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TMI Blog1956 (4) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... terms. Since out of 40,000 shares in the U.C.S., T. Stanes and Co. Ltd. held 21,510, the shares in the hands of outsiders were only 18,490. The letter Exhibit R. 1 explained: "The present ordinary shares of this company are now of the denomination of Rs. 10 each and it is calculated that on the basis of the company's balance sheet as at 30th September, 1954, and as increased by the issue of bonus shares in December, 1954, each of these shares is worth Rs. 39. The shares of your company according to a similar balance sheet valuation as at 30th June, 1954, are worth Rs. 39 per share of Rs. 15 each." T. Stanes and Co. Ltd. offered one share in their company for every one share in the U.C.S. Exhibit R. 1 continued : "Your shareholders are also offered as an alternative to accepting shares in this company in exchange for their shares, a sum of Rs. 21-8-0 for each of their shares. This cash offer is based on the market value of the shares as at date, plus an additional premium." The directors of the U.C.S. sent a circular letter Exhibit R. 2 to every one of their shareholders. Along with the circular a copy of Exhibit R. 1 was also sent. The offer was accepted by all the sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date on which the notice was given the court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms on which under the scheme or contract the shares of the approving shareholders are to be transferred to the transferee company." I have underlined Here printed in italics certain words which are now material, viz. , "the court thinks fit to order otherwise" in order to emphasise the fact that my discretion is limited as regards the nature of the order I can make. As I read the section, I can make only one of two orders. I may dismiss the application of the applicants in which case the transferee company will be entitled and also bound to acquire the shares of the applicants in accordance with the terms of their offer. Alternatively I can allow the application of the applicants in which case the transferee company will not be entitled to acquire the shares of the dissenting shareholders. Then the discretion given to me by the statute slips. I cannot go further and say for instance that I find the fair value of the shares of the dissenting shareholders to be so much and direct the transferee company to acquire the shares of the dissenting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition to so very large a majority of the shareholders who are concerned. Accordingly, without expressing a final opinion on the matter, because there may be special circumstances in special cases, I am unable to see that I have any right to order otherwise in such a case as I have before me, unless it is affirmatively established that, notwithstanding the views of a very large majority of shareholders the scheme is unfair. There may be other grounds, but I see no other grounds available in the present case for the interference of the court." Certain observations which appear in Hormusji s case ( supra ) from which I have already quoted, are of help. Beaumont C.J. observed: "For myself I accept the view that the burden is upon the dissentients to adduce reasons for thinking that the majority of shareholders were wrong............I should say that instances of such cases would be where there has been misrepresentation which may have influenced the view of the majority of shareholders, or where there is the possibility of some unfair dealing, for example, the directors of the transferor company having some ulterior motive in advising the shareholders to accept the offer, or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only limited to cases of misrepresentation and fraud.............The fairness or otherwise of the offer has to be judged by what value is put by the sellers on their own concern and assets..........The question before the court, as I have stated in the beginning, is whether the dissenting shareholders are entitled to obtain from the court an order preventing the purchasing company from obtaining their shares, which can only be made on the ground that the offer was not fair and reasonable." Now, the first observation that I would make in respect of the transaction before me is that there is no allegation of any fraud or misrepresentation in placing the scheme before the shareholders. It has not been shown either that any material fact was withheld or not disclosed. In Exhibit R. 1 it is very plainly stated, "The object of this offer is to make your company a wholly owned subsidiary of this company and a similar offer is being made to the shareholders of Stanes Motors (South India) Ltd." It also specifically states that unless nine-tenths of the shareholders of both companies signify their willingness to accept the offer made on or before the 25th September, 1955, the offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch relates to winding up and just now the U.C.S. is not being wound up. Moreover, section 208-C (3) makes provision for arbitration if the parties cannot agree on the price. There is no such provision in section 153-B. It is common knowledge that very often there is no correspondence between the value of the assets held by the company and the price at which these shares are quoted on the exchange. By following a very conservative policy and declaring only modest dividends a company may have built very large resources and accumulated assets of far more value than the prices quoted on the stock exchange reflect. But when you try to sell your shares you can get only the price ruling on the stock exchange. In In re Press Caps Ltd. [1949] Ch. 434; 19 Comp. Cas. 327 , Wynn-Parry J. observed : "A valuation is only an expression of opinion. It may be made on one of a number of bases, but the final test of what is the value of a thing is what it will fetch if sold. In some cases a sale has to be made as one knows who exercises the administrative jurisdiction of the Chancery Division, but if there exists a market, as, for instance, the stock exchange in the case of shares, in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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