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TMI Blog2003 (10) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... id Company. In pursuance of the aforesaid proposal, the resolution was passed by the Company at its Extraordinary General Meeting (EOGM) held on 13-6-2003, whereby the Company had approved the said reduction of share capital. At the said meeting, six members who were present, had strongly opposed and spoken against the said resolution. Their main objection has been that there has been discrimination between the members holding equity shares, in the sense one group being the promoters group viz., Sandvik AB and Sandvik Finance BV are treated separately and the other equity shareholders who are holding 4.46 per cent shares have no option but to leave the Company and accept the amount offered by the Company. To put in other words, the said shareholders of non-promoters group having 4.46 per cent shares were not given any option but they were to leave even if they do not accept the offer of Rs. 850 by a particular day. Then in any event, after a particular date they will have to leave the Company accepting the compensation of Rs. 850 per share. The main grievance of the opposing shareholders has been that those minority shareholders who were desirous of continuing in the said Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court had specifically formulated the certain points (questions) for consideration, and the point No. ( ii ) whereof, reads as under:- "Whether the Company Court has power to grant reorganization scheme under section 391 read with sections 100 to 104 empowering the company to buy back the shares from the shareholders or whether section 77A is the only mode to buy back the shares?" The Division Bench after discussing the law exhaustively in the case referred to above, came to the conclusion as under:- "There is no reason as to why a cancellation of shares and the consequent reduction of capital cannot be covered by section 391 read with section 100 merely because a shareholder is given an option to cancel or to retain his shares. In view of the forgoing discussions, the objections of the Appellants based on Section 77A must be rejected." 6. Mr. Tulzapurkar therefore contended that the objection that buying back in case of reduction of share capital can only by resorting to Section 77A, is not a correct proposition in law. Mr. Tulzapurkar has strongly relied upon an old English Court judgment in the case of British and American Trustee And Finance Corpn. v. Couper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the event if they do not accept the said offer their shares will be compulsorily purchased at Rs. 850 per share after a particular date, in any event. In fact, he emphasized that the resolution clearly contemplates two classes of shareholders amongst the paid-up equity shareholders, in the sense, one group known as promoters group and the others being the non-promoters group, and what is sought to be done by the aforesaid resolution is to completely extinguish the shares held by the non-promoters group and to force them out of the Company. 10. Mr. Dwarkadas, the learned counsel has therefore contended that the aforesaid proposal had virtually no option at all, and he emphasized that in any event this is a matter wherein the Petitioner Company ought to have proceeded by way of a scheme under sections 391 and 394 of the Companies Act read with section 100 of the Companies Act. The Petitioner company could not have proceeded only under section 100 as in the instant case whereas the same ought to have proceeded under section 100 read with section 391 of the Companies Act. Mr. Dwarkadas, the learned Counsel has referred and relied upon the very same judgment in the case of Sterl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the application, that the majority are acting oppressively, or that the arrangement is unfair or inequitable in the ordinary sense of those words. His real objection rather seems to be that he prefers the American system of doing business, and that he has more confidence in the American committee than in the London board." 12. In these circumstances, Mr. Dwarkadas, the learned Counsel has contended that the aforesaid English Judgment makes it abundantly clear that even a single minority shareholder has a right to oppose, and as pointed out in the said case the opposition was not on the ground that his shares have been purchased and his rights have been extinguished. The opposition of the said shareholder in that case was that he preferred the American way of conducting business and not the British way of conducting business, as such the Court did not interfere. It was not a case of extinguishing the right to hold a share. 13. Mr. Dwarkadas has pointed out that in the instant case, obviously there is no option given to the minority shareholders and the only option is to sell and there is no other option and if that be so, it is totally unfair and this Court ought not to ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with what the scheme purports to achieve. The application for an order for meetings is a preliminary step, the applicant taking the risk that the classes which are fixed by the Judge, unusually on the applicant s request are sufficient, for the ultimate purpose of the section, the risk being that if in the result, and we emphasise the words in the result they reveal inadequacies, the scheme will not be approved. If e.g. rights of ordinary shareholders are to be altered, but those of preference shares are not touched, a meeting of ordinary shareholders will be necessary but not of preference shareholders. If there are different groups within a class the interests of which are different from the rest of the class, or which are to be treated differently under the scheme, such groups must be treated as separate class for the purpose of the scheme. Moreover, when the company has decided what classes are necessary parties to the scheme, it may happen that one class will consist of a small number of persons who will all be willing to be bound by the scheme. In that case it is not the practice to hold a meeting of that class, but to make the class a party to the scheme and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will have to leave the Company and they will be paid Rs. 850 per share. In fact, as rightly pointed out by Mr. Dwarkadas referring to the aforesaid judgment of the English Court in Re Denver Hotel Co. s case ( supra ) even a single minority shareholder is entitled to oppose, and if the Court finds the scheme to be unjust, the Court should not confirm the said reduction of share capital. Even with regard to the judgment of High Court in the case of Sterlite Industries (India) Ltd. ( supra ) (referred to above) wherein it was a scheme under section 391 read with section 100 of the Companies Act, in that context the Court held that there was no necessity to buy back only under section 77A of the Companies Act. In fact, Mr. Dwarkadas did not contend that it is the only way of buy back under section 77A. His contention is that there ought to have been a scheme under section 391 of the Companies Act and not only by way of section 100 whereby the statutory protection offered to minority shareholders is denied. His emphasis is that the proposal had no option and in any event the proposal was highly inequitable, unjust, unfair, in the sense that the minority shareholders will have to le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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