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TMI Blog2003 (6) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... g Company Petition No. 28 of 2003, the High Court of Gujarat has approved and sanctioned the scheme. Similarly in Company Petition No. 61 of 2003 filed by Cadila Health Care Ltd. the transferee company having its registered office in the State of Gujarat, the High Court of Gujarat has approved and sanctioned the scheme. The registered office of the petitioner company is situated at Mumbai within the jurisdiction of this court and hence, it has sought approval of the scheme of its merger into the transferee company. 2. In pursuance of the summons for directions (Company Application No. 75 of 2003) filed by the petitioner, this court directed that meeting of the equity share holders of the petitioner company should be convened on 13th March, 2003 for the purpose of considering and if thought fit approving, with or without modifications, the scheme of arrangement of amalgamation of the petitioner company along with three other companies mentioned above with the transferee company. By the same order dated 7th February, 2003, this court dispensed with the holding of the meetings of the secured or unsecured creditors of the transferor company for the reasons stated in para 11 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidator appearing in person states that the Official Liquidator has no objection for sanctioning the scheme. Shri Chakradhara Paik, Regional Director, Western Region, Department of Company Affairs, Mumbai has filed affidavit dated 16th April, 2003 stating that the scheme is not prejudicial to the interest of creditors and share holders of the transferor company. Shri Master, learned counsel for the Regional Director states that the Regional Director has no objection for sanctioning the scheme. The petitioner has filed an affidavit sworn in by Shri Rajesh Parte on 25th March, 2003 annexing thereto the latest Balance Sheets and Profit and Loss Account of the transferor as well as transferee companies for the nine months period ending 31st December, 2002 together with auditor s certificates of limited review. 6. The objectors and the petitioner company have filed affidavits in support, in opposition and in rejoinders. The objectors were heard. The objections raised by them are summarised below : 1. The report of the Chairman appointed to the meeting of the equity share holders annexed to the petition at Exhibit G is incomplete and is not in consonance with Rule 78 of Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... majority of the concerned creditors or members, the court has to be satisfied that the requisite statutory procedure has been followed, that the scheme is just, fair and reasonable to the persons who are likely to be affected by it, because it would bind not only the majority of the share holders or creditors but, also the dissenting minority of the shareholders or creditors. Therefore, the scheme must be just and fair to them. It must also not be unconscionable, illegal or otherwise unjust to the share holders or creditors or any class of them. The court does not act as a rubber stamp and does not act merely by the ipse dixit of the majority of the shareholders but, can reject the scheme if it finds it to be unfair, unjust or unreasonable to the share holders or creditors or any class of them. This scrutiny of course is done in broad common sense manner and the court has no jurisdiction like an appellate authority to minutely scrutinise the scheme with a view to find faults in it. It is the commercial wisdom of the parties to the scheme who have taken an informed decision, about the usefulness and propriety of the scheme by supporting it by the requisite majority. The court cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 or 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 the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval of the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case, two renowned firms of valuers have considered different methods and have made an unanimous report. They have suggested the swap ratio of 7 equity shares of Rs. 5 each in the transferee company for 4 equity shares of Rs. 10 each of the petitioner company. The objectors submitted the fair swap ratio should have been 2 to 1 (8 to 4) or more instead of 7 to 4 as suggested by the valuers. According to the objectors, the ratio was unfavourable to the equity share holder of the petitioner company. As stated earlier, it is again to be kept in mind that the exchange ratio is in the realm of commercial wisdom of well-informed equity share holders. It is not for the court to sit in appeal over the valued judgment of the equity share holders who are supposed to be commercial men. Commercial men who know their common benefit and interests underlining the proposed scheme, with open eyes, have okayed the swap ratio of 7 to 4 as above by an overwhelming majority of 90 per cent in numbers and 99 per cent in value of the members present and voting. The limited jurisdiction of the Court is only to see whether the ratio is so wrong or the error is so gross as would make the scheme unf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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