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TMI Blog2002 (9) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thereafter to "Reliance Petroleum Limited on 16-4-1993. 3. The Registered Office of Reliance Petroleum Limited the transferor Company is at Village Motikhavdi P.O. Digvijay Gram, Distt. Jamnagar (Gujarat) 361140. 4. As per certified copy of the last audited balance sheet of RPL is on 31st March, 2001, the authorized share capital of the petitioner company is Rs. 70,00,00,000 divided into 600,00,00,000 equity shares of Rs. 10 each, 30,00,00,000 preference shares of Rs. 10 each and 70,00,00,000 unclassified shares of Rs. 10 each. The issued capital is Rs. 5,203,04,71,000 divided into 520,30,47,100 equity shares of Rs. 10 each, the subscribed capital is Rs. 520,16,66,900 and the calls in arrears on the equity shares amount to approximately Rs. 2,41,00,000. 5. The main objects of RPL, are to carry on the business of extraction of oil by different means from various kinds of commodities as specified in para 4 of the petition and to carry on all or any of the following business viz. Refining of Petroleum Crude Oil, manufacturers of refined oil, perfumed and all other types of oil and extracting by-products thereof. 6. The Registered Office of Reliance Industries Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o on the Official Liquidator attached to this Court under the second proviso to section 394(1) of the Act. 11. In response to the aforesaid notices, objections have been received from the following persons : ( i )Shri S.D. Basu, Objection dated 11-4-2002. ( ii )Shri Kashinath Sahu, Objection dated 15-4-2002. ( iii )Smt. Vanita Ravindra Dandekar, Objection dated 2-5-2002. ( iv )Shri Rajesh C. Shah, Objection dated 15-6-2002. ( v )Shri Bhupendra Popatlal Shah, Objection dated 24-6-2002. All the objections were sent to the petitioner company through its solicitors. 12. The Court has gone through the Individual objections raised by the different objectors. Most of the objections are challenging, primarily, the share exchange ratio, various other objections raise common issues and it is not necessary to deal with them individually for the reasons that follow. 13. Before dealing with the principal objection regarding the report submitted by S.B. Billimoria Co. and Price Waterhouse, Chartered Accountants, it is necessary to dispose of the different objections raised on behalf of the respective objectors. 14. The first contention was that RIL, the transferee C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the Company and if the shareholders have arrived of such a decision by applying approach of a prudent businessman. It is not for the Court to sit in judgment. Furthermore, nothing has been brought on record to show that even if a monopoly results, it would affect the public interest of the economic interest of the country adversely, which may be a factor having relevant bearing. 18. Mr. Soparkar, the learned senior counsel appearing on behalf of the objector, Shri Rajesh C. Shah, invited attention of the Court to the three affidavits filed by the objector viz. first one dated 15-6-2002, second one dated 24-6-2002 and the third one dated 16-7-2002. It was submitted that the applicant-objector was holding 2400 shares jointly with family members, and he is a practising Chartered Accountant since last 25 years. That the share exchange ratio of 11 shares of RPL for 1 share of RIL under the proposed Scheme was with an ulterior motive and for personal benefit of the promoters and would result into unjust enrichment at the cost of small investors/shareholders of RPL. That there was no adequate and meaningful disclosure in the notice calling the meeting so as to enable th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a rubber stamp while accepting the present report. The report is merely an expression of opinion without any supporting basis; that it was always open to the Court to discard a report on the ground that the same was not a reliable or if the Court found that factors which have gone into preparation of the report are not relevant, but in the present case on a bare reading of the report, it was not possible for the Court to state even thus. That if the Court came to a conclusion that the valuation report did not reflect a fair share exchange ratio or that while adopting and applying the methodology mistake had been committed, an opportunity should be granted by calling for a fresh report from a third valuer. Reliance was placed on the following decisions in support of various objections : ( i ) Mafatlal Industries Ltd., In re [1995] 84 Comp. Cas. 230 1 (Guj.); ( ii ) Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp. Cas. 792 2 (SC); ( iii ) Tata Oil Mills Co. Ltd., In re [1994] 3 Comp. LJ 46 (Bom.); ( iv ) Marshall Sons Co. (India) Ltd. v. ITO [1997] 223 ITR 809IN 3 (SC). 20. As against this, Mr. Bhatt, the learned senior counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the meeting was fairly represented and that the statutory majority was acting bona fide and lastly that the arrangement i.e. Scheme was such which an intelligent and honest man, acting in respect of his interest, might reasonably approve. The Court, at the same time, is not required to differ from the decision of the majority arrived at the meeting unless any of the factor was found to be wanting. A share exchange valuation will have to be approved unless it shocks the conscience of the Court. 23. The broad contours of jurisdiction have been succinctly summarized and enumerated in the decision of Miheer H. Mafatlal s case ( supra ) and it is not necessary for this Court to reiterate the same. In the same decision it has been stated that : "...It has also to be kept in view that which exchange ratio is better is in the realm of commercial decision of well informed equity shareholders. It is not for the Court to sit in appeal over this value judgment of equity shareholders who are supposed to be men of the world and reasonable persons who know their own benefit and interest underlying the proposed scheme. With open eyes they have okayed this ratio and the entire scheme. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ujarat Samachar" (all editions) on 19-4-2002. It is reported that 5925 (Five Thousand Nine Hundred and Twenty Five) shareholders attended either personally or by proxy and such number of equity shareholders were holding 397,76,12,296 (Three Hundred Ninety Seven Crores, Seventy Six Lakhs, Twelve Thousand Two Hundred Ninety Six) equity shares of the value of Rs. 3977,61,22,960 (Rupees Three Thousand Nine Hundred Seventy Seven Crores Sixty One Lakh Twenty Two Thousand Nine Hundred and Sixty only). After the scheme of amalgamation was taken as read with the permission of meeting, the Chairman read out the salient provisions of the Scheme and after inviting debate thereon, a question was submitted in the form of resolution. Thereafter, the resolution on the proposed scheme was put to vote. It is reported that 5775 (Five Thousand Seven Hundred and Fifty Five) equity shareholders of the petitioner-company holding 397,75,44,231 (Three Hundred Ninety Seven Crores Seventy Five Lakhs Forty Four Thousand Two Hundred and Thirty One) Equity Shares representing 97.47 per cent in number of Equity Shareholders and 99.99 per cent in the value of the Equity Shares present and voting, voted in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuers could not be shown to be vitiated by fraud and/or mala fide . It is settled legal position that merely because the determination is done by a slightly different method which might result in a different conclusion would not justify interference unless it was found to be unfair. There is nothing on record to hold that the exchange ratio, brought on record by the aforesaid valuation report, is in any manner unjust or unfair. At the cost of repetition, it requires to be stated that 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 vote that has to be kept in view by the Court. The Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the scheme by the requisite majority. 28. On behalf of the objectors reliance was placed on the fact of valuation report of Mr. Nrupesh C. Shah tendered with objection affidavit dated 24-6-2002 for contending that in earlier decisions of the Supreme Court and this Court the valuations had been acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferee Company has been ordered by the Central Government under sub-section (6) of section 209A of the Act. Upon Inspection of such Books and Records, the person making the inspection is required to report to the Central Government and in case of a default, sub-sections (8) and (9) of the said section provide for punishment, but the same are in relation to the company or its officers and cannot stand in way of this Court while granting approval to the Scheme, if other factors stand satisfied. 30. The Official Liquidator has placed on record his report dated 3-5-2002 and it is stated therein that the auditors appointed for the purpose of scrutiny and Investigation of the Books of Account and affairs of RPL have submitted their report. It is stated in the report that the auditors are of the opinion that the acts and transactions of the Company i.e., RPL were conducted within the objects mentioned in the memorandum of Association of the Company and that the affairs of the Company have not been conducted in a manner prejudicial to the interest of its members or the public. 31. In view of what is stated hereinbefore the Scheme of Amalgamation as proposed by the petitioner-c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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