1971 (12) TMI 62 - HC - Companies Law

Summary

Issues Involved:
1. Compliance with statutory provisions under sections 391 and 394 of the Companies Act.
2. Representation of the class of shareholders.
3. Reasonableness of the scheme from a business perspective.
4. Application of the Monopolies and Restrictive Trade Practices Act, 1969, particularly section 23(1)(a).

Issue-wise Detailed Analysis:

1. Compliance with Statutory Provisions:
The petition was filed under sections 391 and 394 of the Companies Act for sanctioning an amalgamation arrangement between the petitioner and the respondent. The court examined the scheme to ensure that all statutory provisions had been complied with. The petitioner strictly adhered to the requirements, and the scheme was approved by more than the statutory majority of members. The High Court of Bombay had already sanctioned the scheme, and the Gujarat High Court was also satisfied with the compliance.

2. Representation of the Class of Shareholders:
The court assessed whether the class of shareholders was fairly represented. The figures showed that a significant majority approved the scheme, indicating fair representation. The minority opposing the scheme did not appear at the hearing to present their views, suggesting that the majority did not coerce the minority. The court concluded that the class was well represented, and the scheme was approved by a substantial majority.

3. Reasonableness of the Scheme from a Business Perspective:
The court evaluated whether the scheme was such that a man of business would reasonably approve. The scheme involved the amalgamation of the transferor company with the petitioner, which would bring a substantial sum of Rs. 14.70 crores to the petitioner for expansion and liquidity. The court found that the scheme was commercially sound and beneficial from the transferee company's perspective. The Bombay High Court had already examined the scheme from the transferor company's viewpoint and sanctioned it.

4. Application of the Monopolies and Restrictive Trade Practices Act, 1969:
The Central Government opposed the scheme, arguing that it required approval under section 23(1)(a) of the Monopolies Act, as both companies were undertakings within the Act's meaning. The court examined whether the respondent (transferor company) was an undertaking engaged in the provision of service. The court found that since the Bank Nationalisation Act, the respondent was not engaged in any business or service. The respondent's activities, such as selling compensation bonds and making interim deposits, did not constitute carrying on business or providing service. The court concluded that the respondent was not an undertaking under the Monopolies Act, and section 23(1)(a) did not apply. Therefore, the scheme did not require Central Government approval.

Conclusion:
The court sanctioned the scheme of amalgamation, as it complied with statutory provisions, fairly represented the class of shareholders, and was reasonable from a business perspective. The objections under the Monopolies Act were dismissed, as the respondent was not an undertaking within the Act's meaning. The court issued specific directions for implementing the scheme, including the transfer of properties, continuation of proceedings, allotment of shares and bonds, and registration with the Registrar of Companies. The petitioner's costs were to be borne by themselves, and the Government of India was awarded one set of hearing fees.