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TMI Blog2000 (5) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that they have no objection. 3. It has been pleaded that the Board of Directors had already passed a resolution approving the scheme of amalgamation. The petitioner company had secured creditors to the tune of Rs. 29,26,000 and unsecured creditors to the tune of Rs. 6,64,06,813.11. The principal provisions of the scheme of amalgamation have been mentioned which are as under: "With effect from 1 April, 1999 (hereinafter called the appointed day ), the entire undertaking of the petitioner-company without any further act or deed, be and stand transferred to and vested in Ceekay Daikin Limited pursuant to section 394 of the Companies Act, 1956. 13. The scheme further provides that: ( i )One equity share of Rs. 10 fully paid-up in Ceekay Daikin Limited or cash for odd shares shall be allotted to each of the subscribers for every 2.4 equity shares held by them in the petitioner-company. However, no shares shall be allotted to Ceekay Daikin Limited for the shares held by it in the capital of the petitioner-company. The new equity shares of Ceekay Daikin Limited issued in terms of the scheme shall, subject to applicable regulations, be listed and/or admitted to trading on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme by the requisite majorities of the shareholders of the petitioner-company and Ceekay Daikin Limited (transferee-company) respectively as may be directed by the Punjab Haryana High Court at Chandigarh, and the Bombay High Court at Mumbai on the respective applications made for calling of meetings and necessary resolutions are passed under the Companies Act, 1956, for the purpose. ( c )The sanction of the respective High Courts at Chandigarh and Bombay under sections 391 and 394 of the Companies Act, 1956, on the application on behalf of the petitioner-company and Ceekay Daikin Limited respectively being obtained. ( d )Completing of normalisation of share application money in the petitioner-company by rejecting and refunding Rs. 5,87,50,000 to Exedy Corporation and its subsidiary companies, and Rs. 1,62,50,000 to Ceekay Daikin Limited. ( e )Injection of loan money amounting to Rs. 8,50,00,000 from Ceekay Daikin Limited to the petitioner-company for proceeding with set up of production facilities without any interruption. ( f )Injection of external commercial borrowing of Rs. 38.25 million by Exedy Corporation, Japan, and Rs. 16.25 million by Ceekay Daikin P-1 Ltd. as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally supervisory. This court in the case of Patiala Starch Chemical Works Ltd. [1958] 28 Comp. Cas. 111 (Punj. Har.), in this regard has held as under: "... It is true that the court ought not to substitute its discretion for that of the shareholders, who should normally be permitted to manage their own affairs themselves, but it is also to be remembered, that in sanctioning a scheme, the court does not simply register the wishes of the shareholders or the creditors, as the case may be, as expressed in their resolution passing the scheme. It is the duty of the court to examine the scheme and to see whether there has been compliance with the provisions of law. The scheme must conform to the standard of reasonableness, having regard to all the information that may be available ..." (p. 117) 8. Similarly, the Gujarat High Court in the case of Sidhpur Mills Co. Ltd. AIR 1962 Guj. 305, has held that it is the duty of the court to see that the scheme is a fair and reasonable one. The initial burden is on the petitioner to show that, prima facie, the scheme is fair and reasonable which would be approved by a prudent shareholder. The Madras High Court in the cases of Coi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Delhi High Court in the case of Shyam S. Rastogi v. Nona Sona Exports (P.) Ltd. [1986] 50 Comp. Cas. 832 ( sic ), also deprecated the practice that the court is merely a rubber stamp. It was held as under: "Company Court is not a mere conduit pipe or stamping authority to whatever scheme that may be laid before it. Not unoften, motivations in the moving of such schemes are oblique. It is, in fact, for the court to first look at the scheme whether it has any strength or merit of its own and is financially viable or a mere attempt to take back the affairs and the assets of the company which had been earlier perforce taken over at the time of winding up." 10. Same test was applied by the Rajasthan High Court in the case of Richa Jain v. Registrar of Companies [1990] 69 Comp. Cas. 248 . Bombay High Court in the case of Tata Oil Mills Co. Ltd., In re [1994] 81 Comp. Cas. 754 held that the role which the courts have to play in this country is more vital and potent. It has no supervisory role [It has not only a supervisory role?] but also a pragmatic role which requires the forming of an independent and informal judgment. 11. Supreme Court in the case of Hindu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt gets satisfied about the same. 6.That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law, and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same. 7.That the Company Court has also to satisfy itself that members or class of members of creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising of the same class whom they purported to represent. 8.That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. 9.Once the aforesaid broad parameters about the requirement of a scheme for getting sanction of the court are found to have been met, the court will have no further jurisdiction to sit in appeal over th ..... 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