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Issues Involved:
1. Exchange Ratio Fairness 2. Requirement of Central Government Approval under MRTP Act 3. Notice to Creditors 4. Compliance with Statutory Requirements and Good Faith Detailed Analysis: 1. Exchange Ratio Fairness The primary issue was whether the exchange ratio of shares between the transferor and transferee companies was fair. The Regional Director, Company Law Board, argued that the exchange ratio was disproportionate, suggesting that the value of the shares in the transferee-company was significantly higher than those in the transferor-company. The court noted that the exchange ratio had been evaluated by three reputable firms of chartered accountants, who deemed it fair and reasonable. The court emphasized that the valuation considered multiple factors, including break-up value, yield, and stock exchange prices, and found no defect or mala fides in the valuation process. The court concluded that the exchange ratio was fair and reasonable, citing precedents that supported the consideration of stock exchange prices in share valuation. 2. Requirement of Central Government Approval under MRTP Act The Regional Director contended that the scheme required approval under section 23 of the Monopolies and Restrictive Trade Practices Act (MRTP Act). The court examined section 23(3) of the MRTP Act, which exempts certain interconnected undertakings producing the same goods from needing such approval. The court found that both companies were interconnected and not dominant undertakings, and they produced the same goods, thus satisfying all conditions under section 23(3). The court also noted that the scheme had received approval under section 72A of the Income-tax Act, 1961, reinforcing the conclusion that no additional approval under the MRTP Act was necessary. 3. Notice to Creditors The objection regarding the necessity of notifying creditors was addressed by noting that the petitions had been widely advertised, and no creditors had objected. The court highlighted that the major creditor, the Central Bank of India, did not oppose the scheme. It was also noted that all creditors of the transferor-company would automatically become creditors of the financially stronger transferee-company. The court found no merit in the objection and concluded that the scheme would not prejudice the creditors. 4. Compliance with Statutory Requirements and Good Faith The court reviewed whether the statutory requirements under sections 391 and 394 of the Companies Act were met. It was satisfied that the scheme had been approved by an overwhelming majority of shareholders, both in number and value, and that the meetings were fairly representative. There was no evidence of coercion or undue influence on the minority shareholders. The court reiterated that its role was to ensure the scheme was fair and reasonable and not to delve into the commercial merits or demerits of the scheme. The court found no lack of good faith and concluded that the scheme was in the public interest and beneficial for both companies and their shareholders. Conclusion: The court sanctioned the scheme of amalgamation, finding it fair, reasonable, and in compliance with statutory requirements. The effective date of the amalgamation was altered from November 30, 1977, to April 1, 1979, due to delays in the disposal of the petitions. Notice was issued to the official liquidator for the dissolution of the transferor-company without winding up.
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