1973 (7) TMI 63 - HC - Companies Law

Summary

Issues Involved:
1. Power of the companies to amalgamate.
2. Compliance with statutory requirements.
3. Validity of the shareholders' meeting and proxy voting.
4. Valuation and exchange ratio of shares.
5. Feasibility and fairness of the scheme.

Detailed Analysis:

1. Power of the Companies to Amalgamate:
The court examined whether Jalpaiguri Tea Co. Ltd. and Bijoynagar Tea Co. Ltd. had the power to amalgamate under their respective memoranda of association. Initially, neither company had the explicit power to amalgamate or sell their entire undertakings. However, resolutions were subsequently passed to alter their memoranda to include such powers, which were confirmed by the High Court on 18th September 1972. The certified copy of the altered memorandum was filed on 3rd May 1973. The court noted that the scheme was conditional upon obtaining these powers, thus validating the scheme upon the filing of the certified copies. The court concluded that it was not faced with an extreme case where the companies had no power at all; rather, the companies acquired the necessary power before the scheme's implementation.

2. Compliance with Statutory Requirements:
The court emphasized the importance of fulfilling statutory requirements under sections 391 and 394 of the Companies Act. It was argued that a company without the power to amalgamate or dissolve could not propose such a scheme. The court reviewed various precedents and concluded that the statutory power to sanction a scheme of amalgamation under section 391 was not limited by the objects clause of the companies' memoranda. The court found that the statutory requirements had been met, as the scheme was conditional upon the companies acquiring the necessary powers, which they did.

3. Validity of the Shareholders' Meeting and Proxy Voting:
The validity of the shareholders' meetings and the rejection of proxies were contested. The court reviewed the chairman's report and the relevant rules, concluding that the meetings were properly convened, and the proxies were correctly handled. The court rejected the contention that the proxies given in Bengali were improperly rejected and found no merit in the argument that notice should have been given to the creditors.

4. Valuation and Exchange Ratio of Shares:
The exchange ratio proposed in the scheme was 14:1, based on a report by Messrs. Lovelock & Lewes, Chartered Accountants. The respondents pointed out irregularities in the valuation but did not provide an alternative valuation. The court considered the affidavit by the Regional Director, Eastern Region, Company Law Board, which suggested a fair exchange ratio of 15 shares of Jalpaiguri Tea Co. Ltd. for every 2 shares of Bijoynagar Tea Co. Ltd. The court found this to be a fair valuation and modified the scheme accordingly.

5. Feasibility and Fairness of the Scheme:
The court assessed the feasibility and fairness of the scheme, considering whether the statutory requirements were met, all classes were properly represented, and whether the scheme was one that a prudent person would reasonably approve. The court noted that the majority of the shareholders approved the scheme, and no substantial opposition was present. The court found no evidence of unfeasibility or unworkability in the scheme and noted the potential for better economic management and expansion of the tea industry. The court concluded that the scheme was fair and feasible.

Conclusion:
The court sanctioned the scheme of amalgamation with the modification that the exchange ratio should be 15 shares of Jalpaiguri Tea Co. Ltd. for every 2 shares of Bijoynagar Tea Co. Ltd. The petitioners were directed not to take any steps for three weeks except for giving requisition to have the order drawn up. Each party was ordered to bear its own costs.