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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 ..... tions 391-394 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. Also as borne from the record that the ESOP Scheme has been terminated by IBPL on 02.08.2011 ans thus as 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. As objector asserts that in lieu of the consultancy dated 01.07.2010 even if the said agreement is terminated before the time the objector is entitled to Rs. 3,00,000/- for the months of August-September, 2012, which has not been paid by IBPL. The said contention raised by the objector is disputed by IBPL. It is stated by IBPL that the consultancy agreement came to be terminated and, therefore, in the months of August-September, 2012 no consultancy was derived from the objector and, therefore, he is not entitled to Rs. 3,00,000/- for the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts. Objector contention that the proposed scheme is not in the public interest and against the interest of stock holders and is mala fide is unacceptable as considering the documents on record of Regional Director and the Official Liquidator, it transpires that the Official Liquidator on examination of the record and on the basis of the report submitted by C.A., has opined that the scheme is not prejudicial to the public at large and that the companies are not engaged in any activities which is prejudicial to the public interest. In view of the above, it cannot be said that the scheme under consideration is mala fide in any manner. Both the authorities have not only examined the record of the companies, which are part of the scheme, but the Official Liquidator has also got it examined by C.A. Thus as objector has no locus standi to raise objections on the basis that he is shareholder. Similarly, the status of the objector as a creditor is also not only doubtful but is a disputed and even if it is presumed, as observed earlier, it is less than even minimal for which the objector has other remedy under law and, therefore, on such ground the scheme cannot be halted. Thus the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion of the meeting. 3. 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 alongwith report of the Chairman, which indicates that a resolution resolving the proposed scheme of amalgamation as prayed for it came to be approved by 94.74% majority. It is further indicative from the said report that out of 19 unsecured creditors 18 voted in favour of the resolution approving the scheme of amalgamation, whereas only one unsecured creditor voted against it, which shows that in value 99.27% unsecured creditors have approved the scheme. 4. Celestial Biologicals Limited (the transferor company - petitioner of Company Petition No.194/12) filed Company Application No.262 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 said meeting, within 14 days from the conclusion of the meeting. 7. 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 indicate that a resolution resolving the proposed scheme of amalgamation as prayed for it came to be approved by 91.67% majority. It is further indicative from the said report that out of 12 unsecured creditors 11 voted in favour of the resolution, approving the scheme of amalgamation, whereas only one unsecured creditor voted against it, which shows that in value 92% unsecured creditors have approved the scheme. 8. Intas Biopharmaceuti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the secured creditors and further held that it being a transferee company meeting of the unsecured creditors is not necessary to be held and the same was dispensed with. (II) DETAILS OF THE PRESENT PETITIONS: 11. As noted hereinabove, Company Petition Nos.193-196 of 2012 are filed by the transferor companies for sanctioning of the scheme of amalgamation with the transferee company/IPL of Company Petition No.197 of 2012. This Court (Coram: Abhilasha Kumari, J) vide orders dated 25.09.2012 admitted all five petitions, after considering the report of the chairman in each case and directed that the notice of admission be advertised in English daily newspaper "Indian Express" and Gujarati daily newspaper "Sandesh", both in Ahmedabad editions. That notice to the Central Government, through the Regional Director, Department of Corporate Affairs (in all petitions) as well as notice to the Official Liquidator (in Company Petition Nos.193-196 of 2012) were ordered. While admitting the petitions this Court dispensed with publication of the notice in the Government Gazette. It appears from the affidavits of publication filed in each petition that pursuant to the aforesaid orders date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the office of the Regional Director to move this Court for listing of their matter so that their grievance can be heard by this Court. 12.2 It is further observed that one Shri Mani Swaminathan Iyer has also informed the Regional Director as regards termination of Employees Stock Option Plan/Scheme (ESOP) and has raised further grievances. Regional Director has asked M.P. Advisors and Shri Iyer to move this Court and raise their objections in the present petitions. Regional Director has further observed that the Registrar of Companies, Ahmedabad (Guj.) (RoC) has submitted report dated 31.10.2012 and as per the said report, no complaint and/or representation have been received against the petitioner companies, except a complaint from Commissioner of Food Drug Control Administration, Gandhinagar against one of the transferor companies i.e. Celestial Biologicals Limited (i.e. the petitioner of Company Petition No.194 of 2012). It is averred by Regional Director that no prima facie violation of the provisions of the Act has been noticed against any of the petitioner companies. However, it is submitted that the transferee company may be directed to undertake responsibility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the C.A. dated 25.10.2012, which is also annexed with the report of the Official Liquidator. The Official Liquidator has considered the said report of the C.A. and has expressed that the C.A. has submitted his report after proper verification of the books of accounts maintained by the transferor companies as well as the audit report for the years 2010-11 and 2011-12 and has also examined the scheme. It is also observed that the C.A. has opined that the companies are not sick industrial companies within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985 and it has been categorically stated that the affairs of the companies have not been conducted in a manner prejudicial to the interest of its members or the large public interest. It is further stated that the companies may be directed by this Court to preserve their books of accounts, papers and records and not to dispose off the record without prior permission of the Central Government in compliance to the provisions of Section 396A of the Act. (V) OBJECTIONS FILED BY ONE COMPANY VIZ. UNIMARK REMEDIES LIMITED IN COMPANY PETITION NOS.195 OF 2012 AND 197 OF 2012: 15. It may be noted that Unimark Reme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion granted. It is, however, made clear that this Court has not expressed any opinion on merits of the Scheme as the same is an independent issue. 2. With this observation the applications are disposed of as not pressed." 16.1 After the aforesaid order, the objector/ Shri Iyer has filed an affidavit of objections dated 19.12.2012 in Company Petition No.196 of 2012 (filed by Intas Biopharmaceuticals Limited/IBPL) wherein it is stated that the objections are filed in his capacity as shareholder, creditor and also in public interest against the proposed scheme of arrangement in the nature of amalgamation by the transferor company/IBPL by way of this petition. It is stated that he was promoter, co-founder and director of several group companies of INTAS since its inception. It is also stated that the objector has strong objection to the amalgamation scheme as the same would result into destruction of the larger importance of the research and product development work and would adversely affect the larger interest of the citizens, interest of the dedicated team of scientists and knowledge workers and their years of toil in addition to the general value destruction. It is also stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to the Accounting Treatment proposed to be given in the books of the resulting Company under Clause 8.1.3 of the proposed scheme has been taken care of and proper explanation has been rendered by the Company. As rightly pointed out by Mr. Soparkar that the said observation is not in consonance with the Accounting Principles in general and Accounting Standard, AS-14 in particular. The plain reading of the Accounting Standard, AS-14 makes it very clear that the same is applicable only in case of amalgamation and not in the case of demerger as envisaged in the present scheme. This view is supported by the decision of Allahbad High Court in the case of Jagran TV (P.) Ltd., In re, reported in [2009] 90 SCL 138 (All.), wherein it is held that with regard to Accounting Standard-14 a statement was given in Delhi High Court that since the transferor company will merge into transferee-company, the Accounting Standard-14 will be followed. In the case before the Allahbad High Court there is no amalgamation but demerger of the business of the petitioner company with the transferee-company. Here in the present case, there is no amalgamation and it is merely a demerger of the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scheme to be fair, reasonable, according to law and in the interest of shareholders. There is no reason to make any departure from this view." 19. In view of the aforesaid, more particularly in view of the common additional affidavit filed by the transferee company, (which is part of record of Company Petition No.193/2012) the transferee company shall make the said disclosure in the first financial statement of the transferee company, after the scheme is sanctioned as undertaken by the transferee company. In view of that, therefore, the first observation made by the Regional Director does not survive. So far as the second and the third observations are concerned, it may be noted that Company Petition No.61 of 2012 filed by M.P. Advisor against IBPL has been disposed of by this Court vide judgment and order dated 05.07.2012, whereas the third observation is concerned, the objections filed by Shri Iyer are dealt with hereinafter. 20. Considering all the facts and circumstances of the case and taking into account the affidavits and reply affidavits thus, the observations made by the Regional Director do not survive. VIII OBJECTIONS RAISED BY THE OBJECTOR/SHRI IYER: 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.A. are mis-representation and are mala fide attempt to deprive the objector and the other stock option holders of their legal rights. It is further submitted that IBPL has made an entire mockery of the mandatory requirement of holding a meeting of the shareholders by mis-representating the important facts before this Court. 21.2 It may be noted that in response to the objections so filed by the objector/Shri Iyer, Mr. Jayesh Shah, Chief Officer of IPL and Authorized Signatory of IBPL has filed an additional affidavit dated 17.01.2013 (in Company Petition No.196 of 2012) and have denied the allegations leveled by the objector. It is stated that the contentions and claims of the objector are false, frivolous and baseless and the allegations about suppression of material facts are unfounded, untenable either in law or in fact. Preliminary objection was raised with regard to the locus standi of the objector to file any objections. It is categorically asserted that the objector is neither a shareholder, as per the register maintained by the company, nor he is a creditor. 21.3 It is submitted that the contention of the objector that he was one of the promoter directors of IBPL for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the objector is its creditor. It is submitted that subsequent to the resignation of the objector as director of the company, a consultancy agreement came to be executed between IBPL and the objector in the month of July 2011 with validity period of two years. It is further submitted that as such the objector has raised invoices for the services rendered by the objector upto 31.07.2012 for Rs. 46.5 lacs which, as submitted by IBPL, has been paid off to the objector. It is further submitted that the objector, after the said payment, has raised two additional invoices for the period when no consultancy was rendered by the objector and, therefore, it is submitted that the objector is not even the creditor of IBPL. 21.6 It is further denied that IBPL had entered into settlement or understanding with the objector. It is further submitted that IBPL is not liable or any understanding entered into between individuals in their individual capacity. It is submitted that as per the copies of correspondence placed on record by the objector it cannot be inferred that any commitments have been made by IPBL. It is further averred that the amount received by the objector has been made to him by Dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity and the same shall help to achieve synergic benefits. It is also contended that the resignation of staff members as well as some members of senior management is a matter of routine and the same has not effected the product development programmes of IBPL. It is also contended that the company has been progressively developing new products and in fact has increased its turnover over the years. It is also denied that strategic decisions taken by the management of the group companies is not in the interest of the company and its stake holders and it is further denied that the same is not in public interest. 21.9 IBPL has further contended that ESOP Scheme 2007 has already been terminated and no rights were ever vested in any employees and none of the employees have any rights or say in approval of the scheme and as such the employees have no locus standi as far as the same is concerned. It is further submitted that therefore there is no question of intimating anybody about the proposed scheme. It is further denied that the ESOP Scheme was mala fidely and unilaterally revoked. It is also contended that the said issue is not relevant for consideration of the proposed scheme. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he objector is still creditor of IBPL. 23.1 It was contended that as per the chart incorporated in the affidavit of objection of the objector (at Page 108), the objector has stated his share holding in INTAS group companies as on 31.03.2010. It was admitted by the learned counsel for the objector that the fact that 2000 shares had been purchased by Mrs. Parul U. Chudgar on 11.07.2011 for consideration of Rs.9,72,000/- and those shares were transferred in the name of Mrs. Parul U. Chudgar during August, 2011. However, it was contended that as per list (at Annexure-E of the affidavit page 214) some of the shares held by the objector were transferred without any consideration and, therefore, there exists remaining interest of the objector in those shares. It has also been admitted that as per the share transfer form (at Page 243 annexed with the additional affidavit) 100 shares held by the objector of a company viz. Cytas Research Limited has been transferred for total consideration of Rs.52,75,000/- i.e. at Rs.5,275/- per share. It was further contended that out of total 79,24,733 shares of IBPL, Cytas Research Limited holds 11,31,848 shares and, therefore, the value of 1000 shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mary reason for any investor to invest in the company's share. It was further reiterated that the ESOP Scheme was mala fidely and unilaterally terminated on 02.08.2011 wherein the Board of Directors of IBPL consisted of only family members of Chudgar family where the only one outsider is Shri Sanjiv D. Kaul, who was appointed on 02.08.2011 itself through the investment made by Chrys Capital in the IPL/transferee company. It was further submitted that the entire share holding of IBPL is held by either Chudgar family or entities owned, controlled and operated by the same family. 23.4 It was further contended that the transferee company paid all private investors, including TATA and Kotak at a very significantly higher price. It was therefore contended that the proposed scheme is against the interest of the stock option holders, who do not have any corresponding stack in the transferee company like the shareholders of IBPL and is against the interest of those who rely only on the intrinsic value of IBPL to recover their efforts' and sweat's worth. It was further contended that it is all the more necessary to pierce the corporate veil and to understand in what manner after having dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L and the transferee company becomes liable to pay the dues of the objector and in such an event the creditor would have a right of ensuring that his liability will be fulfilled. It was further contended that considering the net worth as well as profit earned in the last financial year even if the claim of the objector is held to be genuine by an appropriate forum, the transferee company/IPL will be in a position to satisfy such a claim. It was therefore submitted that the objections raised by the objector in his capacity as creditor are baseless since he is not a creditor of IBPL and hence, he has no locus standi in the present proceedings. 24.1 Similarly it was also contended that the objector is not a shareholder and, therefore, he has no locus standi to file the present objections. It was further submitted it is an admitted fact that the objector's name is not entered into the Register of members of any of the petitioner companies. It was submitted that a person cannot automatically becomes a member unless his name is registered in the Register. Relying upon the ratio laid down by the Bombay High Court in the case of Sant Chemicals (P.) Ltd. v. Aviat Chemicals (P.) Ltd. 1993 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to them. Under such circumstances the ESOP Scheme was merely operational and contractual in nature. It was submitted that the Board of Directors of the company has terminated the ESOP Scheme much before proposing the scheme of arrangement came to be proposed. It was vehemently submitted that termination of the scheme has not been challenged by the objector before any forum and such issue cannot be considered in the present proceedings which relate to sanction of a scheme. Referring to Clause 8.1 of the said ESOP Scheme it was contended that even according to the scheme the rights get converted into shares only when the company goes for public issue and only then the objector can get voting right. It was submitted that it is an admitted position that in the present case the company has not gone for public issue and, therefore, no right has accrued in favour of the objector and in absence of such, reliance on the ESOP Scheme for exercising right of the objector is thoroughly misconceived. Relying upon the ratio laid down by the Apex Court in the case of National Organic Chemical Industries Ltd. v. Miheer H. Mafatlal [2004] 121 Comp. Cas. 519/54 SCL 96 it was contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and, therefore, now it is not open for the objector to raise any objection that the shares were undersold with which the petitioner companies are not connected with as the said transaction is between one shareholder to another. It was submitted that the objections raised regarding valuation of shares is purely a matter of commercial wisdom and when the shareholders of any of these companies have not raised any objections with regard to valuation, the objector, who is not a shareholder has no locus standi to raise that objections and there is nothing on record to suggest that the valuation was not fair or reasonable. Relying upon the case of Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 10 SCL 70 (SC), it was contended that when the shareholders agreed to the valuation, which is based on the report of C.A. then the same cannot be challenged in the scheme proceedings. 24.7 It was further submitted that there is no statutory or other prohibition on amalgamation of the companies with different objects and, therefore, in absence of such statutory or other prohibition it is not open for the objector to object the scheme on such ground and it is for the shareholder to decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family run companies. 24.10 Reminding the role of this Court while sanctioning the scheme it was submitted that the scheme under Section 391 of the Act is supervisory. Relying upon the ratio laid down by this Court in the case of Core Health Care Ltd. (supra) it was submitted that the objector has no ground to persuade this Court to withhold the sanctioning of the scheme as proposed and it was submitted that the objections require to be rejected with exemplary costs. Reliance was also placed by the learned Senior Counsel for the petitioners on the following decisions: (i) SIEL Ltd., In re [2004] 122 Comp. Cas. 536/[2003] 47 SCL 631 (Delhi); (ii) Hindalco Industies Ltd. In re ,[2009] 151 Comp. Cas. 446/94 SCL 1 (Bom.); (iii) Reliance Communications Ltd., In re [2009] 94 SCL 219 (Bom.); (iv) Sant Chemicals (P.) Ltd.'s case (supra) (IX) CONCLUSIONS OF THE OBJECTIONS: 25. Considering the objections raised by the objector it would be appropriate to deal with them in context to the status on the basis of which the objections are raised. As observed earlier, the objector claims to be the shareholder of IBPL. The said fact is denied by IBPL in its additional affidavit, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the facts of the present case and the ratio laid down by the Bombay High Court as well as Delhi High Court in the judgments referred to above, the objector is not a shareholder of any of the companies and, therefore, he has no locus to raise any objections on the ground that he is a shareholder. 29. Considering the second limb of the objection wherein the objector asserts that he is a creditor of the company, if examined the objector asserts that in lieu of the consultancy dated 01.07.2010 even if the said agreement is terminated before the time the objector is entitled to Rs. 3,00,000/- for the months of August-September, 2012, which has not been paid by IBPL. The said contention raised by the objector is disputed by IBPL. It is stated by IBPL that the consultancy agreement came to be terminated and, therefore, in the months of August-September, 2012 no consultancy was derived from the objector and, therefore, he is not entitled to Rs. 3,00,000/- for the said months. Considering this aspect the case of the objector that he is a creditor is disputed. Even if it is presumed that the objector is a creditor of IBPL it has rightly been contended by IBPL that the same would be eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. In addition to that, the record indicates that the shares of IBPL as well as the other companies were sold to a private person and not to IBPL. The record further reveals that in case of transfer of shares in Celestial Biologicals Limited, ATMRF and Indus Biotherapeutics Ltd. the shares were in the joint names and, therefore, name of the objector has been deleted. Apart from the fact that such transfer of shares is executed wherein the objector has signed transfer forms and the same has been recorded even before the Registrar of Companies the validity of transferors cannot be gone into in the present proceedings. The Apex Court in the case of National Organic Chemicals Industries Ltd. (supra) has observed thus: "7. ... ... ... There was no statutory need to have decided this issue while dealing with the application for approval of the scheme under section 391 of the Companies Act, indeed, that issue did not arise before the company court. That apart basic principles of natural justice are violated by the courts below in deciding an issue against the appellant in proceedings to which the appellant was not even party. By this finding, the appellant's right to hold shares in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected. As held by this Court in the case of Core Health Care Ltd. (supra) there is no statutory bar or prohibition for amalgamation of companies with different objects. 34. In addition to this, as enumerated above, the objector has raised objection to the effect that the proposed scheme is not in the public interest and against the interest of stock holders and it is also further contended that the scheme is mala fide. The objector has also contended that certain disclosures are not made by IBPL, more particularly relating to the ESOP Scheme. On consideration of the documents on record, stand of the authorities viz. Regional Director and the Official Liquidator, it transpires that the Official Liquidator on examination of the record and on the basis of the report submitted by C.A., has opined that the scheme is not prejudicial to the public at large and that the companies are not engaged in any activities which is prejudicial to the public interest. In view of the above, it cannot be said that the scheme under consideration is mala fide in any manner. Both the authorities have not only examined the record of the companies, which are part of the scheme, but the Official Liquidato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors or any class of them; or (b) between a company and its members or any class of them; the Court may, on the application of the company or of any creditors or member of the company or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs. (2) If a majority in number representing three fourths in value of the creditors, or class of creditors, or members, or class of members, as the case may be, present and voting either in person or, where proxies are allowed under the rules made under Sec. 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company: Provided that no order sanctioning any compromise or arrangement shall be made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Court, it would be binding to all creditors or class of creditors, or members or class of members, as the case may be, which would also necessarily mean that even to dissenting creditors or class of creditors or dissenting members or class of members such sanctioned scheme would remain binding. Before sanctioning such a scheme even though approved by a majority of the concerned creditors or members the Court has to be satisfied that the company or any other person moving such an application for sanction under sub-sec. (2) of Sec. 391 has disclosed all the relevant matters mentioned in the proviso to sub-sec. (2) of that Section. So far as the meetings of the creditors or members, or their respective classes for whom the Scheme is proposed are concerned, it is enjoined by Sec. 391 (1)(a) that the requisite information as contemplated by the said provision is also required to be placed for consideration of the concerned voters so that the parties concerned before whom the scheme is placed for voting can take an informed and objective decision whether to vote for the scheme or against it. On a conjoint reading of the relevant provisions of Sections 391 and 393 it becomes at o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing minority to whom it is offered for approval and which has been approved by such class of persons with requisite majority vote. 29. However further question remains whether the Court has jurisdiction like an appellate authority to minutely scrutinise the scheme and to arrive at an independent conclusion whether the scheme should be permitted to go through or not when the majority of the creditors or members or their respective classes have approved the scheme as required by Sec. 391 sub-sec. (2). On this aspect the nature of compromise or arrangement between the company and the creditors and members has to be kept in view. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the Court. The Court certainly would not act as a Court of appeal and sit in judgement over the informed view of the concerned parties to the compromise as the same would be in the realm of corporate and commercial wisdom of the concerned parties. The Court his neither the expertise nor the jurisdiction to delve deep into the commercial wisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me placed for its sanction with a view to finding out whether a better scheme could have been adopted by the parties. This exercise remains only for the parties and is in the realm of commercial democracy permeating the activities of the concerned creditors and members of the company who in their best commercial and economic interest by majority agree to give signal to such a compromise or arrangement. The aforesaid statutory scheme which is clearly discernible from the relevant provisions of the Act, as seen above, has been subjected to a series of decisions of different High Court and this Court as well as by the Courts in England which had also occasion to consider schemes under pari materia English Company Law. We will briefly refer to the relevant decisions on the point. But before we do so we may also usefully refer to the observations found in the oft-quoted passage in Bucklay on the Companies Act, 14th Edition. They are as under: "In exercising its power of sanction the Court will see, first that the provisions of the statute have been complied with, secondly, that the class was fairly represented by those who attended the meeting and that the statutory majority are actin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt? I shall not attempt to define what elements may enter into the consideration of the Court beyond this, that I do not doubt for a moment that the Court is bound to ascertain that all the conditions required by the statute have been complied with; it is bound to be satisfied that the proposal was made in good faith; and, further, it must be satisfied that the proposal was at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such a member, might approve of it. What other circumstances the Court may take into consideration I will not attempt to forecast." In Anglo-Continental Supply Co. Ltd., Re,(1992) 2 Ch.723, Ashbury, J., a century later reiterated the very same propositions as under: "Before giving its sanction to a scheme of arrangement the Court will see firstly that the provisions of the statute have been complied with; secondly that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than the broad and general principles inherent in any compromise or settlement entered between parties that it should not be unfair or contrary to public policy or unconscionable. In amalgamation of companies, the Courts have evolved, the principle "prudent business management test" or that the scheme should not be a device to evade law. But when the Court is concerned with a scheme of merger with a subsidiary of a foreign company then test is not whether the scheme shall result in maximising profits of the shareholders or whether the interest of employees was protected but it has to ensure that merger shall not result in impeding promotion of industry or shall obstruct growth of national economy. Liberalised economic policy is to achieve this goal. The merger, therefore, should not be contrary to this objective. Reliance on English decisions Hoare Co. Ltd., Re, 1933 All ER Rep 105, Ch. D. and Bugle Press Ltd., Re., 1961 Ch 270, that the power of the Court is to be satisfied only whether the provisions of the Act have been complied with or that the class or classes were fully represented and the arrangement was such as a man of business would reasonably approve between two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erged: (1) The sanctioning Court has to see to it that all the requite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Sec. 391 (1) (a) have been held. (2) That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Sec. 391, sub-section (2). (3) That the concerned meetings 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 majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. (4) That all necessary material indicated by Sec. 393 (1)(a) is placed before the voters at the concerned meetings as contemplated by Sec. 391, sub-sec. (1). (5) That all the requisite material contemplated by the proviso to sub-sec. (2) of Sec. 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 arrangeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the court has supervisory role in the matter of sanction of the scheme, the court is not required to find out as to whether a better scheme could have been adopted by the parties and unless the court finds that the action of majority is manifestly unfair and fraud is involved in the scheme, the court cannot reject the scheme." 39. The objector has also pointed out that the IBPL has not disclosed that the ESOP Scheme 2007 has been terminated. At the outset it is clarified that the said is a scheme between the employer and the employees, which is not challenged by any employees, including the objector. Considering the aspect of the fact of such non-disclosure of fact, this Court in the case of Dwarka Prasad Agarwal Brothers (supra) has observed thus: "[8.15] On considering Sections 391 to 394 of the Act, 1956, it appears to the Court that while submitting the Scheme under Section 391(1) of the Act, 1956, the only statutory requirement by the Company would be to disclose the material facts relating to the companies latest financial position; latest auditors report on the accounts of Company and the pendency of any investigation proceedings in relation to the Company under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... class of creditors or the members of any class of members the particulars mentioned in Section 393 of the Act, 1956 (at the time when the meeting is called under Section 391 of the Act, 1956). If any of the particulars mentioned in Section 391 of the Act, 1956 or under Section 393 of the Act, 1956 are not furnished and/or full particulars/disclosures are not given and/or some material facts related to the disclosures to be made under Section 391(2) of the Act, 1956 or under Section 393 of the Act, 1956 are withheld and/or suppressed and the Scheme is got sanctioned then and then only it can be said that the order is vitiated by not disclosing the full particulars as required. Therefore, it appears to the Court that for non-disclosure of the particulars other than the required under Section 391(2) and Section 393 of the Act, 1956, it cannot be said that the Company and/or the applicant has withheld the material facts which will affect sanctioning of the Scheme/arrangement. At this stage, the decision of the Hon'ble Supreme Court in the case of Miheer H. Mafatlal v. Mafatlal Industries Ltd. reported in [1997] 1 SCC 579 is required to be referred to. In the said decision, while exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the court there could be a better scheme for 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." Considering the aforesaid facts and circumstances and the aforesaid decision, it cannot be said that by not disclosing various litigations enumerated in para 4(a) of the present application and/or non-disclosing the decision of the Hon'ble Supreme Court dated 07.07.2003, there has been a material suppression which will affect sanctioning of the Scheme. [8.18] The another question will arise whether on the aforesaid ground the Scheme can be modified in exercise of powers under Section 392 of the Act, 1956? As discussed hereinabove, the powers under Section 392 of the Act, 1956 can be exercised only for proper working of the Scheme and the powers under Section 392 of the Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the fact that the Official Liquidator has also opined that the affairs of the transferor companies are not carried out in any prejudicial manner, this Court is of the opinion that the objector, who is an ex-employee, has come forward to raise the objections for his personal interest rather than public interest. Considering all these facts and circumstances of the case and taking into account all the affidavits and reply affidavits and submissions made during course of hearing the present scheme of arrangement is in the interest of all stock holders i.e. shareholders, creditors as well as in the public interest and the same deserves to be approved and the same is hereby sanctioned. ORDER 42. The petitions are accordingly allowed and the sanction is granted to the scheme of arrangement (at ANNEXUREC to the petitions). Prayers in terms of Paragraph No.21(a) (of Company Petition Nos.193196/2012) and prayer at Paragraph No.16(a) (of Company Petition No.197/2012) are granted. 43. The petitioner companies shall pay the fees of Mr. M. Iqbal A. Shaikh, learned Senior Central Government Counsel, which are quantified at Rs. 7,500/ per petition. All the four transferor companies sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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