9911796707
TMI Blog1999 (12) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... as aforesaid. 2. The Scheme of Amalgamation placed at Exh. C might be referred to from Company Petition No. 69 of 1999, which is the first petition. The scheme provides for the amalgamation of AIL, APL and ACL into APRL pursuant to sections 391 to 394 and other relevant provisions of the Companies Act, 1956 ('the Act') from 1-10-1998 being the appointed date. The scheme is to take effect from the date on which all the conditions and matters referred to in clause 18 are fulfilled and approvals and consents referred to therein have been obtained. After reciting the respective share capitals the scheme proceeds to deal with transfer and vesting of the undertakings including assets and liabilities, debts and obligations, rights and duties, etc. and reorganisation of the capital in the following exchange ratio: ( A )Equity Shares of Rs. 10 each, credited as fully paid-up, to the equity shareholders of the Intex whose names are recorded in its Register of Members on the Record Date in the ratio of the 4 equity shares of the face value of Rs. 10 each in the transferee-company for every 7 equity shares of the face value of Rs. 10 each in Intex; (B)Equity shares of Rs. 10 each, cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as may be agreed by the respective Boards of Directors of the Transferor-Companies and the Transferee-Company, this Scheine shall become null and void and in that event no rights and liabilities whatsoever shall accrue to or be incurred inter se by the parties or their shareholders or creditors or employees or any other person. In such case each company shall bear its own costs or as may be mutually agreed." [Emphasis supplied] In respect of the aforesaid clause the transferee and transferors-companies moved Misc. Civil Application Nos. 55 to 58 of 1999 in all these petitions for placing on record the fact with regard to extension of time by the respective board of directors. The said miscellaneous civil applications were highly contested and by order dated 10-9-1999 all the said applications were granted in terms of following order: "All the four misc. civil applications are hereby granted, permitting to place on record in the respective company petitions true copies of the resolutions coupled with Pursises signed by all the Directors of the respective companies stating that the time for the Scheme to take effect is extended upto 31st December, 1999, on condition that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and briefly stated they are : " ( a )Having regard, to all the circumstances the amalgamation will integrate business operations, introduce considerable synergies and reduce inter-company transactions; ( b )The amalgamation will financially strengthen the transferee-company by capturing the intrinsic synergy between cotton yarn, gabardine and denim. ( c )The consolidated financials arising upon the amalgamation of the transferor-companies will be significally larger and the financial statements will be able to present the strengths and operations of the group in a more effective way to its shareholders. The shareholders of all the companies will Benefit from this exercise. ( d )If necessary, the amalgamation could pave the way for further restructuring/consolidation in the Group in its best interests." It has also been asserted in the respective petitions that AIL was incorporated by taking over the original Nagari Mills Ltd., and APL was constituted by taking over the original Saraspur Mills Ltd. It could be noticed from the submissions made that originally the said companies whose names have been respectively changed as AIL and APL went financially weak and Arvind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned, he has submitted his report dated 12-4-1999 in Company Petition No. 69 of 1999 where AIL, the transferor- company is the petitioner He has asserted that the affairs have not been conducted in a manner prejudicial to the interest of the members or of public interest. Since he was permitted to appoint Chartered Accountant from the penal of Chartered Accountants, he appointed Kiran Shah Associates, C.A. for the purpose of investigation of the affairs of the company and upon report of the said C.A. he expressed his opinion as aforesaid. The report of the Chartered Accountant has been annexed with the Official Liquidator's report. In so far as the Company Petition No. 70 of 1999 filed by petitioner transferor-company APL is concerned, similar is the report dated 12-4-1999 of the Official Liquidator. In case of petitioner transferor-company ACL in Company Petition No. 71 of 1999 is concerned, such report dated 12-4-1999 has also been filed by the Official Liquidator. At the time of hearing of all these petitions neither the Official Liquidator nor his Chartered Accountant had anything to say against the scheme of amalgamation in question. They have not come out with any suggestio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has submitted his objections, inter-alia stating that he and his other partners held 6,090 shares in the transferor-company APL. The first grievance was that he was not given notice of meeting of the shareholders, which was to be held on 5-3-1999 for according sanction to the scheme of amalgamation in question. The notices are sent under certificate of posting, but there might be cases of collusion between the persons from the Post and the persons from the concerned company and, therefore, actual dispatch of the notices under certificate of posting would require scrutiny. It is his case that only he received the notice and all his other relations did not receive the notice of the meeting. According to his say he informed about this fact to the APL. However, without taking into consideration this objection of the objector, meeting was held on 5-3-1999. It has next been submitted that required particulars/facts have not been communicated or informed to the shareholders and intentionally suppressed. Such particulars relate to the capital growth of the respective companies and the schemes whether present or prospective with regard to the business of the companies. He has also conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properties and the values thereof stated in the books also might be matchless than the market Value. If that is considered, total worth of all three transferor-companies would be more than Rs. 278 crores. The three transferor-companies are sought to be amalgamated with the transferee-company, which has total paid-up capital of Rs. 15 lakhs with reserves of Rs.5 lakhs, totalling to Rs. 20 lakhs being its capital worth. If the balance of profit and loss to the extent of Rs. 5.38 lakhs is deducted from the said capital, it would reflect total capital of Rs. 15 lakhs or less in so far as the transferee-company is concerned. The transferee-company has invested a sum of Rs. 78.30 lakhs on the quoted shares and the market price thereof was Rs. 22.33 lakhs as on 31-3-1998 as stated in the report. It has been asserted that there is no material to know the market value of unquoted investments in the sum of Rs. 13.19 lakhs. It has thus been submitted than there has been negative value of Rs. 30 per share in so far as transferee-Company is concerned. Besides, there is a debt in the sum of Rs. 115 lakhs which the transferee-company owes. There are no particulars for showing who would have to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nspection in the open Court in presence of the concerned Assistant in the OJ Department of this Court and submitted before the Court that having taken the inspection he might file the affidavit as indicated in the aforesaid order. He was accordingly granted time to file affidavit by 10-5-1999. It was also clarified that his objections ought to have been filed in Company Petition No. 70 of 1999 in Company Application No. 19 of 1999. In order dated 7-5-1999, while making such observations, attention of the objector was drawn to the following facts in the affidavit setting out his objections appearing at pages 48 and 49 of the record of this petition: "B.... This is supported by wrong affidavits of sending the notices by Under Certificate of Posting by Chairman of petitioner-company, which is saleable commodity under our all corrupted departments for which small persons have to Suffer a lot. Not only this but also this Hon. Courts sanction such a wrong affidavit as a gesture. Knowing this fallacies of such certificate this Horn Courts accepts as legal documents? A separate public interest litigation shall be filed by the objector taking the matter of all earlier such petitions where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n affixed 25 Rs. 2.35 Rs. 2.39 only 1/4th round 40 Rs. 5, 43 Rs. 2, 44 Rs. 5, 46 Rs. 2, 48 Rs. 5 and 2, 54 Rs. 5, 55 Rs. 2, 81 Rs. 2 affixed over Rs. 10, 83, 85, 87 Rs. 2, 92, 93 Rs. 5, 95, 101,, Rs. 2, 103, 104, Rs 5, 120, 122 Rs. 10, 124, Rs. 5, 140 Rs. 10, 144, Rs. 7,147 Rs. 10, 159 Rs. 10 hot cancelled. Volume No. 3 pages 25, 30, 38 Rs. 2, 41 Rs. 10, 43, 48, 65, 66, 67, 70, 77 Rs. 2 not cancelled but page No. 70 separately cancelled. 125 Rs. 2 separately cancelled page No. 191 not cancelled but only by X mark only. Volume No. 4 pages 1,6,7,17,18,19,20,120 Rs. 2 stamped. On last pages wrongly pasted. Volume 5 page 199 Rs.2 not cancelled. Volume 23 Rs. 10 stamp Apt cancelled 42,47, 50 Rs. 2 not cancelled. Page No. 73 Defaced Stamp of Rs. 10 is used. Page 97 Rs. 10 cancelled affixed. Volume 24 pages 24, 26, 45 68, 92, 140, 168, 185, Rs. 2 not cancelled. Volume 6 Page 172 over stamped not cancelled. 147 Over stamp Rs. 2,148, 178,179,153,152,158,159,180,159 Rs. 2 not cancelled 166 Rs. 2 cancelled 184, 186 Rs. 2 not cancelled. 188, 190 Rs. 2 over stamped not cancelled. Volume 8 pages 3, 4, 5, 8, Rs. 2 stamp not cancelled. Page 9 Rs. 5 affixed cancelled. 35, 43, 46 Rs. 2 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airman of the meeting of the shareholders of the said transferor-company was personally interested in getting the scheme approved since he was having large number of shares of transferor-company APL (Arvind Polycot Ltd.) and that share exchange ratio has accordingly been loaded in favour of shareholders of APL. He has asserted that all the material facts have not been disclosed in the scheme of amalgamation and explanatory statement annexed to it. Hence, the voters did not know what they were doing while voting in favour of the scheme of amalgamation. His grievance is that his objections were not considered by the Chairman and by any of the authorities to whom he has sent His objections. He has asserted that meeting of 13.5 per cent preference shareholders was not held and, therefore, it can be said that resolution were not passed by the statutory majority in value and in number at the meeting or meetings as contemplated by section 391. At this very stage it might be noted that as asserted in the affidavit of one Mr. Amar Merita of the transferor-company Industrial Development Bank of India, the sole 13.5 per cent Cumulative Redeemable Preference Shareholder of the petitioner-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s concerned, APL. has paid dividend at 10 per cent on the equity share; whereas AIL has paid also dividend for the value of the equity shares for the period of 1995-96, 1997-98, but APRL (transferee-company) has not declared any dividend for the last 4 years. In this view of the matter, the share exchange ratio offered in the proposed explanatory statement in the scheme of amalgamation would be hardly fair to the shareholders of the petitioner-company (AIL). It has also been asserted that Valuers/Chartered Accountants had not computed value of the equity shares of any of the companies on the basis of intrinsic worth of net assets of the respective companies. Besides, APRL transferee-company does not have any fixed assets as on 30-9-1998. It has been asserted that authenticity of the information furnished to the Chartered Accountants is also doubtful. It has been alleged that the Chartered Accountants/Valuers C.C. Chokshi Co. and Banshi Mehta Co. have not performed their functions objectively and honestly and in accordance with financial norms and practice, they having acted in collusion with the management of the respective companies sought to be amalgamated. The valuation has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at the exchange ratio on the basis of book value of the net assets of the companies such book values might not indicate true worth of the assets. Hence, the share exchange ratio has not been properly computed. It has been asserted by the Valuers that realisable value of all the fixed assets has not been furnished and, therefore, the shares exchange ratio is not fair and just. The report is also qualified accordingly by the said Chartered Accountants/Valuers and unless such qualification is not removed, the report should not be relied upon. It has, then, been asserted that the objector mortgaged shares of other companies and got the loan from the bank to invest in AIL and the interest on the amount of loan of Rs. 63,000 is paid by the objector and, therefore, the interest of the company deserves to be protected. It has been asserted that by not disclosing any details of AML (Arvind Mills Ltd.) the petitioner is shrewdly misleading the Court. While admitting that there was required majority in approving the scheme of amalgamation it has been asserted that approximately 37 per cent of the equity shares of APL have been held by AML, 50 per cent of the equity shares of the ACL ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that view of the matter, AML (Arvind Mills Ltd.) would hardly have any shares in APRL as compared to the shares being allotted by APRL. It has been asserted that lead financial institutions of the country, viz., ICICI, IDBI, UTI had their nominees being on the board of directors of all the transferor-companies and they would never agree to accept such exchange ratio as would prejudice any one of the companies under amalgamation. It has been asserted that the Valuers have given adequate reasons for the method of valuation chosen by them and they are well known Chartered Accountants, whose expertise has been accepted by the Hon'ble Supreme Court of India. None of the valuers has been associated with any of the four companies or AML either as an Auditor or as Tax Adviser and their impartiality could not even otherwise be doubted. It has been asserted that valuation report of assets could have been relevant only if the valuation was being done on the basis of break-up value method and that method is not the only method for valuation. The valuers have not based their opinion only on that basis and, therefore, it was not necessary to obtain valuers' report. They have not proceeded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and they were sent under certificate of posting addressed to all the equity and preference shareholders. The photocopies of such certificates of posting have been produced. The objectors hold in all 3,300 shares and at the meeting of the Shareholders the scheme was voted in favour of amalgamation by the shareholders holding more than 97 lakhs equity shares. Thus, the scheme, even if the objectors holding 3,300 share of the transferor-company voted against the scheme, would have been assed by more than 99.9 per cent majority in value. It has been asserted that the objections with regard to report of the valuers are irrelevant apart from being misleading. Valuers were requested as per letter datedp-11-1998 to undertake the valuation. Further the report was available on22-1-1999. The same was placed in the meeting of the board of directors of the company held on 24-1-1999. Thereupon the work of drafting of the petitions was undertaken. The application was filed on 28-1 1999.Thus, there was no question of raising any suspicion with regard to report of the valuers. Referring to the earlier proceedings it has been asserted that the petition for sanction of the scheme of amalgamation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 and 15) are reproduced. They may be reproduced here : "(14). The transferee-company is a company which is wholly owned by the Arvind Mills Ltd. the transferee-company currently does not carry on any significant\business activity. After the amalgamation, the transferee-company will be able to effectively, capture business synergies that exist between Cotton Yarn, Denim and Gabardine particularly in the light of Gabardine production capacity being set up by the Arvind Mills Ltd. (15) The amalgamation of the transferor-companies into the transferee- company will integrate business operations and introduce considerable synergies in the business of the transferor-companies. The amalgamation is also expected to result in a structure elimination, the cross holdings between these groups companies and would also eliminate inter-company transactions and the inefficiencies arising as a result of such inter company dealings. The Group believes that upon merger the Group would reap the benefit of consolidation through focused management and lower costs and would reflect a better consolidated financial picture. Upon completion of the current restructuring exercise, the Group will have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the outset, it may be noted that since two of the objectors were parties in person, they were heard extensively. Their common objection with regard to sending of notices unless certificate of posting was scrutinised by permitting them inspection of all the books containing particulars of despatch of notices with respective notings of certificate of posting. Even after such a Searching inquiry, they were not able to point out any deliberate attempt made by any of the officers/employees of the transferor-company APL in seeing that some selected shareholders were deliberately prevented from attending the meeting. A faint effort was made by them to show that there was single stamping on the respective pages of the register by the Postal Authorities. This court had an occasion to examine the register even from that angle, but no direct or indirect attempt on the part of either the employees of the transferor-companies or the Postal Authorities could be spelt out. In that view of the matter, it cannot lie in the mouth of the objectors to say that the procedure of convening meeting of the shareholders has not been either duly or properly complied with. Same would be the position with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion while pointing out three required conditions for amalgamation, namely, there should be two inter-connected undertakings, they should not be dominant undertaking and they should be producing same goods. Patiala Starch Chemical Works Ltd. In re [1958] 28 Comp. Cas. 111 (Punj.) was the case concerning the shareholders passing resolution having interest in the transferee-company and valuation of assets was not based on disinterested opinion. On facts, therefore, the Punjab High Court did not sanction the Scheme. A single Bench of the Delhi High Court in Union of India v. Asia Udyog (P.) Ltd.. [1974] 44 Comp. Cas. 359 observed (in the context of tax liability) that the liability of a transferee-company to pay the creditors of the transferor-company would not be a step in aid of the amalgamation, but would be a consequence thereof. In Freeman Lockyer v. Buckhurst Park Properties (Mangal) Ltd. [1964] 34 Comp. Cas. 405 (CA) Board's power to appoint Managing Director and Managing Director's authority to appoint an Architect was under consideration. Following observations appearing in Sussex Brick Co. Ltd, In re [ 1960] 30 Comp. Cas. 536 (Ch. D.) have also been read : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork and arbitrariness involved in the valuation. That, however, will not deter according of sanction to the scheme of amalgamation. This decision was carried in O.J. Appeal and the Division Bench of this Court confirmed the same. The decision of the Divisionwench in Mafatlal Industries Ltd., In re [1996] 87 Comp. Cas. 705 (Guj.). Dealing with the broad propositions to be borne in mind the Bench said that without multiplying propositions, to borrow the expressions of Chandrachud, J., in J.S. Davar's case ( supra ) , it is not possible to enumerate exhaustively what material the Court is entitled to take into consideration, but the Court is required to examine each scheme on its merits and in the light of attendant circumstances. The Court has to view totality of scheme and its workability primely from the following points of view : ( i ) Whether it satisfies the statutory requirement. ( ii )Whether it satisfies the lest of reasonableness and whether the scheme proposed is in good faith which a man of business would reasonably approve. There the Bench observed with regard to exchange ratio as under : "This principle was succinctly seated by the Calcutta High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite majority vote as required by section 391(2). ( 3 ) That the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. ( 4 ) That all necessary material indicated by section 393(1)( a ) is placed before the voters at the concerned meetings as contemplated by section 391(1). ( 5 ) That all the requisite material contemplated by the proviso to sub section (2) of section 391 of the Act is placed before the court by the concerned applicant seeking sanction for such a scheme and the Court 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 X X X Extracts X X X X X X X X Extracts X X X X ..... ts. The clause appears at No. 3.4.2 in that report. It would read: "3.4.2. The objects of the Company as contained in its Memorandum of Association are to inter alia transact or carry on agency business to carry on (sic) of the business of trading and generally dealing in earth and ores of all kinds, including iron ore, ferromanganese, china clay, quarts, Silica, abrasives, minerals, aluminium, aquamarine asbestos, barium materials, bauxite, pipes, Flurospars and mineral substances." It was, therefore, submitted that the object cause is not such as would cover the business and affairs of the transferor-companies. It was then pointed out by the learned advocate appearing on behalf of the respective companies that mere was an amendment in the object clause of the transferee-company carried out as per the procedure prescribed under the relevant provisions of the Act. That object clause has been read before this Court and it might be reproduced : MEMORANDUM OF ASSOCIATION OF ARVIND PRODUCTS LTD. "I The name of the Company is "Arvind Products Limited". II The Registered Office of the company will be situated in the State of Gujarat. III The objects for which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , women's and children's clothing and wearing apparel, furnishing fabrics and made-ups of every kind, nature and description. [B] The, objects incidental or ancillary to the attainment of the main object are: 1. To build, construct, alter, maintain, enlarge, pull down, remove or replace, arid to work, manage and control any buildings, offices, factories, mills, shops, machinery, engines, roadways, tramways, railways, branches or sidings, Bridges, reservoirs, water courses wharves, electric works and other works and conveniences which may seem calculated directly or indirectly to advances the interests of the Company, and to join with any other person or company in doing any of these things. 2. To apply for purchase, or otherwise acquire, and protect and renew in any part of the world any patents, rights, trade marks, designs, licences, concessions, and the like, conferring any exclusive or limited right to their use, or any secret or other information as to any invention which may seem capable or being used for any of the purposes of the company, or the acquisition of which may seem calculated directly or indirectly to benefit the company, and to use, exercise develop or gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions of Reserve Bank of India, to receive money on deposit or loan and borrow or raise money in such manner as the Company shall think, fit, and in particular by the issue of debenture, or debenture stock (perpetual or otherwise) and to secure the repayment of any money borrowed, raised or owing by mortgage, charge or lien upon all or any of the property or assets of the company both present and future, including its uncalled capital, and also by a similar mortgage, charge or lien to secure and guarantee the performance by the Company or any other person or company of any obligation undertaken by the Company or any other person or company as the case may be. However, the Company shall not carry on any Banking or Insurance Business. 9. To draw, make, accept, endorse, discount, execute, and issue promissory notes, bills of exchange, bills of lading, warrants, debentures, and other negotiable or transferable instruments. 10. To apply for, promote and obtain any act of Parliament, charter, privilege, concession, licence or authorisation of any Government, State or municipality, or other authority for enabling the Company to carry any of its objects into effect or for extending an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contributory pension or superannuation funds for the benefit of, and give or procure the giving of donations, gratuities, pensions, allowances or emoluments to any persons who are or were at any time in the employment or service of the Company, or of any company which is a subsidiary of the Company or is allied to or associated with the Company or with any such subsidiary company, or who are or were at any time Directors or Officers of the Company or of any such other Company as aforesaid, and the wives, widows, families and dependents of any such persons, and also establish and subsidies and subscribe to any institutions, associations, clubs or funds calculated to be for the benefit of or to advance the interests and well-being of the Company or of any such other company as aforesaid, and make payments to or towards the insurance of any such person as aforesaid, and do any of the matters aforesaid, either alone or in conjunction with any such other company as aforesaid. 18. To establish or promote or concur in establishing or promoting any company or companies for the purpose of acquiring all or any of the property, rights and liabilities of the Company or for any other purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umption in their company. 5. To carry on the business of manufacturers of and dealers in chemicals, chemical compounds (organic and inorganic) in all forms, and chemical products of any nature and kind whatsoever, and all by-products and joint products thereof. 6. To carry on business as chemical engineers, analytical chemists, importers, exporters, manufacturers of and dealers in heavy chemicals, acids alkalies, petro-chemicals, chemical compounds, and chemicals of all any kinds (solid liquid and gaseous), drugs, medicines, pharmaceuticals, antibiotics, tennis, tannin extracts, essences, food colours, solvents, plastics of all types, dyestuffs, intermediates, textile auxiliaries, cellophanes, colours, dyes, paints, varnishes, vat and other organic dyestuffs, chemical auxiliaries, disinfectants, insecticides, fungicides, deodrants, biochemical and pharmaceutical, medicinal, sizing, bleaching, phtographical preparations and articles. 7. To carry on in India or abroad the Business of producers, manufacturers, importers, exporters of and dealer in all kinds of paints, distempers, pigments, writing, printing and inks of all other kinds and raw materials used for the preparation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, rectifiers, integrated and hybrid circuits, relays, pollinate meters, connectors, printed circuits, coils, chokes, transformers, switches, volume controls, plugs, sockets, aerial gears, diodes and allied items intended for and used in electronic devices, and in air-conditioners, refrigerators, washing machines, heaters and cooking ranges and other types of domestic appliances and any type of equipment used in the generation, transmission and receiving of sound, light and electrical impulses and component parts thereof and other materials used in or in connection with electronic and electrical industries. 12. To take part in the information, supervision or control of the business or operations of any company or undertaking and for that purpose to act as an Issue House, Registrars and Share Transfer Agents, Financial Advisers or Technical Consultants and to appoint and remunerate any directors, administrators or accountants or other experts or agents. 13. To manufacture, process, prepare, preserve, can, refine, bottle, buy, sell and deal whether as wholesalers or retailers or as exporters or importers or as principals or agents, in foods, meats, eggs, poultry, vegetables, can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shing machines and other electric appliances including radios, televisions, transformers and electric motors of every kind and description. 19. To build, take on lease, purchase or acquire in any manner whatsoever any apartments, houses, flats, bungalows, row houses, rooms huts or other accommodation for residential use and to let or dispose of the same on any system of instalment payment basis rent, purchase basis or by outright sale whether by private treaty or in any other mode of disposition all or any integral part thereof. 20. To provide long-term finance to any person or persons or cooperative society or association of persons or body of individuals either at interest or without and/or with or without any security for construction, purchase, enlarge, or repair of any houses, hats, row houses, bungalows, rooms, huts used for residential purpose either in total or part thereof or to purchase any freehold or leasehold lands, estate or interest in any property to be used for residential purposes. 21. To carry on the business of dealers in machinery and plant of every description and kind and in particular machine, tools and implements, and to repair, alter, convert, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representatives, Engineers, Designers, Consultants for any or all of Plastics such as wooven sacks, Monofilament Yarn, Ropes, Twines, Chair cane, Household Articles, Industrial Items and/or Rubber goods including the business of resins and moulding compounds such as ABS, Acetal, Acrylic, Alkyd, Cellulose, Acetate, C.A.B Crosslinked thermoplastics, Epoxy, Melamine, Nylon, Polyamide, Porycarbonate Polyester, Polyethylene Low density high density, Polyprobylne, polystyrene, polyurethane, P.V.C., U.F., M.F., P.F., C.P.W., D.O.P., Foamed plastics of all kinds, Reinforced Plastics and composites, Plastias Films, sheetings and laminates, Chemicals, Additives, Fillers and reinforcement and all other Plastic materials of all kinds that may be in existence or may be developed in future. 29. To carry on the business of manufacturers, dealers in, exporters and importers of all varieties, kinds and grades of steel, and to carry on and ( sic ) engineers including ( sic ) and dealing in steel billets, steel rods, steel rods, steel ingots, steel sheets, steel wires and in all kinds of steel products whether forged, rolled or drawn and consequently to manufacture, sell and deal in all or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ywhere in India or abroad the business of warehousing, transporting and carriage of goods and to provide storage and protection of goods against insects, ants, rats, moisture, rain, fire and other natural or man-made calamities. 38. To market products and/or services under established brands and to promote the popularity of such brand and to carry on the business of Merchants, Brokers, Agents, Stockist, Dealers, Sellers, Buyers, Importers and Exporters of all kinds of Hosiery goods whether synthetics, artificial or natural Ready-made garments, Interlinings, Accessories required for garments, Textile Machineries and spare parts, Engineering, Electrical and Electronic goods, Spares, Consumable, Colours, Chemicals, Dyes, Dyes intermediates, Petro-chemicals, Plastics, Packing materials of all kinds and description, their products and by-products or their convertors. 39. To undertake and carry on generally the business as Finance company and in particular Financing of Industrial enterprises, Housing finance, Bills discounting, Factoring, Financing to all kinds and description of Plants, Machineries, Equipments, Household appliances, Office equipments, Furniture, Computers and Vehicl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Date, the issued and paid-up equity share capital of the transferee-company shall be reorganised by way of variation of rights attached to the existing equity shares of the transferee-company in pursuance of the relevant provisions of the Act in the following manner : ( i )for every 150 (one hundred and fifty) equity shares held by each shareholder of the transferee-company whose name appears in its register of members on a date to be determined by the Board of Directors of the transferee-company or any committee thereof, shall be issued and allotted (prior to the Record Date) the following quantity of fully paid shares of the transferee-company: (A)135 (one hundred and thirty five) 13.5% cumulative redeemable preference shares of Rs. 10 each redeem able at par at the end of ten years or earlier at the option of the transferee-company by giving three months notice; and (B)15 (fifteen) equity shares of Rs. 10 each. ( ii ) In the event that any shareholder of the transferee-company becomes entitled to a fraction of a share of a value not less than one-half shares, then such shareholder shall be entitled to one share. In the event that any shareholder of the transferee-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Group Companies to which Arvind Mills Ltd., belongs as the prime company. In fact this factor would be a relevant factor in considering the scheme of amalgamation seeing the light of the day in its natural course. Apparent any ulterior motive in proposing the scheme of amalgamation would stand ruled out from that factor. Besides, the shares of the Arvind Mills Ltd., were quoted in the market at much higher price (Rs. 32 per share on 1-10-1998). Even the objector had fairly conceded that the shares of AML have been quoted and the market price has consistently remained around Rs. 30 per share at the relevant point of time. If that is so, the transferor-companies, none of whom had any quotation beyond its face value at any point of time at the relevant period could be said to have been placed at a disadvantage on account of the presence of AML in any of the four companies. All arguments revolving round presence of AML canvassed by tie objectors and on their behalf deserve to be discarded as obviously the presence of AML would be beneficial for the companies sought to be amalgamated. At this very stage the argument that the demand of the product 'Denim' of AML has reduced whereas de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions of the objector is on lack of ascertainment of market value of fixed assets. It is true that the Chartered Accountants have recited that a report of external valuers or management estimates as regards the realisable value of fixed assets has not been furnished. However, it is also a fact that such a report has not been called for by the Chartered Accountants from the respective companies. Besides, this is not a case of reorganisation or arrangement in a company going into liquidation or taken into liquidation where realisable value of the assets would assume importance. That apart, what the valuers have taken into consideration is the overall financial position/picture of the respective companies under amalgamation. This can be visualised from the report itself. In the forwarding letter dated 9-2-1999 of Chartered Accountants Bansi S. Mehta Co. and C.C. Chokshi Co. it has been stated that the report has been based upon the information furnished to them as set out in the report and as per the discussions they had with the concerned officers of the companies. The report runs into 41 pages divided into 10 heads. First head is 'purpose of the report'. Second head is 'so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e), details of fixed assets and contingent liabilities as also bad and doubtful debts, outstanding balance as on 31-3-1998 and organisation chart have been taken into consideration, In respect of APRL first 3 documents as also unaudited balance sheet and profit and loss account for the last six months ending on 30-9-1998 have been taken into consideration. The experts have clarified that the report has to be read in totality and not in parts. They have also recited that they did not have any access to the records of the companies for verification of the authenticity of the information furnished to them and their work would not constitute an audit or certification of the past working results of the companies and that the projected working results of the transferor-companies have been used in the valuation exercise carried out by the Chartered Accountants. They have recited that the fair basis of amalgamation has been arrived at as at 1-10-1998 on a consideration of relevant factors and had given their brief report on 22-1-1999 expressing their opinion on the fair and equitable exchange ratio for the amalgamation of the four companies. The shareholding pattern of the four companies h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of public bodies can be subjected to inspection by the Court. To do so, is incompetent and improper and, therefore, out of bounds. Nevertheless, the broad parameters of fairness in administration, bonk fides in action and the fundamental rules of reasonable management of public business, if breached, will become justiciable...." [Emphasis Supplied] (p. 472) In para 4 it hay been observed that the scheme of amalgamation cannot be fainted on apprehension and speculation as to what might possibly happen in future. Sen, J. speaking for His Lordship and Hon'ble the Chief Justice of India has observed in paras 29, 30 and 31 as under: "29. Mr Dholakia, learned counsel appearing for Mr. Jajoo, one of the shareholders of TOMCO, has questioned the justification of the ratio of allotment of shares, 2 shares of HLL in exchange of 15 shares of TOMCO. Accordingko Mr. Dholakia, this ratio is entirely unsatisfactory and unfair to the TOMCO shareholders. It has been contended that the Board of Directors of TOMCO did not explain the Scheme of Amalgamation in the explanatory statement circulated among the shareholders. In particular, how the shark, exchange ratio 15 TOMCO shares to 2 HLL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was produced for showing a substantiation of the valuation that had been made of the shares of the two companies sought to be amalgamated in that case. After setting out different methods of the valuation and some or all the factors to be taken into consideration, it has been observed in para 43 that in case of amalgamation a combination of all or some of the methods of valuation may be adopted for the purpose of fixation of exchange ratio of the shares of two companies; and with regard to the objection concerning disclosure of material it has been observed in para 57 that a similar question came up for consideration before a Division Bench of Gujarat High Court in the case of Jitendra R. Sukhadia v . Alembic Chemical Works Co. Ltd. [1987] 3 Comp. LJ. 141 and in that case dealing with the amalgamation it was held that the exchange ratio of the shares of the two companies had to be stated along with the notice of the meeting and how this exchange ratio was worked out, however, was not required to be stated in the statement contemplated under section 393(1)( a ). Even with regard to the future interest of consumers (future market condition) the Apex Court has observed in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he field of valuation and if no mistake can be pointed out in the said valuation, it is not for the Court 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." (p. 309) In the present case the objector Mr. Hasmukhlal Shah read his objections as also his written submissions before this Court. Mr. Bhavsar argued the matter for the other objector in the matter of petitioner AIL, the transferor-company, as also read the written submissions. He also read some portion of the booklet of the Institute of Chartered Accountants. However, having considered the submissions in the light of what the Apex Court has said as above and in the light of the report of Chartered Accountants C.C. Chokshi Co., whose good repute has been acclaimed by the Apex Court and having noted a very salient feature about the absence of any other valuation or exchange ratio pressed for consideration before this Court, the objections and submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition as aforesaid in the context of the objections of the three objectors and their submissions/written arguments and I have also gone through the relevant rules and forms (Rules 32, 33, 69, 78, 79 and 184 of the Company (Court) Rules, 1959 and the relevant Forms Nos. 35139, 40 and 42) and the provisions of sections 391 to 394 of the Companies Act. It would clearly appear that the scheme of amalgamation in question has been approved by a thumping majority, much more than the requisite statutory majority and after following requisite statutory procedures sanction for the same has been sought for, the proposed scheme of amalgamation is not shown to be violative of any of the provisions of law and is also not shown to be contrary to public policy. Interest of the workmen and employees of all the companies is also taken care of. None of the creditors, secured or unsecured, has come forward to object to the scheme of amalgamation in question inspite of public notices. The broad advantages of the scheme of amalgamation in question have been set out in the respective petitions also. The approvals of principal creditors ICICI and IDBI are also placed on record. For the purpose of testing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company might stand augmented. The scheme, therefore, deserves to be sanctioned as per the order that is to follow. The objector Mr. Hasmukhlal Shah sent a written communication dated 27-9-1999 setting out some subsequent transactions which AML (Arvind Mills Ltd.) had with Asmani Investments Ltd. (its subsidiary) in respect of the shares of transferee-company. Mr. Dipakkumar J. Shah has also sent communication dated 20-9-1999 after sending some post card communications. This Court does not approve of sending communications by the two objectors after the matter was over and fixed for judgment. The petitioner has filed affidavit-in-reply of one Mr. Ramnik Bhimani, its Company Secretary denying the allegations while asserting that such transactions in law cannot be taken into consideration. The deponent has asserted that the transfer of shares has taken place between AML and its subsidiary and for all practical purposes the shares continued to be held by AML and makes no difference on either valuation aspect or the consequent exchange ratio. Such objections subsequently sent deserve to be rejected as aforesaid. Cost: Before passing the order, question of cost is required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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