9911796707
TMI Blog1997 (10) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... t Pipe House, 56, Hanuman Road, New Delhi. The authorised share capital of the transferee-company is Rs. 7,50,00,000 divided into 7,50,000 equity shares of Rs.100 and paid-up equity share capital is Rs. 6,50,00,000 divided into 6,50,000 equity shares of Rs. 100. The main objects of the transferee-company are set out in its memorandum and articles of association. 3. The transferor-company was incorporated on 25-8-1994 as a private limited company. The main objects of the transferor-company are also set out in its memorandum and articles of association. 4. The transferor-company is engaged in the business of manufacturing and trading of cold rolled steel strips, galvanised or ungalvanised in coils or in sheets, black and galvanised steel tubes, strips, steel scrap, billets and slabs. It is, thus, apparent that the transferor-company is predominantly engaged in carrying on the business of manufacturing and trading of cold rolled steel, etc., and transferee-company is engaged in the business of manufacturing and trading of MS pipes and tubes poles, cold rolling strips, steel structural poles and also in investing, trading and dealing in shares and debentures and in financing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme of amalgamation on the ground that the petitioner-company does not belong to the same management and is not under common control as that of the transferor-company. The further objection of the Registrar of Companies, as is disclosed from the aforesaid reply affidavit, is that the transferor and the transferee-companies both have adopted book value for valuation of shares/assets instead of resorting to assessment of valuation on market value. It was also stated that the transferor-company is going to transfer imported plant and machinery worth more than Rs. 95 lakhs to the transferee-company and, therefore, the transferee-company is benefited to the aforesaid extent. The Registrar of Companies stated that the affairs of the company do not appear to have been conducted in a manner prejudicial to the interest of its members or public. 9. The petitioner-company filed a rejoinder to the aforesaid reply affidavit filed on behalf of the Registrar of Companies. It was pointed out in the said rejoinder that the issue as to whether the two companies, namely, the transferor and the transferee-companies, belong to the same manage- ment or not is not material and/or considered import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders of the transferee-company. 12. Objection was also taken by the counsel with regard to the capital reserve as shown in the balance-sheet of the transferee-company. It was submitted that the net worth of the transferee-company while working out the value of shares has been reduced by a sum of Rs. 16,39,240 which is shown as capital reserve in the balance-sheet of the transferee-company and in doing so the exchange ratio has been manipulated to the aforesaid extent. Similarly, the net worth of Cold Rollings India Pvt. Ltd., the transferor-company, has also been manipulated by addition of the pro- posed issue of capital to the extent of Rs. 7,28,000. 13. In the context of the aforesaid objection and submission of the learned counsel appearing for the Registrar of Companies, it would be necessary to consider how far the said objections are relevant and/or applicable when considered in the light of the provisions of sections 391 and 394. The said provisions lay down the statutory requirement to be complied with for supporting a scheme of amalgamation. Section 391(1)( a ) requires the requisite meetings to be held under sub-section (2) of section 391. It is provided that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court finds that it is unconscionable or an illegal scheme or is otherwise unfair or unjust to the class of shareholders or creditors for whom it is meant. It was also held that the Court would not act as a Court of appeal and sit in judgment over the informed view of the concerned parties to the compromise as the same would be in the realm of corporate and commercial wisdom of the concerned parties. The Supreme Court also observed that the Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the scheme by the requisite majority and, consequently, the company Court's jurisdiction to that extent is peripheral and supervisory and not appellate. 16. The issue, therefore, that arises for my consideration in the present case is whether those formalities as prescribed under the statute have been complied with in the present case. Once it is found that such statutory formalities have been duly complied with, the next question that is to be examined by me is whether the scheme is fair and reasonable and that there is no fraud involved. Once I come to such a conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, who are experts in the field of valuation and if no mistake can be pointed out in the said valuation, it is not for the Court either to substitute its exchange ratio, especially when the same has been accepted without demur by the overwhelming majority of the shareholders of the two companies or to say that the shareholders in their collective wisdom should not have accepted the said exchange ratio on the ground that it will be detrimental to their interest. The Supreme Court further went on to say that the Court will not act as a Court of appeal and sit in judgment over the informed view of the concerned parties to the compromise as the same would be in the realm of corporate and commercial wisdom of the concerned parties. The Supreme Court also observed that the Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the scheme by the requisite majority and, consequently, the company Court's jurisdic-tion to that extent is peripheral and supervisory and not appellate. 19. Counsel appearing for the Registrar of Companies although tried to persuade me to hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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