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TMI Blog2004 (4) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... ce at 102, Stephen House, BBD Bagh (East), Kolkata in accordance with the scheme of amalgamation annexed as annexure A to this company petition. 2. On hearing the company application No. 20 of 2003, this court on 28-8-2003, dispensed with the meeting of the shareholders of the transferee company for the purpose of considering, and if thought fit, for approving with or without modification, the scheme of amalgamation by which the transferor company was proposed to be amalgamated with the transferee company. Since there were no creditors in the transferee company consequently the meeting of the creditors was required to be called for. 3. The transferee company thereafter filed the present petition under rule 79 of the Companies (Court) Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It was contended that two different methods of the valuation should not be adopted for valuing the shares of the respective companies. The Regional Director contended that the price quoted at the Kolkata Stock Exchange of the transferor company could not be considered, as the fair value of the shares of the transferor company and that the book value of the shares of the transferor company should be taken as the fair value and on that basis the ratio of exchange should be made in the scheme of amalgamation. The Regional Director, Company Law Board, Northern Region, Kanpur suggested that the fair ratio of exchange should be two shares of Rs. 10 each of the transferee company for every one share of Rs. 10 each of the transferor company inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the transferor company was running in losses or very little profit in the last three years and therefore, the earning capitalisation method would also not give a fair value of the shares. In such circumstances, the valuer took the average quoted price of the shares of the company of the last three years in arriving at the value of the share of the transferor company. 9. On the other hand, the valuer found that the transferee company is an unlisted company and is also a closely held company. Since the value of the shares was not quoted by the stock exchange, the valuer took the net assets of the company against the fully paid up equity shares and arrived at the net asset value per share. 10. The Regional Director in his objection h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge ratio has to be considered as fair and reasonable. 13. A similar view was also taken by the Calcutta High Court in the matter of E.I.T.A. India Ltd. v. Narayan Prasad Lohia [2000] 99 Comp. Cas. 276 , and by the Madras High Court in Coimbatore Cotton Mills Ltd. and Lakshmi Mills Co. Ltd., In re [1980] 50 Comp. Cas. 623 and by the Bombay High Court in Govind Rubber Ltd., In re [1995] 83 Comp. Cas. 556 as well as by the Supreme Court in Hindustan Lever Employees' Union's case (supra). 14. In Operations Research (India) Ltd., In re [2000] 101 Comp. Cas. 101 1, the Gujarat High Court held that if the shareholders in their commercial wisdom have accepted the exchange ratio of shares with their open eyes, it would not be open for the Regional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nscionable. In amalgamation of companies, the courts have evolved, the principle of 'prudent business management test' or that the scheme should not be a device to evade law…." (p. 39) 17. The main reason why a notice is given to the Regional Director under section 394A of the Companies Act is to ensure that the public interest is safeguarded when companies propound a scheme of amalgamation. In the present case, the Regional Director in his affidavit has not stated that the exchange ratio is contrary to public interest. The Regional Director has only stated that the interest of the shareholders of the transferor company is likely to be a adversely affected by the exchange ratio. If at all there is undervaluation, then, it is the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, I do not find anything in the scheme, which could be said to be detrimental to the interest of any shareholder or creditor of the transferee company or to the public interest. 20. Thus, this court hereby sanctions the scheme of amalgamation as appended as annexure A to this petition and hereby declares the same to be binding on the shareholders and creditors of the transferee namely, Ratan Housing Development Ltd. For this purpose the effective date will be the same as mentioned in the scheme of amalgamation, namely, the date when the certified copy of this order and the order of the Calcutta High Court in respect of the transferor and the transferee company are filed before the concerned Registrar of Companies. It is further ordered t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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