval was also made to the Central Government under Section 23 of the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), which was granted on January 21, 1982. 2. Requisitioned Meeting An alternative scheme proposed by Harbans Lal Malhotra and Sons Ltd. was rejected by the board of directors and secured creditors as not advantageous. After the Supreme Court declined to stay further proceedings, a requisitioned meeting was requested by some shareholders to consider renegotiating with Brooke Bond India Ltd. or examining alternative schemes. The main purpose of the requisitioned meeting was to compel the company to withdraw Company Petition No. 84 of 1981. 3. Statutory Obligations under Section 391 of the Companies Act, 1956 Under Section 391, once a scheme of amalgamation is approved by the required majority in a statutory meeting, the company is obligated to present a petition for confirmation of the scheme within seven days of the filing of the report by the chairman of the meeting. This scheme, if sanctioned by the court, becomes binding on all members and creditors from the date of approval at the statutory meeting, not from the date of court sanction. 4. Change of Circumstances and Subsequent Change of Mind The court noted that there was no dispute about the validity of the statutory meetings held for considering the scheme. The secured creditors and a substantial body of shareholders claimed to have changed their minds and wished to demonstrate this change at the requisitioned meeting. However, the court emphasized that a subsequent change of mind by some members and creditors cannot be taken into account. The court cited previous judgments, including those from the Privy Council and the Gujarat High Court, which supported the view that post facto circumstances generally should not be considered unless they are rare and exceptional. 5. Legal Validity of Requisitioned Meeting The court found that the requisitioned meeting was not called to consider matters affecting the company's internal management but to compel the company to withdraw the pending petition for amalgamation. The explanatory statement annexed to the requisition was deemed insufficient and misleading as it did not present any specific alternative scheme. The court held that the requisitioned meeting interfered with the company's statutory obligation under Section 391 and was, therefore, bad in law. 6. Jurisdiction of the Company Court The court held that it had jurisdiction to deal with the judge's summons for restraining the holding of the requisitioned meeting. The requisitioned meeting aimed at withdrawing a petition pending under Section 391, which directly related to the court's jurisdiction under the same section. The court made the judge's summons absolute, restraining the holding of the requisitioned meeting and awarded costs to the applicant. Conclusion The court concluded that the requisitioned meeting was not legally valid as it aimed to interfere with the statutory obligations of the company under Section 391 of the Companies Act, 1956. The court emphasized that subsequent changes in circumstances or changes of mind by some members and creditors cannot be grounds for reconsidering an already approved scheme of amalgamation. The judge's summons to restrain the holding of the requisitioned meeting was made absolute, and costs were awarded to the applicant.
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