9911796707
TMI Blog1975 (9) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... er will pay the advocate's fees of the counsel of the Central Government." In order to appreciate the circumstances under which these directions were given, it would be necessary to set out a few facts. The petitioner-company, Mahindra Ugine Steel Co. Ltd. (hereinafter referred to as "the transferee-company") and the respondent-company, the Bank of Baroda Ltd. (hereinafter referred to as "the transferor-company"), are two public limited companies. The registered offices of the transferor-company and the transferee-company are situate in the State of Gujarat and State of Maharashtra, respectively. A scheme of arrangement for amalgamation of the transferor-company with the transferee-company was sanctioned by me on April 7, 1975. On June 21, 1975, the High Court of Bombay also gave its sanction to the said scheme. Consequently, on August 2, 1975, I made appropriate orders under section 394(1) of the Companies Act, 1956 (hereinafter referred to as "the Act"), and one of the directions contained in the said order was that the transferor-company shall stand dissolved as and from September 25, 1975. The scheme provides for various matters but I shall refer to only those provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersons, the transferee-company forwarded to the members of the transferor-company, who had opted for cash, necessary instruments of transfer, completed to the extent necessary, for signatures and requested such members to return the instruments of transfer duly signed latest by August 25, 1975. This request was contained in a letter issued on August 5, 1975, under certificate of posting. It appears that approximately 2,195 shareholders of the transferor-company complied with the request and returned the instruments of transfer duly signed. However, nearly 233 members failed to comply with the request. In view of the fact that the transferor-company was directed to be dissolved as and from September 25, 1975, the said company gave intimation as required by the Stock Exchange of Bombay that its transfer books would remain closed from September 19, 1975. In the meantime, the transferee-company filed the present application in this court on September 6, 1975, praying for an order that the shares of the members of the transferor-company who had exercised the cash option but had failed to execute instruments of transfer as required by the transferor-company be transferred to the names ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Express and Loksatta published from Bombay on September 12 and 13, 1975, respectively. He has further stated in the said affidavit that having regard to the short time it was not possible to arrange for publication of the notice in the Times of India or in the Indian Express in its editions published from other centres or in any other newspapers in such centres. However, on September 13, 1975, individual letters were addressed to all members of the transferor-company who opted for cash and failed to return the instruments of transfer duly signed giving them intimation about the institution of the present application and requesting them to return the instruments of transfer duly signed so as to reach the transferee-company latest on September 17, 1975. The deponent has further stated in the said affidavit that only 25 out of the defaulting members of the transferor-company were resident of States other than Maharashtra and Gujarat and that the failure to publish notices in newspapers published from centres other than Ahmedabad and Bombay was not likely to result in any prejudice especially in view of the fact that individual notices were served upon all such members. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned members, the transferee-company which acted in good faith on the basis that the scheme would be fully implemented by all concerned, would be exposed to unnecessary costs and risk. Counsel for the Central Government raised no objection against an appropriate order being made in this behalf. Now, on a perusal of the relevant sub-clauses of clause 9 of the scheme, it is clear that it gives to a member of the transferor-company an option to receive cash payment in lieu of his entitlement to shares and debentures as provided in clause 7. Such option has to be exercised within the prescribed time limit in the manner prescribed in sub-clause (ii), that is, by a notice in writing accompanied by relevant share certificates for cancellation sent to or served upon the transferee-company at its registered office. The exercise of such option has been made irrevocable. In other words, once a member of the transferor-company elects to receive cash payment in lieu of shares and debentures in the mariner and within the time prescribed, the only right he would have is to receive such payment on surrender of shares held by him. However, under sub-clause ( iii ) a discretion is vested in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stage and ensure proper working and implementation of the scheme by adoption of a suitable course. The question posed above resolved itself into two separate questions. First, whether the court has any power to step in at this stage and, secondly, what would be the proper course to be adopted to remedy the situation. Counsel for the transferee-company and transferor-company both submitted that there was no precedent and that in order to answer the questions I will be required to traverse a virgin field. Section 392, sub-section (1) of the Act expressly confers very wide powers on the court. It authorises the court to supervise the carrying out of the compromise or arrangement and, inter alia , to give such directions in regard to any matter as it may consider necessary for the proper working of the compromise or arrangement. The power so conferred is exercisable not only at the time of making of an order under section 391 sanctioning a compromise or an arrangement in respect of a company but also at any time thereafter. Such power is not conferred on the English courts by statute nor was it conferred on the Indian courts under section 153 of the Indian Companies Act, 1913. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons to execute instruments of transfer on behalf of the concerned shareholders. It becomes necessary, therefore, to examine whether the court which sanctioned the scheme can appoint a person, in exercise of the powers conferred by section 392(1), to do all acts necessary to fulfil the obligation of a member of the transferor-company arising out of the option irrevocably exercised by him and the consequential right exercised by the transferee-company to require such member to transfer his shares to designated persons. Two cases where such power is exercised in a somewhat analogous situation by civil courts by virtue of statutory provisions immediately come to mind. The first is the case where a seller fails to complete the sale of shares and the purchaser sues for an order of specific performance to compel the other party to carry out the contract. It is true that, if similar shares can readily be bought on an available market, a seller in default under the contract of sale cannot be compelled to transfer the shares he holds; the buyer will have to resort to the market and will recover the difference between the contract price and the higher price he has to pay on the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r with an instrument of transfer executed on behalf of the shareholders by any person appointed by the transferee-company and on its own behalf by the transferee-company and pay or transfer to the transferor-company the amount or other consideration representing the price payable by the transferee-company for the shares which, by virtue of that section, the said company is entitled to acquire and the transferor-company is thereupon bound to register the transferee-company as the holder of these shares. Similarly, Table A in Schedule I, which contains the regulations for management of a company limited by shares, prescribes the mode of sale of any share on which the company has a lien. Regulation 11(1), which is material, provides that to give effect to any such sale, the board of directors may authorise some person to transfer the shares sold to the purchaser thereof. These two provisions contained in the Act indicate that a share held by a member might in certain circumstances be required to be transferred by some other person duly appointed in that behalf to act for and on behalf of such member. From the foregoing discussion it would appear that the concept of the court interpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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