9911796707
TMI Blog2004 (4) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement including statutory compliances, objectors failed to discharge their burden to prove demerits of the scheme in question. Nothing has been placed on record to prove illegality, unfairness, unrecommendableness of the scheme. Merely giving unsupported and baseless views cannot be accepted specially when merits of the scheme of arrangement has been recognised and approved by all others. In this case, the above conclusion turns upon the material placed by the parties. First and foremost issue is meaning, scope and purpose of arrangement . The scheme of arrangement in question falls within the ambit of the provisions of sections 391 to 394 of the Companies Act and the Rules made thereunder. The word arrangement is not specifically defined under the Companies Act. This scheme of arrangement has the ingredients of demerger and reduction of share capital and scheme of arrangements with the concerned companies and Trust, cannot be said to be beyond the purview of sections of the Companies Act, the scheme of arrangement in question, therefore, is maintainable. The word arrangement , though not defined specifically, has a wide range and ambit. The present scheme of arrangement is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objection. ( e ) All the experts/professionals submitted their report and opinion and accepted the scheme. These experts/professionals include financiers, auditors, chartered accountants, bankers, creditors, financial institutions and above all company managements, apart from unanimous majority decisions to support the scheme. ( f ) Once creditors, financial institutions, expert in respective business and professionals, approved the scheme (of arrangement) unanimously by overwhelming majority of shareholders in proportion to 99.99 00.1, and also approved the scheme after due and effective deliberation on all issues and satisfied by all the classes, in my view also, such determination and/or commercial merits of the scheme need not be gone into or interfered with as a fault finder and/or to pick holes in it, merely because some objections have been taken or raised by some shareholders. There are no strong and cogent reasons made out and pointed out by any one, to disapprove such scheme. No other objectors have pressed their objections or appeared in court to support such objections. ( g ) No illegality of any other law has been placed and proved with supporting material, in referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any affairs and action. Result - In view of the above, the sanction of the scheme, as prayed, is granted. The Company Petition No. 120 of 2004 is made absolute in terms of the prayer clauses ( a ) to ( k ) with liberty. Parties to proceed in accordance with law. Costs of Rs. 2,500 to the Regional Director be paid by the petitioner within a period of four weeks from today. X X X X Extracts X X X X X X X X Extracts X X X X ..... ated under the Companies Act having its registered office at Birlagram, Nagda, Madhya Pradesh. Samruddhi is primarily engaged in investment activities (as person acting in concert), Grasim and Samruddhi respectively hold 14.86 per cent and 0.87 per cent of the equity shares of the petitioner-company. Pursuant to acquisitions through negotiated transactions, in the open market, an open offer made for the shares of the petitioner-company by Grasim, an unlisted company as an acquirer with Samruddhi, a wholly owned subsidiary of Grasim a proposal to demerge the [L&T] demerged company's cement business was given by Grasim and after due deliberation, the Board of directors of the demerged company accepted the proposal from Grasim for demerger of the cement business into the resulting company or CemCo by way of a scheme of arrangement under sections 391 to 394 of the Companies Act. (E) L&T Employees' Welfare Foundation [for short 'Trust'] is an employee welfare trust established under the Indian Trusts Act, 1882. Relevant provisions 3. The relevant provisions concerning the scheme of arrangement are under the Companies Act, 1956 and the Companies (Court) Rules, 1959 [for short 'Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding fixed deposit holders and equity shareholders as required by the order of the court. As per rule 74 of the Company Rules, the notice of the said meetings were advertised in the 'Free Press Journal' (Mumbai edn.), 'Navshakti' (Marathi edn.) and in all English editions of the 'Times of India'. 6. The meeting of the secured creditors was attended by 49 secured creditors, either personally or by proxies or through authorised representatives of the petitioner-company entitled together to 23,846,300,000.00 value of debts and debentures. The meeting of the unsecured creditors, was attended by 63 unsecured creditors, either personally or through proxies, including FD holders or authorised representatives of the petitioner-company entitled together to 2,487,405,000.00 value of the debts/fixed deposits. The equity shareholders meeting was attended by 620 members holding equity shares, either personally or through proxies or authorised representative holding equity shares of the petitioner-company entitled together to 140,240,184 equity shares of Rs. 10 fully paid-up. All the above meetings were chaired by Mr. Anil Manibhai Naik, the person appointed by the hon'ble court, in the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies Act read with rules 79 to 87 of the Company Rules, alongwith the affidavit as required under rules 18 and 21 of the Company Rules. 10. It is pertinent to note that subsequent to the submission of an application to the Hon'ble High Court for direction to hold the meetings of secured creditors, unsecured creditors and equity shareholders, the share capital of the petitioner-company has increased by an amount Rs. 6,40,000 comprising 64,000 equity shares of Rs. 10 each on account of exercise of options by the employees. This resulted into present issued capital of the petitioner-company which has became Rs. 249,12,34,120 comprising of 24,91,23,412 equity shares of Rs. 10 each. The subscribed and paid-up capital has become Rs. 248,80,35,910 comprising of 24,88,03,591 equity shares of Rs. 10 each. 11. The petitioner-company, therefore, has also invoked the provisions of sections 100 to 104 of the Act and sought the confirmation of the court for the reduction of share capital, as after the demerger the transfer of the assets and liabilities as mentioned in the opening financial statements of CemCo, the shareholders' fund of the petitioner-company comprising of the share capital and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with rules 79 to 87 of the Company Rules by Company Application No. 566 of 2003 and obtained order on 17th December, 2003, for dispensing with the meetings of the equity shareholders and unsecured creditors of CemCo company in view of the letters of consent dated 12th December, 2003 submitted by all the equity shareholders of CemCo and the letters of consent dated 13th December, 2003 submitted by the unsecured creditors. There has been no material changes in the creditors of CemCo or the resulting company. 13. The resulting company or UltraTech CemCo Ltd., has filed Company Petition No. 121 of 2004 on 11th February, 2004, with statutory and requisite material and documents as per the provisions of the Act and Rules and also in compliance with the provisions of section 2(19AA) of the Income-tax Act, 1961 alongwith the proposed scheme of arrangement. In the said petition, it is also averred that there are no investigation proceedings initiated or pending under sections 235, 237, 239 and 247 of the Act. The usual averments, as required as per the procedure, have been made therein with necessary prayers. Both the company petitions are, therefore, inter-connected and interlinked for al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Act. There is no positive averment to the effect that the scheme is not in the interest of shareholders or creditors. Submissions 17. (A) Mr. Virendra Tulzapurkar, senior counsel, appearing on behalf of the petitioner-company read and referred various authorities to support the petition and its prayers. Those cases are : (1) Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp. Cas. 792 (SC) (2) Hindustan Lever Employees' Union v. Hindustan Lever Ltd. [1994] 4 Comp. LJ 267 SC (3) Nicholas Piramal (India) Ltd., In re (unreported) (4) Renuka Datla v. Duphar Interfran Ltd. [2002] 46 CLA 79 (Bom.) (5) Piramal Spg. & Wvg. Mills Ltd., In re [1980] 50 Comp. Cas. 514 (Bom.) (6) Investment Corpn. of India Ltd., In re [1987] 61 Comp. Cas. 92 (Bom.) (7) Vasant Investment Corpn. Ltd., In re [1982] 52 Comp. Cas. 139 (Bom.) (8) PMP Auto Industries Ltd., In re [1994] 80 Comp. Cas. 289 (Bom.) (9) ICICI Ltd., In re [2002] 49 CLA 1 (Bom.) (10) Reliance Industies Ltd. [unreported]. (B) Mr. Goolam Vahanvati, Advocate General of Maharashtra, appearing for Grasim Industries Ltd., has also supported and referred and read the following cases in addition to the cases cited above : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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-ray the same. (7) That the company court has also to satisfy itself that members or class of members or 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sanctioning such scheme based on the foundation of public interest or public policy or unfair or unconscionable has been laid down and elaborated : The prudent business management test or that the scheme should not be a devise to evade the law has been further elaborated. The Apex Court's decision also emphasises that such scheme should not result in impeding promotion or industry or should obstruct growth of national economy. Liberalised economic policy is to achieve this goal. The essential paragraphs 5 and 6 are reproduced below : "5. What requires, however, a thoughtful consideration is whether the company court has applied its mind to the public interest involved in the merger. In this regard, the Indian law is a departure from the English law and it enjoins a duty on the court to examine objectively and carefully if the merger was not violative of public interest. No such provision exists in the English law. What would be public interest cannot be put in a straitjacket. It is a dynamic concept which keeps on changing. It has been explained in Black's Law Dictionary as : 'something in which the public, the community at large, has some pecuniary interest, or some interest b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may have to be given precedence. The jurisdiction of the court in this regard is comperhensive." (p. 276) 18d. The Apex Court's decision in Hindustan Lever Employees' Union's case (supra) also clarified that as a result of amalgamation, if it is found that the working of the company is being conducted in a way which brings it within the mischief of any particular Act, it would be open to the concerned authorities to go into and decide the controversy as it thinks fit. In the present case, all the concerned authorities, including regulatory authority, relevant and related for the purpose of sanctioning of the scheme in question, after due notice, have given their no objection to the scheme. This includes SEBI, stock exchange, Regional Directors and others. The relevant para 71 is reproduced to clarify the issue further: "As a result of the amalgamation, if it is found that the working of the company is being conducted in a way which brings it within the mischief of the MRTP Act, it would be open to the authority under the MRTP Act to go into it and decide the controversy as it thinks fit." (p. 293) 18e. This Apex Court decision further crystallised the submission of the objector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amal (India) Ltd.'s case (supra) related to a scheme of arrangement has been referred to consider the objections raised by the objectors in the present matter. This judgment, after considering the merits of the matter, rejected the objection and granted the scheme under section 394(1) of the Act. This judgment has also considered the striking principles of Apex Court's decision in Miheer H. Mafatlal's case (supra) in paras 11 and 12, which is reproduced as under: "11. In proceedings of the nature before the court the governing principles of law are those which the Supreme Court has laid down in Miheer H. Mafatlal v. Mafatlal Industries Ltd. AIR 1997 SC 506. The Supreme Court while formulating parameters of the jurisdiction under sections 391 and 394 noted that the sanctioning court must ensure that all the requisite statutory formalities have been duly observed, that the scheme which is put up for sanction of the court is backed up by the requisite majority; that the concerned meeting 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 proposed scheme of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 4 of the proposed scheme provides that with effect from 1st July, 2003, the appointed date, the investment of NPIL in GPPL shall stand transferred to and vested in a company known by the name of Kojam Fininvest Ltd. ('Kojam'). As consideration for the transfer, clause 5 of the proposed scheme stipulates that Kojam shall issue and allot shares to every member of NPIL holding fully paid-up equity shares in NPIL whose name appears in the register of members of NPIL on the record date. Kojam is to allot for four equity shares held in NPIL, one equity share of Kojam of the face value of Rs. 10 credited as fully paid-up. The scheme has also provided that NPIL Fininvest (P.) Ltd. a wholly owned subsidiary of NPIL shall subscribe for an additional 4,49,199 equity shares each of Rs. 10 of Kojam." 18g. Reference was made to Renuka Datla's case (supra) whereby a Division Bench of this hon'ble court, based on Miheer H. Mafatlal's case (supra) overruled the objections and sanctioned the scheme and resisted an overwhelming majority of the shareholders. The relevant paragraphs 15, 16 and 17 are relevant even for the purpose of approving the scheme in question. '15. The contention, namely, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modifications as the court may desire to make. The order of the learned company Judge shows that, at the hearing, the learned counsel for the respondent-company, agreed that clauses 5.8, 5.9 and 9.7 of the scheme of arrangement may be deleted from the scheme. This was accepted by the learned company Judge as deletion of the said clauses did not in any way alter, affect or prejudice the scheme of the arrangement so as to require reconsideration of the scheme of demerger or approval of the shareholders. It is contended by the learned counsel for the appellant that this was not permissible at all. Irrespective of what was conceded before the company Judge, if the scheme approved is not something identical to what was approved by the shareholders, the whole thing must be sent back for the approval of the shareholders once again. In our view, this contention is unsound. When a scheme is put before the company court for approval, the company court may approve it wholly or with or without modification or reject the same. If the modification consists merely of deletion of certain clauses which do not affect the rest of the scheme, and if the scheme together with these clauses has already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... versed in company law and matters which influence dealings on the stock exchange, could find a good many loop-holes in it. That amounts to this : the scheme is open to criticism; but does that go far enough ? That is the difficulty in the present case. It has not been suggested on behalf of the applicant that there has been any bad faith or any intentional misleading of the applicant, but although the scheme is open to a good deal of criticism, which might be enlarged on at great length in one or more circulars, what exactly the effect on the mind of the shareholders would have been I do not pause to inquire. That the scheme is open to criticism I have no doubt, but can it be said therefore to be unfair? I think it rather difficult to predicate unfairness in any case in which there has been perfect good faith on the side of the person who is alleged to have been unfair. I think that the applicant is faced with the very difficult task of discharging an onus which is undoubtedly the heavy one of showing that he, being the only man in regiment out of step, is the only man whose views ought to prevail. That is the difficulty he is faced with in the present case. I agree that certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed goes to the root of the present matter. The objectors failed to discharge their onus of proof of allegations of unfair, illegal or against the public policy as contemplated under the Companies Act. The scheme of the Companies Act has to be read and understood in the context in which the Companies Act and its scheme worked for the purpose and benefit of the company and its shareholders. This judgment has been referred in Miheer H. Mafatlal's case (supra) also at page 620. Those allegations were without any proof, material and documents. Those allegations were bare allegations without supporting evidence or even basic averments. Those allegations were general and are baseless and without any material. 18i. Mr. Goolam Vahanvati further relied on Maknam Investment Ltd.'s case (supra) to elaborate further that the case of Sussex Brick & Co. Ltd.'s case (supra) as referred above has been followed and reappreciated in this judgment and in that case also, after considering the merits of the objection, the court has dismissed the objection and sanctioned the scheme. 18j. Mr. Goolam Vahanvati further pointed out that in reference to Grierson Oldham & Adams Ltd.'s case (supra ), oppositi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely to implement the sanctioned scheme whose overall fairness and feasibility has been judged by the court under section 394 of the Act." (p. 299) 18-l. Further reference was made to ICICI Ltd.'s case (supra) in the matter of amalgamation of ICICI Ltd. in reference to the scheme of amalgamation to resist the objection of objectors in reference to the alleged valuation and production of material before the court to show that valuation arrived at is grossly unfair, or unjust. This court again reconfirmed that the majority of shareholders decision should prevail considering the rule of corporate majority. This judgment had considered Hindustan Lever Employees' Union's case (supra ) and Piramal Spg. & Wvg. Mills Ltd.'s case (supra ) and granted the scheme, as prayed, by observing as under in para 14 of the said judgment : "In the present case, it is clear that the valuers appointed by the companies together have given their detailed report and have adopted various methods for arriving at the fair exchange ratio. The Reserve Bank of India, which is an independent body even, without the knowledge of the petitioner-company and bank, called for the report and it is clear from the content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally restructuring agreements and the report of the recommendations of ratio for the issue of equity shares issued by Earnst & Young (P.) Ltd. and N.M. Raiji & Co., Ex. A and Ex. C, conceded to be taken on record. Ex. B is a notice issued by the petitioner-company. It was received by the objector Rasik S. Poladia. Ex. J is the letter dated 31st March, 2002, issued by the petitioner-company. Ex. B is an annual report of Narmada Cement Co. Ltd. of 2002-2003 which is objected by the counsel for the petitioner-company to be taken on record. The basic objection is that the averments made in the affidavit dated 2nd April, 2004, are after-thought and cannot be accepted after closing of the matter or at least after closing of the matter by the learned counsel for the said objector. Mr. Jain, advocate for the objector insisted to consider this additional affidavit to be taken on record in view of para 1 of the said affidavit. After considering the merits of the matter and the grounds and objections already raised in the first two affidavits of Mr. Rasik S. Poladia as well as, in the gist of submissions filed by his advocate, I see no reason to allow this additional affidavit on record. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, not made any additional arguments, as matters were already closed for orders. Mr. Raaste, however, wanted to file additional affidavit with new documents, which was opposed by the counsel for the petitioner-companies, as matters were already closed for orders. They, therefore, submitted that now, no new or additional affidavit can be permitted to be taken on record and to re-open the closed matter. They also contended that now remedy of objection is elsewhere. On 20th April, 2004 Mr. Raaste, in spite of the above rejection, in the guise of written submissions, again wanted to file on record, all new reasons and documents. Counsel appearing for the petitioner-companies pointed out that contents of the additional affidavit dated 19th April, 2004, which was rejected by order, are same, Mr. Raaste's conduct and whole attitude is only to prolong and postpone the matter and now judgment. Therefore, it was also rejected by an order. It may be noted that Mr. Poladia and Mr. Raaste have common objectives and grounds of objections. Both are aware of each other's objections. Companies have exchanged and provided objection copies to respective objectors also. Pattern and grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s through the chairman's letter dated 31st December, 2003, and, therefore, such supplement details do not comply with the statutory requirements of 21st December, 2003, notice, even though the meeting was held on 3rd February, 2004. The whole scheme is favourable to Grasim and Birla groups and the Birla group will have a controlling interest in the resulting company. The transfer from Grasim to the Trust is at a concessional price of 44 per cent of its value. The fund of the shareholders, in fact, has been passed on to the employees (Trust). The brand is proposed to be transferred to the Birlas at a very nominal price of reputed and established petitioner-company (L&T). 20. Mr. Sanjay Jain, learned counsel for the objectors, viz., Rasik S. Poladia has opposed the scheme of arrangement in question and relied on the following cases : 20a. Oil & Natural Gas Corpn. Ltd. v. Saw Pipes Ltd. [2003] 5 SCC 705 - This judgment is a landmark judgment to interpret and explain the phrase "public policy of India" as contemplated under sections 34(2)(b), 28(a ), 13(5) and 16(6) or the Arbitration and Conciliation Act, 1996. The enlarged meaning given to those phrases is not in dispute. Specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no right to approach the court and in such cases, the court would refuse to exercise its discretion in favour of such petitioner or party whose actions are not bona fide. It is also settled that withholding of vital documents relating to litigation amounts to fraud on the court and such guilty party is liable to be thrown out at any stage. 20d. State Bank of India v. Alstom Power Boilers [2003] 5 Bom. CR 421.--In this case, reference is made to paragraphs 27 and 28 in support of the submission that the parties-companies should produce or place on record the latest balance sheet, profit and loss account and the auditor's report as on the date when the matter is actually heard by the court specially when there is a gap between the date of the application and when the court considers the scheme for sanction. The court, in such circumstances, should call for latest possible information even at and during the course of hearing. In the said judgment, it was clearly observed further that on facts and circumstances of the case, all the material facts relating to the company including latest financial position had been on record. 20e. Rex v. Kensingtan [1917] KBD 486.--This foreign ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he offerees as a body and not whether it is fair to a particular shareholder in the peculiar circumstances of his own case...." The Chancerry Division at page 364 placetum H, has further held that: "The other general observation which arises from the Sussex Brick case, is that the fact that the applicants may be able to demonstrate that the scheme is open to criticism, or is capable of improvement, is not enough to discharge the onus of proof which lies upon them...." As already noted above, decisions of the Chancery Division have also been recognised and followed by the Calcutta High Court in the matter of Maknam Investment Ltd.'s case (supra). In view of this, in my opinion, the objections, as raised, have no substance. Those objections are frivolous and liable to be rejected. All the statutory compliances have been followed. The scheme of arrangement is not against the public policy or against the interest of the shareholders of the company or employees or workers. The scheme of arrangement falls within the parameters of the Apex Court's decision in the case of Mafatlal (supra) and Hindustan Lever Employees' Union's case (supra) and other decisions of the High Courts (supra). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement. The basic scheme, as elaborated in the Petition, the background as well as rationale for the scheme, envisages that it is with an intention to achieve the global vision in this rampant globalisation competitiveness in the national, as well as international market. Its intention can be gathered from the following paragraphs of the scheme of arrangement itselfs. "(E) In furtherance of the restructuring agreement and the undertaking between the parties thereto, this composite scheme (as defined hereunder) provides for : (a)the demerger, upon the effectiveness of which, the demerged company would hold 20 per cent of the paid-up capital of the Resulting company the balance 60 per cent would be held by the shareholders of the demerged company in the same proportion in which shares are held by them in the demerged company; (b)the occurrence, on the effective date, of all of the following concurrently: (i)deposit of the CemCo shares and the L&T shares by each of L&T and Grasim/Samruddhi respectively in escrow in accordance with the share escrow arrangement (as defined hereunder); (ii)deposit of the purchase consideration (as defined hereunder) and the sale consideration (as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the High Court; (ii)deposit of an amount equal to the remaining 90 per cent of the gross value of the open offer within 90 days of the date of filing of the report by the chairman of the meeting of L&T's shareholders and creditors, approving this scheme. The aggregate of the amounts deposited pursuant to sub-clauses (i ) and (ii) above is hereinafter referred to as the "open offer consideration". (b) On the announcement being made to the public in relation to the open offer, the open offer consideration together with the interest, if any, accrued on the same till the making of the public announcement shall be appropriated to an escrow account maintained by a designated investment banker or such other person nominated by Grasim (to be appointed in terms of the open offer escrow agreement) on an interest earning basis, and shall be held in escrow by such person until the completion of the open offer, and shall be distributed to the successful offerees of the open offer in accordance with the terms of the offer letter. (c) The amounts held in escrow pursuant to sub-clauses (a) and (b), above shall be invested as provided in the open offer escrow arrangement. (d) The intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated material and information has been publicised and notified including the scheme of arrangement and related and concerned documents as per the requirement of law. The scheme provides objectives of the scheme, remaining and demerged business liabilities, reconstruction of capital shares entitlement ratio, terms and conditions of open offers, escrow arrangements, management of cement business including specific provisions of assets, dates, contracts, deeds related liabilities, etc., including tax and such other provision. Care of the employees and its concerned Trust is specifically taken. From the scheme, it is also clear that care is taken of various significant aspects of all concerned companies, their respective obligations and liabilities and procedure during the transitional period. Basic accounting process and all its necessary details have been placed on record. Arrangement 24. First and foremost issue is meaning, scope and purpose of 'arrangement'. The scheme of arrangement in question falls within the ambit of the provisions of sections 391 to 394 of the Companies Act and the Rules made thereunder. The word 'arrangement' is not specifically defined under the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the expression 'arrangement' used in section 390. In support of his contention as to the import of the word 'arrangement' in section 390 of the Act, Mr. Bulchandani relied upon the observations in Hindustan Commercial Bank Ltd. v. Hindustan General Electrical Corporation Ltd. [1960] 30 Comp. Cas. 367 (Cal.)/AIR 1960 Cal. 637 and the observations in Chowgule & Co. (P.) Ltd., In re [1972] TLR 2163. Mr. Bulchandani urged that in view of this, the petitioner would not be entitled to come under section 391 and hence no relief can be granted on this score. I am unable to accept this contention. The word 'arrangement' as set out in section 390(b) is an inclusive definition and contemplates all arrangements and not only reorganisation of the share capital. This is all the more clear, because the word used is 'includes'. Coming to the case of Hindustan Commercial Bank Ltd. v. Hindustan General Electrical Corporation Ltd. [1960] 30 Comp. Cas. 367 (Cal.)/AIR 1960 Cal. 637, I do not see how this case can assist Mr. Bulchandani, for in paragraph 27 it has been stated as follows (page 381 of 30 Comp. Cas.): 'The word "arrangement" in section 391 is of wide import. By section 390 "arrange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eree-company, who issues shares to the shareholders of the transferee-company. The concept of demerger is well established and explained under the Companies Act, as well as, under the Income-tax Act. The Bombay High Court, in Nicholas Piramal India Ltd.'s case (supra), while considering a scheme of arrangement, sanctioned such scheme and therein also proportions of the shares were fixed and accordingly decided as per the proposed scheme of arrangement. Therefore, in the circumstances, I see no reason not to consider the present scheme of arrangement on merits. The objectors have been unable to point out any other provisions whereby such scheme can be objected or rejected. Mere general allegations are not sufficient. In the facts and circumstances of the case, the scheme of arrangement, in absence of any specific bar or limitation, falls within the ambit of sections 391 to 394 of the Companies Act and is maintainable. These company petitions were already admitted and parties have already acted on that basis and further all legal formalities have also been completed. Therefore, now there is no reason to accept any objection to the effect that the present scheme of arrangement cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overwhelming majority of the shareholders had approved the scheme at the meeting called for this purpose and it approved the exchange ratio. In fact, a proposal for amendment of the exchange ratio was also rejected by the overwhelming majority of 99 per cent shareholders. There is no reason to presume that the shareholders did not know what they were doing...." (p. 284) A few shareholders cannot, in the facts and circumstances of the case, halt or intend to halt such scheme of arrangement for their respective profit or gain or sentiments. A shareholder's rights under the company law is well established. The scheme and purpose of the company law and affairs of the company governed by the same provisions which provides that any such decision which is in the interest of the company and its shareholders and members, has to be taken by majority by following due process of law. Once the requisite formalities have been complied with, the due notices and material were placed before the respective shareholders and, after due deliberation, decision has been taken by majority, which is admittedly overwhelming in the present case (99.99 per cent), court cannot interfere or suggest or accept t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any objection on behalf of the creditors or unsecured creditors when admittedly in this case, they have sanctioned and approved the arrangement by unanimous decision in their respective meetings. The objections raised by the objectors in the present case are, therefore, not bona fide and not in the interest of the company at all. The commercial wisdom of the shareholders to approve such scheme in majority has to be respected. Mere bald allegations that scheme is not in the public interest, without material or justification for the said allegation, cannot be accepted. The majority shareholders have taken into consideration the total scheme of arrangement in question. The share exchange ratio which has been fixed after the valuation report of the professional and expert auditors, the effect of shares of Narmada Cement Co. Ltd. or transfer of cement division or the alleged monopoly or concentration needs to be rejected and for that reason, such scheme of arrangement cannot be interfered with. It is necessary to consider that the objectors like Mr. V. Ranganathan and Mr. R. Shekar, who have admittedly not attended the meeting and have not participated in any proceedings now, cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d documents or that false statements were made or that there was any failure to perform the duty of disclosure. From the record, it is very clear that it is statutory requirement that company should provide and declare all requisite material for the purpose of sanctioning the scheme of arrangement in question. The basic material including the scheme of arrangement, restructuring agreement, report dated 24th September, 2003, of Earnst & Young (P.) Ltd. and N.M. Raiji & Co., chartered accountants, memorandum of articles of association of L&T and CemCo, audited balance sheets and profit and loss accounts of L&T and CemCo for financial year ended 31st March, 2003, no objection letters dated 19th November, 2003 and 25th November, 2003 from Stock Exchange, Mumbai and National Stock Exchange of India Ltd. respectively, certified copy of the order of Bombay High Court dated 12th December, 2003 directing the conveying of the meetings, etc., were made available for inspection for the shareholders even prior to the date of the meetings at its registered office. The scheme of arrangement itself provides the various details of all the concerned companies and there is full disclosure in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders have not raised any objection in this regard. Creditors and unsecured creditors have taken unanimous decision to support the scheme of arrangement based on sufficient and requisite disclosure. Therefore, now it is too late for the objectors to raise these objections of non-disclosure of requisite or necessary material. The material placed on record is sufficient to support the scheme of arrangement as placed for sanction. There is nothing on record to substantiate that the scheme is a device to defraud the public or some shareholders. Even otherwise, mere allegations are not sufficient to substantiate such contention. The present scheme of arrangement is sound, reasonable, fair and equitable and accepted by the shareholders in thumping majority and unanimously by all classes of creditors. In such circumstances, no case is made out to pierce the corporate veil, as alleged. No suppression of material or false statements 27. The materials on record, as well as documents filed in support of the scheme by the concerned companies, are sufficient to consider the scheme of arrangement in question. Once the majority has taken a decision which includes financial institutions, secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital in nature, failing which, the whole scheme would be against public policy or contrary to law. There is no doubt that the concerned companies should follow the legal framework and should consider the public policy, public interest and welfare of its employees and such scheme of arrangement should be in the larger interest of their shareholder members and for the company's benefit. In this background and in the facts and circumstances of the case, the decision cited by the objectors in Badrock Ltd.'s case (supra) (Nijjar, J.) is totally distinguishable and cannot be made applicable to the present case. There is no such great irregularity, illegality, fraud or suppression of facts or material placed on record or proved by any contrary material by the objectors. No other competent authority or regulatory authority have even raised such allegations of suppression of facts and/or of false material placed on record by the companies concerned, as alleged by the objectors. It appeared in the present case that on the contrary the objectors have twisted the figures, accounts and misread the Balance Sheet and Schedule to the scheme, just to obstruct and create hurdle in the sanctioning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout refer- ring actual proof and material on record, in reference to the scheme of arrangement in question is totally misplaced. The public interest, in sanctioning of the scheme of any kind, cannot be decided merely on the basis of general allegations of fraud, illegality or breach of public policy or public interest. There is no material placed on the record to justify the allegations of breach of the public policy or public interest or that the scheme is unfair and contrary to the laws. After perusal of the scheme and after hearing all the counsels for the respective companies and after considering the objections filed on record, there was nothing to show that the present scheme is against public interest or public policy. The corporate purpose and object of the scheme of arrangement as a whole is fair, just and reasonable on all material aspects. Transfer of shares of [NCCL] 31. There is nothing demonstrated from record to show that the shareholders of L&T or shareholders of NCCL are in any way prejudiced or will be affected by the present demerger, as the very same Cement Division or Undertaking which was part of L&T would now vest in the resulting company in which also th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r motive or by flouting the Takeover Regulations and, therefore, any transfer of shares under the Takeover Regulations is void as alleged by the objectors. In the circumstances, therefore, on this ground also, objections, as raised, are unsustainable on the foundation of public policy or public interest or law. The provisions of section 293(1)(a ) of the Companies Act read with judgment in Brooke Bond India Ltd.'s case (supra) at pages 358/359 cannot be overlooked in this reference. Methodology of demerger makes the theory clear that instead of L&T being the holding company of NCCL, CemCo will become the holding company. It is difficult to accept that the shareholders can raise objection on the ground that the valuation of those shares (NCCL) were not made separately, in the facts and circumstances of the case, apart from the fact as observed in Nicholas Piramal India Ltd.'s case (supra) that such objection of valuation of shares cannot be the ground to interfere with the scheme. Anyhow, that cannot be agitated in the present proceedings as it is outside the scope of the present enquiry also. Therefore, all the objections of the shareholders of Narmada Cement is totally irrelevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition for sanction of a scheme of arrangement and reduction of share capital is maintainable Hindustan Commercial Bank Ltd.'s case (supra). No separate procedure for bringing about requisite changes 34. The provisions under sections 391 to 394 of the Act are meant to clear the contemplated schemes and related or concerning other alterations or changes which may be made effectively to implement the sanctioned scheme. PMP Auto Industries Ltd.'s case (supra) has declared that these provisions are in the nature of single window clearance system to ensure that the parties are not put to avoidable or unnecessary cumbersome procedure for making a representation or application to the court for various other alterations or changes which may be essential or necessary or consequential to implement the sanctioned scheme. In view of this, on this ground also, scheme cannot be halted. Shares listing of transferor-company 35. The Regional Director of Company Affairs in its affidavit submitted that as per the Bombay Stock Exchange order or letter dated 19th November, 2003 transferor-company should get the shares listed before making public offer. It is worth to note that the Bombay Stock Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n proceedings like these. It may be noted here that the valuation of the shares which is a mandatory in a scheme of amalgamation may not be necessary in cases of demerger like this since the shareholders continue to hold shares in the transferor-company and the shareholders of the transferor-companies are also issued shares in the transferee-company. In a way, no exchange ratio is required in the present scheme as the shareholders of the transferor-company continue to remain as its shareholders. 36a. In the present case, no objection of any irregularity in accounts or under-valuation or under-valuation of shares has been raised by the Regional Director and substantiated by others. 36b. In reference to valuation of shares in case of scheme of amalgamation reliance was placed in Piramal Spg. & Wvg. Mills Ltd.'s case (supra), thereby the object in respect of valuation of shares alleged to be unfair to the shareholders of the transferor-company was rejected by observing as under : "The Regional Director has next pointed out that the shares of the transferor-company, according to him, have been undervalued for the purpose of determining how many shares of the transferee-company could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nai, who appears for the Regional Director of the Company Law Board, has stated that there is nothing contrary to public interest in the scheme of amalgamation which is before me." (p. 516) The scheme was sanctioned in this matter also. 36c. The other reliance is also made on the unreported judgment, i.e., Reliance Industries Ltd.'s case (supra) whereby, after considering Miheer H. Mafatlal's case (supra), Piramal Spg. & Wvg. Mills Ltd.'s case (supra ), Grierson Oldham & Adams Ltd.'s case (supra ), it was observed as under: "Placing reliance in the judgment Grierson, Oldham & Adams Ltd., In re [1968] 1 Ch. 17/[1967] Comp. Cas. 357 (Ch.D.) the learned Judge observed as under : ...It is possible in cases like this to criticise figures, offers and balance sheets and argue about matters of fairness and unfairness. Unless the person who challenges the valuation satisfies the court that the valuation arrived at is grossly unfair, the court will not disturb the scheme of amalgamation which has been approved by the shareholders of the two companies. The English case dealt with the right of dissident shareholders to challenge the scheme of amalgamation." There is no case for inspection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as on facts and such objections has no force and substance. As per the provisions of section 391 of the Companies Act, as already observed, classification as done was proper and correct. No such objection or suggestion were raised or made by the majority of the sharehold- ers including all class of creditors. Once due notices were issued and published and notified in accordance with the law and requisite meetings were held accordingly, such objection of different classes, as raised, cannot be accepted. Welfare of employees - employees Trust 40. As per the scheme of arrangement, the employees scheme will acquire the holding of Grasim in L&T to the extent of 14.95 per cent which shares were acquired by the employees Trust would achieve the ultimate aim and object of the scheme which is to demerge cement business into a company eventually controlled by Grasim and leave L&T and its management to concentrate on its core business, i.e., engineering and construction with the aid and assistance and participation and involvement of its employees who would be the beneficiaries of 14.95 per cent shares of L&T held by the employees Trust. This submission of Mr. Dwarakadas who appeared on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst such objectors. Such objections in a given case, may be bona fide or in the interest of the minority shareholders. One cannot overlook that the oppression or any action of majority shareholders if against the minority shareholders or case of oppression or coercion, has a different forum to invoke. While sanctioning the scheme of arrangement, this aspect of coercion or oppression cannot be considered in such a company petition at the instance of such objectors with no material or no justification in support of their allegations of oppression or monopolization or concentration of cement industry, as such. No other objectors/interveners investors have filed any written objection or submission and not argued in person or through advocate, except the objections referred to in the judgment. (a) A shareholder who, in spite of notice and knowledge, does not attend any meetings and/or participates and suggests his opinion or places before all other shareholders, his point of view with material to support and/or never participates in voting, but still, without attending the proceedings, sends written objections without supporting evidence to court at the last stage. (b) A shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons to support the scheme. (f) Once creditors, financial institutions, expert in respective business and professionals, approved the scheme (of arrangement) unanimously by overwhelming majority of shareholders in proportion to 99.99 × 00.1, and also approved the scheme after due and effective deliberation on all issues and satisfied by all the classes, in my view also, such determination and/or commercial merits of the scheme need not be gone into or interfered with as a fault finder and/or to pick holes in it, merely because some objections have been taken or raised by some shareholders. There are no strong and cogent reasons made out and pointed out by any one, to disapprove such scheme. No other objectors have pressed their objections or appeared in court to support such objections. (g) No illegality of any other law has been placed and proved with supporting material, in reference to the scheme in question. Companies are bound to comply with all legal formalities. (h) The objections are frivolous, unfair and mala fide and are not within the framework of the law. No evidence or material have been placed to justify to show that the scheme is illegal, unjust or against pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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