1971 (6) TMI 37 - HC - Companies Law

Shares of shareholders dissenting from scheme or contract approved by majority Power and duty to acquire

Issues Involved
1. Right to serve notice under section 209(1) of the Companies Act 1948.
2. Validity of the conversion shares under section 209.
3. Inclusion of nominated shares under section 209.
4. Calculation of the requisite majority under section 209.
5. Validity of the notice given by T. & C. under section 209.
6. Exercise of the court's discretion under section 209.

Detailed Analysis

1. Right to Serve Notice Under Section 209(1) of the Companies Act 1948
The applicants claimed that T. & C. had no right to serve notice under section 209(1) of the Companies Act 1948 to acquire the ordinary shares in Simo held by them. The court examined the offer document sent by Wm. Brandt's Sons & Co. Ltd. on behalf of T. & C., detailing the share and stock conversion process and the conditions under which shares could be acquired.

2. Validity of the Conversion Shares Under Section 209
The applicants argued that the conversion shares should be excluded from the ambit of section 209, asserting that the section refers only to shares actually in issue at the date of the offer. The court, however, concluded that the wording of section 209 is wide enough to include conversion shares, stating, "I do not accede to the argument that shares must necessarily be in issue at the offer date in order to come within section 209."

3. Inclusion of Nominated Shares Under Section 209
The applicants contended that the nominated shares, which were allotted directly to T. & C., should be excluded as they were never held by the stockholders. The court found that the offer document involved a scheme or contract including the transfer of an absolute right to an allotment of shares, stating, "I see no necessity for the narrow construction urged upon me by the applicants."

4. Calculation of the Requisite Majority Under Section 209
The court had to determine the correct date for counting the number of shareholders to ascertain whether the approving shareholders amounted to three-fourths of the total holders. The court decided that the most practicable date for counting heads was the date when the offer was made. The court concluded that T. & C. satisfied the requisite 75% majority even after deducting the holders of the committed 4,800,000 shares.

5. Validity of the Notice Given by T. & C. Under Section 209
The applicants argued that the notice given by T. & C. was defective as it did not refer to the attainment of the requisite majority in number. The court concluded that the prescribed form of notice did not require mentioning the numerical majority, stating, "I therefore conclude that such additional information was not regarded as essential by the statutory instrument in a case where the proviso is applicable."

6. Exercise of the Court's Discretion Under Section 209
The applicants urged the court to exercise its discretion against T. & C., arguing that the offer was more attractive to stockholders than to shareholders. The court rejected this argument, stating, "The terms of the actual offer gave no greater advantage to a person who was entitled to a share because he exercised his right to convert than to a person who was entitled to a share because he was already on the register."

Conclusion
The court did not make the declaration sought by the applicants, thereby allowing T. & C. to proceed with the acquisition of the shares under section 209.

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