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TMI Blog1995 (11) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociation of the transferor-company. As per the latest audited balance-sheet, as on March 31, 1994, the authorised, issued, subscribed and paid-up share capital of the transferor-company consists of the following : Share capital as on March 31, 1994. Authorised : 5,000 equity shares of Rs. 100 each Rs. 5,00,000. Issued and subscribed: 5,000 equity shares of Rs. 100 each fully paid-up Rs. 5,00,000. The objects for which the transferor-company was incorporated are set out in the memorandum and articles of association of the transferor-company, annexed as annexure-A in the petition. The principal object of the transferor-company is as under : "To carry on the business of manufacturers, buyers, sellers, distributors, importers, and makers, refiners, processors, or formulators, traders and dealers in PVC battery separators, battery containers, battery terminals, battery chargers, automobile regulators, motorcycle alternators and portable power supplies." The objects incidental or ancillary to the attainment of the main objects include, the object to enter into partnership or any other arrangement for sharing profits, union of interests, co-operation, joint venture, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act, 1956. All the debts, liabilities, obligations and dues of the transferor-company shall be deemed to be transferred to the transferee-company, pursuant to the provisions of the afore-mentioned statute. The scheme also provides that one hundred and fifty fully paid-up equity shares of Rs. 10 each of the transferee-company shall be issued for every fully paid up equity share of Rs. 100 each held by the members of the transferor-company. It is also further provided in the proposed scheme of amalgamation that new equity shares of the transferee-company to be allotted to the members of the transferor-company shall rank for dividend, voting rights and in all other respects pari passu with the existing equity shares of the transferee-company. It is in the abovesaid premises that, the petitions praying for the sanction of the scheme of amalgamation, are referred to in the petitions and annexed as annexure-C. Company Application No. 34 of 1995 was filed on February 16, 1995, and the orders were passed on February 22, 1995. Under these orders, there has been the dispensation with the statutory meetings as required under the Companies Act, 1956. In the same way, in the other petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e [1961] 2 GLR 681; AIR 1962 Guj 305, the learned single judge of this court, while pointing out the correct approach for the sanctioning of the scheme for amalgamation says that the scheme should not be scrutinised in the way a carping critic, a hair-splitting expert, a meticulous accountant or a fastidious counsel would do it. But, it must be tested from the point of view of an ordinary reasonable shareholder, acting in a businessman-like manner, taking within his comprehension and bearing in mind all the circumstances prevailing at the time when the meeting was called upon to consider the scheme in question. It is also pointed out that, before the scheme is sanctioned, it would be the duty of the court to see that the proposed scheme is a fair and reasonable one, but the initial burden in this respect would be on the petitioner to show that, prima facie, the scheme is a fair and reasonable one, such as a prudent and reasonable shareholder would approve of and not object to. The very same principle appears to have been laid down by the Punjab High Court in Patiala Starch and Chemical Works Ltd., In re [1958] 28 Comp Cas 111 . The court says that the scheme has to be examined b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned single judge of this court has said that, in the case of private limited companies, if all the concerned shareholders have put up an agreed scheme, the court and the Company Law Board should not come in the way of amalgamation. Therefore, the question regarding the sanction of the scheme of amalgamation, as being presented before me, requires to be examined, in view of the above said principles of law. Reverting to the affidavit-in-reply filed on behalf of the Central Government, it is stated that the transferee-company is incorporated on January 16, 1995, and the transferor-company is sought to be amalgamated with it, with effect from February 1, 1995, i.e. , within a period of 15 days of the incorporation of the transferee-company. It is said that an existing closely held private limited company is sought to be amalgamated with a just born company, having no assets, no business, no performance, and no past record. But, this contention fails, when the justification for the amalgamation, as stated in the petitions is studied. It is said that the transferor-company, being a private limited company, the scope for expansion and growth is limited and, therefore, the mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly out of free reserves built out of the genuine profits. In other words, it is sought to be contended that, the reserves created by the revaluation of fixed assets cannot be capitalised in such a way and the bonus shares could not be issued. It is also contended that, all the companies including the private limited companies closely held as well as unlisted public companies are prohibited from issuing bonus shares out of the revaluation reserves. Arguing in the same line, it has been contended that, the bonus shares cannot be issued by capitalisation of the revaluation reserve and that the revaluation reserve is not a free reserve. It is also contended that the dividend cannot be declared out of the revaluation reserve as the same is to be excluded from the definition of "reserve". The whole effort on the part of learned counsel for the Central Government, was to point out that, a game is being played on the basis of the revaluation reserve. But, it shall have to be appreciated that, at present, no such eventualities are going to occur. If such eventualities are to occur in future, and if the transferee-company, after amalgamation, is to go for the public issue, the SEBI guidelin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned single judge has taken a view that, when there was no evidence of fraud or mala fides on the part of the persons making the valuation and when the standard method of valuation is adopted, the objection to the valuation should be overruled. Here also, in the instant case before me, there is not only no evidence of fraud or mala fides on the part of the valuer, but even there is no such whisper in the affidavit-in-reply, filed on behalf of the Central Government. In view of this factual and legal position, the contention does not appear to be open to the Central Government. The exchange ratio, therefore, cannot be said to be unreasonable or unfair. This requires to be said and emphasised regard being had to the revaluation reserve of the assets of the transferor-company. Thus, it appears that, the petitions require to be allowed and the scheme of amalgamation, as presented along with the same require to be sanctioned. The same is hereby accordingly allowed and sanctioned. Therefore, with effect from the 1st day of February, 1995 (the appointed day), the entire undertaking and all the properties and movable and immovable assets of whatsoever nature of the transferor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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