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TMI Blog2002 (6) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of hotels, restaurants, cafes, taverns, refreshment rooms, boarding and lodging. 3. The transferee-company was incorporated on 18-9-1970 under the provisions of the Act, and has its registered office at Chennai. The authorised capital of the transferee-company is Rs. 75,00,00,000 consisting of Rs. 50,50,000 redeemable cumulative preference shares of Rs.100 each and 2,45,00,000 equity shares of Rs. 10 each. The issued, subscribed and paid-up capital of the company is Rs. 16,46,93,820 consisting of 1,64,69,382 equity shares of Rs. 10 each fully paid-up. The object of the transferee-company is to carry on the business of hotels, restaurants, cafes, taverns, beer house, boarding and lodging. 4. The above petitions have been filed for sanction of the proposed scheme of amalgamation of the transferor-company with the transferee-company. The objects of the transferor-company and the transferee-company are similar and a scheme of amalgamation was proposed for the transfer of assets and liabilities of the transferor-company to the transferee so that the transferee-company would be a company with a much larger asset base with strong financials which would enable higher earning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y proxy by 296 shareholders of the company entitled together to 42,00,685 shares of Rs. 10 each and he has further stated that the scheme of amalgamation was read over and explained and majority of the shareholders approved the scheme of amalgamation. 7. It is seen from the report of the chairman appointed to hold the meeting of the transferee-company that the meeting was attended either personally or by proxy by 474 shareholders of the company entitled together to 73,09,525 shares of Rs. 10 each and he has further stated that the scheme of amalgamation was read over and explained and majority of the shareholders approved the scheme of amalgamation. 8. One of the shareholders of the transferor-company holding 572 equity shares filed objections in C.P. No. 19 of 2002 and the very same person, who is also a shareholder in the transferee-company holding 250 equity shares, filed objection in C.P. No. 20 of 2002 also, objecting to the approval of the scheme of amalgamation of the transferor-company with the transferee-company. The objections raised by him in both the objections are one and the same and they are as follows : ( a )The proposed share exchange ratio is grossly unf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd transferee-companies, in which he sought them to take remedial measures by making an open offer by the transferee-company to all the shareholders other than the Taj Group to purchase the transferor-company shares held by the small shareholders at a price not less than Rs. 100 per share, being the price paid by the shareholders at the last rights issue in 1996 and his appeal was not heeded to and he received a reply, dated 22-11-2001, from the transferee-company informing of their resolve to go ahead with the merger. 10. Mr. A.K. Mylsamy, the learned counsel for the petitioners, in both the petitions, has submitted that the objector Mr. N. Umasankar attended the extraordinary general meeting of the transferor-company on 27-12-2001 and spoke in the meeting and proposed an amendment to the scheme of amalgamation in the same lines as suggested by him in his letter, dated 5-11-2001 and the shareholders by majority of 86.14 per cent rejected the amendment and thereafter, the chairman put the scheme of amalgamation in its original form to vote and more than 90 per cent of the shareholders, present in person and by proxy, approved the scheme. 11. It is not in dispute that Mr. N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he average capital employed in the past three years and the yield value per share is determined. Under the asset approach method, the net asset value of the company was determined and it was divided by the number of shares to determine the asset value per share. 13. It is not in dispute that S.B. Billimoria Co. and N.M. Raiji Co. (valuers) are reputed Chartered Accountants. The objector has stated in his objections that the Chartered Accountants, who have carried out the valuation, are either directors or auditors of the Tata-Taj Group Companies and, therefore, they are not independent Chartered Accountants. The above allegation is vague and general. It is not the case of the objector that the valuers are the statutory auditors of either the transferor or transferee-companies. Imputations of bias cannot lightly be made against the professional Chartered Accountant who is expected to discharge the duties according to the obligations cast on him by the statute and the well established principles of professional conduct and etiquette. Hence, this contention of the objector is devoid of merit. 14. The learned counsel for the petitioners relied on the decisions of the Apex C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by section 391(1)( a ) have been held. (2) That the scheme put up for sanction of the Court is backed up by the requisite 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 the 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 polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it will be detrimental to their interest." (p. 309) 15. In Hindustan Lever Employees Union s case ( supra ), their Lordships of the Apex Court have laid down as follows : "When in case of amalgamation of company admittedly more than 95 per cent of the shareholders who are the best Judge of their interest and are better conversant with market trend agreed to the valuation determined it could not be interfered by Courts as, certainly, it is not part of the judicial process to examine entrepreneurial activities to ferret out flaws. The Court is least equipped for such oversights. Nor, indeed, is it a function of the Judges in our constitutional scheme. It cannot be said that the internal management, business activity or institutional operation of public bodies can be subjected to inspection by the Court. To do so, is incompetent and improper and, therefore, out of bounds. . . ." (p. 471) While it is not in doubt that the Court has to be satisfied that a fair procedure had been adopted and an honest attempt was made to arrive at a fair and reasonable share exchange ratio in the interest of the general body of shareholders and creditors, the Court should nevertheless refrain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance sheets of both the transferor and the transferee-companies set out the financial position as on 31-3-2001 and, therefore, it is not necessary to mention in the statement under section 393 about the individual holdings of Tata or Reddy Group. They have specifically denied the allegation of the objector that the provisions of the Act were not complied with. According to the chairman, he sent individual notices to all the shareholders by certificate of posting enclosing a copy of the scheme of amalgamation, explanation statement under section 393 and the proxy form and he has filed affidavit of service before this Court. The statement under section 393, sent to the shareholders, sets out in detail the shareholding of the directors of the company and it is further stated in it that the copies of various documents, including valuation report, are open for inspection at the registered office of the company. Hence, the contention that the relevant material was not placed before the shareholders is not correct. 19. Mr. N. Umasankar, objector herein, further contended that the management of the transferor-company collected large number of proxies and the general body meeting was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the respective Board while approving the scheme of amalgamation. The object of both the companies is one and the same and it is to carry on the business of hotels, restaurants, cafes, taverns, beer house, boarding and lodging and the reason for merger is stated as one of creation of a company with much larger asset base and net worth with strong financials and the merger would result in cost reduction and duplication of activities on account of commonality in the business of both the companies. The shareholders of both the companies have approved the scheme in overwhelming majority. The scheme of amalgamation is in the realm of corporate and commercial wisdom of concerned parties and the Court cannot sit in judgment over the view of the parties. 22. Lastly, the objector raised a contention which was not raised in his memorandum of objections. He contended that under the declaration given pertaining to sections 238 to 251 of the Act, the petitioners have not disclosed the pendency of prosecution proceedings in EOCC No. 105 of 2001 on the file of the Additional Chief Metropolitan Magistrate, Economic Offences-I, Egmore, Chennai-8, initiated by the Registrar of Companies agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case is being contested by the transferee-company and its directors and it is pending. Hence, the contention of the objector that sections 235 to 251 and the like mentioned in section 391(2) shall mean and include the inspection of the Registrar under section 209A is unacceptable and deserves to be rejected. 23. The Regional Director of Department of Company Affairs, Chennai, has filed an affidavit stating that the scheme provides protection to the interest of transferor-company upon amalgamation. 24. On a perusal of the record, it appears that the requisite statutory procedure has been complied with. The scheme does not appear to be contrary to any public policy and the scheme, as a whole, is found to be just, fair and reasonable from the point of view of prudent men of business and the scheme has been approved by the overwhelming majority of the shareholders of both the companies and there is no objection by the creditors of transferor-company for the amalgamation. The proposed scheme of amalgamation is not violative of any provision of law. 25. Accordingly, the scheme of amalgamation as presented for approval is sanctioned. Both the company petitions are ordered a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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