Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
nd
% Judgment reserved on : 2 May, 2013
th
Judgment pronounced on: 16 May,2013
+ CO.APP. 70/2012
RAM KOHLI ..... Appellant
Through Mr. V.N. Koura with Ms.
Paramjeet Benipal, Advocates
versus
INDRAMA INVESTMENT PVT LTD
SELECT HOLIDAY RESORTS LTD ..... Respondent
Through Mr. N.P.S. Chawla, Mr. Satwinder
Singh and Mr. Nitin Gera,
Advocates
CORAM:
HON’BLE MR. JUSTICE SANJAY KISHAN KAUL
HON’BLE MR. JUSTICE SANJEEV SACHDEVA
SANJEEV SACHDEVA, J.
1. By way of the present appeal, the appellant impugns the decision
dated 01.06.2012 whereby the application of the appellant under
Section 394 (2) and Section 395 (1) of the Companies Act
(hereinafter referred to as the said Act), questioning the validity of
the scheme of amalgamation sanctioned by the Company Judge
vide order dated 24.08.2004, was dismissed.
2. Petition under Section 391 and 394 of the said Act were filed for
sanctioning the scheme of amalgamation of M/s Indrama
CO. APP. 70/2012 Page 1 of 13
Investment Private Limited (transferor company) with M/s Select
Holiday Resorts Ltd. (transferee company).
3. The transferor company filed an application under Section 391 (1)
and Section 394 of the Companies Act for dispensation of the
requirement of convening of the meeting of the equity
shareholders and creditors of the transferor company. The
Company Court while granting dispensation of the said meetings
of the transferor company directed convening of separate meetings
of equity shareholders, secured and unsecured creditors of the
transferee company.
4. Meetings of the transferee company, as directed, were held in
terms of the directions of the Company Court and in the respective
meetings, the scheme was approved with the requisite majority.
After the approval of the scheme petition was filed for sanction of
the scheme of arrangement under Section 391 (2) read with
Section 394 of the Act.
5. The court vide its order dated 21.04.2004 directed for issuance of
notice to Regional Director, Department of Company Affairs,
Kanpur and also for advertisement of the said scheme in the
newspapers. Pursuant to the notice, the Regional Director filed his
report giving his no objection to the grant of sanction to the
scheme of arrangement. Despite the advertisement in the
newspapers no objections were filed by anyone to the grant of
sanction to the scheme of arrangement. Vide order dated
CO. APP. 70/2012 Page 2 of 13
24.08.2004, the scheme of amalgamation/arrangement was
sanctioned.
6. After a lapse of about six months, the appellant filed an
application under Section 394 (2) and 395 (1) questioning the
validity of the scheme with a prayer for modification/recall of the
order dated 24.08.2004. Apart from the appellant herein one more
shareholder had filed a similar application, however after the
impugned order we are informed that he had not carried the matter
up in appeal and has accepted the scheme.
7. The appellant was a shareholder in M/s Select Holiday Resorts Ltd
(Transferee Company). The transferor company held 98% shares
of the transferee company and 1% shares in the transferee
company belonged to Mr. Inder Sharma and his family and only
1% of the shareholding was with the outsiders. The appellant had
a shareholding of approximately 0.001% (being 15000 shares out
of 15,000,000 shares) in the said transferee company.
8. In the scheme that was proposed, the objects that were sought be
achieved were as under:-
(i) “Both the transferor company as well as the transferee
company are closely held unlisted companies with a
commonlineage. The transferor company is holding
approximately 98% shareholding in the transferee company
and the balance is held by the individual shareholders,
including family members of Ms. Inder Sharma, the
promoter of both the companies whose holding constitutes
approximately 1% in the transferee company.
CO. APP. 70/2012 Page 3 of 13
(ii) The transferee company has been incurring losses in its
operations and had borrowed high cost funds over a period
from the banks and financial institutions and continues to
borrow funds from banks, which are secured by corporate
guarantees given by the transferor company.
(iii) Under the scheme, the entire assets and liability of the
transferor company will vest in the transferee company with
st
effect from 31 March, 2003 or such other date or dates as
this Court shall direct in consideration of the transferee
company allotting shares to the shareholders of the
transferor company in the manner indicated in the scheme.
It has been provided in Part-II of the scheme in Para Nos.
6.1 to 6.4 thereof that as a consequence of the sanctioning
of the present scheme the value of shares carrying face
value of Rs.10/- each of the transferee company shall be
reduced to Rs.0.20/- and the remaining to the extent of
Rs.9.80/- shall be cancelled/extinguished. The exchange
ratio, it is claimed, has been arrived at after due
consideration of the financial position, profitability and
effect of amalgmation in respect of the transferor company
and the transferee company and is considered to the fair
and reasonable taking all the circumstances into
consideration.
(iv) It is further claimed that by amalgamating the said two
companies, the cost and management of the said companies
will considerably be reduced and will result in carrying on
the business more economically and efficiently and also in
obtaining their main purpose by new and improved means
and enlarging their areas of operation.
(v) As a result of the amalgamation, the business of the two
companies can be combined conveniently and
advantageously.
(vi) As a result of the amalgamation, the resources of the two
companies will be pooled and the transferee company will
CO. APP. 70/2012 Page 4 of 13
be able to rationalize and strengthen its management,
finance and it will be able to conduct its business efficiently.
(vii) The amalgamation will result in usual benefits and
economies of scale, pooling and consolidation of resources
and reduction in the cost of management and overhead
expense and administration.
(viii) The amalgamation will have beneficial result for both the
companies concerned, their shareholders, employees,
creditors and all concerned.
9. In pursuance to the orders of the court dated 10.02.2004, meeting
of the secured/unsecured creditors and equity shareholders of the
transferee company was convened and the scheme was duly
approved without any modification.
10. Notices of the said meeting were also sent individually to the
equity shareholders of the transferee company together with the
copy of the scheme of arrangement besides being advertised in
two newspapers i.e. ‘The Statesman’(English) and ‘Dainik
Jagran’(Hindi).
11. The case of the appellant is that he never received any notice of
the meeting but claims knowledge of the sanction of the scheme
only on receipt of communication dated 14.12.2004 with regard to
disposal of the odd lots shares held by the members/shareholders
of the company.
12. The appellant who was holding 15,000 equity shares, as per the
scheme since the value of the shares carrying face value of Rs.10/-
had diminished to Rs.0.20 was to get one share for each 500
CO. APP. 70/2012 Page 5 of 13
shares and was thus entitled to only 30 shares in the new
company. As per the scheme shares below 50 in number were to
be treated as fractions and fractional shares were not to be allotted
but were to be sold by the trustees. The Board of Directors of the
transferee company were to appoint any bank or financial
institution or mutual fund or any of its directors or officers as
trustees for the purposes of sale of the fractional shares at the best
available price in one or more lots by private sale/placement.
13. The Scheme of amalgamation/arrangements that was proposed
th
was sanctioned by the Company Court vide order dated 24
August, 2004.
14. The appellant thereafter filed an application under Section 394 (2)
and Section 395 (1) of the Companies Act (hereinafter referred to
as the said Act), questioning the validity of the scheme of
amalgamation/arrangements sanctioned by the Company Court
vide order dated 24.08.2004.
15. The application filed by the appellant seeking recall of the
approving the scheme of amalgamation was dismissed vide the
impugned order dated 01.06.2012. Vide the impugned order, the
learned Company Court has noticed that it was not in dispute that
the procedure as laid down in Section 391 of the Act was followed
both at the stage of first motion and at the stage of second motion
before the scheme was approved.
16. Mr. V. N. Kaura, learned Senior Advocate appearing on behalf of
CO. APP. 70/2012 Page 6 of 13
the appellant contended that the appellant and other shareholders
whose shareholding was being treated as fraction under the
scheme should be treated as a separate class and a separate
meeting qua them should have been held.
17. Under Section 391 of the Companies Act, there is only one class
of equity shareholders. The decisive factor for determining the
class of shareholder is not the shareholding pattern but the
category of shares that one holds. All equity shareholders
constitute the same class of shareholders. Merely because
individuals held small fraction of shares, that would not make
them a separate class. All equity shareholders irrespective of the
shareholding pattern would constitute the same class. What the
appellant is seeking to do is to create a class within a class, which
is not what is contemplated in the scheme of Section 391 of the
Companies Act.
18. The procedure as prescribed under Section 391 has been duly
complied with and the company court has not at one but two
stages examined the scheme of amalgamation/arrangement and
has found the same not to be unfair or enquitable before giving its
imprimatur thereto. The company court at the time of sanction of
the scheme has examined the same and has not found the same to
be unfair or enquitable. When the appellant sought
modifications/recall of the order of sanction of the scheme vide
the impugned order, the scheme was re-examined and has been
once again found not to be unfair or enquitable.
CO. APP. 70/2012 Page 7 of 13
19. The appellant merely held 15,000 shares out of 15,000,000 shares
(i.e. 0.001% shares) in the transferee company. A person holding
0.001% miniscule share holding cannot defeat a scheme approved
by at least 99% of the shareholders. Even Section 391 Sub Section
th
(2) provides that a decision of majority i.e. 3/4 in value of the
creditors or class of creditors or class of members as the case may,
shall be binding on all the creditors and shareholders of that class
as well as on the company.
20. In the present case, not only 3/4 majority but 99% of the
shareholders have approved the scheme and the court has found
that there is disclosure of all relevant facts, material and financial
position.
21. We do not find any infirmity in the finding recorded in the
impugned order that the appellant did not constitute a separate
class of shareholders and that the due procedure as prescribed has
been followed.
22. Mr. V.N. Kaura further submitted that the effect of the scheme
was that the appellant was being forced to transfer his shares in the
company which was not permissible.
23. We find that this aspect has been very elaborately considered by
the company court in the impugned order and we are in full
agreement with the findings recorded therein. The Company Court
has relied on the judgment of Reckitt Benckiser (India) Ltd . 122
(2005) DLT 612 to come to the conclusion that the so-called
CO. APP. 70/2012 Page 8 of 13
forceful acquisition of the shares was not prohibited and the
present scheme was fair and reasonable and was permissible in
law. The said judgment relied upon by the Company Court has
examined the law as settled by various judicial pronouncements
not only by various High Courts and the Hon’ble Supreme Court
but also the principles on the issue by various judgments of the
House of Lords.
24. The learned Company Court has found the scheme of
amalgamation/arrangements as fair and bona fide and not
impermissible, we find no reason to take a different view.
25. Learned Counsel for the respondent has drawn our attention to
various judgments of the High Courts to contend that similar
schemes that provided for exist of the minority shareholders have
been examined and upheld therein. In support of his submissions
he relied upon the following judgments:-
(i) ITW Signodge India Limited In Re (2004) 52 SCL 147 (AP)
(ii) Matther and Platt Pumps Limited In re C.P.69 of 2010
(iii) Hoganas India Ltd. In Re [2009] 148 Comp Cas Bom
(iv) Organon India Limited 2010 (4) Bom CR 268
(v) Sandwik Asia Limited 2009 (3) BOM CR 57
(vi) Reckitt Benckister (India) Ltd. 122 (2005) DLT 612.
We have examined the judgments referred to by the respondent
and are in agreement with the principles laid down therein.
26. The Company Court while examining the scheme of
CO. APP. 70/2012 Page 9 of 13
amalgamation/arrangement does not have the jurisdiction to act
like an appellate authority to scrutinize the scheme minutely or to
arrive at an independent conclusion whether the scheme should be
permitted or not when the majority of the creditors or the
shareholders have approved the scheme as required by Section 391
(2) of the Companies Act.
27. The Company Court does not act as a court of appeal and does
not sit in judgment over the view of the concerned parties as the
same is in the realm of the corporate and commercial wisdom of
the concerned parties. The court has neither the expertise nor the
jurisdiction to go into the commercial wisdom exercised by the
creditors and shareholders of the company who have ratified the
scheme by the requisite scheme majority. The Company Courts
jurisdiction to that extent is peripheral and supervisory and not
appellate. The court cannot undertake the exercise of scrutinizing
the scheme placed before it with a view to find out whether a
better scheme could have been adopted by the parties. When the
scheme is sanctioned by the requisite majority, the jurisdiction of
the company court is to examine whether the scheme is fair and
reasonable and whether or is not it is violative of any provisions of
law or whether it is contrary to any public policy.
28. Learned senior Advocate for the appellant further submitted that
an option should have been given to the appellant whether to
continue as a shareholder or whether to accept the amount being
offered and to exit. We find no merit in the submission inasmuch
CO. APP. 70/2012 Page 10 of 13
as the scheme as a whole has to be considered and the court cannot
substitute the scheme. The scheme of acquisition of shares of
minority as mentioned hereinabove has been held by various
judicial pronouncements to be lawful, provided it is not done with
ulterior motives or mala fides. On examination of the facts and
circumstances we do not find that the scheme is mala fide or
actuated by ulterior motives. The Company Court has found the
scheme to be bona fide and reasonable and in the interests of the
company and we find no reason to take a different view.
29. The learned counsel for the respondent pointed out that the
scheme was sanctioned in the year 2004 and has in fact being
implemented in 2004 itself and majority of the shareholders whose
shares were acquired under the scheme have already accepted their
money and it is only the present appellant who possesses only
0.001% of the shareholding is approaching to the court for
rejecting the scheme. We find force in the submission of the
learned counsel for the respondent that a shareholder holding only
0.001% shares cannot be permitted to hold the company to ransom
where 99% of the shareholders have accepted the scheme and the
majority of the remaining shareholder comprising 1% have
accepted the scheme and taken the moneys in lieu of their shares.
Much water has flown under the bridge for this court now to
interfere with the scheme of amalgamation/arrangement.
30. As noticed herein above, the scheme has been examined by the
Company Court not only at the time when it was sanctioned in
CO. APP. 70/2012 Page 11 of 13
2004 but also at the time of the passing of the impugned order.
The company Court has found the scheme to be reasonable bona
fide and not unjustified. We see no reason to take a contra view to
the view taken by the learned Single Judge.
31. We may also note that the present appeal has been filed under
section 483 of the Companies Act which forms part of Part – VII
of Chapter – II. Part VII deals with winding up of a company. In
the present case, we are concerned with a scheme of
amalgamation/arrangement which would be governed by Part –
VI, Chapter – V dealing with Arbitration, Compromises,
Arrangements and Reconstructions. In fact, under section 391 of
the Companies Act there was earlier a provision of appeal under
sub-section (7) which since stands deleted without creating a
corresponding provision for appeal. The present appeal has been
filed impugning the order dismissing the application seeking recall
of the sanction of the scheme which would virtually amount to
being an appeal against the order of review.
32. The moot point, thus, arises, whether the impugned order is at all
appealable by seeking recourse to a different provision meant for
winding up of a company. Since we had heard the appeal on
merits and found that the finding of the learned Single Judge
holding that the scheme to be fair and reasonable do not call for
any interference, we leave this question open.
33. We find no infirmity in the impugned order and the appeal being
CO. APP. 70/2012 Page 12 of 13
devoid of merit is accordingly dismissed with no orders as to
costs.
SANJEEV SACHDEVA, J.
MAY 16, 2013 SANJAY KISHAN KAUL, J.
pkv
CO. APP. 70/2012 Page 13 of 13
nd
% Judgment reserved on : 2 May, 2013
th
Judgment pronounced on: 16 May,2013
+ CO.APP. 70/2012
RAM KOHLI ..... Appellant
Through Mr. V.N. Koura with Ms.
Paramjeet Benipal, Advocates
versus
INDRAMA INVESTMENT PVT LTD
SELECT HOLIDAY RESORTS LTD ..... Respondent
Through Mr. N.P.S. Chawla, Mr. Satwinder
Singh and Mr. Nitin Gera,
Advocates
CORAM:
HON’BLE MR. JUSTICE SANJAY KISHAN KAUL
HON’BLE MR. JUSTICE SANJEEV SACHDEVA
SANJEEV SACHDEVA, J.
1. By way of the present appeal, the appellant impugns the decision
dated 01.06.2012 whereby the application of the appellant under
Section 394 (2) and Section 395 (1) of the Companies Act
(hereinafter referred to as the said Act), questioning the validity of
the scheme of amalgamation sanctioned by the Company Judge
vide order dated 24.08.2004, was dismissed.
2. Petition under Section 391 and 394 of the said Act were filed for
sanctioning the scheme of amalgamation of M/s Indrama
CO. APP. 70/2012 Page 1 of 13
Investment Private Limited (transferor company) with M/s Select
Holiday Resorts Ltd. (transferee company).
3. The transferor company filed an application under Section 391 (1)
and Section 394 of the Companies Act for dispensation of the
requirement of convening of the meeting of the equity
shareholders and creditors of the transferor company. The
Company Court while granting dispensation of the said meetings
of the transferor company directed convening of separate meetings
of equity shareholders, secured and unsecured creditors of the
transferee company.
4. Meetings of the transferee company, as directed, were held in
terms of the directions of the Company Court and in the respective
meetings, the scheme was approved with the requisite majority.
After the approval of the scheme petition was filed for sanction of
the scheme of arrangement under Section 391 (2) read with
Section 394 of the Act.
5. The court vide its order dated 21.04.2004 directed for issuance of
notice to Regional Director, Department of Company Affairs,
Kanpur and also for advertisement of the said scheme in the
newspapers. Pursuant to the notice, the Regional Director filed his
report giving his no objection to the grant of sanction to the
scheme of arrangement. Despite the advertisement in the
newspapers no objections were filed by anyone to the grant of
sanction to the scheme of arrangement. Vide order dated
CO. APP. 70/2012 Page 2 of 13
24.08.2004, the scheme of amalgamation/arrangement was
sanctioned.
6. After a lapse of about six months, the appellant filed an
application under Section 394 (2) and 395 (1) questioning the
validity of the scheme with a prayer for modification/recall of the
order dated 24.08.2004. Apart from the appellant herein one more
shareholder had filed a similar application, however after the
impugned order we are informed that he had not carried the matter
up in appeal and has accepted the scheme.
7. The appellant was a shareholder in M/s Select Holiday Resorts Ltd
(Transferee Company). The transferor company held 98% shares
of the transferee company and 1% shares in the transferee
company belonged to Mr. Inder Sharma and his family and only
1% of the shareholding was with the outsiders. The appellant had
a shareholding of approximately 0.001% (being 15000 shares out
of 15,000,000 shares) in the said transferee company.
8. In the scheme that was proposed, the objects that were sought be
achieved were as under:-
(i) “Both the transferor company as well as the transferee
company are closely held unlisted companies with a
commonlineage. The transferor company is holding
approximately 98% shareholding in the transferee company
and the balance is held by the individual shareholders,
including family members of Ms. Inder Sharma, the
promoter of both the companies whose holding constitutes
approximately 1% in the transferee company.
CO. APP. 70/2012 Page 3 of 13
(ii) The transferee company has been incurring losses in its
operations and had borrowed high cost funds over a period
from the banks and financial institutions and continues to
borrow funds from banks, which are secured by corporate
guarantees given by the transferor company.
(iii) Under the scheme, the entire assets and liability of the
transferor company will vest in the transferee company with
st
effect from 31 March, 2003 or such other date or dates as
this Court shall direct in consideration of the transferee
company allotting shares to the shareholders of the
transferor company in the manner indicated in the scheme.
It has been provided in Part-II of the scheme in Para Nos.
6.1 to 6.4 thereof that as a consequence of the sanctioning
of the present scheme the value of shares carrying face
value of Rs.10/- each of the transferee company shall be
reduced to Rs.0.20/- and the remaining to the extent of
Rs.9.80/- shall be cancelled/extinguished. The exchange
ratio, it is claimed, has been arrived at after due
consideration of the financial position, profitability and
effect of amalgmation in respect of the transferor company
and the transferee company and is considered to the fair
and reasonable taking all the circumstances into
consideration.
(iv) It is further claimed that by amalgamating the said two
companies, the cost and management of the said companies
will considerably be reduced and will result in carrying on
the business more economically and efficiently and also in
obtaining their main purpose by new and improved means
and enlarging their areas of operation.
(v) As a result of the amalgamation, the business of the two
companies can be combined conveniently and
advantageously.
(vi) As a result of the amalgamation, the resources of the two
companies will be pooled and the transferee company will
CO. APP. 70/2012 Page 4 of 13
be able to rationalize and strengthen its management,
finance and it will be able to conduct its business efficiently.
(vii) The amalgamation will result in usual benefits and
economies of scale, pooling and consolidation of resources
and reduction in the cost of management and overhead
expense and administration.
(viii) The amalgamation will have beneficial result for both the
companies concerned, their shareholders, employees,
creditors and all concerned.
9. In pursuance to the orders of the court dated 10.02.2004, meeting
of the secured/unsecured creditors and equity shareholders of the
transferee company was convened and the scheme was duly
approved without any modification.
10. Notices of the said meeting were also sent individually to the
equity shareholders of the transferee company together with the
copy of the scheme of arrangement besides being advertised in
two newspapers i.e. ‘The Statesman’(English) and ‘Dainik
Jagran’(Hindi).
11. The case of the appellant is that he never received any notice of
the meeting but claims knowledge of the sanction of the scheme
only on receipt of communication dated 14.12.2004 with regard to
disposal of the odd lots shares held by the members/shareholders
of the company.
12. The appellant who was holding 15,000 equity shares, as per the
scheme since the value of the shares carrying face value of Rs.10/-
had diminished to Rs.0.20 was to get one share for each 500
CO. APP. 70/2012 Page 5 of 13
shares and was thus entitled to only 30 shares in the new
company. As per the scheme shares below 50 in number were to
be treated as fractions and fractional shares were not to be allotted
but were to be sold by the trustees. The Board of Directors of the
transferee company were to appoint any bank or financial
institution or mutual fund or any of its directors or officers as
trustees for the purposes of sale of the fractional shares at the best
available price in one or more lots by private sale/placement.
13. The Scheme of amalgamation/arrangements that was proposed
th
was sanctioned by the Company Court vide order dated 24
August, 2004.
14. The appellant thereafter filed an application under Section 394 (2)
and Section 395 (1) of the Companies Act (hereinafter referred to
as the said Act), questioning the validity of the scheme of
amalgamation/arrangements sanctioned by the Company Court
vide order dated 24.08.2004.
15. The application filed by the appellant seeking recall of the
approving the scheme of amalgamation was dismissed vide the
impugned order dated 01.06.2012. Vide the impugned order, the
learned Company Court has noticed that it was not in dispute that
the procedure as laid down in Section 391 of the Act was followed
both at the stage of first motion and at the stage of second motion
before the scheme was approved.
16. Mr. V. N. Kaura, learned Senior Advocate appearing on behalf of
CO. APP. 70/2012 Page 6 of 13
the appellant contended that the appellant and other shareholders
whose shareholding was being treated as fraction under the
scheme should be treated as a separate class and a separate
meeting qua them should have been held.
17. Under Section 391 of the Companies Act, there is only one class
of equity shareholders. The decisive factor for determining the
class of shareholder is not the shareholding pattern but the
category of shares that one holds. All equity shareholders
constitute the same class of shareholders. Merely because
individuals held small fraction of shares, that would not make
them a separate class. All equity shareholders irrespective of the
shareholding pattern would constitute the same class. What the
appellant is seeking to do is to create a class within a class, which
is not what is contemplated in the scheme of Section 391 of the
Companies Act.
18. The procedure as prescribed under Section 391 has been duly
complied with and the company court has not at one but two
stages examined the scheme of amalgamation/arrangement and
has found the same not to be unfair or enquitable before giving its
imprimatur thereto. The company court at the time of sanction of
the scheme has examined the same and has not found the same to
be unfair or enquitable. When the appellant sought
modifications/recall of the order of sanction of the scheme vide
the impugned order, the scheme was re-examined and has been
once again found not to be unfair or enquitable.
CO. APP. 70/2012 Page 7 of 13
19. The appellant merely held 15,000 shares out of 15,000,000 shares
(i.e. 0.001% shares) in the transferee company. A person holding
0.001% miniscule share holding cannot defeat a scheme approved
by at least 99% of the shareholders. Even Section 391 Sub Section
th
(2) provides that a decision of majority i.e. 3/4 in value of the
creditors or class of creditors or class of members as the case may,
shall be binding on all the creditors and shareholders of that class
as well as on the company.
20. In the present case, not only 3/4 majority but 99% of the
shareholders have approved the scheme and the court has found
that there is disclosure of all relevant facts, material and financial
position.
21. We do not find any infirmity in the finding recorded in the
impugned order that the appellant did not constitute a separate
class of shareholders and that the due procedure as prescribed has
been followed.
22. Mr. V.N. Kaura further submitted that the effect of the scheme
was that the appellant was being forced to transfer his shares in the
company which was not permissible.
23. We find that this aspect has been very elaborately considered by
the company court in the impugned order and we are in full
agreement with the findings recorded therein. The Company Court
has relied on the judgment of Reckitt Benckiser (India) Ltd . 122
(2005) DLT 612 to come to the conclusion that the so-called
CO. APP. 70/2012 Page 8 of 13
forceful acquisition of the shares was not prohibited and the
present scheme was fair and reasonable and was permissible in
law. The said judgment relied upon by the Company Court has
examined the law as settled by various judicial pronouncements
not only by various High Courts and the Hon’ble Supreme Court
but also the principles on the issue by various judgments of the
House of Lords.
24. The learned Company Court has found the scheme of
amalgamation/arrangements as fair and bona fide and not
impermissible, we find no reason to take a different view.
25. Learned Counsel for the respondent has drawn our attention to
various judgments of the High Courts to contend that similar
schemes that provided for exist of the minority shareholders have
been examined and upheld therein. In support of his submissions
he relied upon the following judgments:-
(i) ITW Signodge India Limited In Re (2004) 52 SCL 147 (AP)
(ii) Matther and Platt Pumps Limited In re C.P.69 of 2010
(iii) Hoganas India Ltd. In Re [2009] 148 Comp Cas Bom
(iv) Organon India Limited 2010 (4) Bom CR 268
(v) Sandwik Asia Limited 2009 (3) BOM CR 57
(vi) Reckitt Benckister (India) Ltd. 122 (2005) DLT 612.
We have examined the judgments referred to by the respondent
and are in agreement with the principles laid down therein.
26. The Company Court while examining the scheme of
CO. APP. 70/2012 Page 9 of 13
amalgamation/arrangement does not have the jurisdiction to act
like an appellate authority to scrutinize the scheme minutely or to
arrive at an independent conclusion whether the scheme should be
permitted or not when the majority of the creditors or the
shareholders have approved the scheme as required by Section 391
(2) of the Companies Act.
27. The Company Court does not act as a court of appeal and does
not sit in judgment over the view of the concerned parties as the
same is in the realm of the corporate and commercial wisdom of
the concerned parties. The court has neither the expertise nor the
jurisdiction to go into the commercial wisdom exercised by the
creditors and shareholders of the company who have ratified the
scheme by the requisite scheme majority. The Company Courts
jurisdiction to that extent is peripheral and supervisory and not
appellate. The court cannot undertake the exercise of scrutinizing
the scheme placed before it with a view to find out whether a
better scheme could have been adopted by the parties. When the
scheme is sanctioned by the requisite majority, the jurisdiction of
the company court is to examine whether the scheme is fair and
reasonable and whether or is not it is violative of any provisions of
law or whether it is contrary to any public policy.
28. Learned senior Advocate for the appellant further submitted that
an option should have been given to the appellant whether to
continue as a shareholder or whether to accept the amount being
offered and to exit. We find no merit in the submission inasmuch
CO. APP. 70/2012 Page 10 of 13
as the scheme as a whole has to be considered and the court cannot
substitute the scheme. The scheme of acquisition of shares of
minority as mentioned hereinabove has been held by various
judicial pronouncements to be lawful, provided it is not done with
ulterior motives or mala fides. On examination of the facts and
circumstances we do not find that the scheme is mala fide or
actuated by ulterior motives. The Company Court has found the
scheme to be bona fide and reasonable and in the interests of the
company and we find no reason to take a different view.
29. The learned counsel for the respondent pointed out that the
scheme was sanctioned in the year 2004 and has in fact being
implemented in 2004 itself and majority of the shareholders whose
shares were acquired under the scheme have already accepted their
money and it is only the present appellant who possesses only
0.001% of the shareholding is approaching to the court for
rejecting the scheme. We find force in the submission of the
learned counsel for the respondent that a shareholder holding only
0.001% shares cannot be permitted to hold the company to ransom
where 99% of the shareholders have accepted the scheme and the
majority of the remaining shareholder comprising 1% have
accepted the scheme and taken the moneys in lieu of their shares.
Much water has flown under the bridge for this court now to
interfere with the scheme of amalgamation/arrangement.
30. As noticed herein above, the scheme has been examined by the
Company Court not only at the time when it was sanctioned in
CO. APP. 70/2012 Page 11 of 13
2004 but also at the time of the passing of the impugned order.
The company Court has found the scheme to be reasonable bona
fide and not unjustified. We see no reason to take a contra view to
the view taken by the learned Single Judge.
31. We may also note that the present appeal has been filed under
section 483 of the Companies Act which forms part of Part – VII
of Chapter – II. Part VII deals with winding up of a company. In
the present case, we are concerned with a scheme of
amalgamation/arrangement which would be governed by Part –
VI, Chapter – V dealing with Arbitration, Compromises,
Arrangements and Reconstructions. In fact, under section 391 of
the Companies Act there was earlier a provision of appeal under
sub-section (7) which since stands deleted without creating a
corresponding provision for appeal. The present appeal has been
filed impugning the order dismissing the application seeking recall
of the sanction of the scheme which would virtually amount to
being an appeal against the order of review.
32. The moot point, thus, arises, whether the impugned order is at all
appealable by seeking recourse to a different provision meant for
winding up of a company. Since we had heard the appeal on
merits and found that the finding of the learned Single Judge
holding that the scheme to be fair and reasonable do not call for
any interference, we leave this question open.
33. We find no infirmity in the impugned order and the appeal being
CO. APP. 70/2012 Page 12 of 13
devoid of merit is accordingly dismissed with no orders as to
costs.
SANJEEV SACHDEVA, J.
MAY 16, 2013 SANJAY KISHAN KAUL, J.
pkv
CO. APP. 70/2012 Page 13 of 13