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TMI Blog1999 (3) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised certain objections which I shall deal with in the course of the order. There has been a contest of some consequence particularly with regard to one aspect of the case. One of the shareholders of the company Coffee Lands Ltd. which happens to be among the transferor companies by the name of Arun Kumar Agrawal has filed Company Application No. 96 of 1999 along with Company Application No. 98 of 1999 wherein he has requested that the delay in filing the earlier company application be condoned. Company Application No. 98 of 1999 is allowed and the delay is condoned because the petitioners' learned counsel himself rightly submitted that it would be far more desirable if the Court were to consider the objections on merits and deal with them. The sub-stratum of the objections that have been canvassed by Agrawal centre around the proposed allotment of shares by the transferee company in the ratio of 1:1. According to Agrawal, Coffee Lands Ltd. is a relatively smaller company and he seeks to say that both the intrinsic value of the shares as also their potential not to mention the earnings thereon both present and in the projected future have not been properly evaluated and it is h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is virtually unprecedented. More impor-tantly, relying on the settled legal position, the petitioner's learned counsel has submitted that the applicant has only levelled certain accusations and charges and stopped at that but that he has failed to substantiate those charges and further more that it was open to the applicant himself to have satisfied this Court from whatever basic material he wanted to rely on to the contrary, assuming he was capable of doing so, that the formula advocated by him is superior or professionally more correct than the one adopted by the petitioners in which case alone, it may have been open to him to ask the Court to refuse to rely on the recommendations of the two professional firms of Chartered Accountants and A.N.Z. Grindlays Investment Division which company in turn has also supported the recommendations from the Chartered Accountants. The situation that has arisen in this group of petitions is one that could and does arise before the company courts from time to time and even though the various principles of law on the basis of which such situations are required to be dealt with are more or less well crystalised, to my mind, it would be necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds is concerned, the voting was 6,48,399 votes in favour and 30,190 against. It was pointed out to me that there would always be some disapprovals particularly in large corporate bodies and that one of the considerations which the Court would go by is the question as to whether the overwhelming majority of shareholders have approved of the scheme or whether there has been a relatively large vote against. I do concede that normally where a vote is taken, the verdict proceeds on the basis of majority but this need not always be the barometer because the very argument that has been canvassed before this court is that if in a given situation the majority of shareholders approve of the scheme, that this should not be the ground on which the interests or the minority shareholders should be disregarded. There is considerable substance in this contention but the law only requires that the Court should apply its mind to the grounds on which the dissent or decision has been put forward and unless those grounds are cogent and valid, it is inevitable that the objection will have to be overruled. As far as the present set of cases are concerned, one of the requirements which the Companies Act p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the evaluation are untenable. What is even more distressing is the fact that after a detailed written application and after generating consid-erable heat in the court room, the worthy gentleman neither engaged an Advocate to represent himself nor did he extend to the Court the courtesy of appearing and pointing out whatever his grievances were. The order-sheet will indicate that because the regional director asked for time, that the court despite opposition from the petitioners granted reasonable time to that party and fixed the date of hearing after a sufficient gap on a date that was indicated to all the parties. Mr. Agrawal was present in the court room when this date was indicated and it was also made clear to him and to the learned Advocates that the Court would hear the parties or their learned Advocates on that date and that no adjournment would be granted. Despite this, Mr. Agrawal was absent when the hearing started. Significantly enough, it is not as though he was unaware of the date of hearing because he had requested a learned Advocate to ask for an adjournment on his behalf on the ground that he had gone away to Delhi. Mr. Agrawal is anything but a pauper and I was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than full opportunity of acquainting themselves with the reasons for the proposed exchange of shares in the ratio of 1:1, it is clear to me that this has not been done either arbitrarily nor has it been done on a cursory basis but that the reference was made to as many as three of the best brains in the profession who have recommended this particular ratio. The reason for my having set out this procedure elaborately is in order to indicate that on the one hand, we have a careful scientific and professional consideration of all the crucial aspects of the evaluation whereas on the other hand, we have a bald charge levelled by Agrawal that the evaluation has been done by firms which are obligated to the petitioners and that the Court must discard it. It is very necessary for me to not only deprecate the manner in which the allegations have been levelled, as also the behaviour of the person who has levelled these allegations and his behaviour about which I have referred to earlier, but more importantly for me to indicate that as far as the appraisal and the conclusions are concerned, that even after a minute scrutiny as far as this aspect of the case is concerned, they are virtually fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the principles enunciated by the Supreme Court but in sum and substance, as far as the aspect of evaluation is concerned, what needs to be seen is that it is not notional assessment of what the present or projected value or rating of a share is, taken in isolation as compared to the corresponding value worked out through a well defined scientific formula, but what the Court is required to look into is the fact that a scheme of amalgamation is invariably a package deal or a totality of several factors that need to be viewed at as a whole. The value is not be viewed in isolation and again, it is a well known fact that the methods followed for purposes of working out results, differ and like statistics figures could be swung around to virtually support any argument. That is precisely the reason why the formula for evaluation has now been crystallised and the process is invariably entrusted to experts as in the present instance. There is nothing on record to call into question either the status or the competence of the experts to whom the valuation issue was referred except Mr. Agrawal's charge that they happen to be firms who are regularly auditing the accounts of the Tata Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding will be in contravention of section 42 of the Act which prohibits the holding of shares by a subsidiary company in its holding company. In response to this objection, Mr. Raghavan has pointed out to me that in an almost identical case in the case of Himachal Telematics Ltd. and Himachal Futuristic Communications Ltd. In re [1996] 86 Comp. Cas. 325 the Delhi High Court had occasion to observe that such an objection was inconsequential while considering a scheme of amalgamation. The Court had occasion to consider the scheme of the Companies Act and to hold that the provisions that govern the scheme of amalgamation are independent provisions and that they are not limited by what is contained in section 42 in the matter of sanction of the scheme of amalgamation. Going by the principle of harmonious construction, the Delhi High Court overruled this objection. It is unnecessary for me to embark upon a detailed reasoning but suffice it to say that I am in agreement with the view canvassed by the Delhi High Court in so far as in matters of sanction of a scheme of amalgamation, this objection is liable to be overruled. The second objection is a rather strange one in so far as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of them is in the case of Mcleod Russel (India) Ltd. 1997 (4) Comp. Cas. LJ 60. The Calcutta High Court while considering this aspect of the case had occasion to observe that rule 85 is in relation to a proposed compromise or arrangement which involves reduction of capital of the company and that in respect of proposed scheme of amalgamation or merger where the Transferor Companies merge their identities with the Transferee Company, rule 85 has no application where a scheme of amalgamation simplicitor is under consideration involving transfer of the entire assets and liabilities of the Transferor Companies. I only need to add that the Companies Act itself prescribes separate provisions and procedures for the process of amal-gamation, that certain changes are inevitable in such situations and that one of the overriding considerations that a Court will look into is as to whether there has been substantial reduction in the capital and if as is obvious in the present case where only 280 equity shares of Rs. 10 are involved in relation to a Company of substantial financial solvency, that the objection itself becomes hyper technical and inconsequential as it does not effect the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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