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TMI Blog2013 (6) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ured creditors of the company. This Court (Coram: Abhilasha Kumari, J) vide order dated 31.07.2012 ordered dispensation of the meetings of the equity shareholders and the secured creditors and also directed to hold meeting of unsecured creditors. This Court further directed the company to hold meeting of the unsecured creditors of the company on 07.09.2012 for the purpose of considering and, if thought fit, approving with or without modifications, the proposed scheme of arrangement in the nature of amalgamation of the company with IPL/transferee company, as proposed between the company and its unsecured creditors. It was further directed that at least 21 clear days before the meeting to be held, as aforesaid, a notice be issued to all the unsecured creditors in the prescribed manner and appointed Shri Jainand Vyas, Vice President Accountants or failing him Shri C.K. Yagnik, Head-Legal of IPL/the transferee company, as the chairman of the aforesaid meeting, which was ordered to be scheduled on 07.09.2012 and in respect of any adjournment(s) thereof. Other directions were also issued by this Court, including directing the chairman to submit report to this Court, the result of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has filed by Shri Jainand Vyas along with report of the chairman, which indicate that a resolution resolving the proposed scheme of amalgamation as prayed for came to be approved unanimously i.e. by 100%. 6. Intas Pharma Limited (the transferor company of Company Petition No.195/12) filed Company Application No.263 of 2012 before this Court seeking dispensation of the meetings of the equity shareholders and the secured creditors on the basis of their written consent and for further direction to hold meeting of the unsecured creditors of the company. This Court (Coram: Abhilasha Kumari, J) vide order dated 31.07.2012 ordered dispensation of the meetings of the equity shareholders and the secured creditors and also directed to hold meeting of the unsecured creditors. This Court further directed the company to hold meeting of the unsecured creditors of the company on 07.09.2012 for the purpose of considering and, if thought fit, approving with or without modifications, the proposed scheme of arrangement in the nature of amalgamation of the company with IPL/transferee company, as proposed between the company and its unsecured creditors. It was further directed that at least 21 clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing him Shri C.K. Yagnik, Head-Legal of IPL/the transferee company, as the chairman of the aforesaid meeting, which was ordered to be scheduled on 07.09.2012 and in respect of any adjournment(s) thereof. Other directions were also issued by this Court, including directing the chairman to submit report to this Court, the result of the said meeting, within 14 days from the conclusion of the meeting. 9. It appears from the record that the aforesaid meeting came to be held on 07.09.2012 and an affidavit to that effect has filed by Shri Jainand Vyas along with report of the chairman, which indicates that a resolution resolving the proposed scheme of amalgamation as prayed for came to be approved unanimously i.e. 100%. 10. IPL (the transferee company of Company Petition No.197 of 2012) filed Company Petition No.265 of 2012 before this Court seeking dispensation of the meetings of the equity shareholders and the secured creditors on the ground that consent of all of them were obtained and further that it being a transferee company meeting of the unsecured creditors is not necessary. This Court (Coram: Abhilasha Kumari, J) vide order dated 31.07.2012 ordered dispensation of the meetings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transferor companies and the value of the shares to be issued by the transferee company to the members of the transferor companies is proposed to be written off against the general reserve and if there is deficit, the same is proposed to be treated as free reserve in the books of the transferee company. It is also observed that even as per Clause 11(e) of the Scheme provides authorization to the Board of Directors of the transferee company in consultation with the auditors, to account any of these balances in any manner whatsoever, as may be deemed fit. It is therefore contended that the transferee company should be directed to comply with the requirements of AS-14 strictly while recording the entries of amalgamation in its book. Thus, the first observation made by the Regional Director relates to the accounting treatment to be followed by the transferee company. 12.1 It is further observed that M.P. Advisors has filed Company Petition No.61 of 2011 against one of the transferor companies i.e. Intas Biopharmaceuticals Limited (for short "IBPL") (of Company Petition No. 196 of 2012) before this Court for winding up and since the grievances of said M/s. M.P. Advisors was sub judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatements. It is further stated that Clause 11(e) of the scheme provides only for a contingency and authorizes the Board of Directors to deal with such exceptional situation of deviation from the accounting Standard AS-14. It is also stated that IPL undertakes to abide by the directions that may be issued by this Court with regard to the said disclosure to be made in the financial statements of the transferee company after the scheme is sanctioned. It is also stated that as regards the second and the third observations of the Regional Director, in case if any parties desire to object the scheme, such parties can present their objections before this Court. (IV) RESPONSE OF THE OFFICIAL LIQUIDATOR: 14. The Official Liquidator has filed separate reports to the notices issued by this Court in Company Petition Nos.193-196/2012 i.e. all the four transferor companies. It appears from the aforesaid reports that in view of the directions issued by this Court vide separate orders dated 25.09.2012 in case of the transferor companies, the Official Liquidator has appointed Chartered Accountants, M/s. D.C. Parikh & Co. (C.A.) for carrying out the investigation work. Reliance is also placed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avit dated 19.12.2012, which have been dealt with by IPL by filing an additional affidavit dated 10.01.2013. Thereafter URL has filed further affidavit dated 23.01.2013 withdrawing the said objections and has stated on oath that URL and has declared before this Court on oath that URL has no objection. Mr. Bharda, learned advocate for the objector/URL (in Company Petition Nos.195/12 and 197/12) has submitted that URL has withdrawn the objections. (VI) OBJECTIONS FILED BY SHRI MANI SWAMINATHAN IYER IN COMPANY PETITION NO.196 OF 2012 I.E. PETITION FILED BY INTAS BIOPHARMACEUTICALS LIMITED/IBPL (THE TRANSFEROR COMPANY). 16. It may be noted that the objector/ Shri Iyer filed Civil Application No.370 of 2012 before this Court for being joined as party in Company Petition No.196 of 2012 wherein this Court vide order dated 14.12.2012 passed the following order: "1. Mr. Bhadresh Raju, learned Advocate for the applicant on instructions does not press these applications without prejudice to the rights of the applicant to take appropriate recourse which is available in law in relation to the subject matter of each of the Company Petition including the right to file the objection, if any. Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th learned Counsel were also permitted to file their written submissions as regards the objections raised, which are also forming part of the record. (VII) REGARDING OBSERVATIONS OF REGIONAL DIRECTOR: 18. Considering the first observation made by the Regional Director as regards the accounting system, it may be observed that Section 211(3B) of the Act stipulates that the petitioner is required to make certain disclosures when the accounting system proposed is not in consonance with the AS-14. If the practice adopted for such accounting entry, varies from the said standard, necessary disclosure would be made in the financial statements. This Court while dealing with the requirements of AS-14 in the case of Gallops Realty (P.) Ltd., In re [2009] 150 Comp. Cas. 596/[2010] 97 SCL 93 (Guj.) has observed thus: "9 Having heard Mr. S.N. Soparkar, learned Senior Advocate with Mrs Swati Soparkar, learned advocate for the petitioner and Mr. Harin P. Raval, learned Asstt. Solicitor General, appearing for the Regional Director and having considered the additional affidavit filed by the Directors of the Companies, the Court is of the view that the observation made by the Regional Director wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the time being unpaid on any shares held by the members of the Company. Thus, the Companies Act clearly and specifically permits utilisation of reserve arising out of revaluation of assets for purpose of issuing fully paid up bonus shares. 11 Reference is also made to the decision of Rajasthan High Court in the case of Sutlej Industries Ltd., In Re. reported in [2007] 135 Company Cases 394 (Raj.) wherein similar objection was raised by the Regional Director, The objection was raised to the effect that since surplus arising out of the scheme of arrangement i.e. arrangement/amalgamation reserve is of capital nature and cannot be considered as general reserve as the same (general reserve) is free for distribution to the shareholders of a Company in the form of dividend/bonus shares, whereas 'arrangement/amalgamation reserve' cannot be utilised for distribution to the shareholders. While dealing with this contention the Court held that such a clause in the scheme was not objected to by the shareholders and the meeting of shareholders unanimously approved the scheme of arrangement. The Court did not see any good reason to exclude such a clause from the scheme and broadly found the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ift loans, etc. It is further submitted that demerging and merging the entities within a span of five years is a waste of the valuable time of this Court as well as the same is against the public interest and the interest of the stock holders of IBPL. It is submitted that the action of IBPL have been attempted to be pushed through in a hurried, haphazard and furtive manner whereby it is alleged that the objector as well as various other stock option holders have not given consent to the proposed scheme. It is submitted that IBPL has never informed the objector as well as the other stock option holders of the amalgamating company about the proposed scheme. It is further submitted that ESOP scheme has been malafidely and unilaterally revoked by IBPL and such action of IBPL is against the interest of the stock option holders and not in the interest of the stock holder of IBPL. It is also submitted that IBPL has misrepresented the important fact regarding the transfer of shares held by the objector without paying him the full consideration and that his consent has never been sought for the proposed scheme. It is also submitted that the certificates provided by the concerned C.A. are mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retionary in nature and the same itself did not confer any legal right in favour of any employee. It is further stated by IBPL that no legal right has accrued in favour of the objector as an employee of IBPL and even otherwise unless and until the actual shares have been issued to the employees under ESOP Scheme, rights in capacity of shareholders do not come into existence and, therefore, it is submitted that the objector has no right and interest in IBPL as shareholder under the ESOP Scheme, 2007. 21.4 It is further submitted by IBPL that holdings of the objector even in other group companies have been transferred in the names of holding companies or promoters or have been transferred to another name of the said company and it is further submitted that as on date the objector does not hold any shares of IBPL directly or indirectly and, therefore, it is submitted that the objector is not a shareholder of IBPL. IBPL has annexed a chart showing the holdings of the objector in IBPL as well as any other group companies in order to show that the objector has no share holding in the companies which are part of the present scheme. 21.5 IBPL has also denied the fact that the objector is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking companies and, therefore, under both circumstances before and after the scheme the transferee company has substantial positive net worth. It is therefore submitted that the rights of the creditors of any of the companies are not in any way going to be adversely affected by the proposed scheme of amalgamation. 21.8 IBPL has further denied all the contentions raised by the objector and has more particularly denied the contention raised by the objector in Paragraph No.23 in the affidavit. It is submitted that there is no reason or ground for raising the corporate veil in order to safeguard the personal interest of an ex-employee. It is further denied that there is misuse of corporate shelter by the promoters and the concerned professionals of INTAS group for personal enrichment and profiteering through misusing the mechanism of restructuring of entities. It is also denied that any of the group companies have taken any undue benefits provided by the statutory authorities for various research and development initiatives. It is further contended that on the contrary the proposed scheme of amalgamation would result into consolidation of all activities under one entity and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement deserves to be sanctioned in the interest of stock holders such as shareholders, secured creditors and unsecured creditors as well as public at large. 22. The objector has also filed a further affidavit along with documents in the form of Form-23, special resolution passed by the petitioner-Company at its Annual General Meeting (AGM) held on 28.09.2007, along with explanatory statement pursuant to the provisions of Section 173(2) of the Act and the Draft Red Herring Prospectus of the transferee company/IPL. 23. Mr. Bhadresh Raju, learned Counsel appearing for the objector/Shri Iyer, raised certain objections which are part of the affidavit filed by the objector and has also filed written submissions dealing with the contentions raised by IBPL. It is contended that as per the consultancy agreement dated 01.07.2010 entered into between IBPL and the objector, more particularly Clause-4 thereof, IBPL was liable to pay entire amount of Rs.50 lacs to the objector and, therefore, it was contended that as IBPL has averred in Paragraph No.7 of its additional affidavit it has paid only Rs.46.50, which is not fully paid as claimed by the objector and that the objector is still c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BPL since inception of the ESOP Scheme and the same had vested in favour of the objector before the date of his resignation. 23.3 It was contended that the stock options are granted to the employees as an incentive for both past performance as well as for future expectations and as noticed and highlighted by IBPL itself, are one of the main ways to attract and retain talent in cut throat industry. It was therefore contended that it is in the interest of stock option holders, including the objector, to ensure that IBPL gets the highest possible valuation for itself and is allowed to be listed on a recognized stock exchange at the highest possible price leading to the realization of value for the hard work and efforts of the employees/stock option holders over the years. However, it was contended that the ESOP scheme did not permit to unilaterally revoke the same and it was alleged that such an action was mala fide and against the benefit of the objector as stock option holder. It was further submitted that the Draft Red Herring Prospectus of IPL/transferee company dated 25.03.2011 speaks of future continued growth of the transferee company, which is the primary reason for any inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditor nor a shareholder of the company and, therefore, he has no locus standi to file such objections. It was pointed out that the objector claims that he is a creditor on the basis of the fact that two bills of consultancy raised by the objector for Rs. 1,50,000/- each, as pointed out earlier, relate to the period for which the objector had rendered no consultancy service. It was therefore contended that no such amount was payable. Relying upon the notices addressed by the objector dated 02.06.2012 and 20.08.2012 it was contended that the consultancy services of the objector came to be discontinued after June 2012 on account of several differences with the company. Further relying upon the judgments reported in the case of Emco Ltd., In re [2004] 54 SCL 76 (Bom.) as well as Mahaluxmi Cotton Mills Ltd., In re AIR 1950 Cal. 399, it was contended that a disputed creditor is not a "creditor" for the scheme proceedings. It was further contended that even if it is assumed that the objector is a creditor of IBPL and that all his claims are genuine then also, the scheme stipulates that all the liabilities of IBPL gets transferred to the transferee company/IPL and the transferee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the shares belong to the objector were undersold is completely false and misconceived. It was pointed out by the objector himself that he has executed the share transfer forms, which were never objected and it is not even the case of the objector that he executed such forms under coercion or duress. It was submitted that the said transfer is not between IBPL or the said company and the objector but it is a matter between the purchaser and seller of the shares to which IBPL is never a party. Additionally, it was submitted that even if it is presumed that the claim of the objector regarding his share holding is presumed to be genuine, then also this is not a correct form to adjudicate such claim. It was submitted that the present petitions relate to sanction of a scheme and in such proceedings the court will not decide the shareholding of IBPL as the same is statutorily not required to be decided. 24.4 It was further submitted that the objections as regards termination of ESOP Scheme is misconceived and the same is liable to be rejected. It was submitted that the petitioner companies are unlisted companies and, therefore, the SEBI guidelines are not applicable to them. Under such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was communicated to the objector vide emails dated 01.06.2011 and 30.06.2011. It was submitted that pursuant to the said agreement all shares were transferred on 04.07.2011 and thereafter the objector addressed email dated 10.09.2011 to his lawyer for withdrawal of notice officially. 24.6 It was submitted that after the said settlement the objector herein did not raise any grievance till June 2012. However, the objector again raised grievance by sending notices, after IBPL floated this scheme. It was further submitted that even otherwise the objections raised by the objector are frivolous and baseless. It was submitted that the objections raised by the objector are extensively based on the ESOP Scheme, which are totally misconceived and the same is beyond the present controversy and that the objector fails to appreciate that the ESOP Scheme stood cancelled. It was also submitted that the objector has failed to appreciate the fundamental difference between the preference shares and the equity shares and the difference between the valuation of such shares. It was submitted that the objector has as such sold the shares voluntarily for a consideration and, therefore, now it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Scheme is without any basis whatsoever. 24.9 It was submitted that similar arguments of the objector that the scheme is not in public interest is baseless, misconceived and the same are based on the ESOP scheme. It was submitted that the said scheme was a matter between the employees of the company and the company and not for the general public. It was further submitted that the employees cannot be generalized with public because there is a contractual relation between the employees and the company and that no allegation of public interest is involved. It was further submitted that the transferee company/IPL is financially very healthy and is capable of taking care of any alleged liability, even if it is presumed that any such disputed liability would arise. It was also contended that the objections raised by the objector to the effect that IBPL is run by a family and hence different parameters should be adopted while sanctioning the scheme, is completely baseless. It was submitted that there is no provisions that while sanctioning the scheme under Section 391 of the Act different parameters are required to be adopted when the scheme involves family run companies. 24.10 Remindi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as contended that he is a shareholder. It is borne out from the record that the ESOP Scheme has been terminated by IBPL on 02.08.2011. It may be noted that even if it has been considered that such a scheme exists as on date, as per the said scheme vested option in case of a person who has resigned like the objector can be exercised from the date of listing of the shares of the company on a recognized stock exchange and the time limit so prescribed in the said terminated scheme was within one month from the date of listing. Firstly, such a scheme does not exist and the shares of IBPL are admittedly not listed and, therefore, by no stretch of imagination, it cannot be presumed that the ESOP Scheme is in existence and that the objector is a shareholder. 27. In view of the foregoing, the name of the objector does not register in the Register of shares in any of the companies (at Annexure-E) and the companies which are part of the present scheme. It may be noted that during course of hearing learned counsel for the objector has not been able to point out that the objector is a shareholder of any of the petitioner Companies. 28. Considering the facts of the present case and the ratio l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted bills is not mentioned in it and such an objection has been taken for the first time before this Court. Relying upon the decision of Calcutta High Court in the case of Mahalaxmi Cotton Mills Ltd. (supra), IBPL has contended that the objector is not even a creditor as his name does not appear in the book as the said two bills, on the basis of which the objector claims to be the creditor, are disputed. In the said judgment it has been held as under: "11. I am of opinion that for the purpose of this application, the creditors whose names appear in the books of the company should be considered as creditors and their votes would taken into account. The creditors whose names do not appear in the books of the company should not be considered as creditors unless they can show prima, facie on this application to the satisfaction of the Court that they are creditors. 32. The objector has also contended that IBPL has disposed of shares at a higher value, whereas the objector has been paid less amount. Such a question is not essential to be considered while considering the scheme for approval of the scheme under Section 391 of the Act. In addition to that, the record indicates that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terminated by IBPL as per the resolution passed in the meeting of its Board of Directors on 02.08.2011 and, therefore, the said scheme does not exist as on date. It may be noted that the record reveals that after passing of the resolution the objector has settled the issue with IBPL and did not raise any objection. In addition to this, whether the ESOP Scheme 2007 has been rightly terminated by IBPL or not is not necessary to be decided while dealing with approval of the scheme under Section 391 of the Act. It is also a matter of fact that except the objector no other employees of IBPL has come forward even to object the scheme of amalgamation under consideration in these petitions. It is also a matter of record that such termination has not even been challenged by the objector before any appropriate forum and, therefore, the objector cannot be permitted to raise such an issue while considering the present petitions, which is for approval of the scheme of amalgamation. The objector has also raised an objection to the effect that IBPL and the transferee company operate in two different areas and, therefore, requires to be rejected. As held by this Court in the case of Core Health C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 391-394 of the Act as it is a contract between the employer and employees and the employees may have right to challenge termination in different proceedings before different forum and that cannot be a ground to disapprove the scheme of amalgamation and, therefore, the objections raised by the objector deserve to be negatived. 37. It would be advantageous to refer to the judgment of the Apex Court in the case of Miheer H. Mafatlal (supra) wherein it has been considered the limited scope and jurisdiction of the Court, which is called upon to sanction the scheme of amalgamation as per the provisions of Section 391 read with Section 393 of the Act. Referring to the provisions of Sections 391-393 of the Act the Apex Court has observed thus: "28 The relevant provisions of the Companies Act, 1956 are found in Chapter V of Part VI dealing with 'Arbitration, Compromises, Arrangements and Reconstructions'. In the present proceedings we will be concerned with Sections 391 and 393 of the Act. The relevant provisions thereof read as under: "391. (1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them; or (b) between a company and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisement, there shall be included either such a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain of such a statement as aforesaid". The aforesaid provisions of the Act show that compromise or arrangement can be proposed between a company and its creditors or any class of them, or between a company and its members or any class of them. Such a compromise would also take in its sweep any scheme of amalgamation/merger of one company with another. When such a scheme is put forward by a company for the sanction of the Court in the first instance the Court has to direct holding of meetings of creditors or class of creditors, or members or class of members who are concerned with such a scheme and once the majority in number representing three fourths in value of creditors of class of creditors, or members or class of members, as the case may be, present or voting either in person or by proxy at such a meeting accord their approval to any compromise or arrangement thus put to vote, and once such compromise is sanctioned by the Court, it would be binding to all creditors or class of creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t automatically put its seal of approval on such a scheme. It is trite to say that once the scheme gets sanctioned by the Court it would bind even the dissenting minority shareholders or creditors. Therefore, the fairness of the scheme qua them also has to be kept in view by the Company Court while putting its seal of approval on the concerned scheme placed for its sanction. It is, of course, true that so far as the Company Court is concerned as per the statutory provisions of Sections 391 and 393 of the Act the question of voidability of the scheme will have to be judged subject to the rider that a scheme sanctioned by majority will remain binding to a dissenting minority of creditors or members, as the case may be, even though they have not consented to such a scheme and to that extent absence of their consent will have no effect on the scheme. It can be postulated that even incase of such a Scheme of Compromise and Arrangement put up for sanction of a Company Court it will have to be seen whether the proposed scheme is lawful and just and fair to the whole class of creditors or members including the dissenting minority to whom it is offered for approval and which has been approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under Sec. 433 of this Act. (3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act under Sec. 153 of the Indian Companies Act, 1913 (7 of 1913), sanctioning a compromise or an arrangement." Of course this Section deals with post-sanction supervision. But the said provision itself clearly earmarks the field in which the sanction of the Court operates. It is obvious that the supervisor cannot ever be treated as the author or a policy maker. Consequently the propriety and the merits of the compromise or arrangement have to be judged by the parties who as sui juris with their open eyes and fully informed about the pros and cons of the Scheme arrive at their own reasoned Judgement and agree to be bound by such compromise or arrangement. The Court cannot, therefore, undertake the exercise of scrutinising the scheme placed for its sanction with a view to finding out whether a better scheme co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt also has to see that the minority is not being overridden by a majority having interests of its own clashing with those of the minority whom they seek to coerce. Further than that, the Court has to look at the scheme and see whether it is one as to which persons acting honestly, and viewing the scheme laid before them in the interests of those whom they represent, take a view which can reasonably be taken by businessmen. The Court must look at the scheme, and see whether the Act has been complied with, whether the majority are acting bona fide, and whether they are coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and then see whether the scheme is a reasonable one or whether there is any reasonable objection to it, or such an objection to it as that any reasonable man might say that he could not approve it." To the similar effect were the observations of Fry, L.J., which read as under: "The next enquiry is under what circumstances is the Court to sanction a resolution which has been passed approving of a compromise or arrangement? I shall not attempt to define what elements may enter into the consideration of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... looks into the scheme as to find out that it is not manifestly unfair and/or is not intended to defraud or do injustice to the other shareholders." We may also in this connection profitably refer to the Judgement of this Court in the case of Hindustan Lever Employees' Union v. Hindustan Lever Ltd. 1995 Supp (1) SCC 499:(1994 AIR(SCW) 4701) wherein a Bench of three learned Judges speaking through Sen, J. on behalf of himself and Venkatachaliah, and with which decision Sahai, J., concurred. Sahai, J., in his concurring Judgement in the aforesaid case has made the following pertinent observations in the connection in paras 3 and 6 of the Report: "But what was lost sight of was that the jurisdiction of the Court in sanctioning a claim of merger is not to ascertain with mathematical accuracy if the determination satisfied the arithmetical test. A Company Court does not exercise an appellate jurisdiction. .... Sec. 394 casts an obligation on the Court to be satisfied that the scheme for amalgamation or merger was not contrary to public interest. The basic principle of such satisfaction is none other than the broad and general principles inherent in any compromise or settlement entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company, unless something can be done to improve its performance. In the last two years, it has sold its investments and other properties. If this proposal of amalgamation is not sanctioned, the consequence for TOMCO may be very serious. The shareholders, the employees, the creditors will all suffer. The argument that the Company has large assets is really meaningless. Very many cotton mills and jute mills in India have become sick and are on the verge of liquidation, even though they have large assets. The Scheme has been sanctioned almost unanimously by the shareholders, debenture-holders, secured creditors, unsecured creditors and preference shareholders of both the Companies. There must exist very strong reasons for withholding sanction to such a scheme. Withholding of sanction may turn out to be disastrous for 60,000 shareholders of TOMCO and also a large number of its employees." In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the Company Court has clearly got earmarked. The following broad contours of such jurisdiction have emerged: (1) The sanctioning Court has to see to it that all the requite statutory procedure for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. The aforesaid parameters of the scope and ambit of the jurisdiction of the Company Court which is called upon to sanction a Scheme of Compromise and Arrangement are not exhaustive but only broadly illustrative of the contours of the Court's jurisdiction." 38. Following the ratio laid down by the Apex Court in the case of Miheer H. Mafatlal (supra) this Court in the case of Core Health Care Ltd. (supra) has held that in the proceedings under Sections 391-394 of the Act this Court does not have jurisdiction to sit in judgment over the commercial wisdom of the parties of the scheme but has supervisory role and (in Paragraph No.68) has observed thus: "68. From this judgment, it would be clear that in the scheme proceedings, the court does not sit in judgment over the commercial wisdom of the parties to the scheme, the court has supervisory role in the matter of sanction of the scheme, the court is not required to fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be disclosed and therefore also, on the aforesaid ground the order passed by this Court sanctioning the Scheme is not vitiated and/or the same is not required to be recalled and/or modified as prayed by the applicant. [8.16] Now, so far as the words "and the like" at the end of proviso to Section 391(2) of the Act, 1956, the decision of the Hon'ble Supreme Court in the case of Express Hotels Pvt. Ltd. is required to be referred to. As held by the Hon'ble Supreme Court in the said decision, the expression "and the like" required to be considered ejusdm generis. Therefore, the word "and the like" at the end of proviso to Section 391(2) of the Act, 1956 is required to be considered along with earlier requirements as mentioned in the said provision. [8.17] Even otherwise as stated hereinabove while submitting the Scheme/compromise under Section 391 of the Act, 1956, Company or any other person by whom an application has been made is required to give full particulars as mentioned in Section 391(2) of the Act, 1956 and required to furnish particulars to the creditor or any class of creditors or the members of any class of members the particulars mentioned in Section 393 of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romise 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 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 the requirements of a scheme for getting sanction of the court are found to have been met, the court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med as non-disclosure of particular required under Sections 391-393 of the Act and, therefore, such objection raised by the objector cannot be sustained. 41. The objections raised by Shri Iyer do not inspire any confidence. The said objector is not even a shareholder, as discussed hereinabove and, therefore, as such has no right to file any objections in his capacity as a shareholder. So far as challenge to discontinuation of the scheme is concerned, the same would not fall within the scope and ambit of Sections 391-394 of the Act, if the said objector has any right it can be challenged before an appropriate forum in appropriate proceedings. As observed hereinabove, even if the status of the objector as a creditor is examined, which is denied by the petitioner in view of the fact that the Regional Director has clearly opined subject to only one technical observation as regards accounting system that there is no complaint under the Act received against any of the petitioner companies i.e. both the transferor companies and the transferee company and considering the fact that the Official Liquidator has also opined that the affairs of the transferor companies are not carried out in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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