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TMI Blog1980 (3) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business of ginning, spinning, weaving and manufacturing or dealing in cotton or other fibrous substances and the preparation of dyeing or colouring of any other said substances and the sale of yarn, cloth and other manufactured products. The transferee-company was incorporated under the Indian Companies Act, 1913, on May 15, 1946. The nominal capital was Rs. 50 lakhs divided into 30,000 equity shares of Rs. 100 each and 40,000 10% redeemable cumulative preference shares of Rs. 50 each of which 10,000 equity shares of Rs. 100 each were issued and all of them fully paid up. The object of the company was to carry on the business in the manufacture of industrial products, food products, namely, starch and glucose, pharmaceutical and other chemical preparations, food products, industrial chemical products, etc. It is stated in C.P. No. 71 of 1978 that the transferor-company has virtually become a sick textile mill since the last few years. The machinery became outdated and it had to be replaced. They could not modernise the machinery on account of the paucity of finance. Up to 1974, the transferor-company was able to spend a sum of Rs. 24'07 lakhs in modernising its plant and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appointed chairman of the meeting. Pursuant to the order of this court dated July 21, 1978, a meeting of the equity shareholders of the transferor-company was held on September 8, 1979, at 10 a.m. at the registered office of the transferor-company in Coimbatore. Due notice for the holding of the meeting had been served on all the shareholders of the transferor-company and notice was also given by publication in the Mail on August 3, 197S, Nava India on August 6, 1978, and in the Tamil Nadu Gazette on August 16, 1978. The meeting was attended by 65 shareholders either in person or by proxy and holding 7,552 equity shares. The value of the shares held by them came to Rs. 7,55,200. One shareholder holding 10 equity shares of the value of Rs. 1,000 voted against the resolution. The meeting of the transferee-company was held under the chairmanship of R. Venkataswamy Naidu. The meeting was attended by 67 equity shareholders in person or by proxy holding 7,868 equity shares, the value of which came to Rs. 7,86,800. All of them voted in favour of the resolution. The chairman has filed separate reports of the proceedings of the two meetings. Consequently, the above company petitions ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed for a meeting of the creditors of the two companies. The question for consideration is whether the necessary sanction of the court should be accorded to the proposed scheme of amalgamation. Under section 391(2) of the Companies Act, 1956, the scheme of amalgamation should be approved by a majority in number representing three-fourths in value of the members or class of members present and voting either in person or by proxy. It is not disputed by Mr. U.N.R. Rao, the senior standing counsel for the Central Government, that this statutory requirement has been satisfied in this case. From the figures already given it is seen that the proposed scheme of amalgamation has been approved by an overwhelming majority, both in number and value of both the companies. It is also clear that those who took part in the two meetings are fairly representative of the majority of the shareholders of the two companies. The next aspect which the court has to bear in mind is to see whether the majority of the members have been acting bona fide and whether the minority has been overridden by the majority having interests of its own clashing with those of the minority whom they seek to coerce. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Secretary, Department of Company Affairs, Ministry of Law, Justice and Company Affairs, is one of the five persons appointed by the Central Govt. to act as specified authority for the purpose of section 72 A of the I.T. Act, 1961, as per notification No. S.O. 710(e), dated October 11, 1977 (See [1977] 110 ITR (St.) 14), published in the Gazette of India, Extraordinary, Part II, section 3(ii), page 2669, dated October 11,1977. Therefore.it may be taken that even the Secretary, Department of Company Affairs, Ministry of Law, Justice and Company Affairs, who is one of the five members of the specified authority under section 72A of the I.T. Act, 1961, has cleared the scheme of amalgamation. Therefore, it should be taken that the said authority was satisfied that the amalgamating company was not, immediately before such amalgamation, financially viable by reason of its liabilities, losses and other relevant factors and that the amalgamation was in the public interest and that the amalgamation would facilitate the rehabilitation or revival of the business of the amalgamating company. Section 23(2) of the MRTP Act requires that the prior approval of the Central Govt. has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der has come forward and objected before me that the ratio fixed in the scheme of amalgamation is neither fair nor reasonable. It cannot be disputed and it was not disputed as a matter of fact by Mr. U. N. R. Rao, that the shareholders are the best judges on the rate of exchange ratio to be fixed in a scheme of amalgamation and once they have accepted it, it is not for the court to say that the shareholders of both the companies in their collective wisdom should not have accepted the exchange ratio arrived at in the scheme of amalgamation on the ground that it was detrimental to their interest. Further, the statement of Mr. S. V. Subramaniam that the value of the shares of the two companies as quoted on the stock exchange is more or less equal was not disputed by the learned counsel for the Central Govt. Mr. U. N. R. Rao then argues that it is not shown that the transferor-company has no potential of making a profit in the future. At the same time, it was not disputed that the transferor-company has been running at a loss. In this context, it may be recalled that the specified authority under section 72A of the I. T. Act, 1961, would not have given sanction under the said section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the power to direct the proposed scheme of amalgamation for consideration before the meeting of the creditors of the two companies, I do not think on the facts of this case, it is necessary to direct such a procedure to be followed in this case. As I have already stated, the transferee-company is admittedly a very solvent company and is capable of meeting the liabilities of the transferor-company. For the reasons already stated by me that the interest of the creditors of the transferor-company are amply safeguarded, I do not consider it necessary to accede to the request of Mr. U. N. R. Rao, that the scheme of amalgamation should be directed to be placed before the meeting of the creditors. In fact, I am unable to understand why the Regional Director, Company Law Board, comes forward with an objection to the acceptance of the scheme of amalgamation when the Secretary, Department of Company Affairs, Ministry of Law, Justice and Company Affairs, who is one of the members of the specified authority under section 72A of the I.T. Act, 1961, has approved the scheme of amalgamation. There is also one other aspect of the matter which has to be borne in mind. Admittedly, the transferor-c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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