1971 (4) TMI 59 - HC - Companies Law

Summary

Issues Involved:
1. Approval of the scheme of amalgamation under sections 391 and 394 of the Companies Act, 1956.
2. Requirement of Central Government approval under section 23 of the Monopolies and Restrictive Trade Practices Act, 1969.
3. Fairness and reasonableness of the share exchange ratio in the scheme of amalgamation.
4. Joinder of the Central Government as a party to the petition.

Issue-wise Detailed Analysis:

1. Approval of the scheme of amalgamation under sections 391 and 394 of the Companies Act, 1956:
The petitioner sought the court's sanction for a scheme of amalgamation between the petitioner-company and the respondent-company under sections 391 and 394 of the Companies Act, 1956. The respondent-company supported the petition and submitted to the court's orders. The court noted that the scheme was unanimously approved by the shareholders of both companies in meetings convened as per court directions. The official liquidator's report confirmed that the affairs of the petitioner-company were conducted in a manner not prejudicial to the interests of its members or public interest. Consequently, the court granted the petition for amalgamation.

2. Requirement of Central Government approval under section 23 of the Monopolies and Restrictive Trade Practices Act, 1969:
The Central Government contended that the scheme required its approval under section 23 of the Monopolies Act, as both companies were "undertakings" within the meaning of section 2(v) of the Act. The petitioner-company argued that it was not an "undertaking" since it had not engaged in any business after 1965, particularly not in the provision of any "service" as defined in section 2(r). The court examined the business activities of the petitioner-company and concluded that it continued to carry on the business of an investment company, which did not qualify as a "service" under section 2(r) of the Monopolies Act. Thus, the petitioner-company was not an "undertaking," and its amalgamation with the respondent-company did not require Central Government approval under section 23(1).

3. Fairness and reasonableness of the share exchange ratio in the scheme of amalgamation:
The Central Government argued that the share exchange ratio of 5 shares of the petitioner-company to 2 shares of the respondent-company was unfair to the shareholders of the petitioner-company. The court noted that the ratio was determined by two reputable firms of chartered accountants after examining the financial positions of both companies. The court referenced previous judgments, emphasizing that it should not interfere with the scheme unless it was affirmatively shown to be unfair. Since no shareholder or creditor objected to the scheme, and the Central Government failed to establish that the valuation was unfair, the court upheld the share exchange ratio as fair and equitable.

4. Joinder of the Central Government as a party to the petition:
The Central Government applied to be joined as a party to the petition under order I, rule 10(2) of the Civil Procedure Code and rule 9 of the Companies (Court) Rules, 1959, to secure a right of appeal. The court rejected this application, stating that section 394A of the Companies Act already secured the Central Government's presence by notice, and there was no jurisdiction to add a party solely to confer a right of appeal. This decision was consistent with a previous ruling in a similar case involving the Central Government.

Conclusion:
The court granted the petition for the amalgamation of the petitioner-company with the respondent-company, finding no requirement for Central Government approval under the Monopolies Act and determining the share exchange ratio to be fair. The Central Government's application to be joined as a party was rejected, and the costs of the official liquidator and the petitioner-company were ordered to come out of the assets of the amalgamated companies.