ORDER
Anoop V. Mohta, J.
1. The present Company petition is under section 391 of the Companies Act, 1956 (for short ‘Companies Act’) read with Rules 67 to 89 of the Company (Court) Rules, 1956 (for short `Rules’) for sanction of the Scheme of Amalgamation (for short `Scheme’) for merger of Canere Actives & Fine Chemicals Private Limited (for short ‘transferor company’ or ‘Canere’) with the Nicholas Piramal India Limited (for short ‘transferee company’ or ‘NPIL’) and all the members and creditors of NPIL. The petitioner-company’s registered office is situated at 405-408, Navbharat Estate, Zakaria Bunder Road, Sewree, Mumbai, State of Maharashtra. The registered office of NPIL is situated at 100, Centre Point, Dr. Ambedkar Road, Parel, Mumbai, State of Maharashtra.
2. The authorised, issued, subscribed and paid-up share capital of the petitioner-company is as under :
Authorised Capital Rs. (in lacs)
1,00,00,000 Equity Shares of Rs. 10 each 1000.00
70,00,000 Preference Shares of Rs. 10 each 700.00
Issued Subscribed and Paid Up
1,00,00,000 Equity Shares of Rs. 10 each fully paid up 1000.00
3. The latest audited accounts and balance sheet of the petitioner- company for the year ended 31st December, 2003, is a part of the record.
4. The authorised, issued, subscribed and paid-up share capital of NPIL is as under :
Authorised (Rs.)
5,00,00,000 Equity Shares of Rs. 10 each 50,00,00,000
15,00,000 Preference Shares of Rs. 10 each 15,00,00,000
1,00,00,000 Unclassified Shares of Rs. 10 each 10,00,00,000
______________
Total 75,00,00,000
_______________
Issued, Subscribed & Paid up :
3,80,03,201 Equity Shares of Rs. 10 each 38,00,32,010
15,00,000 Non Cumulative Redeemable
Preference Shares of Rs. 100 each 15,00,00,000
_________________
53,00,32,010
_________________
5. The last audited accounts and balance sheet of NPIL for the year ended 31st March, 2003, and the audited financial result of NPIL for the six months ended 30th September, 2003, and for the third quarter ended 31st December, 2003, subjected to limited review by NPIL’s statutory auditors, are part of the record.
6. The petitioner-company is a Private Limited Company and as set out and authorised in its Memorandum of Association, decided to go for the Scheme in question. The NPIL is a Public Limited Company and as per the objects, as set out in their Memorandum of Association, also decided and approved the present Scheme of Amalgamation.
7. The Scheme of Amalgamation of the present companies is a part of the record and takes into consideration all the various and relevant aspects of such fair and sound Scheme.
8. It may be noted here that the Scheme of Arrangement between the Morarjee Goculdas Spinning & Weaving Company Limited (for short ‘Morarjee’) and the petitioner-companies, whereby the Tools Division of Morarjee has been proposed to be demerged into the petitioner-company with effect from the appointed date, i.e., 1st December, 2003. As per the said demerger Scheme and accordingly, shares exchange ratio was fixed and decided, alongwith other relevant provisions. For the said demerger Scheme, a Company Petition has been filed under sections 391 to 394 of the Act vide Company Petition No. 73 of 2004 by Morarjee and Company Petition No. 91 of 2004 by the Company Petitioner herein, i.e., Canere.
9. The petitioner-company proposed to enter into an arrangement as embodied in the Scheme of Amalgamation between the petitioner company and NPIL whereby, the petitioner-company would merge and/or amalgamated with NPIL with effect from the appointed date i.e., 1st October, 2003. The merger of the petitioner-company with NPIL, would be along with the rights and liabilities and obligations of the petitioner- company under the said demerger Scheme. This will result into demerger of the Tools Division of Morarjee into the petitioner-company, i.e., Canere with effect from 1st December, 2003, and the said demerger Scheme will now further demerger into NPIL with effect from 1st December, 2003, being the amalgamated company of the petitioner-company and NPIL under the Scheme. In the result, the obligations of the petitioner-company to allot preference shares to the equity shareholders of Morarjee under the demerger Scheme would also now stand taken over by the NPIL. The right to receive 5% redeemable cumulative shares of the petitioner- company by the equity shareholders of Canere would now stand transferred into the right to receive 596 redeemable cumulative preference shares of NPIL being the amalgamated company of the petitioner- company and NPIL under the Scheme. In the result further, all rights and obligations of the petitioner-company under the demerger Scheme shall pass on to and become those of NPIL. The equity shares of NPIL are listed on the Stock Exchange, Mumbai and Ahmedabad and also on the National Stock Exchange. The preference shares of NPIL are not listed on any of the Stock Exchanges.
10. Considering the above facts and Scheme between the parties, the Board of Director of the petitioner-company, as well as, of NPIL, at the respective meetings held on 28th January, 2004 approved the Scheme.
11. The Company Application No. 544 of 2003 filed by Morarjee pursuant to the orders dated 12th December, 2003, and 18th December, 2003, meetings of equity shareholders of Morarjee was conveyed on 15th January, 2004. This was pursuant to the power delegated to the Board of Directors of Morarjee as per Clause 13.4 of the said demerger Scheme Exhibit-F, i.e., Scheme of Arrangement between Morarjee and Canere.
12. The Scheme in question has taken into consideration the following aspects.
“16. Upon sanctioning of the Scheme by this Hon’ble Court, as provided in the Scheme :
(a) the entire Undertaking of the petitioner-company (as defined in Clause 1.7 of the Scheme) with all its assets and liabilities shall stand transferred to and vested in NPIL on and from the appointed date viz., 1st October, 2003 and in consideration NPIL shall issue and allot its three (3) preference shares of Rs. 100 each credited as fully paid up to the equity shareholders of the petitioner-company in place and in lieu of every twenty (20) equity shares held in the petitioner- company as provided in Clause 5.1(a) of the Scheme and,
(b) The Tools Division of Morarjee shall now stand demerged into NPIL w.e.f. 1st December, 2003 being the Appointed Date under the said Demerger Scheme and in consideration NPIL shall issue and allot its six (6) preference shares of Rs. 10 each credited as fully paid up to the equity shareholders of Morarjee in respect of every five (5) equity shares of Rs. 10 each held in Morarjee as provided in Clause 5.1(b) of the Scheme”.
13. The petitioner has also elaborated the benefits of the proposed Scheme in paragraphs 18 to 21 of the petition.
14. In view of Clause 24(f) in the Listing Agreement between NPIL and the respective Stock Exchanges, the Stock Exchange, Ahmedabad and the National Stock Exchange, a copy of the Scheme has been filed by NPIL with the said Stock Exchanges, NPIL will have to take steps for listing of the preference shares as per Clause 5.1 of the Scheme.
15. By an order dated 27th February, 2004, in Company Application No. 63 of 2004, filed by the petitioner, the Court has dispensed with the convening of the meetings of the equity shareholders and also of its secured and unsecured creditors in view of the No Objection Certificate given by 100% of the shareholders of the petitioner-company, shareholders, secured creditors as averred in the Affidavit by Mr. S. Parikh dated 16th February, 2004, in support of the Summons for Directions. The petitioners have undertaken to issue notice of the hearing to the unsecured creditors.
16. On 8th March, 2004, pursuant to the order dated 6th February, 2004, a meeting of the equity shareholders of NPIL was duly convened. The said order was passed in Company Application No. 37 of 2004 filed by NPIL and the shareholders have unanimously accepted the said decision and granted the approval. As already pointed out, NPIL has also filed on 9th March, 2004, a Company Petition No. 209 of 2004 in connection with Company Application No. 37 of 2004 for sanction of the Scheme.
17. As pointed out earlier, the Scheme in this petition is conditional upon approval of the demerger Scheme between Morarjee and the petitioner- company, i.e., Canere, as has been sought by Morarjee and the petitioner- company herein in Company Petition No. 73 of 2004 and Company Petition No. 91 of 2004 respectively. Therefore, it was submitted to take up the hearing of the Scheme of demerger referred to in the said Company Petition No. 73 of 2004 and Company Petition No. 91 of 2004, as well. The Scheme [Exhibit-A] sub…… the Demerger Scheme [Exhibit-F] and hence such submission.
18. The petitioners, as well as, NPIL Directors have no material interest in the Scheme, save and except as mentioned in Paragraph 27 of the petition.
19. NPIL is in sound financial position and the amalgamation embodied in the proposed Scheme will not adversely affect the interest of the secured and unsecured creditors of the petitioner-company. The Scheme of Amalgamation is in the interest of the company and its shareholders. The assets and liabilities of NPIL as on 31st March, 2003, is reproduced as under:
“31. As per the last audited accounts for the year ended on 31st March, 2003, the assets and liabilities of NPIL were as under:
Assets Rs. in crores
(i) Fixed assets (including capital work in
progress of Rs. 8.58 crores) 315.39
(ii) Current-assets (including investments of
Rs. 53.46 crores) 588.91
(iii) Total ______
904.30
_______
Liabilities
(i) Loan funds 284.35
(ii) Current liabilities 156.96
(iii) Provisions 50.63
Total ________
491.94"
________
Thus, the assets of NPIL are far in excess of its liabilities. Consequent upon the Scheme taking into effect, NPIL will have the additional assets and liabilities of the petitioner-company undertaking arid the Tools Division of Morarjee taken over by NPIL under the Scheme will be as under :
Assets : Rs. 93.63 crores Liabilities : Rs. 77.83 crores 19A. Relevant averments are :
“It will thus be seen that the assets of NPIL are more than sufficient to meet the liabilities not only of NPIL but also the liabilities of the Undertaking of the petitioner-company (as defined) and of the Tools Division of Morarjee when NPIL will take over. Further, the assets of NPIL shall stand increased as a result of the transfer to NPIL of the Assets of the Canere Undertaking and the Tools Division of Morarjee”.
20. There are no investigation proceedings pending or have been initiated in relation to NPIL under Sections 235 to 251 of the Companies Act. In view of this, the present petition has been filed on 10th March, 2004, for sanction of the Scheme in question.
21. By order dated 16th March, 2004, the company petition was admitted and fixed for hearing on 15th April, 2004. The appropriate notices were issued. In view of the averments made in Para 35, the individual notices of the hearing of the petition to the unsecured creditors were dispensed with. Notices of hearing, as per the usual procedure, have been given. The petitioner has filed affidavit dated 19th March, 2004, proving servive of the petition, as per law. The petitioner-company has filed another affidavit dated 25th March, 2004, proving publication of the notice in the newspaper and the same is also placed on record.
22. By affidavit dated 30th April, 2004, the Official Liquidator, by his report dated 13th April, 2004, endorsed that the affairs of the transferor company, i.e., viz., Canere Actives & Fine Chemicals Private Limited have not been conducted in a manner prejudicial to the interest of its members or to the public interest. It needs to be mentioned here that this Report is based on the Report of the Auditors pursuant to the proviso to section 394(1) of the Companies Act.
23. The Regional Director, by its affidavit dated 7th April, 2004, (Common in Company Petition Nos. 208 and 209 of 2004 connected with Company Application Nos. 63 & 37 of 2004) endorsed that the Scheme is not prejudicial to the interest of the creditors and shareholders, based on the report of the Registrar of Companies, as per the procedure and law.
24. As held in the judgment delivered by this Court [Anoop v. Mohta, J.] in Larsen & Toubro Ltd. dated 22nd April, 2004, all the legal and essential and necessary formalities have been complied with by the companies and the petition were filed within the framework of law. Requisite and essential material and documents were made available and notified, published and available with the requisite details and documents, before to all concerned, including the shareholders, creditors and competent authorities. No objections were raised about the non disclosure of materials or documents. The Regional Director, Company Registrar – all these authorities have, after due verification of the record of the company, endorsed and reconfirmed that the scheme is not against public interest, prejudicial to shareholders and all actions of the companies are within the framework of law. There is nothing illegal, unjust, unsound or against public policy or interest. No other department have raised any objection. All the experts/professionals submitted their Report and opinion and accepted the Scheme. These experts/professionals include Financiers, Auditors, Chartered Accountants, Bankers, Creditors, Financial Institutions and above all Company Managements, apart from unanimous majority decisions to support the Scheme. No illegality of any other law has been placed and proved with supporting material, in reference to the Scheme in question. Companies are bound to comply with all legal formalities. In the present case, no other alternative or possible view was explained or suggested, on any material issues, including the issue of share ratio. In my opinion, any view should not be given or expressed, as it will amount to thrusting and imposing decision against unanimous and majority decisions of the shareholders, creditors, financial institutions, such imposition is out of the Court’s domain. In this competitive market, the corporate world with exhaustive strategies is a must. Companies knowhow to make or arrange and adjust their business to run with the national and international markets. Third person may not be in a position to provide them business strategies and above all, companies know their respective shareholders’ need, may not be bound by the views expressed by the third persons. Unless there is apparent illegality, unfairness, unreasonableness where it is essential to pierce the veil of corporate strategies. Otherwise, it is difficult to have judicial review of this aspect of globalization and utility of material sources by the businessman or experts in the field. Business strategy is not the Court’s domain. It is difficult for the Courts to express their opinion on such matters. Business adjustments or arrangements cannot be decided or thrusted or imposed by the Court specially when such arrangement or adjustment or such Scheme is within the framework of the law.
25. In view of the above, the sanction of the Scheme, as prayed for, is granted. The company petition is made absolute in terms of prayer Clauses (a) to (n) with liberty. Parties to proceed in accordance with law.
26. Costs of Rs. 2,500 each to the Regional Director and the Official Liquidator, to be paid by the petitioner within a period of four weeks from today.