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TMI Blog2013 (7) TMI 1243X X X X Extracts X X X X X X X X Extracts X X X X ..... he said order the meeting was convened and the chairperson submitted the report as well. 3. In an application under Section 394 of the said Act containing the report of the chairperson the Court directed the service of the copy of the said application upon the Central Government. 4. At the time of promulgation of the Companies Act, 1956 Section 394A was not incorporated therein which subsequently came to be incorporated and/or inserted by Act XXXI of 1965 with effect from 15th October 1964. The said provision contemplates the notice to be given to the Central Government for the purpose of ascertaining the objection which may be raised before passing any order either under Section 391 or Section 394 of the said Act. The aforesaid provision was introduced with the specific object, intent and purpose so that the Court who is not supposed to put a mere rubber seal to the sanction of the arrangement and/or scheme proposed under Section 391 of the said Act. It is obviously for the definite object and purpose that the aforesaid arrangement/or scheme is fair, reasonable and is not oppressive to the members or the public. 5. The Central Government in the affidavit have taken the only obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chartered Accountant can be proved to be unreasonable or tainted with malice, the Court should not refuse to sanction the scheme on the basis of an objection raised by the Central Government and placed reliance upon the Co-ordinate Bench judgement in the case of Joonktollee Enterprises Ltd., In re [2008] 145 Comp. Cas. 159 (Cal). 10. Lastly, it is contended that the valuation of share should be left to the shareholders who may ultimately be interested in the scheme and/or arrangement and therefore, the Central Government could not have raised dispute relating to the share exchange ratio and relied upon the judgement of the Apex Court in the Hindustan Lever Employees, Union v. Hindustan Lever Ltd. [1994] 2 SCL 157. 11. The learned advocate appearing for the Central Government, however, submits that section 394A of the said Act does not prohibit the Central Government to bring before the Court the unreasonableness and/or unfairness in the share exchange ratio and the powers so conferred under the said provision should not be restricted as sought to be pleaded by the petitioners. 12. Upon hearing the respective submissions, as indicated earlier, the pivotal objections raised by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open to the respondents to argue that the valuation of Rs. 105/- having been accepted by majority of almost all the shareholders, no public interest is involved in it. No further need be said as allotment of shares to UL at Rs. 105 is not approved by the Reserve Bank of India. It has been challenged before the High Court and is pending adjudication." (Emphasis supplied) 14. In the case of Miheer H. Mafatlal (supra), the Apex Court was considering the matter relating to sanction of the scheme on the basis of an objection raised by the minority Director. The Apex Court formulated five points where 5th point relates to share exchange ratio of the equity shares of the transferor and transferee companies. In the said judgement, the Apex Court took note of the observations made by Sahai, J. while concurring the judgement rendered in case of Hindustan Lever Employees' Union (supra) that the jurisdiction of Court in sanctioning a claim of merger is not to be ascertained in mathematical accuracy as the Company Court does not exercise the appellate jurisdiction, but the Court proceeded to observe that section 394 cast obligation on the Court whether the scheme or arrangement is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een done without following the proper method, still the Court should allow as the shareholders have uniformly accepted and/or vetted in favour of the proposed scheme. The Division Bench observed that the ratio of share exchange to be determined on the valuation made by an expert. In paragraph 60 of the said judgement the Division Bench has proceeded that in the event any objection is raised by any of the shareholder, the matter would have taken a different complexion as it would require a further probe into the question of ratio of share exchange. The aforesaid judgement, in my considered view, runs contrary to the ratio laid down in the case of Miheer H. Mafatlal (supra) where the Court overruled the objections raised by one of the shareholder-Director on the finding that the same should be left to the domain of an expert. 17. As an alternative submission, the petitioners tried to impress upon the Court that fairness opinion is obtained from one KARN MERCHANT BANKERS LIMITED relating to the report of the Chartered Accountant who determined the share exchange ratio as the company is listed in the Calcutta Stock Exchange. 18. According to the petitioner, the said report contemplat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same the shareholders have unanimously approved the proposed scheme and/or arrangement. 24. Although a fairness opinion has been obtained, which suggests that the exchange ratio has been valued in line with the past practices and cannot be said to be unfair or improper. The said fairness opinion is based upon the economic regulatory monetary market and other conditions as on the date of September 12, 2012 and endorse the manner in which the valuation has been made by the said Chartered Accountant. This court, therefore, finds that in order to dispel all the clouds raised because of the conflicting opinions of the expert, an independent Chartered Accountant from the panel of the Official Liquidator should be appointed for the purpose of verifying the share exchange ratio as indicated in the proposed scheme. 25. This court, therefore, directs the Official Liquidator to engage a Chartered Accountant from its panel, who shall submit the report before this court within three weeks' from date relating to the fairness and/or reasonableness of the share exchange ratio, and the cost for such purpose shall be borne by the petitioner. The petitioner is directed to hand over all the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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