2016 (3) TMI 553 - HC - Companies Law

Scheme of amalgamation - whether the non-receipt of communication issued to seek consent/ no-objection to the then proposed scheme of amalgamation would effect the said scheme as ultimately, sanctioned? - Held that - The applicant, if anything else, would be deemed to have knowledge of the proceedings pending in this court for obtaining sanction of the then proposed scheme of amalgamation. Undoubtedly, an affidavit was filed at the relevant stage by the petitioners before this court that they had not received any objections to the scheme from any of its shareholders and/or creditors. The applicant, before the sanction of the scheme of amalgamation, admittedly held, in transferor company no.9, only 4.5% of the equity stake, while, in transferor company no.10, the applicant held 21% of the equity stake. At the first motion stage, consents were obtained from shareholders of transferor company no.9 which amounted to 95.5% in value, whereas in numbers, 27 out of the 28 shareholders, in transferor company no.9, had given their consents. Similarly, in so far as transferor company no.10 was concerned, 79% in value, had given their consents. In terms of numbers, 11 out of the 12 shareholders of transferor company no.10, had given their consents.Quite clearly, a majority comprising of more than 3/4th in value of the shareholders in both, transferor company no.9 and 10, had given their consents. Therefore, even if, it is assumed that notice was not issued to the applicant, the scheme could not be set aside on this ground alone. The other argument of Mr Mehta that share valuation is faulty, is not supported by any cogent material. These are bald submissions, which are not backed by any cogent material. The mere fact that the shareholding of the applicant in the transferee company has got reduced to 2.97% (from 4.50% and 21%, as held in transferor company no. 9 and 10, respectively), will not, to my mind, help the cause of the applicant. Therefore, find no merit in the application. It is, accordingly, dismissed.

Summary

Issues Involved:
1. Recall of the order dated 20.02.2013 sanctioning the scheme of amalgamation.
2. Alleged non-receipt of communication seeking consent/no-objection for the scheme of amalgamation.
3. Reduction in equity stake post-amalgamation.
4. Validity of the share exchange ratio and valuation.
5. Timeliness and motivation behind the application.

Issue-wise Detailed Analysis:

1. Recall of the Order Dated 20.02.2013:
The applicant, D.D. Global Capital Ltd., sought the recall of the order dated 20.02.2013, which sanctioned the scheme of amalgamation involving 13 companies, including Gulab Buildtech Private Limited and Verma Buildtech & Promoters Private Limited. The applicant was a shareholder in both companies and claimed that the amalgamation reduced its equity stake significantly.

2. Alleged Non-receipt of Communication:
The applicant contended that the order dated 28.05.2012, which dispensed with the shareholders' meetings, was based on falsehood as the communication seeking consent/no-objection for the scheme was never received. The court, however, found that BDR had dispatched notices to shareholders, including the applicant, and obtained consents from more than 3/4th in value of the shareholders and creditors. The court emphasized that inadvertent omission or bona fide mistakes in issuing notices are not fatal if the resolution has the approval of a majority comprising 3/4th in value.

3. Reduction in Equity Stake Post-amalgamation:
The applicant argued that the reduction in its equity stake from 4.50% and 21% in transferor companies to 2.97% in BDR was not in its best interest and contrary to public interest. The court noted that the share exchange ratio was 1:1 for transferor company no. 9 and 1:12 for transferor company no. 10, and the applicant was entitled to 1,03,200 shares and 2,71,080 shares respectively. The court found that the reduction in equity stake alone was insufficient to set aside the scheme.

4. Validity of the Share Exchange Ratio and Valuation:
The applicant challenged the share valuation and exchange ratio, claiming they were faulty. The court held that matters of valuation and share exchange ratios fall within the domain of the concerned companies and would not be interfered with unless fraud or public interest issues were evident. The court referenced the Supreme Court judgment in Miheer H. Mafatlal vs Mafatlal Industries Ltd., emphasizing that commercial decisions should not be overturned lightly.

5. Timeliness and Motivation Behind the Application:
The court observed that the applicant moved the court only in January 2014, despite receiving communication on 08.03.2013 to surrender original share certificates. The court found this delay problematic and indicative of a lack of timely intervention. Additionally, the court noted allegations that the application was motivated by disputes involving the applicant's promoter/director and BDR.

Conclusion:
The court dismissed the application, finding no merit in the arguments presented. The court emphasized that the majority consent obtained, the proper dispatch of notices, and the applicant's delayed response all contributed to the decision to uphold the original order sanctioning the scheme of amalgamation.