Allowed

Torrent Power Sec Ltd. v. ...

Gujarat HC12 Jul 2006COMP/68/2006

Case brief

AI extract

What is this about?

This judgment sanctions a Scheme of Arrangement involving amalgamation of three transferor companies with Torrent Power Limited and reorganization of share capital. The court held the scheme was just, fair, and reasonable, satisfying statutory requirements under the Companies Act, 1956, and dismissed objections regarding share valuation and capital reduction.

What did the court decide?

Sanctioned the Scheme of Arrangement (Annexure-C) and minutes under Section 103 for reduction of capital; permitted filing of common order under Form No.42.

Torrent Power Sec Ltd. Vs ... — Company and Corporate | Gujarat HC (2006)

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COMP/67/2006

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JUDGMENT

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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COMPANY PETITION No. 67 of 2006
In
COMPANY APPLICATION No. 216 of 2006
With
COMPANY PETITION No. 68 of 2006
In
 COMPANY APPLICATION No. 220 of 2006
With
COMPANY PETITION No. 69 of 2006
In
 COMPANY APPLICATION No. 221 of 2006
With
COMPANY PETITION No. 70 of 2006
In
COMPANY APPLICATION No. 222 of 2006

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For Approval and Signature:

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HONOURABLE MR.JUSTICE ANANT S.DAVE

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1^{Whether Reporters of Local Papers may be} allowed to see the judgment ?

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2 To be referred to the Reporter or not ?

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3^{Whether their Lordships wish to see the} fair copy of the judgment ? Whether this case involves a substantial

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question of law as to the interpretation

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4 of the constitution of India, 1950 or any order made thereunder ?

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5^{Whether it is to be circulated to the} civil judge ?

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TORRENT POWER AEC LTD. - Petitioner(s) Versus

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... - Respondent(s)

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Appearance :

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MR S.N.SOPARKAR, Ld.Senior Counsel appearing with Mrs. SWATI SOPARKAR
for Petitioner(s) : 1,

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MR SUNIL L MEHTA for Respondent(s) : 1,

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MR PURVISH J MALKAN for Respondent(s) : 1,

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MR.VARUN K.PATEL for Respondent(s) : 1,

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JUDGMENT

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CORAM : HONOURABLE MR.JUSTICE ANANT S.DAVE

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Date : 12/07/2006

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ORAL JUDGMENT

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1. All these petitions are filed for sanction

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of the Scheme of arrangement under Sections
100, 101 and 391 to 394 of the Companies Act,
1956. The Company Petition No. 67 of 2006 is
for a Scheme of Arrangement including
Amalgamation to be made between Torrent Power
AEC Limited (TAPL) (hereinafter referred to
as “the petitioner company” or “the
Transferor Company”) and Torrent Power
Limited (TPL) (hereinafter referred to as
“the Transferee Company”) as well as the
Reorganization of the Share Capital of the
Transferee Company since the petitioner being
a Public Limited Company within the meaning
of Companies Act, 1956.

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2. So far as the Company Petition No.68 of 2006
is concerned, it is for the sanction of this

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JUDGMENT

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Court to a Scheme of Arrangement including
the Amalgamation to be made between Torrent

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Power SEC Limited (TPSL) (hereinafter

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referred to as “the petitioner company” or
“the Transferor Company”) and Torrent Power
Limited (TPL) (hereinafter referred to as
“the Transferee Company”) as well as the
Reorganization of the Share Capital of the
Transferee Company, since the petitioner
being a Public Limited Company within the
meaning of Companies Act, 1956.

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Company Petition No. 69 of 2006 is

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concerned, it is for the sanction of this
Court to a Scheme of Arrangement including

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the Amalgamation to be made between Torrent

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Power Generation Limited (TPGL) (hereinafter

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referred to as “the petitioner company” or

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“the Transferor Company”) and Torrent Power
Limited (TPL) (hereinafter referred to as

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Transferee Company) as well as the
Reorganization of the Share Capital of the

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Transferee Company since company being a
Public Limited Company within the meaning of
Companies Act, 1956.

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So far as the Company Petition No.70 of
2006 is concerned, it is for the sanction of
a Scheme of Arrangement including the
Amalgamation of Torrent Power AEC Limited
(TPAL), Torrent Power SEC Limited (TPSL) and
Torrent Power Generation Limited (TPGL)
(hereinafter referred to as “the Transferor
Companies”) with Torrent Power Limited (TPL)
(hereinafter referred to as “the petitioner
company” or “the Transferee Company”) as well
as for the Reorganization of the Share
Capital of the petitioner Company, being a
Public Limited Company within the meaning of
Companies Act, 1956.

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Thus, TPAL, TPSL and TPGL are the
Transferor Companies and TPL is the
Transferee Company. There is consensus

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amongst learned advocates appearing for

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respective parties to hear this case finally
today.

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3. It is the case of the petitioner Company
that on 28th day of May, 1913, the Ahmedabad
Electricity Company Limited, under the
provisions of Indian Companies Act, VI of
1882 of the Legislative Council of India came

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to be incorporated. The name of the company
was subsequently changed to Torrent Power AEC

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Limited on 28th October, 2004. As per the

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Audited Balance Sheet on 31.03.2005, the
authorized share capital is Rs.50,000 lacs

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issued Rs.11,327.58 lacs and Subscribed and

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Paid-up Share Capital is Rs.6327.44 lacs. The

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Memorandum and Articles of Association of the

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petitionerCompanyisannexedwith

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Annexure-'A' to the petition, which broadly
enumerates business of the Company to be
carried out and so as to generate, develop

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and accumulate electrical power and also to
transmit, distribute and supply such power at
various places. It also mentions incidental

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or ancillary object to the attainment of main

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objects which clearly provided for entering
into any arrangement from sharing profits,
amalgamation, union of interests, co-
operation or otherwise with any person or
company engaged in any business etc. It is
stated that petitioner Company i.e. Torrent
Power AEC Limited (TPAL) and earlier known as
Ahmedabad Electricity Company Limited, is 93
year old integrated power generation,
transmission and distribution power and the

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company listed on Bombay Stock Exchange
Limited and National Stock Exchange of India
Limited, with generating capacity of 500 MW

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and supplier of 4 billion units of power to
around 1.3 million customers. The Company for
the financial year 2004-05 has total income
of approximately Rs.1335 crores and the net

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profit was nearly Rs.106.71 crores and built
up reserves of nearly Rs.632 crores.

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4. The Transferee Company Torrent Power

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Limited (TPL) was incorporated as a Private
Limited Company on 29th April, 2004, on a
change of name it is known after conversion
into a Public Limited Company as a Torrent
Power Limited. A Fresh Certificate of
Incorporation was obtained on 08.02.2006
which is also to undertake consolidated
operation of the three Transferor Companies
of the Torrent Group in the power sector.

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5. The reasons narrated for Scheme of

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arrangement is with a view to consolidate the
power business of the Torrent Group of
amalgamating three Companies i.e. TPAL, TPSL

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and TPGL into TPL and considering the
scenario prevailing in the energy sector, it
was thought fit that in order to enable the

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group to be more competitive and for better
growth opportunities so as to capitalize on
the strength of these three companies in a
systematic, integrated and optimized fashion.

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The Board of Directors has decided for
amalgamation so that twin objectives of
sustainability of the existing efficiency
parameters and future growth can be achieved.
It also narrates strategic, financial,
Organizational and Operational advantage so
that proposed amalgamation could enable the
group to leverage its existing assets and
human resources for enhancing the value of
its stakeholders. It has also in its mind
certain other commercial advantages and
better investments opportunities in the power
sector in this Country.

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6. It is further stated about determination

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of exchange ratio to be provided in the
scheme, to the shareholders of three

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transferor companies and it was thought
broadly to downsize the resultant equity
capital of the amalgamated company to
maintain/approve the earning per share and
also to maintain reasonable trading float
ensuring better price discovery so that
stakeholders can have certain benefits and
the difference so arising out of proposed
reduction is to be transferred to general
reserve. That reorganisation of the share
capital of the transferee company being
consequential it is stated that amalgamation
proposed is an integral part of the scheme.

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7. The salient features of the Scheme of

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arrangement, Part-I, annexed at Annexure:-'C'
after referring to various definitions

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mentioned about appointed date as dtd.01st
April, 2005 is in Clause 2.2. Clause 2.3
mentions about “Assets” and includes
undertakings of each of the transferor

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company. It also states about Transfer and
vesting of undertaking of the transferor
companies to transferee companies from the
appointed date. Clause-3 refers to operative

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date. That Clause-4 of Part-II is for share

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capital. Part-III is about Amalgamation. So
far as legal proceedings are concerned, it is
clearly stated in Clause-7 that all suits,
actions and proceedings of whatever nature by
or against the Transferor Companies pending
and/or arising on or before the Effective
Date shall not abate, or be discontinued or
be in any way prejudicially affected by
reason of the transfer of the business of the
Transferor Companies pursuant to the scheme
as proposed. It is further stated that such
legal proceedings if any, to be continued,
prosecuted and enforce by or against the
Transferee Company as effectually as if the
same had been pending and/or arising against
the Transferee Company, so if the provisions

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and undertaking by the Transferee Company
about the legal proceedings.

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8. The scheme makes specific provisions in
Clause-12 are as under:-

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“Clause 12: ISSUE OF SHARES BY THE
TRANSFEREE COMPANYAND REORGANISATION OF

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ITS SHARE CAPITAL:-

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Clause-12.1:-The Board of Directors of the

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Transferor Companies and the Transferee
Company appointed M/s. N.M.Raiji & Co.,

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Chartered Accountants as the valuer for

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determination of fair exchange ratio for

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issue of shares to the shareholders of the

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Transferor Companies by the Transferee
Company pursuant to the amalgamation of the

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Transferor Companies with the Transferee

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Company. A fairness opinion has also been

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provided by M/s Ernst & Young Private
Limited on the valuation done by M/s.
N.M.Raiji & Co.

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Clause-12.2:- Upon coming into effect of

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this Scheme and in consideration of the
transfer and vesting of the Undertaking of
the Transferor Companies in the Transferee

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Company the Transferee Company shall,
subject to the subsequent provisions of the
Scheme and without any further application
or deed, be required to issue and allot to
the equity shareholders of the Transferor
Companies whose names appear in the
Register of Members of the Transferor
Companies as on the Record Date, equity
shares of the face value of Rs.10/- each in
the Transferee Company, credited as fully
paid-up, (hereinafter referred to as the
“Exchange Shares”), in the following
manner.

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(a) 22 (Twenty Two) equity shares of
Rs.10/- each fully paid-up of Torrent

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Power Limited for every 1 (one) equity

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shares of Rs.10/- each fully paid-up
held in Torrent Power AEC Limited.

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(b) 47 (Forty Seven) equity shares of
Rs.10/- each fully paid-up of Torrent
Power Limited for every 1 (one) equity
shares of Rs.10/- each fully paid-up
held in Torrent Power SEC Limited.

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(c) 1 (One) equity shares of Rs.10/-
each fully paid-up of Torrent Power
Limited for every 1 (one) equity shares
of Rs.10/- each fully paid-up held in
Torrent Power Generation Limited.

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scheme being effective, the shares of
TPGL held by TPAL and TPSL shall be
cancelled and no shares shall be issued

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by the Transferee Company against these
shares.”

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Clause:12.3:- Upon the Scheme
becomingeffective,theissued,
subscribed and paid up equity share
capital of the Transferee Company shall
stand reduced with effect from the
Appointed Date, in accordance with
Section 100 and all other applicable
provisions of the Act, if any, in the
manner as provided hereunder:

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a) The issued, subscribed and paid up
equity share capital of the Transferee
Company including the Exchange Shares
shall be reduced by reducing the face
value and paid up value of the said
shares from Rs.10/- each to Rs.2.50/-
each. Consequent to such reduction in

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the value of the shares from Rs.10/-
each to Rs.2.50/- each, value of the
shareholding of the shareholders of the
Transferee Company, including the

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allotees of the Exchange Shares, shall
be reduced proportionately.

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b) Simultaneously, 4 (four) equity
shares (including the Exchange Shares),
each of Rs.2.50/-shall be consolidated
into 1 (One) share of Rs.10/- fully paid
up.

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c) It is hereby clarified that the
amount of Rs.1417.35 Crore by which the

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share capital of the Transferee Company
including the Exchange Shares is reduced

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in terms of Clause 12.3 (a) of the
Scheme, shall not be paid to the
shareholders of the Transferee Company

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but shall be credited to the “General
Reserve” account of the Transferee
Company.

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Clause-12.4:-. In view of Clauses
12.1, 12.2 and 12.3 of the Scheme, upon

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coming into effect of this Scheme and in

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consideration of the transfer and
vesting of the Undertaking of the
Transferor Companies in the Transferee
Company, the Transferee Company shall
actually issue and allot to the equity
shareholders of the Transferor Companies
whose names appear in the Register of
Members of the Transferor Companies as

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on the Record Date, equity shares
mentioned hereunder (hereinafter called
the “New Equity Shares”) of the face
value of Rs.10/- each in the Transferee
Company credited as fully paid-up, in
the following manner:

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a) 5.5 (Five and Half) equity shares of
Rs.10/- each fully paid-up of Torrent
Power Limited for every 1 (one) equity

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shares of Rs.10/- each fully paid-up
held in Torrent Power AEC Limited.

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b) 11.75 (Eleven and Three Fourth)
equity shares of Rs.10/- each fully

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paid-up Torrent Power Limited for every
1 (one) equity shares of Rs.10/- each
fully paid-up held in Torrent Power SEC
Limited.

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c) 0.25 (One Fourth) equity shares of
Rs.10/- each fully paid-up of Torrent

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Power Limited for every 1 (One) equity
shares of Rs.10/- each fully paid-up
held in Torrent Power Generation
Limited.”

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It is clarified that on the scheme

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being effective, the shares of TPGL held
by TPAL and TPSL shall be cancelled and
no shares shall be issued by the
TransfereeCompanyagainstthese

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shares.”

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Clause:12.5:- The Scheme makes

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provision that reduction of capital of
Transferee Company pursuant to the
scheme shall be given effect as an

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integral part of the scheme and the
consent given to the scheme by the
shareholders and creditors of the

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Transferee Company shall be deemed to be

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their consent under the provisions of
Section 100 and all other applicable
provisions of the Act to such reduction
of the capital of the Transferee Company
and the Transferee Company shall not be
required to convene any separate meeting
for such purpose. It is also stated that
the order of the Hon'ble High Court
sanctioning the Scheme shall be deemed
to be an Order under Section 102 of the
Act.

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9. In Clause:-12.6 (a) to (g), it is stated

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that Transferee Company shall take steps for

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listing of shares and the listing agreement
with the stock exchange where the shares of
the Transferor Companies are listed is on

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record and it assures listing of these shares
on the stock exchange where the agreement

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exists in accordance with the SEBI
(DisclosureandInvestorProtection)
Guidelines, 2000. New equity shares to be
issue to shareholders of Transferor company

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to rank parri passu with the existing equity
shares of the Transferee Company in respect
of dividend, bonus, right shares, voting
rights and other corporate benefits. Until
the Effective Date, the holders of the equity
shares of the Transferor Companies shall
continue to enjoy their rights under their
Articles of Association, including the right
to receive dividend if any, declared in
accordance with the Act and the Articles of
Association of the Transferor Companies.
Clause 13 is pertaining to amendment to
memorandum and articles of association of the
transferee company.

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10. It is also stated that by an order dated
01st May, 2006, the learned Company Judge had
directed the petitioner company to convene
the separate meetings of equity shareholders,
unsecured creditors and secured creditors of

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the company for considering the scheme and if
thought to approve with or without
modification and accordingly Chairman of the
meetings came to be appointed and report of
the Chairman dated 10th June, 2006 is on
record at Annexure:-'E' to the petition.

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11. With the above backdrop of the facts,
the petitioner has submitted the scheme for
sanction before this Court so as to bind on
all equity shareholders, unsecured creditors
and secured creditors of the Petitioner
Company and also on the petitioner company.

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12. At the outset, three objectors have
raised their objections against sanction
granted by this Court. Objections filed by

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Dr. Arvind Gupta, a shareholder is placed on
record so as another objector Shri Pravinsinh

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Jadeja, also a shareholder and the third
objector has also filed his objection in
Company Petition No.67 of 2006. All the
objectors have common grievances and they
have relied on submissions of Shri K.M.Patel,
learned advocate appearing on behalf of
second objector.

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13. As per the objectors, one of the main
objections is that being shareholder, he has
challenged the Government Resolution dated
16.07.1997, whereby a sale transaction and
ownership of 28.89% of equity shares in the
Torrent Power AEC limited is questioned.
According to him, the above Special Civil
Application No.8936 of 1998 is admitted by

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this Court and is pending for final hearing.
The second objection is with regard to the
outcome of the scheme if sanctioned would

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result into erosion of share capital of the
shareholders since reduction in the face
value of the shares would effectively result
in the issue of new shares and the offer made
in the scheme is illusive and amounts an
eyewash.

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14. The third objection is raised to the
effect that that public institution like
Government of Gujarat, Gujarat State
Investments Ltd., Life Insurance Corporation

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of India Limited, The Oriental Insurance
Company Limited, National Insurance Company
Limited, General Insurance Corporation of
India Ltd. have acted contrary to the public
interest and failed to protect interest of
different class of investors and tax-payers
for the country. According to the objector if

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the scheme is unfair, unreasonable and
detrimental to the shareholders, the Court
can certainly judiciously x-ray the scheme by

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lifting the veil and reject the same. It is
the fourth objection that determination of
exchange ratio is not recommended by the firm
of Chartered Accountant. According to the

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objector, evaluation of the shares by two
different experts i.e. M/s.N.M.Raiji and
Company and M/s. C.C.Choksi and Company,
firms of the Chartered Accountant, there is
price difference between two valuations
within the very short span and the difference
is Rs.107 per share since on March 10th, 2006
shares of Torrent Power AEC Limited (TPAL)
was evaluated at Rs.327/- as per
M/s.C.C.Choksi & Co. and later on in the

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scheme, the value of the same share is shown

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as Rs.220/- on March, 22, 2006 as per

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M/s.N.M.Raiji & Co. which is contrary to the
interest of the public at large. The fifth

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objection is raised that the mandatory
provisions of Sections 101 and 102 of the
Companies Act, 1956 have been by-passed and

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reduction in share capital need not be
permitted. The sixth objection is raised by
relying on the explanatory statement that
sufficient material is not disclosed about
status of Transferee Company and sanctioning
of scheme would ultimately create monopoly at
the hand of the directors who will be
exclusively in a control of the affairs of
the Transferee Company, which is at a nascent
stage and having equity of Rs.5 lakhs and
virtually controlled by the directors. Lastly
accumulation of free reserve by Rs.1417.35
Crores, will be at disposal of the Directors
of the Transferee Company will create

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monopoly and thus it will be against public
interest.

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15. Objections raised by the second and third
objectors are of the similar nature and need
not require reproduction. Shri Sunil Mehta,
learned advocate has adopted submissions of

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learned advocate Shri K.M.Patel appearing for
another objectors.

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objections placed on record are denied by the
petitioner company by filing affidavit-in-
rejoinder and it is stated that the
shareholders representing around 85% of the

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total value of shares, attended the meeting
and 97.12% in number and 99.999 % in value
agreed to the scheme. Thus, the scheme was
approved 97.12% in number and 99.999% in
value by members present and voting by
overwhelming majority of the shareholders in

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number and in value of shares. It is also
stated that voting of Government of Gujarat
and its industrial investment agency and
other financial institution is in accordance

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with law. It is further stated that Special

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Civil Application filed by objector is
admitted and the issue being subjudice

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further comments were not offered except
denial of certain allegations leveled by the
objector. By and large the rejoinder reflects
incorrect understanding of the objectors
about the exchange ratio, wrong comparison of
market and book value of the shares of
Transferor Company and Transferee Company as
wrongly understood by the objector. The
provision of general reserved fund, reduction
of shares, valuation by the expert in the
field are elaborately dealt with in this and
another rejoinder filed by the transferor
company.

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17. Shri S.N.Soparkar, learned Senior Counsel
appearing for the petitioner has broadly
referred to the background of the Transferor
Companies, activities carried out, financial
structuring,businesstransactions,
provisions of newly enacted Electricity Act,
2003 and Gujarat Electricity Industry

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(Reorganisation and Reg.) Act, 2003,
ingredients of Sections 391 to 394 of the
Companies Act, 1956 earlier orders passed by
this Court ordering convening of the meetings

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by publishing same in widely circulated two
daily news papers i.e. Times of India and
Gujarat Samachar, and, thereafter, he has
also drawn my attention to the broad features
of the Scheme and rationale behind the
arrangement of share capital.

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18. According to his submission, at the

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outset, notice of meeting with Explanatory
statement under Section 393 of Companies Act,

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1956, was sent with all requisite
informations and record was kept for
inspection at the Registered Office of the
companies. Out of 249 equity shareholders who

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has attended the meeting either personally or

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by proxy, two shareholders holding 78 shares
abstained from voting and 4 ballots entitled

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to 127 shares were found invalid. Out of 243
validballotscastrepresenting
Rs.53,52,23,730/- being 5,35,22,373 shares of
Rs.10/ each, 236 votes were found to be in
favour of the proposed scheme of arrangement
whereas 7 ballots representing Rs.4,010/-
were found against the proposed scheme. Thus,
resolution came to be passed approving the
scheme was carried out by requisite statutory
majority of 97.12% in number and 99.999% in
value and it was resolved accordingly. Even
in the meeting of un-secured creditors which
was attended by 32 and the total value of
their debts was Rs.41,38,15,141.38 had given
their consent. They were thus 100% in number
and 100% in value. The meeting of the secured
creditors of the company was attended by the
solecreditorwhichvaluedat

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Rs.91,84,21,052/- and accordingly it was
resolved. He has further submitted that the
meeting was convened in accordance with the

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statutory requirement under the Act and the
Rules and the report is submitted by the
Chairman is annexed and affidavit in reply is
also filed by the Chairman. According to him,
except the objections of objectors of present
proceedings, no other person have raised any
objection to the approval of the scheme.

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19. He has drawn my attention to the report

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of the Official Liquidator who has submitted
report on the basis of the recommendations of
the Chartered Accountant appointed from the
penal maintained by him which reveals that
they have no objection to the scheme. Even
report of the Regional Director, Western
Region, Ministry of Company Affairs,
Government of India dated 03rd July, 2006 is
placed alongwith affidavit which indicates

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furnishing of latest balance-sheet as on
31.03.2005 for the latest financial position
and to increase authorized capital of the

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Transferee Company by complying Section 94/97
of the Companies Act, 1956.

¶244

20. According to Shri Soparkar, learned

¶245

Senior Counsel appearing for the company,

¶246

latest financial position of the company as
required is placed on record and about second
objection he has submitted that in view of
the resolution passed increasing in the share

¶247

capital is integral part of the scheme and
the provisions made therein and in view of
certain judgments no further procedure is
required to be followed. Shri Soparkar,
learned Senior Counsel has submitted that on

¶248

the scheme becoming effective, as mentioned
in Clause-13, the authorized capital clause
of the Memorandum of Association of the
Transferee Company shall be substituted by

¶249

the paragraph and the approval contained in

¶250

the said clause and approval by the
shareholders to the scheme shall be deemed to

¶251

COMP/67/2006

¶252

31/94JUDGMENT

¶253

be their consent to the alteration of the

¶254

Memorandum of Association pursuant to Section
16 read with Section 94 and other applicable
provisions. So according to him, there is no
need to undertake any further exercise as
stated in the above report of Regional
Director. Shri Soparkar, learned Senior
Counsel has submitted that voting by the
representatives of Government of Gujarat
Industrial Investment Agency or any other
Financial Institution in favour of the
scheme, is not contrary to any existing
provisions of any law much less under the
Companies Act, 1956 or Rules made thereunder.

¶255

21. He has further submitted that role of the

¶256

Company Court while exercising jurisdiction
in the scheme of arrangement or amalgamation

¶257

of the companies, is very limited. According

¶258

to him, when overwhelming majority of the
shareholders have collectively exercised

¶259

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¶260

32/94JUDGMENT

¶261

their commercial wisdom in favour of the

¶262

scheme and in the present case, it is 97.12%
of the value of the shares and the 99.999% in

¶263

favour of the number and 100% in the case of
unsecured creditors and secured creditors qua

¶264

debts, the scheme as framed provides fair
exchange ratio as determined by the experts
in the field and vetted by reputed
International Firm, requires sanction by this
Court.

¶265

22. Shri Soparkar, learned Senior Counsel

¶266

has further submitted that there is nothing
to indicate that the scheme is either unfair,
manifestly unjust or can be said to be fraud
on minority of shareholder or in any case,

¶267

even detrimental to their interest or public
at large. According to him, the objections of

¶268

the objector, are based on incorrect
appreciation of mode suggested for exchange
of shares. He has relied on the decision of

¶269

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¶270

33/94

¶271

JUDGMENT

¶272

the Apex Court reported in 1996 87 Company

¶273

Cases and submitted that none of the nine

¶274

celebrated principles as enumerated by the
Apex Court come to the rescue of the
objector. Even if the present scheme,

¶275

according to him, is examined by keeping in
mind the above broad principles, the scheme
successfully satisfies the test laid down by

¶276

the Apex Court. The above ratio, according to

¶277

him, is based after the factors and methods

¶278

recognized for determination of such ratio as
taken into consideration by the Chartered
Accountants and it is also in consonance with

¶279

the reported decision in 1995 Supp (1)

¶280

Supreme Court Cases 499 in case of Hindustan

¶281

Lever Employees' Union Vs. Hindustan Lever

¶282

Ltd. And Others, where the Apex Court has
considered the above aspects in detail.

¶283

 That there are three other decisions,

¶284

in the line which followed the above decision

¶285

by the learned Single Judge of our High Court

¶286

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¶287

34/94

¶288

JUDGMENT

¶289

also.

¶290

23. Shri Soparkar, learned Senior Counsel
appearing for the petitioner has referred to
the explanatory statement. “ 12.1, 12.2.,
12.3 and 12.5” and in detail explained why
procedure under Sections 100, 101 and 102 of
the Companies Act, 1956 need not be followed.

¶291

In support of above submissions, he has
placed reliance on 40 Company Cases Page-871

¶292

in the case of Maneckchowk And Ahmedabad

¶293

Manufacturing Co. Ltd.and other two

¶294

decisions. He has also drawn attention of the
Court about valuation of the share of Torrent

¶295

Power AEC Limited by M/s. N.M.Raiji & Co.
Chartered Accountant and M/s. C.C.Choksi and

¶296

Co. which reveal difference of about Rs.107/-

¶297

in a short span of 10 days. He has relied on

¶298

the letters issued by M/s.Raiji & Co. and

¶299

submitted that both the evaluation was in
different context and the evaluation of this

¶300

COMP/67/200635/94JUDGMENT

¶301

scheme is concerned, it was as per the
regulation framed by SEBI.

¶302

24. So far as General Reserve and the fund to

¶303

be utilized, he has submitted that said

¶304

reserve is created with specific purpose

¶305

since it can be used only as per the
provision of the Companies Act, 1956 and

¶306

mainly with regard to the issuance of

¶307

dividend and making provision about loss and

¶308

likewise. He has also relied upon various
clauses of the scheme and submitted that

¶309

objectors have simply said about scheme being

¶310

unfair and unjust, but could not point out
specifically basis for being branded the

¶311

scheme as unjust and unfair. He has also

¶312

relied upon various observations of the Apex

¶313

Court about power of this Court by re-reading

¶314

the judgment of the Apex Court in case of

¶315

Meehir H.Mafatlal Vs.Mafatlal Industries Ltd.

¶316

reported in (1996) 87 Company Cases 792 and

¶317

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¶318

36/94JUDGMENT

¶319

submitted that role of the Court is like that
of umpire in the game of cricket and unless

¶320

the scheme is manifestly unjust no
interference of the Court is called upon.

¶321

25. Shri K.M.Patel, learned advocate

¶322

appearing for the objectors has submitted

¶323

that even as per the decision of the Apex

¶324

Court in case of Miheer Mafatlal, the scheme

¶325

has to be just, fair and reasonable.
According to the learned advocate for the
objectors, it is not always that once a
statutory majority recommends approval of the

¶326

scheme for arrangement and/or of the scheme

¶327

for an arrangement and/or amalgamation, the
Court would sanction it mechanically. The
duty of the Court is to judiciously x-ray the

¶328

scheme and not to act merely as a rubber
stamp. In the present case, initially when

¶329

28.89% of equity shares owned by the
Government of Gujarat and the sale

¶330

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¶331

37/94JUDGMENT

¶332

transaction with Torrent Power AEC Limited
came to be challenged, any approval by such
shareholders is not in the public interest

¶333

and validity and legality of the above
transaction is subject matter of Special
Civil Application No.8936 of 1988. In
advancing further arguments, the learned
advocate has submitted that the scheme at

¶334

Annexure:-'C' is floated with a view to
frustrate the outcome of the Special Civil
Application and any sanction by this Court
would result into a situation of no return.

¶335

26. Learned advocate for the objectors has

¶336

further submitted that determination of share
exchange ratio is unfair and it will rob the
shareholders of their financial worth as
against the listed price of the share of the

¶337

two listed companies. He has further
submitted that the fixation of above ratio is
detrimental to minority shareholders and

¶338

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¶339

38/94

¶340

JUDGMENT

¶341

there are other procedural irregularities
also. According to him, even reduction in
share capital is not as such an integral part
of the scheme and initially even the valuer

¶342

appointed by Transferor Company did not
recommend any reduction of the face value of
equity shares from Rs.10/- each to Rs.2.50
immediately upon the approval of the scheme

¶343

of arrangement. According to the learned

¶344

counsel for the objectors, effective actual
ratio will result into financial losses to
small shareholders of two public listed

¶345

companies i.e. TPAL and TPSL. According to
him, even creation of general reserve of

¶346

Rs.1417.35 crores will be in the hand of the

¶347

directors of Transferee company, which will
create irreversible situation. According to
learned counsel for the objectors, the State
Government has recently on 10.03.2006 offered

¶348

another 4.74% of the share holding to Torrent
Power Pvt. Limited valued at over Rs.327/-

¶349

39/94JUDGMENT

¶350

COMP/67/2006

¶351

where the valuation was done by another
Chartered Accountant M/s. C.C.Choksi &

¶352

Company, while in the present scheme the
valuation of the share M/s. N.M.Raiji & Co.is
Rs.220/-, within short span of 10 days only,
which grossly undervalues the equity of the
Transferor Company and causes loss to
Government of Gujarat.

¶353

27. Shri K.M.Patel, learned advocate has

¶354

further drawn my attention to the provisions
of Sections 101, 102 and 173 of the Companies
Act, 1956, and Rule 85 of the Company Court
Rules, 1959 and submitted that the Transferee
Company is having very small base of equity
and merger of three Transferor Companies
would result into unjust growth of wealth in
the hands of Board of Directors at the cost

¶355

of small shareholders. According to the
learned advocate Shri Patel, the Transferee
Company is even not doing any business and

¶356

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¶357

40/94JUDGMENT

¶358

amalgamation of transferor company would
result into monopoly in the hand of

¶359

management and fund will be misused.

¶360

28. Shri K.M.Patel, learned advocate has
relied on mandatory requirement of Section
173 of the Companies Act, 1956 which is not
followed in this case and relied on and
submitted that the reduction in share capital
is not permissible. He has also submitted
that power company, catering the need of more
than 20% of population in the city and having
vast consumer base, cannot be permitted go
ahead with the scheme in the public interest.

¶361

29. Shri Saurabh Soparkar, learned Senior
Counsel in his rejoinder reiterated that in
the pending Special Civil Application, no
injunction whatsoever is granted against the

¶362

company in exercising the voting rights by
the shareholders. It is submitted that

¶363

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¶364

41/94JUDGMENT

¶365

Section 391 of the Companies Act, 1956 is
complete code by itself. According to him,
the objections about creation of monopoly is
without any factual foundation, since various
provisions of the Electricity Act, 2003 and

¶366

the Electricity Regulatory Commission Act,
1998 would take care of different situations
with regard to Transmission, Distribution,
and Supply of the Electricity by the
transferee company in respect of subject
matter of above statutes.

¶367

About objection that on effective

¶368

valuation upon reduction in the face value,
equity shareholder of TPAL will get shares

¶369

worth Rs.55/- only and a person holding a
share of TPL would get Rs.5.5 shares only, it
is submitted that this objection conveniently

¶370

ignores the fact that book value of the share

¶371

of TPAL is only Rs.10/-. If the value of

¶372

shares of two companies is compared, it
becomes clear that against one share of

¶373

42/94JUDGMENT

¶374

COMP/67/2006

¶375

Rs.10/- of TPAL, the shareholder is getting
5.5 shares worth Rs.10/- of TPL, which
means against Rs.10/ the shareholder is
getting Rs.55/-. He has further submitted
that the fallacy of the objection raised by
the objector is because the aspect is not
considered from the above angle and he is
comparing the market value of shares of TPAL
against the book value of shares of TPL.
Thus, by comparing un-comparable the
objection about eroisen in the wealth of the
shareholder is raised artificially.

¶376

30. Mr.Soparkar has therefore submitted that

¶377

the share exchange ratio determined is based
on the well considered principles determined
by the experts in the field and in consonance
with the principles laid down in case of

¶378

Hindustan Lever Employees' Union reported in

¶379

1995 Supp (1) SCC 499 and for this purpose he
referred to the explanatory notes and

¶380

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¶381

43/94JUDGMENT

¶382

relevant clauses therein and submitted that

¶383

the scheme is unless manifestly unjust and
unfair the Court will refuse to lift the veil
of the scheme.

¶384

31. Shri Soparkar, learned Senior Counsel

¶385

has further submitted that the dispute which
is sought to be raised by the objector is

¶386

between two shareholders and the same cannot

¶387

be a subject matter of Section 391 of the
Companies Act, 1956 and for this purpose he
has relied upon 121 Company Cases 519 in case

¶388

of National Organic Chemical Vs. Miheer H.

¶389

Mafatlal. According to him, voting by the
Government, its investment agency and other

¶390

financial institution cannot be said to be

¶391

contrary to any statutory provisions or

¶392

against the public policy. To strengthen his

¶393

argument, reliance was placed in the reported

¶394

decision of the Apex Court in AIR 1986

¶395

Supreme Court P-1370 in case of L.I.C. Vs

¶396

COMP/67/2006

¶397

44/94

¶398

JUDGMENT

¶399

Escort Ltd. and more particularly Paras:100
and 102 of the above judgment, where in a

¶400

similar situation, voting by Life Insurance
Company in that case, was approved by the
Supreme Court.

¶401

Shri Soparkar, learned Senior

¶402

Counsel has also relied upon the order dated
20thJune, 2000 passed this Court

¶403

(Coram:Hon'ble Mr.Justice K.M.Mehta, J.) in
Company Petition No.116 of 2000 connected

¶404

with Company Application No.166 of 2000. Even
according to Shri Soparkar, learned Senior

¶405

Counsel character and nature of the

¶406

Transferee Company, existing share capital of

¶407

the Transferee Company has nothing to do with

¶408

the scheme of amalgamation so far as
Transferor Company, irrespective of its
financial and economical strength seek merger

¶409

of the amalgamation or any arrangement
approved by the statutory majority. In

¶410

respect of his argument, he has relied upon

¶411

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¶412

45/94

¶413

JUDGMENT

¶414

decision reported in 107 Company Cases 232

¶415

and submitted that in a given case, even if a

¶416

Transferor Company is incurring loss,
exercise of power under Section 391 cannot be
refused on that ground. Learned Counsel Shri
Soparkar again referred to Clause-12.6(c) of
the Scheme with regard to listing of new
shares.

¶417

32. Shri Soparkar learned counsel has, at the
cost of repetition, relied on his submissions
which he made while describing broad features
of the scheme that why the scheme is bona-
fide, just and fair and not to the
detrimental to the shareholders relying upon

¶418

the case ofManeckchowk And Ahmedabad

¶419

Manufacturing Co.Ltd. (Supra) and submitted

¶420

that when the reduction of share capital will

¶421

be an integral part of the scheme to follow

¶422

the provisions would amount unnecessary
exercise of procedure by the Company for no

¶423

COMP/67/2006

¶424

46/94JUDGMENT

¶425

earthy reasons. According to him, when the
resolutions have been passed by the
companies, the Court may not ask the Company
to go through the gamut of similar procedure.
He has, for this purpose, again referred to
the notice of meeting and the explanatory
statement and relevant clauses and submitted
that all relevant and material facts were
placed before the shareholders for their
consideration. Not only, that, but, documents
were kept for inspection at the registered
office of the Transferor Company.

¶426

33. Mr.Soparkar, learned Senior Advocate

¶427

has submitted that O.J.Appeal No.60 of 2006
filed in Company Application 219 of 2006 by
the objectors challenging the order passed by
the Learned Single Judge directing the
Transferor Companies to convene the meeting
came tobe disposed of as not pressed with
certain clarifications.

¶428

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¶429

47/94

¶430

JUDGMENT

¶431

34. The Appellate Bench, however, clarified

¶432

that disposal of appeal would not affect the
rights and contentions of the appellants in
Special Civil Application No.8936 of 1998 and
Company Petition No.67 of 2006 to 70 of 2006.
It is also submitted that Civil Application
No.6482 of 2006 filed in Special Civil
Application 8936 of 1998 is also withdrawn,
which indicate, according to learned Senior
Counsel appearing for the company, that the
request of the objector to stay the relevant
proceedings cannot be exceeded.

¶433

35. Shri Soparkar, learned Senior Counsel
has submitted that by an order dated
01.05.2006 passed in Company Application
No.222 of 2006 in Para:10 of the above order,

¶434

it was considered and thought fit by the
learned Company Judge that reorganization of
capital is proposed as an integral part of

¶435

COMP/67/2006

¶436

48/94JUDGMENT

¶437

the scheme of arrangement. It is not
necessary to pass a separate resolution for
the said reduction. Moreover, the proposed
reduction is not in favour of either of
liability in respect of unpaid share capital
or payment to any shareholder of any paid-up
share capital, the procedure prescribed under
Section 101(2) shall not apply and hence, the
procedure prescribed under Rules 48 to 65 of
the Companies Court Rules, 1959 came to be
dispensed with. Since, the above order is
final so far as the proceedings of these
petitions are concerned, no plea, claim now
can be raised and meetings convened as per

¶438

the above order and notice issued
accordingly, and resolution passed to that
effect, clearly indicates that the scheme of
reduction of share capital being integral
part of the scheme does not require following
the above statutory provisions.

¶439

In respect of his arguments, reliance was

¶440

COMP/67/2006

¶441

49/94JUDGMENT

¶442

placed in a reported decision in case of
Manekchowk And Ahmedabad Manufacturing
Co.Ltd. (Supra). It was submitted that when
the share capital is not reduced by

¶443

extinguishing or reducing liability of any of
the shares of the company, in respect of the
capital not paid-up or by paying off any
paid-up share capital which is in excess of

¶444

the wants of the company, it is not mandatory
to follow the procedure prescribed under sub-

¶445

section 2 of Section 101 of the Companies
Act, 1956, unless the Court so directs. Shri
Soparkar, learned Senior Counsel further

¶446

referred to Clause-15 of Explanatory

¶447

Statement and Clause 12.5 of the Scheme.

¶448

36. Shri Soparkar has placed reliance on 130

¶449

Company Cases 123 (Gujarat) in case of Essar
Steel Ltd.In.Re.and submitted that

¶450

principles and broad conclusions laid down by
the Apex Court in case of Miheer Mafatlal

¶451

COMP/67/2006

¶452

50/94

¶453

JUDGMENT

¶454

(Supra) can be equally applicable in case of
a scheme which requires reduction in share

¶455

capital. According to him, once the broad
parameters as enumerated by the Apex Court
are fulfilled, the other requirements of
procedural in nature need not detain the
Court for according sanction to the scheme
recommended by the overwhelming majority. He
has further emphasized that even in a view of
the Court or according to the opinion of the
Court, a better scheme could have been framed

¶456

or can be recommended, is not a ground for
not according sanction to the scheme. He has

¶457

further submitted that Court would not like
to seat in appeal over the collective and
commercial wisdom of the shareholders who
approved the scheme with open eyes.

¶458

37. Reliance was also placed on the decision

¶459

reported in 107 Company Cases 232 in case of
Kirtibhai Hiralal Patel And Ors. Vs.Arvind

¶460

COMP/67/2006

¶461

51/94JUDGMENT

¶462

Intex Ltd. and it was submitted that if the
shareholders think it proper and think it
advantageous to adopt a particular scheme,
the Court should not sit in appeal over the
decision of the shareholders, since normally
it is presumed that shareholders know their
interest better.

¶463

38. The learned Counsel Shri Soparkar has
further relied upon 117 Company Cases 758 and
submitted that the principles laid down

¶464

Miheer Mafatlal's case (Supra) are

¶465

reiterated and followed.

¶466

39. So far as pendency of Special Civil
Application No.8936 of 1998 is concerned
challengingtheGovernmentResolution
dtd.16.07.1997, by which sale transaction and

¶467

ownership of 28.89% of equity shares in the
Torrent Power AEC Limited is challenged, it
is submitted by the learned advocate

¶468

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¶469

52/94

¶470

JUDGMENT

¶471

appearing for the petitioner that the same is
admitted and it is subjudice and even Clause-
7 of the scheme provides for continuation of
legal proceedings initiated by or against the
Transferor Company even after amalgamation of
such company with Transferee Company.

¶472

40. That so far as the judgment relied upon by

¶473

the learned counsel appearing for the
objector is concerned, it is submitted that
in the present case, reduction does not
involve any diminution in the liability to
pay or does not involve any repayment of the
paid up share capital and the same is
specifically excluded by the order dated
01.05.2006 passed in Company Application
No.222 of 2006 and therefore, the same is not
applicable in the present case.

¶474

Thus, in view of the above

¶475

submissions,learnedCounselShri

¶476

S.N.Soparkar has submitted that the prayer as

¶477

COMP/67/2006

¶478

53/94JUDGMENT

¶479

mentioned in the Company Petition be granted

¶480

and minutes under Section 103(2) for

¶481

reduction of capital as referred in Company
Petition No.70 of 2006 may also be kindly

¶482

sanctioned and permit the petitioner to file
common order as prescribed under Form No.42
required to be filed with the order under
Section 394 of the Companies Act, 1956, for

¶483

all the three transferor companies and
registry be directed to accept such common
order.

¶484

41. I have heard Shri Saurabh Soparkar, learned
Senior Counsel appearing with Mrs. Swati
Soparkar for the Transferee Companies, Shri
K.M.Patel, learned advocate appearing for
objector no.2 Pravinsinh Jadeja and Dr.Arvind
Gupta, objector no.1, party-in-person and
also Mr.Sunit Shah, learned advocate
appearing for objector no.3 in Company
Petition No.69 of 2007.

¶485

COMP/67/2006

¶486

54/94

¶487

JUDGMENT

¶488

42. Amidst the torrential, electrifying and

¶489

energetic submissions of the counsel for the
parties, it is profitable, at this stage, to
refer to various case-law on the subject
matter, as reflected from the pronouncement
of this Court and also by the Apex Court. It
is held in the case of Sidhpur Mills Co.Ltd.,
In re, AIR 1962 Guj 305, wherein the Court
has observed as under:

¶490

“...... it is not for the court to
scrutinise the scheme in the manner of 'a
carping critic, a hair-splitting expert,
a meticulous accountant or a fastidious
counsel' for the effort is not to
emphasise the loopholes, technical
mistakes and the accounting errors. The
perspective has to be that of the
ordinary shareholder exercising his
discretioninareasonableand
businesslike manner. Fundamentally, the

¶491

point to be emphasized is that the
discretion as to whether to sanction the
scheme for amalgamation is one which the
court has the jurisdiction to exercise.

¶492

COMP/67/2006

¶493

55/94

¶494

JUDGMENT

¶495

This cannot be concluded on the supposed
consideration that the scheme has the
support of a large majority of
shareholders.Majoritiesarenot
necessarily comprised individuals each of
whom critiques the provision of the
scheme with a measure of expertise.
Lethargy is not unknown to collective
bodies of shareholders and creditors. In
these circumstances, the court has to be
alive to the duty which sections 391, 392
and 394 cast upon it, before, the court
grants the seal of its approval upon the
proposed amalgamation.”

¶496

43. It would be useful to refer to the

¶497

observations found in the off-quoted passage
in Buckley on the Companies Act, 14th edition.

¶498

They are as under: [Re:page 815, in Miheer H.
Mafatlal (supra)]

¶499

“ In exercising its power of sanction
the court will see, first that the
provisions of the statute have been
complied with, second, that the class
was fairly represented by those who

¶500

COMP/67/2006

¶501

56/94JUDGMENT

¶502

attended the meeting and that the
statutory majority are acting bonafide
and are not coercing the minority in
order to promote interests adverse to

¶503

those of the class whom they purport
to represent, and thirdly, that the
arrangement is such as an intelligent
and honestman, a member of the class
concerned and acting in respect of his
interest, might reasonably approve.

¶504

The Court does not sit merely
to see that the majority are acting

¶505

bona fide and thereupon to register

¶506

the decision of the meeting, but at

¶507

the same time, the court will be slow
to differ from the meeting, unless

¶508

either the class has not been properly

¶509

consulted, or the meeting has not

¶510

considered the matter with a view to
the interest of the class which it is

¶511

empowered to bind, or some blot is

¶512

COMP/67/2006

¶513

57/94

¶514

JUDGMENT

¶515

found in the scheme.”

¶516

44. The Supreme Court, in Miheer H. Mafatlal
(supra), has dealt with the scope and ambit
of the jurisdiction of the company court and
broad contours of such jurisdiction, as laid
down by the Apex Court, are as under:

¶517

(1)The sanctioning court has to see
to it that all the requisite
statutory procedure for supporting
such a scheme has been complied
with and that the requisite
meetings as contemplated by
section 391(1)(a) have been held.

¶518

(2)That the scheme put up for
sanction of the Court is backed up
by the requisite majority vote as
required by section 391(2).

¶519

(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.

¶520

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¶521

58/94JUDGMENT

¶522

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.

¶523

(4)That all necessary material
indicated by section 393(1)(a) is
placed before the voters at the
concerned meetings as contemplated
by section 391(1).

¶524

(5)That all the requisite material
contemplated by the proviso to
sub-section (2) of section 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.

¶525

(6)That the proposed scheme of
compromise and arrangement is not
found to be violative of any
provision of law and is not
contrary to public policy. For
ascertaining the real purpose

¶526

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¶527

59/94JUDGMENT

¶528

underlying the scheme with a view
to be satisfied on this aspect,
the court, if necessary, can
pierce the veil of apparent
corporate purpose underlying the
scheme and can judiciously x-ray
the same.

¶529

(7)That the company court has also
to satisfy itself that members or
class of members or creditors or
class of creditors, as the case
may be, were acting bonafide and
in good faith and were not
coercing the minority in order to
promote any interest adverse to
that of the latter comprising the
same class whom they purported to
represent.

¶530

(8)That the scheme as a whole is
also found to be just, fair and
reasonable from the point of view
of prudent men of business taking
a commercial decision beneficial
to the class represented by them
for whom the scheme is meant.

¶531

COMP/67/2006

¶532

60/94JUDGMENT

¶533

(9)Oncetheaforesaidbroad
parameters about the requirements
of a scheme for getting sanction
of the court are found to have
been met, the court will have no
further jurisdiction to sit in
appeal over the commercial wisdom
of the majority of the class of
persons who with their 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.”

¶534

45. It is required to be noted that valuation

¶535

of shares is a technical and complex problem

¶536

which can be appropriately left to the

¶537

consideration of experts in the field of
accountancy. As observed by the Supreme

¶538

COMP/67/2006

¶539

61/94JUDGMENT

¶540

Court, in Miheer H. Mafatlal (supra), the
following four factors, which had to be kept

¶541

in mind in the valuation of shares:

¶542

1. Capital cover,

¶543

2. Yield,

¶544

3. Earning capacity and

¶545

4. Marketability.

¶546

For arriving at the fair value of share,

¶547

three well known methods are applied:

¶548

1.The manageable profit basis method (the earning per share method)

¶549

2.The net worth method or break up value method, and

¶550

3.The market value method.

¶551

46. The Supreme Court, in Hindustan Lever

¶552

Employees' Union, in paragraph 41 reported in

¶553

1995 Supp (1) SCC P-499, observed as under:

¶554

“ 41. This problem of valuation in the case of amalgamation of two companies has been dealt with by Weinberg and Blank in the book Takeovers and Mergers in which it has been stated that some or all of the following factors will have to be taken into account in determining the final share exchange ratio:

¶555

1.The Stock Exchange Prices of the shares

¶556

COMP/67/2006

¶557

62/94

¶558

JUDGMENT

¶559

of the two companies before the
commencement of negotiations or the
announcement of the bid.

¶560

2.The dividends presently paid on the
shares of the two companies. It is often
difficult to induce a shareholder,
particularly an institution, to agree to
a merger or a share-for-share bid of it
involves a reduction in his dividend
income.

¶561

3.The relative growth prospects of the two companies.

¶562

4.The cover (ratio of after-tax earning to dividends paid during the year) for the present dividends of the two companies. The fact that the dividend of one company is better covered than that of the other is a factor which will have to be compensated for at least to some extent.

¶563

5.In the case of equity shares, the relative gearing of the shares of the two companies. The 'gearing' of an ordinary share is the ratio of borrowings to the equity capital.

¶564

6.The values of the net assets of the two companies. Where the transaction is a thorough-going merger, this may be more of a talking-point than a matter of

¶565

COMP/67/2006

¶566

63/94JUDGMENT

¶567

substance, since what is relevant is the
relative values of the two undertakings
as going concern.

¶568

7.The voting strength in the merged
enterprise of the shareholders of the two
companies.

¶569

8.The past history of the prices of the
shares of the two companies.

¶570

47. It is also advantageous to refer to a

¶571

decision reported in 117 Company Cases 758,
where again the Apex Court has reiterated the

¶572

ratio laid down in case of Miheer Mafatlal

¶573

(Supra) and found that two broad principles
underlying a scheme of amalgamation are that
the order passed by the court amalgamating
the company is based on a compromise or
arrangement arrived at between the parties;
and that the jurisdiction of the company

¶574

court while sanctioning the scheme is

¶575

supervisory only, i.e. to observe that the
procedure set out in the Act is met and

¶576

complied with and that the proposed scheme of

¶577

COMP/67/2006

¶578

64/94

¶579

JUDGMENT

¶580

compromise or arrangement is not violative of
any provision of law, unconscionable to

¶581

contrary to public policy. The court is not
to exercise the appellate jurisdiction and
examine the commercial wisdom of the
compromise or arrangement arrived at between
the parties. Both these principles indicate
that there is no adjudication by the court on
the merits as such.

¶582

48. So far as such reduction of share capital
being an integral part of the scheme, in case
of Maneckchowk And Ahmedabad Manufacturing

¶583

Co. Ltd. reported in 1970 Company Cases 871
it is held that “ When the capital is
reduced by cancelling any paid up share
capital which is lost or is otherwise
unrepresented by available assets, it is not
mandatory to follow the procedure prescribed
in sub-section (2) of section 101 unless the
court so directs. The procedure prescribed
under sub-section (2) of section 101 requires
service of the notice of the petition filed
for confirming the reduction of capital on
every creditor of the company affected by

¶584

COMP/67/200665/94JUDGMENT

¶585

reduction and who is entitled to object to
the reduction. The procedure goes so far as
to make provision by order of the court for
payment to the dissenting creditors. That
procedure is mandatory, where the proposed
reduction involves diminution of liability in
respect of unpaid share capital or payment to
any shareholder of any paid up share capital.
That is not the case here.”

¶586

49. So far as our High Court is concerned,
learned Single Judge in 130Company Cases 129
in case of Essar Steel Ltd., In Re., has
reiterated the principles laid down in (1996)
87 Company Cases 792 in the case of Miheer H.

¶587

Mafatlal and observed that “once the broad
parameters about the requirements of scheme
for getting sanction of the Court are found
to have been met, the court will have no
further jurisdiction to sit in appeal over
the commercial wisdom of the majority of the
class of persons who with their open eyes
have given their approval to the scheme. Even
if in the view of the court, there would be a

¶588

COMP/67/2006

¶589

66/94JUDGMENT

¶590

better scheme for the company and its members
or creditors for whom the scheme is framed.

¶591

The Hon'ble Supreme Court has further
observed that the bona fides of the majority
acting as a group have to be examined, vis-a-
vis, the scheme in question ant not the bona
fides of the person whose personal interest
might be different from the interests of the
voters as a class. The bona fides of a person
can only be relevant if it can be established
with reasonable certainty that he represents
the majority or is the controller of the
majority.”

¶592

The Court has further observed that “ As
far as the variation of the rights of the
equity shareholders and violation of the
provisions of sections 106 and 107 of the
Companies Act, 1956, are concerned, the court

¶593

is of the view that there is no variation of
rights as such and there is no violation of
the provisions contained in sections 106 and

¶594

COMP/67/2006

¶595

67/94JUDGMENT

¶596

provisions have no application to the facts
of the present case. The variation referred

¶597

to in section 106 is variation to the

¶598

prejudice of any class of shareholders, and
not any variation involves the curtailment of
the rights of any class or classes of
shareholders, the consent or sanction of such
class or classes will be necessary.”

¶599

The Division Bench of our High Court in

¶600

case of Kiritbhai Hiralal Patel Vs. Arvind
Intex Ltd. (Guj.) reported in 2001 Vol.107
Company Cases P.232 and particularly at P.239

¶601

in placitum B, C and D, has observed as
under:

¶602

“ The submission of the learned advocate
for the appellants that the profit making
transferor-companies have been amalgamated
into a loss making transferee-company is
also not well founded. It is true that the
company into which the three transferor-
companies have merged into is not a well
established and profit making company. It

¶603

COMP/67/2006

¶604

68/94

¶605

JUDGMENT

¶606

has been submitted by the learned advocate
Shri Soparkar that the transferee-company
is only a shell company into which the
three transferor-companies have merged. The
said merger or amalgamation has taken place
for some synergic advantages. Looking to
the hugeness of capital of the transferor
and the transferee companies, a nominal
loss of approx. Rs. 5 or 10 lakhs by the
transferee-company is almost negligible.
Once again we reiterate that it is always
for the shareholders to decide whether they
should accept a particular scheme. If the
shareholders think it proper and think it
advantageous to adopt a particular scheme,
in our opinion, this court should not sit
in appeal over the decision of the
shareholders.”

¶607

50. In the backdrop of above position of law

¶608

with regard to provisions of Sections 100,
101 and 391 to 394 of the Companies Act, 1956
and the rules made therein, the facts of the
present case are to be examined, whether the
scheme at Exh.'C' is in consonance with
requirements of Sections 100, 101 and 391 to

¶609

COMP/67/2006

¶610

69/94JUDGMENT

¶611

394 of the Companies Act, 1956 or not? That
the object and the rationale behind the
scheme framed and subsequently approved by
class of equity shareholders, unsecured
creditors and secured creditors by passing

¶612

various resolutions are extensively dealt
with in earlier paragraphs. That the nature
and status of Transferor companies and the

¶613

Transferee Company, the type of commercial
venture, are referred to. That salient
features of the scheme are reproduced in
Paras:7, 8 and 9 of this judgment and

¶614

compliance of various provisions as required
under the Companies Act, 1956 and rules made

¶615

therein. That upon seeking order for
convening meetings of the shareholders,
unsecured creditors and secured creditors,
this Court had passed an order on 01.05.2006

¶616

in various Company Application Nos.119 of

¶617

2006, 120 of 2006, 121 of 2006 and 122 of
2006 and it was effectively published in two

¶618

COMP/67/2006

¶619

70/94

¶620

JUDGMENT

¶621

daily newspapers i.e. “Times of India” and
“Gujarat Samachar” of Ahmedabad Editions.
Thereafter, the date of hearing of the
petition for according sanction to the scheme

¶622

was also advertised and as per provisions of

¶623

Section 393 of the Act notices with
explanatory statement were sent, which
contained relevant and important features of

¶624

the scheme as required under law and record
of the companies was kept open for perusal of
the stakeholders. The report of the Chairman

¶625

was received alongwith affidavit about events

¶626

took place in the meetings held as per the
order passed by the Court and compliance of

¶627

various provisions of the Companies Act and
Rules as required. That report of the
Chartered Accountant appointed by the

¶628

Official Liquidator is also placed on record,

¶629

which reveals no objection, if the scheme is
sanctioned by this Court and also a letter of
Regional Director, Western Region, Ministry

¶630

COMP/67/2006

¶631

71/94JUDGMENT

¶632

of Company Affairs, Government of India
dtd.03rd July 2006 with affidavit filed by the
Deputy Registrar of Companies, Ahmedabad
dtd.04th July, 2006 with certain points to be
urged at the time of hearing.

¶633

51. The foremost requirement, before

¶634

sanctioning the scheme under the provisions
of Sections 391 to 394 of the Companies Act,
1956, is to comply with the provisions of the
above sections and various rules and
analogous provisions in this regard. In the
above context, if the present scheme at
Exh.'C' is scrutinized including amalgamation

¶635

to be made between the Transferor Companies

¶636

and Transferee Company as well as re-
organization of the share capital of the
Transferee Company, there are three
Transferor Companies i.e. TPAL, TPSL and TPGL
and TPL is the Transferee Company.

¶637

COMP/67/2006

¶638

72/94JUDGMENT

¶639

52. Sub-sections (1) and (2) of Section 391 of

¶640

the Companies Act, 1956 are as under:-

¶641

“391.Power to compromise or make

¶642

arrangements with creditors and members.

¶643

(1) Where a compromise or arrangement is
proposed-

¶644

(a) between a company and its creditors or any class of them; or

¶645

 (b) between a company and its members or
any class of them;

¶646

the Court may, on the application of the

¶647

company or of any creditor 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

¶648

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

¶649

Court directs

¶650

(2)If a majority in number representing three-

¶651

COMP/67/2006

¶652

73/94JUDGMENT

¶653

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
Section 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:

¶654

[Provided that no order sanctioning any
compromise or arrangement shall be made by
the Court unless the Court is satisfied that
the company or any other person by whom an
application has been made under sub-section

¶655

(1) has disclosed to the court, by affidavit

¶656

COMP/67/2006

¶657

74/94JUDGMENT

¶658

or otherwise, all material facts relating to
the company, such as the latest financial

¶659

position of the company, the latest
auditor's report on the accounts of the
company, the pendency of any investigation
proceedings in relation to the company under
Sections 235 to 251, and the like]. “

¶660

53. Section 393 is with regard to function as

¶661

to compromises or arrangements with creditors

¶662

and members which provides that if the
meeting is called under Section 391, every
notice including the meeting is to be sent to

¶663

a creditor or a member with the statement
stating forth the terms of compromises or
arrangements and explaining its effect and
the interest of the Directors, Managing
Directors or Manager of the Companies with

¶664

the scheme of compromise, if any. It also
interalia provides about other requirements
which we are at present not concerned with.

¶665

COMP/67/2006

¶666

75/94

¶667

JUDGMENT

¶668

Section 394 is with regard to the provision
forfacilitatingreconstructionand

¶669

amalgamation of companies which specifically
provide under Sub-clause III of Clause-(b) of

¶670

Sub-section (i) of Section 394 about the
continuous by or against the Transferee
Company of any legal proceedings pending by
or against any Transferor Companies and
Section 394(A) is about notice to be given to
the Central Government for application under

¶671

Sections 391 and 394 of the Act. So far as
Section 100 of the Act is concerned, it
provides for reduction of share capital and
special resolution be passed in this regard
and Sections 101, 102, 103 and 104 are about
the procedure further to be followed in this
regard.

¶672

54. Thus, in the present case, meeting was

¶673

convened by the petitioner company as per the
direction given by the order dated 01.05.2006

¶674

COMP/67/2006

¶675

76/94

¶676

JUDGMENT

¶677

passed in the Company Application. In all the
Company Petition Nos.67, 68 and 69 of 2006,
it was an order with regard to Transferor
Companies while in Company Application No.222

¶678

of 2006 order passed on 01.05.2006 is
concerned, it was in the case of Transferee
Company TPL, where by specific order,
requirement of procedure prescribed in
Section 101(2) and under Rules 48 to 65 of
the Companies Court Rules, 1959, came to be
dispensed with.

¶679

55. Thus, on perusal of the record, the notice
was published in the newspaper as ordered on

¶680

01.05.2006 in two daily newspapers i.e.
“Times of India” and “Gujarat Samachar”.
Accordingly the notices of the meetings were
advertised in the “Times of India” English
Daily and “Gujarat Samachar” Gujarti daily,
both Ahmedabad editions on 10th May, 2006 and

¶681

also additionally it was published in

¶682

COMP/67/2006

¶683

77/94JUDGMENT

¶684

“Sandesh” and “Divya Bhaskar”, Gujarti daily
both Ahmedabad editions on 10th May, 2006 and
11th May, 2006 and meetings were convened on
08th June, 2006 and Chairman has filed report
alongwith affidavit dtd.10.06.2006. Thus, the
petitioner company has complied with the
direction of the order passed on 01st May,
2006 by convening separate meeting of equity
shareholders, unsecured creditors and the
secured creditors of the companies.

¶685

56. As revealed from the report of the
Chairman that the scheme at Exh.'C' is
approved by 97.12% of the shareholders in
numbers and 99.999% of value of shares
present and voted in the meeting in the case
of equity shareholders. So far as unsecured
creditors are concerned, approval was 100% in

¶686

number and value both, so is the case of
secured creditors. These facts are clear and
revealed compliance of Sub-section (2) of

¶687

COMP/67/2006

¶688

78/94

¶689

JUDGMENT

¶690

Section 391 of the Act which requires
majority in number representing ¾th in value
of creditor or class of creditor or members
present in meeting and voted for the same.
Therefore, the objection of the objector to

¶691

the effect that the scheme is not in
consonance with the above requirement of
Section 391 is ill-founded. Thus all
requirement u/S.391 to 394 of the Companies
Act, 1956 are fulfilled and broad parameters
of Miheer Mafatlal (Supra) for sanctioning
the scheme are satisfied.

¶692

57. So far as reduction of share capital as
objected, it is clearly established from the
fact that since the reduction in share
capital was the integral part of the scheme
and requirement to be followed under Sub-
section (2) of Section 101 of the Act was
dispensed with by an order dtd.01.05.2006 in
Company Application No.222 of 2006, the above

¶693

COMP/67/2006

¶694

79/94

¶695

JUDGMENT

¶696

objection do not survive and need not tobe
dealt with. However, even if it is examined
in the context of law laid down by this Court

¶697

in the case of Maneckchowk And Ahmedabad
Manufacturing Co. Ltd. (Supra) and later on

¶698

in 130 Company Cases 129 in case of Essar

¶699

Steel (Supra), the objections are not well

¶700

founded. Since the law laid down by the above
decision is already reproduced, the same is

¶701

not repeated. That in the present case, no

¶702

liability is reduced qua share capital unpaid

¶703

or payment to Shareholders of any paid up

¶704

share capital, as per Clause 15 of

¶705

Explanatory statement and Clause 12.5 of the
Scheme. Thus, even stakeholders were informed

¶706

as required u/S. 173 of the Act.

¶707

58. Besides, as per principles laid down by

¶708

Miheer Mafatlal's Case (Supra), the present

¶709

scheme fulfills all the relevant criteria
laid therein and against commercial and

¶710

COMP/67/2006

¶711

80/94JUDGMENT

¶712

collective wisdom of the class, this Court
would not like to seat in appeal over the
same.

¶713

59. Even objection with regard to

¶714

determination of share exchange ratio, on
scrutiny it is found that the same is
recommended by the expert in the field M/s.

¶715

N.M.Raiji & Co. and rated as fair by giving

¶716

fair opinion by M/s. Ernst & Young Private
Limited, the Internationally recognized firm

¶717

and company and having applied three methods
of determination of the above exchange ratio
as reflected from the explanatory statement

¶718

and Clause-12(a) net assess method, (b)

¶719

earning capitalization method and (c) market

¶720

price method and explanation further given in

¶721

the affidavit in rejoinder filed by the

¶722

petitioner about misconception on the part of

¶723

the objector about understanding the scheme

¶724

and ratio by comparing market value of the

¶725

COMP/67/2006

¶726

81/94

¶727

JUDGMENT

¶728

Transferor Company with book value of the
Transferee Company the above ratio is not

¶729

unfair in any manner. The objector has only
highlighted so-called reduction in face value

¶730

but not the fact that once such reduction
takes place, four shares are consolidated
into one and the same is only an accounting
method and to see that share capital remains

¶731

at manageable level. The clauses of the

¶732

schemes 12.1, 12.2, 12.3 and 12.4 are
indicative of the fact that shareholders of

¶733

the Transferor Companies are not at loss in

¶734

any manner. It is to be noted that in the
exchange, book value of the share of the

¶735

Transferor Company is to be compared with the

¶736

book value of the Transferee Company and in

¶737

the present case, the book value of the

¶738

Transferor Company is Rs.10/- and so as of

¶739

Transferee Company. As per the manner
suggested 5.50 equity shares of Rs.10/- each
fully paid up of TPL for every one equity

¶740

COMP/67/2006

¶741

82/94JUDGMENT

¶742

share of Rs.10/- each fully paid up held in
Transferor Company TPAL is offered, against
book value of Rs.10/-, shareholder of the
Transferor Company will get Rs.55/- of
Transferee Company. So far as the market

¶743

value of the share of the Transferee Company
to be listed, can be considered after the
price of shares of Transferee Company is
quoted in the stock exchange. Even if Clause-
12.3 is considered about downsizing the value
of the share is concerned, it is reflected
from (b) of Clause-12, simultaneously four
equity shares each of Rs.2.50 shall be
consolidated into one share of Rs.10/- fully
paid and thus there will be no loss to any
shareholders. So is the case of TPSL/TPGL
except the statistics.

¶744

60. Keeping in mind the ratio laid down by the
Apex Court in the case of Hindustan Lever
(Supra) as relied upon again in Miheer

¶745

COMP/67/2006

¶746

83/94JUDGMENT

¶747

Mafatlal's case (Supra), I do not find that
share exchange ratio in any manner unfair and
detrimental to the shareholders of the
Transferor Companies.

¶748

60.1So far as the creation of general

¶749

reserve to the tune of Rs.1417.35 Crores is
concerned, again the creation of such reserve

¶750

is not contrary to any provisions of
Companies Act and it is to be utilized only
after following the provisions of the
Companies Act like giving dividends, bogus
shares or making good the loss after passing
appropriate resolution. Thus, it cannot be
said that it will be advantageous to the
Directors of the Transferee Company and will
create any monopoly. Therefore, there is no
merit in the above objections of the
objector.

¶751

61. The status of Transferee Company being not

¶752

COMP/67/2006

¶753

84/94JUDGMENT

¶754

listed and the objections raised in this

¶755

regard do not detain this Court any longer in
view of listing agreement by the Transferor
Companies with SEBI and provisions made in
this regard in the scheme particularly in
Clause 12.6 (a), (b) and (c) which provide
for issuance and allotment of the shares to
the shareholders of the Transferor Companies.

¶756

Even this Court has held that even if
Transferee Company is making loss, the above
aspect itself will not preclude the Court
from according sanction to the scheme.

¶757

That it is worthwhile to note that as per

¶758

reported decision in Vol.125 Company Case
P.289, delivered by the learned Single Judge

¶759

of Andhra Pradesh High Court in the case of
Compact Power Sources P.Ltd., In re and
another decision reported in 2006 (69) SEBI

¶760

and Corporate Laws Report 10(Bombay)
delivered by the learned Single Judge again

¶761

COMP/67/2006

¶762

85/94JUDGMENT

¶763

has taken a view that in a given case even
non-compliance with provision of Clauses-

¶764

24(f), 24(g) and 24(h) of listing agreement

¶765

with SEBI does not, by itself, bar the

¶766

company from seeking sanction of a scheme of
amalgamation under Sections 391 to 294 of the
Companies Act, 1956, nor does it entail in
automatic disposal of such petition.

¶767

In the present case, the listing

¶768

agreement is in existence and not only that
the scheme provides the safe-guard in Clause

¶769

12.6 (a), (b) and (c) about issuance of
allotment of shares to the shareholders of

¶770

Transferor Company after amalgamation.
Therefore, the scheme is just and proper and
cannot be said to be unfair or in any manner

¶771

detrimental to the interest of the
shareholders and requires to be sanctioned by

¶772

this Court.

¶773

COMP/67/2006

¶774

86/94JUDGMENT

¶775

62. That even objection about voting by

¶776

financial institutions and State Government
agency in favour of scheme cannot be
sustained in view of the decision reported in

¶777

AIR 1986 SC 1370 where voting by L.I.C. In
that case was approved by the Hon'ble Supreme
Court as referred in Paras:100 and 102 of the
above judgment. That financial institution
and Government Corporation are free to
exercise their discretion in accordance with
law with regard to the investment and
disinvestment of the share capital held by
them of a company, for which scheme as

¶778

framed. In an era of liberalisation,
privatisation and globalisation the financial
institutions are free to exercise their
discretion in a fair and just manner and no
public or private interest is jeopardised in
the present scheme.

¶779

63. So far as challenge to the decision of the

¶780

COMP/67/2006

¶781

87/94

¶782

JUDGMENT

¶783

State Government by which ownership of 28.89%
of equity shares by filing Special Civil
Application No.8936 of 1998 is concerned, the
same is admitted and the matter being
subjudice has no relevance with the present
scheme of sanction which do not require any
interference. Even Civil Application filed
later on is withdrawn by the objector in the
aforesaid Special Civil Application. Besides,

¶784

Clause-7 of the scheme provides for the
continuity of the legal proceedings against
and by Transferee Company even after the
scheme is approved.

¶785

64. The objection was raised with regard to

¶786

different valuation by two firms of

¶787

Chartered Accountant and within short span of

¶788

10 days value of share of TPAL is shown,
which indicates difference of Rs.107/-. The

¶789

above objection does not hold good so far as
both the valuation of shareholding of the

¶790

COMP/67/2006

¶791

88/94JUDGMENT

¶792

company was for different purpose. It is

¶793

explained by the petitioner that while it was
for the purpose of finding out the price, at
which the Government of Gujarat was to sell

¶794

the shares held by it in TPAL to the Torrent
Power Group. That two reports are the
exercise undertaken by experts for different

¶795

purposes i.e. M/s. N.M.Raiji & Co. and
M/s.Ernst & Young Private Limited have opined

¶796

on the fairness of exchange of ratio of
shares which is always in relative terms
while the valuation carried out by
M/s.C.C.Choksi and Company is the absolute

¶797

valuation of shares of TPAL. Thus, the above
objection is also of not help to the
objector.

¶798

65. It is also tobe considered that

¶799

suggestions made by the Regional Director in
his affidavit and the letter dtd.03rd July,
2006 annexed thereto about furnishing latest

¶800

COMP/67/2006

¶801

89/94JUDGMENT

¶802

balance sheet the same is placed on record
and true copy indicates provisional balance

¶803

sheet as on 31st March, 2005. The above
compliance is reflected alongwith additional
affidavit dtd.05th July, 2006 filed by Shri
Ashok Modi on behalf of TPAL.

¶804

That suggestion with regard to increasing
authorized capital of Transferee Company and
compliance of Section 94/97 of the Companies
Act, 1956, is concerned it is on record that
resolution is passed increasing the share
capital being integral part and provisions
made about listing of share capitals, it is
not necessary for the company to undergo the
same procedure once again. Thus, the company
has filled up the lacuna pointed out by the
Regional Director.

¶805

66. Even the report of the Official Liquidator

¶806

submitted alongwith the report of the
Chartered Accountant pointed out by him also

¶807

COMP/67/2006

¶808

90/94JUDGMENT

¶809

indicate that the procedure as laid down
under the Companies Act, 1956 is followed and
there is no objection to the scheme if the
same is sanctioned by the Court, since
affairs of the companies are not conducted in
any manner prejudicial to the stakeholders.

¶810

67. That so far as reliance placed by

¶811

Mr.K.M.Patel, learned advocate appearing for
the objectors on the decision reported in AIR

¶812

1998 ORISSA 153 is concerned, the same is not
applicable in the facts of the present case,

¶813

since reduction does not involve any
diminution in the liability to pay or it does
not involve any repayment of the paid up
share capital and specifically by virtue of
the order passed in Company Application
No.222 of 2006 procedure under Rules 48 to 65
of the Rules and Section 101(2) of the Act
was dispensed with and the same is final.

¶814

COMP/67/2006

¶815

91/94JUDGMENT

¶816

Shri K.M.Patel, learned advocate for

¶817

the objectors has also relied upon another
decision reported in 1949 Indian Law Reports
Culcutta Series 127 of Bharati Central Bank
Ltd. which referred to Section 153 of the
Indian Companies Act, 1913, which on the
contrary helps the petitioners since four
criteria laid in the above decision are
fulfilled by the petitioners, which are as

¶818

under:-

¶819

(i) that the provisions of the Act have

¶820

been complied with;

¶821

(ii) that the scheme is a reasonable and
practical one;

¶822

(iii) that the creditors and shareholders had
sufficient information with regard to the
affairs of the company before approving the
scheme and that they acted in good faith;

¶823

(iv) that there are no consideration of
interest to the public which should overside

¶824

the decision of the creditors and

¶825

COMP/67/2006

¶826

92/94

¶827

JUDGMENT

¶828

shareholders;

¶829

68. Thus, if the scheme is scrutinized,

¶830

keeping in mind the decisions of the Apex
Court and this Court as reproduced in
Paras:42 to 48, the Scheme as a whole is
just, fair, reasonable and bona-fide and in
the public interest requires sanctioned in
accordance with law, and therefore, the
scheme at Annexure-c alongwith the Schedule
is sanctioned and shall be binding on all the

¶831

equity shareholders, unsecured creditors and
the secured creditors of the petitioner

¶832

company and on the petitioner company. All

¶833

these petitions are allowed with the reliefs
mentioned therein. So far as prayer made in
Company Petition No.70 of 2006 is concerned,

¶834

minutes under Section 103 for reduction of

¶835

capital as mentioned therein is also
sanctioned and petitioner is hereby permitted
to file common order as prescribed under Form

¶836

COMP/67/2006

¶837

93/94JUDGMENT

¶838

No.42 requires to be filled in under Section
394 of the Companies Act, 1956 for all the
Transferor Companies and the Registry is
directed to accept such common order.

¶839

advocate for the objectors made a request

¶840

before the Court to stay the operation of the

¶841

order to which Mr.S.N.Soparkar, learned
Senior Counsel has raised an objection.

¶842

However, I do not find any reason to stay the
operation of the order and hence, the prayer
made by learned advocate for the objectors is
rejected.

¶843

70. The fees of the learned Assistant
Solicitor General of India is quantified at
Rs.3500/-to be paid by the petitioner-

¶844

company.

¶845

amit

¶846

(ANANT S.DAVE, J.)

¶847

COMP/67/200694/94JUDGMENT

Torrent Power Sec Ltd. v. ...

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Torrent Power Sec Ltd. v. ...

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