9911796707
TMI Blog1982 (8) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany has not paid any divided whatsoever under the shareholders. The company has been declared a relief undertaking under the provisions of the Bombay Relief Undertaking (Special Provisions) Act, 1958, with effect from January 1, 1977. In these circumstances, in or about 1980, a scheme of amalgamation was proposed on behalf of the petitioner company of its amalgamation with the Brooke Bond India Ltd. Thereafter, in pursuance of an order passed by this court in November 26, 1980, statutory meeting of the shareholders, secured creditors and unsecured creditors of the petitioner company were held on January 27, 1981, to consider the proposed scheme of amalgamation. At the meeting so held, 97.30 per cent. of the shareholders, 100 per cent. of the secured creditors and 98.50 per cent. of the unsecured creditors approved of this scheme. Thereafter, on March 6, 1981, Company Petition No. 84 of 1981 (See) was field for auctioning the said scheme of amalgamation. An application was also made to the Center Govt. under the provision of s. 23 of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as the MRTP Act ), for its approval to the said scheme of amalgama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general meeting is exhibit C to the petition. Thereafter, one Bhagwandas, a shareholder of the petitioner-company, filed a suit in the Bombay City Civil Court for an injunction restraining the company from holding the extraordinary general meeting. He also took out a notice of motion for an injunction to restrain the holding of the meeting. The City Civil Court, however, did not grant such an injunction. Thereafter, the applicant herein, who is also a shareholder of the petitioner company has taken out the present judge, s summons for an order, that pending the hearing and final disposal of Company Petition No. 84 of 1981 , the opponents, their servants and agents should be restrained from holding and proceeding with the extraordinary general meeting. 5. In order to consider Whether an injunction as prayed for can be granted or not, it is necessary to consider the nature of the requisition which has been received by the petitioner-company and the purpose for ordered at the requisitioned meeting is in two parts. The first part of the resolution call upon the company to renegotiate with M/s. Brooke Bond India Ltd. and/or to examine alternate scheme in the interest of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erted for the purpose under s. 391(1) of the Companies Act, 1956, it a majority in number representing three-fourths in this value of the class of members or creditors, as the case may be, present and voting at the meeting agree to any compromises or arrangement, it shall, it sanctioned by the court be binding on all members or creditors of the class, as the case may be, and also on the Company. As pointed out by the Privy Council in the case of Raghubar Dayal v. Bank of Upper India Ltd. AIR 1919 PC 9, the arrangement will take effect from the date of approval of the arrangements at the statutory meeting held for the purpose, and not from the date of sanction by the court. Thus, under s. 391 of the Companies Act, 1956, a specific method company to a proposed scheme. Once such an approval is obtained in the manner proceeded by s. 391., the scheme, subject to being sanctioned, become binding on all the members and/or creditors of the company as also on the company from the date of granting of such approval by the members and/or creditors. Under r. 79 of the Companies (Court) Rules, 1959, where the proposed compromise or arrangement is agreed on with or without modification, as procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting of the company in order to demonstrate that they have changed their stance. 9. There have been instances where at the time of consideration of a scheme of amalgamation, a disputes has been raised as to whether the statutory meeting held for the properly held or not. In Dorman Long and Co. Ltd., in re [1934] 1 Ch.D. 635, there was a disputes as to whether the statutory meeting for considering the scheme had been properly held and whether voting was properly recorded at the statutory meetings. It was, in this context, that the court was required to consider whether the petition should be dismissed or whether rests meeting should be summoned. The question of holding a fresh meeting for considering the scheme on account of a subsequent change in she stand of the members did not arise in that case at all. In Waxed Papers Ltd., In re [1937] 156 LT 452, the court was required to consider whether proxy voted which were cast at the statutory meeting convened for considering the scheme were valid. The difficulty in that case arose because the proxy voted were utilised for voting on a resolution to adjourn consideration of the scheme and a point was raised that the power to vote b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue. 10. Nearer home, in the case of Sidhpur Mills Co. Ltd., In re, AIR1962Guj305 , a learned judge of the Gujarat High Court, while considering a scheme of amalgamation, observed as follows (at p. 311) : Therefore, in my judgment, the correct approach to the presents case is (i) to ascertain whether the statutory requirements have been complied with, and (ii) to determine Whether the scheme as a whole has been arrived at by the majority bona fide and in the interests of the whole body of at by the major of injury fide and in the interests of the whole body of shareholders in whose interests the majority purported to act, and (iii) to see whether the scheme is such that a fair and reasonable shareholder will considerate to be for the benefit of the company and for himself ....... I do not wish to be understood to say that, in no case post facto circumstances or events cannot be taken into account, but, on the whole, I have come to the conclusion that, whilst, in some rare and exceptional cases, the court may take into consideration subsequent event to protect the interest of the company or the shareholders, as a general rule, the court should consider the resolution the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M received an alternative proposal for rehabilitation of the petitioners which, according to the Government, had the main advantage of continuing the petitioners as an in depend entity. The Government of Maharashtra, therefore, instructed SICOM to withdraw its support to the merger. 13. It is apparent from this affidavit that SICOM has withdrawn its support to the merger on instructions from the Government of Maharashtra. Apart from bare reference to the alternative proposal, there is nothing in this affidavit which would show that SICOM is aware of the nature the alternative proposal or whether it is better that the existing proposal or whether it is sufficiently worked out so as to be capable of being postal or whether it is sufficiently worked out so as to be capable of being put before the statutory meeting of members and creditors of the company. If there is such a scheme which is more benefits to the company. There is nothing which prevents any member or creditor from coming before the court and asking for the scheme being considered at the statutory meeting, though whether the propounding of a subsequent but more beneficial scheme can be a good reason for not sanctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the court. In the interests of justice, the shareholders must put up with this hardship. 17. It has next been submitted that by calling the requisitioned meeting, the shareholders will be able to draw attention to the change of circumstances that has taken place. In spite of my repeated enquires, I have not been told what these changed circumstances are except that a period of about 20 months has elapsed since the scheme was first proposed. This lapse of 20 months does not, in view, justify the calling of the requisitioned meeting. 18. As I have pointed out earlier, under r. 79 of the Companies (Court) Rules, 1959, the company is required to present the petition for sanctioning the scheme within 7 days of the filing of the report by the chairman; and if the company does not do so, then any member or creditor has been given the right to present a petition for sanctioning the scheme. The company is thus under a statutory obligation to present petition for sanctioning the scheme. The requisitioned meeting clearly interferes with the company's obligation in this connection. 19. It is also extremely doubtful if any subsequent change of circumstances can be taken in to ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a special case was taken before a learned single judge of this court to consider the questions whether the board of direction of a public limited company was bound to call a meeting requisitioned by its members when the resolution which was purported to be passed in such a meeting was contrary to the precisions of s. 274 of the Companies Act. The learned single judge, who answered this question of, held that the board of directors were bound to call a meeting which was so requisitioned, even though the resolution which would be passed at such a meeting would be contrary to the provisions of s. 274 of the Companies Act. Now, these company for considering matters relating to the internal management of requisitioned. Meeting being called to consider matters which affected persons their other than the members and the company or to comply the company to resile formats statutory obligations or to interfere with the excise of the court's jurisdiction under s. 391 of the Companies Act. 22. One of the main reasons why injunctions are not normally granted to restrain the holding of a requisitioned meetings that the shareholders ought to be allowed to regulate and set right the affa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case is not covered by any of the considerations which have led the courts in the past to refuse to injunct such meetings. 23. In the first place, the present meeting has not been called to consider the internal management of the company. The resolution which has been proposed does not deal with matters which concern only the company and it shareholders. The purpose of the requisition is to compel the company to withdraw the petition for amalgamation which is pending before the court. Such a resolution does not pertain only to the company's management and the line of decisions starting with Foss v. Harbottle [1843] 2 Hare 461, therefore, cannot have any bearing on such a meeting. Secondly, the board of directors are not asking for an injunction to prevent thus shareholders from discussing the management of the company. They have called the requisitioned meeting. If the meeting has been called to pre-empt a consideration by the court of the scheme of amalgamation, the calling of such meeting can be questioned by any affected person. It is irrelevant whether such a person has been put up by the board of directors of not. 24. A scheme of amalgamation affects no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. If the purpose of calling the requisitioned meeting more beneficial to the company, that purpose is not going to be served by served by calling the requisitioned meeting. It has been argued before me that in the 30th annual report of the company for the year ending December 31, 1980, it has been mentioned that a modified proposal to lease she company's factory at Aurangabad mentioned to M/s. Harbans Lal Malhotra and Sons Ltd. had again chartered accountants for advice. In the 31st annual report of the company for the years ended December 31, 1981, it has been stated that a proposal to lease the company's undertaking by Harbans Lal Malhotra Sons Ltd., which has been dealt with in the last annual report, has not been further considered in the light of advice that such a scheme of leasing would also require the approval of the Government of Indian under the MRTP Act. Learned counsel for the opponents and for the secured creditors have submitted that in view of the statements made in the two annual reports, it must be presumed that the shareholders knew what was the alternative scheme; and, hence, in the requisition or in the explanatory statement, it was not necessary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any of the provisions of the Companies Act. The purpose is only to get the pending petition under s. 391 of the Companies Act withdrawn. 28. It was lastly submitted that this is a fit case where a suit should be filed against the company and that a judge's summons is not a proper method for obtaining reliefs. It was also pointed out that a suit had, in fact, been filed in the city civil court for this purpose. My attention was also drawn to a decision of the Kerala High Court in the case of Prakasam v. Sri Narayana Dharma Paripalana Yogam 1980] 50 Comp Cas 611 (Ker). In this case, the Kerala High Court held that the company court will not assume jurisdiction where a member seeks to redress an individual injustice done to him. In the present case, however, the resolution is aimed at withdrawal of a petition pending under s. 391 of the Companies Act. The meeting which is requisitioned has a direct nexus with the pending petition under s. 391 of the Companies Act; and hence the company court exercising its jurisdiction under s. 391 of the Companies Act can certainly deal with the judge's summons taken out for the purpose of restraining the holding of such a meeting. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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