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TMI Blog2009 (7) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinabove in the present order. - C.P. NO. 81 OF 2009 C.A. NO. 65 OF 2009 - - - Dated:- 29-7-2009 - JAYANT PATEL, J. K.S. Nanavati, S.N. Soparkar, S.N. Shelat, Mihir Thakore and Nandish Chudgar for the petitioner. Harin P. Raval, Vishwas K. Shah, Shalin Mehta and Hemang M. Shah for the Respondent. JUDGMENT Jayant Patel, J. The present petition is preferred by the petitioning transferor company M/s. Reliance Petroleum Ltd. (hereinafter referred to as "RPL" for the sake of convenience), seeking sanction to the scheme of amalgamation with the transferee company M/s. Reliance Industries Ltd. (hereinafter referred to as "RIL" for the sake of convenience). 2. It appears that after the scheme was accepted by the board of directors of the petitioning company, an application was moved to this court for convening the meetings of the shareholders of the company. This court (Coram : K.M. Thaker J.), vide order dated March 5, 2009, in Company Application No. 65 of 2009 had directed for convening of the meetings of the shareholders, secured creditors (class 1), secured creditors (class 2) and all unsecured creditors. The meetings, pursuant thereto, have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an at the meeting and the following position emerged : ( i )45 secured creditors (class 2) of the applicant-company, having outstanding value of Rs. 8,377 crores and constituting 100 per cent. in number representing 100 per cent. in value of the secured creditors (class 2), present in person or by proxy and voting at the meeting, voted in favour of the scheme. ( ii )No secured creditors (class 2) of the applicant-company, present in person or by proxy and voting at the meeting, voted against the scheme. ( iii )No vote was declared invalid. 7. It is reported accordingly that the scheme of amalgamation was approved unanimously by the secured creditors (class 2), present and voting either in person or by proxy at the meeting. 8. At the meeting of the unsecured creditors, the following position emerged : ( i )648 unsecured creditors having outstanding value of Rs. 8,488.33 crores and constituting 100 per cent. in number representing 100 per cent. in value, present in person or by proxy and voting at the meeting, voted in favour of the scheme. ( ii )No unsecured creditors of the applicant-company, present in person or by proxy and voting at the meeting, voted against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Regional Director dated June 10, 2009. The said communication is also produced together with the said affidavit, relevant of which is as under : It is seen from the Registrar of Companies (A)'s report dated June 2, 2009, that various complaints from several parties on the present scheme of amalgamation have been received and the explanation of the transferor company have been obtained on each of the allegations. After examining the explanation of the transferor company, the Registrar of Companies deemed the replies to be satisfactory. His report has been reviewed by this directorate and on perusal of the information and explanation contained therein, it contours with the same. 14. It is also directed to bring it to the notice of this court accordingly. The gist of the affidavit is that the Central Government on its own has no objection to the scheme of amalgamation, nor any objection is specifically spoken or written on behalf of the Central Government by the Regional Director. However, it further appears that certain complaints were received by the Registrar of Companies from several parties in response to the present scheme of amalgamation. As the complaints were rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Young, one of the experts, whose opinion is pressed into service and produced in the petition comprising of 22 pages in a sealed cover. Together with the said papers, an affidavit was filed for treating the said documents as confidential and the prayer was made that the same may not be parted with or disclosed to the objectors, since the share market of both the companies are sensitive and it may adversely affect the interest of all the shareholders, if such is disclosed. 19. Learned counsel for the objectors, Mr. Shah and Mr. Mehta, and Mr. Maradia as party-in-person, did submit that such papers should be made available to the objectors also, so that they can reply to the said aspects and may assist the court in finding out as to whether such exercise is properly undertaken or not. 20. It also deserves to be recorded that in a scheme, which comes up for sanction of this court, it is true that a shareholder, may be in minority, or any member of the public, who is to be adversely affected by the scheme may file objections, but considerations of such objections or the role of such objectors is unlike adversary litigation to be considered by the court while adjudicating the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection by objectors in a scheme of amalgamation is another part. There is no adversary litigation prevailing in such matters between the company on the one hand and the objectors on the other as sought to be canvassed on behalf of the objectors. Therefore, the petitioning company for the reasons may resist the disclosure of such information and if the court finds that disclosure may adversely affect the other shareholders of the company, such disclosure may be prevented or the material shown to the court for the purpose of examination may not be parted with to the objectors, who otherwise are expected to act in the best interest of the petitioning company. Since the record as tendered is examined by the court for which the reference shall be made hereinafter, it appears that considering the grounds raised in the affidavit, on behalf of the petitioning company, the disclosure of such information is not required when the said aspect is already considered by the court as stated hereinafter : There is already a reference of three methods taken into consideration by the experts in the opinion. They are : ( i )Market price method ; ( ii )Comparable companies multiples' method ; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the scheme only one share of RIL may be available. As against the same, by incorporation of market price method and comparative companies multiples' method, against 16 shares of RPL, the shareholders of RPL are to receive one share of RIL, which is rather beneficial to the shareholders of RPL. 23. The aforesaid is only a general view of the calculations and the methods applied by the experts for suggesting the swap ratio, which is a part of the scheme in the present petition. As against the same, there is no material whatsoever produced by any of the objectors by production of another expert opinion or expert report showing that had all the three methods been applied, the exchange ratio would have been different, nor any material produced to show that the facts and figures as per the market price method or comparative companies multiples' method or net asset value method would be different and consequently this court may not accept the exchange ratio as suggested in the scheme. It is hardly required to be stated that this court cannot be called upon to exercise the power as if the experts in the field of accounting or assessment of the value of shares. It is not that in all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dissenting members of that class. (4)That all necessary material indicated by section 393(1)( a ) is placed before the voters at the concerned meetings as contemplated by section 391(1). (5)That all the requisite 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 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 the same class whom they purported to represent. (8)That the scheme as a whole is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scheme of amalgamation. If such report of expert is considered by the shareholders or the court while considering the question of sanction has insisted for report of any expert are different aspects. Further as observed and recorded earlier, it can hardly be said that the valuation report or the expert's opinion is not supported by the facts and figures. Further, as observed earlier none of the objectors has submitted any other expert opinion or other expert valuation report to contradict and show to this court that the valuation would have been otherwise and other swap ration would have been fair to the shareholders of the petitioning company. Therefore, such objections deserve to be rejected. 27. Learned counsel for the objectors as well as Mr. Maradia did submit that the latest financial statement of accounts is not produced by the petitioning company and, therefore, there is non-compliance with the proviso of section 391(2) of the Act and it was submitted that such would result in noncompliance to the statutory requirement. Therefore, this court may decline the sanction. 28. Such objections also deserve to be rejected for two reasons ; one is that the last balance-sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any prosecution or any mismanagement of the funds made by any of the directors of the company would not be defeated by the sanction granted by this court to the present scheme of amalgamation and suffice it to observe that law will take its own course if such proceedings are to be concluded in accordance with law. As observations have been made in the present order and even otherwise also the legal position is clear, the objection as sought to be canvassed, would not survive. Therefore, thus cannot be said to be a valid ground for declining sanction to the scheme of amalgamation. 31. It was submitted by Mr. Maradia appearing as party-in-person, being one of the objectors, that the Central Government, namely, the Registrar of Companies as well as the Regional Director have not properly discharged their functions in not objecting to the scheme of amalgamation when a number of complaints were received by them. It was also submitted that even in the report of the official liquidator there is no reference to any mismanagement, which is based on the report of the chartered accountant. Therefore, it was submitted that this court may direct for holding of the inquiry by the competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they have not filed objections within the stipulated time, they are entitled to raise the objections prior to the sanction granted by this court. Therefore, their objections may not be thrown away on a mere ground that such were not filed in accordance with the Companies (Court) Rules, 1959, or within the stipulated time limit as sought in the advertisement or otherwise. Whereas on behalf of the petitioning company it was submitted that the objectors have not filed any objections well in time and, therefore, their objections are barred. It was also submitted that the objectors are holding too meagre shares as against the large number of other shareholders. It was submitted that there is no bona fide purpose at all on the part of the objectors in filing the present objections and the ultimate purpose is to stall the scheme of amalgamation. It was, therefore, submitted that this court may reject the objections outright. 34. Considering the above, it appears to the court that the objections filed by the objectors may not be rejected on a mere ground that they are not filed well in time and the court may take a lenient view of the matter on the aspects of time limit in the event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their commercial wisdom, deserves to be interfered with by declining the sanction at the instance of the objectors herein, more particularly when as observed earlier there is compliance with the statutory requirement for sanction to the scheme. 39. In the result the petition is allowed. The scheme of amalgamation at exhibit G is sanctioned, subject to the observations made hereinabove in the present order. 40. The cost of the Central Government is quantified at Rs. 5,000. It would be open to the petitioning company to pay the cost of the Central Government to Mr. Harin P. Raval, learned Assistant Solicitor General then, now learned Additional Solicitor General, by "account payee" cheque directly. The cost of the official liquidator shall be of Rs. 1,500 for preparation of the report and such cost shall also be paid by the petitioning company to the official liquidator by "account payee" cheque. 41. It has been prayed by learned counsel for the objectors to stay the operation of the order for some time so as to enable them to approach the higher forum. Such prayer is objected to by learned counsel appearing for the petitioning company. 42. Considering the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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