In Re: Larsen And Toubro Limited vs Unknown
2004 Latest Caselaw 484 Bom

JUDGMENT

Anoop V. Mohta, J.

Introduction :

1. Global competitiveness :

"The integration of the manufacturing and other facilities of the cement business of the petitioner-company into the resulting company and the eventual acquisition of management control of the resulting company by Grasim, will contribute to enhanced global competitiveness for the resulting company, thereby increasing its ability to compete in domestic and international markets. Increased competitiveness would contribute to the enhancement of future business of the petitioner-company and thereby contributing to the wealth of the shareholders of the petitioner-company."

2. The scheme of arrangement in question is revolving around the above objective of the companies.

3. This is a company petition under Sections 391 to 394 of the Companies Act in the matter of a scheme of arrangement between Larsen & Toubro Ltd. (for short "L & T" or "demerged company" or "petitioner-company" or "transferor company") and Ultra Tech Cemco Ltd. (for short "CemCo" or "resulting company" or "transferee company") and their respective shareholders, creditors and Grasim Industries Ltd. (for short "Grasim") as a shareholder of L&T and L & T Employees Welfare Foundation (for short "trust").

4. Companies :

(A) Larsen & Toubro Ltd.: Larsen & Toubro was incorporated on February 7, 1946, under the Indian Companies Act, 1913, having its registered office at L&T House, Ballard Estate, Mumbai, Maharashtra. The present capital structure of the petitioner-company is as follows :

Rs. in crore

Authorised 325.00 32,50,00,000 equity shares of Rs. 10 each Issued 249.00 24,90,59,412 equity shares of Rs. 10 each Subscribed and paid up 248.74 24,87,39,591 equity shares of Rs. 10 each includes equity shares represented by GDRs

(B) Ultra Tech Cemco Ltd. (for short "CemCo") was incorporated on August 24, 2000, under the Companies Act, as L & T Cement Ltd., now known as Ultra Tech Cemco Ltd., with effect from November 19, 2003, having its registered office situated at L & T House, Ballard Estate, Mumbai, Maharashtra. The present capital structure of the company is as follows :

   

Rs.

Authorised   30,00,00,000

3,00,00,000 equity of Rs. 10 each    

    30,00,00,000

Issued and subscribed   30,00,00,000

3,00,00,000 equity of Rs. 10 each    

Paid up 24,87,71,840  

2,48,77,184 equity shares of Rs. 10 each fully paid up    

51,22,816 equity shares of Rs. 10 each, Re. 1 per share paid up.

51,22,816  

    25,38,94,656

(C) Grasim Industries Ltd. (for short "Grasim") is a shareholder of the demerged company having its registered office at Birlagram, Nagda, Madhya Pradesh. It is engaged in the business of manufacture and sale of viscose staple fibre, cement, sponge iron, chemicals and textiles.

(D) The Samruddhi Swastik Trading and Investment Ltd. (for short "Samruddhi") is a wholly owned subsidiary and an unlisted company incorporated under the Companies Act having its registered office at Birlagram, Nagda, Madhya Pradesh. Samruddhi is primarily engaged in investment activities (as person acting in concert). Grasim and Samruddhi respectively hold 14.86 per cent. and 0.87 per cent. of the equity shares of the petitioner-company.

Pursuant to acquisitions through negotiated transactions, in the open market, an open offer made for the shares of the petitioner-company by Grasim, an unlisted company, as an acquirer with Samruddhi, a wholly owned subsidiary of Grasim, a proposal to demerge the (L & T) demerged company's cement business was given by Grasim and after due deliberation, the board of directors of the demerged company accepted the proposal from Grasim for demerger of the cement business into the resulting company or Cemco by way of a scheme of arrangement under Sections 391 to 394 of the Companies Act.

(E) L & T Employees Welfare Foundation (for short "trust" is an employee welfare trust established under the Indian Trusts Act, 1882).

5. Relevant provisions :

The relevant provisions concerning the scheme of arrangement are under the Companies Act, 1956, and the Companies (Court) Rules, 1959 (for short "Companies Act" and "Company Rules"). Sections 390 to 394 are the basic sections which deal with the scheme of compromise or arrangement or amalgamation or demerger or such other schemes. The other relevant sections of the Companies Act referred to are Sections 78 and 100 to 104. The other provisions are those which deal with meetings of the creditors or the members of the companies or shareholders and procedural requirements for convening and holding such meetings are also essential to note. The Company Rules, which are relevant for the purpose of sanction of the scheme of arrangement or amalgamation or demerger are Rules 6, 7, 9, 10 and 59 to 87.

6. Facts and statutory compliances :

A board meeting was held, after due notice to the directors of the respective companies as per Section 286 of the Companies Act to prepare and finalise the draft scheme of arrangement in question. On September 4, 2003, after due deliberation on the proposals, the board of directors of the petitioner-company and the demerged company approved the scheme of arrangement in question.

7. On November 3, 2003, the restructuring agreement was executed between the demerged company, Grasim, Samruddhi, the resulting company and the trust. On November 19, 2003, and November 25, 2003, respectively, the Bombay Stock Exchange and the National Stock Exchange have issued no objection letters to the demerged company in terms of Clause 24 of the Listing Agreement. On December 12, 2003, Company Application No. 540 of 2003 was filed by L & T by way of judges summons, supported by an affidavit as per Form No. 33 and affidavit in Form No. 34 read with Rule 67 of the Company Rules, 1959. By the orders dated December 12, 2003, and December 18, 2003, it was directed to convene meetings of the secured creditors including debenture holders, unsecured creditors including fixed deposit holders and equity shareholders of the petitioner-company for the purpose of considering and approving the said scheme of arrangement. The requisite meetings were accordingly held on February 3, 2004, at Mumbai. As required under the Companies Act and Rules, specially Section 393 read with Rule 73 of the Companies (Court) Rules, notices of the meetings together with a copy of the said scheme, the statement, the form of proxy and attendance slips were sent individually to the secured creditors including debenture holders, unsecured creditors, including fixed deposit holders and equity shareholders as required by the order of the court. As per Rule 74 of the Company Rules, the notice of the said meetings was advertised in the Free Press Journal (Mumbai edition), Navshakti (Marathi edition) and in all English editions of the Times of India.

8. The meeting of the secured creditors was attended by 49 secured creditors, either personally or by proxies or through authorised representatives of the petitioner-company entitled together to Rs. 23,846,300,000.00 value of debts and debentures. The meeting of the unsecured creditors, was attended by 63 unsecured creditors, either personally or through proxies, including FD holders or authorised representatives of the petitioner-company entitled together to Rs. 2,487,405,000.00 value of the debts/fixed deposits. The equity shareholders meeting was attended by 620 members holding equity shares, either personally or through proxies or authorised representatives holding equity shares of the petitioner-company entitled together to 140,240,184 equity shares of Rs. 10 fully paid up. All the above meetings were chaired by Mr. Anil Manibhai Naik, the person appointed by the hon'ble court, in the absence of Mr. S. S. Marathe.

9. By a special resolution in the said meeting, the issue of reduction of share capital was also passed unanimously. In the meeting of the shareholders, the scheme and the special resolution relating to the reduction of share capital were passed with an overwhelming majority of votes.

10. The chairman of the meetings filed his report as per Rule 78 of the Companies (Court) Rules in the court in respect of the result of the said meetings, dated February 3, 2004. The report of the chairman provides the details of the meeting of the secured creditors, unsecured creditors, equity shareholders and about transactions or business resolved in the said meetings. Various modifications and suggestions made by the shareholders to the scheme were discussed. The details of the basic ingredients of the scheme and respective modifications and its decisions by majority have been placed on record (exhibit H). Basically, three shareholders suggested five modifications in the meeting. Those are Mr. V. M. Raaste, Mr. Mustafa Kargalwala and Mr. Nalin V. Parekh. After following the due procedure, including Rule 77 of the Company Rules, the poll was conducted and after due scrutiny and completion of the required formalities, the results were declared. In all the creditors meetings, unanimous decision was taken that the scheme of arrangement should be approved and agreed to and votes were cast in favour of the resolution accordingly. No vote was cast against the resolution in the meetings of the secured creditors (including debenture holders) and unsecured creditors (including of FD holders). The majority decision of the equity shareholders, after due discussion and deliberation, on the suggested modifications, is reproduced as under :

"3.12 The scrutineers after verifying the poll papers informed the results as under :

(i) 463 members holding 14,02,10,513 votes who attended the meeting either in person or through proxies voted in favour of the proposed scheme of arrangement being adopted and carried into effect.

(ii) 35 members holding 13,845 votes who attended the meeting either in person or through proxies voted against the proposed scheme of arrangement being adopted and carried into effect."

11. The petitioner-company, thereafter, has filed the present company petition for the sanction of the scheme of arrangement under Sections 391 to 395 of the Companies Act read with Rules 79 to 87 of the Company Rules, along with the affidavit as required under Rules 18 and 21 of the Company Rules.

12. It is pertinent to note that subsequent to the submission of an application to the hon'ble High Court for direction to hold the meetings of secured creditors, unsecured creditors and equity shareholders, the share capital of the petitioner-company has increased by an amount of Rs. 6,40,000 comprising 64,000 equity shares of Rs. 10 each on account of exercise of options by the employees. This resulted in the present issued capital of the petitioner-company which has become Rs. 249,12,34,120 comprising 24,91,23,412 equity shares of Rs. 10 each. The subscribed and paid-up capital has became Rs. 248,80,35,910 comprising 24,88,03,591 equity shares of Rs. 10 each.

13. The petitioner-company, therefore, has also invoked the provisions of Sections 100 to 104 of the Companies Act and sought confirmation of the court for the reduction of share capital, as after the demerger the transfer of the assets and liabilities as mentioned in the opening financial statements of Cemco, the shareholders fund of the petitioner-company comprising the share capital and the reserve, will no longer be fully represented by the assets, and, therefore, to reflect the same as an intergral part of the scheme, the equity share capital and certain reserves comprising the shareholders fund is proposed to be recognised, as set out in the scheme. The creditors have supported the proposed share capital of the petitioner-company. The proposal of the reduction of share capital in the present scheme, involves neither diminution of liability in respect of unpaid share capital nor payment to any shareholder of any paid up capital. The financial position of L & T is sound and its assets are far in excess of its liabilities. There is no default in the statutory dues. Therefore, the reduction of the share capital of the petitioner-company in L & T has been an integral part of the scheme and the equity shareholders, secured creditors and unsecured creditors approved the scheme and the reduction of the share capital and passed the resolution accordingly. This hon'ble court, therefore, after considering the above background dispensed with the application of the provisions and the procedure under Sections 100 to 102 and rules made thereunder. The provisions relating to the proposed reduction of the share capital has been subsequently complied with. The form of the proposed minutes under Section 103(1)(b) of the Act has been accordingly submitted. Thereafter, the present Company Petition No. 120 of 2004 with due affidavit of one Mr. Anil Manibhai Naik filed on February 7, 2004, with statutory and requisite details. As averred, there are no investigation proceedings instituted or pending under Sections 234, 237, 239 and 247 of the Act against the petitioner-company directors interest in the scheme explained. Reference has been made to Company Application No. 566 of 2003 of the resulting company, in which an order dispensing with the meetings of the equity shareholders of the resulting company was passed on December 17, 2003, by this court. The notice under Section 394A of the Companies Act was accordingly served to the Central Government. The basic prayers have been made to sanction the scheme of arrangement with all related consequential reliefs including prayers for reduction of share capital.

14. It must be noted here that the resulting company or Cemco has also invoked the provisions of Sections 391 to 394 of the Companies Act read with Rules 79 to 87 of the Company Rules by Company Application No. 566 of 2003 and obtained order on December 17, 2003, for dispensing with the meetings of the equity shareholders and unsecured creditors of Cemco Company in view of the letters of consent dated December 12, 2003, submitted by all the equity shareholders of Cemco Company and the letters of consent dated December 13, 2003, submitted by the unsecured creditors. There has been no material changes in the creditors of Cemco or the resulting company.

15. The resulting company or Ultra Tech Cemco Ltd., has filed Company Petition No. 121 of 2004 on February 11, 2004, with statutory and requisite material and documents as per the provisions of the Companies Act and Rules and also in compliance with the provisions of Section 2(19AA) of the Income-tax Act, 1961, along with the proposed scheme of arrangement. In the said petition, it is also averred that there are no investigation proceedings initiated or pending under Sections 235, 237, 239 and 247 of the Companies Act. The usual averments, as required as per the procedure, have been made therein with necessary prayers. Both the company petitions are, therefore, interconnected and interlinked for all the purposes, including of facts, scheme of arrangement and all related consequences and result.

16. By order dated February 13, 2004, the present company petition was admitted and fixed for hearing on March 18, 2004. The notices of the hearing were ordered to be advertised and to be given to the Regional Director, Department of Company Affairs under Section 394A of the Act. In view of the averments made in paragraph 26 of the petition, the application of the provisions and the procedures to be followed under Sections 100 to 102 of the Companies Act and Rules framed thereunder for convening of the meetings of the creditors was dispensed with.

17. By affidavit dated February 20, 2004, of one Mr. Prabhakar Yevle, an employee of the advocates of L & T, the company averred about the service of the notice of hearing of the petition and the petition on the Regional Director. An affidavit dated March 17, 2004, proving publication of the notice of hearing of the petition in the Free Press Journal, Times of India and Navshakti. All these affidavits are part of the record.

18. By affidavit dated March 24, 2004, the Regional Director, Western Region, Department of Company Affairs, after examining the report of the affairs of the company from the point of view of the shareholders and creditors' interest, basically has not opposed the scheme of arrangement excepting a suggestion to consider the objections raised by one Mr. Rasik S. Poladia and recommendations of the Bombay Stock Exchange in reference to the letter dated November 19, 2003, and National Stock Exchange letter dated November 25, 2003, to list and trade on the stock exchange before the opening of the open offer proposed to be made by M/s. Grasim Industries Ltd. so as to enable the investing public to make an informed investment decision. The additional objection was in reference to Clause 33(b) of the scheme regarding amendment to the capital clause of the resulting company as the same involves increase of authorised capital requiring payment of stamp duty and Central Government registration fee and compliances with the procedure stipulated under Section 31/97 of the Companies Act. It is, therefore, submitted that the resulting company may be directed to pay the requisite stamp duty, Central Government registration fee and file the required forms with the Registrar of Companies and comply with the previsions of the Companies Act. There is no positive averment to the effect that the scheme is not in the interest of shareholders or creditors.

19. Submissions :

(A) Mr. Virendra Tulzapurkar, senior counsel, appearing on behalf of the petitioner-company read and referred to various authorities to support the petition and its prayers. Those cases are :

(1) Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp Cas 792 (SC);

(2) Hindustan Lever Employees' Union v. Hindustan Lever Ltd. [1994] 4 Comp LJ 267 ; [1995] 83 Comp Cas 30 (SC),

(3) Nicholas Piramal (India) Ltd., In re (unreported) (since reported in [2004] 121 Comp Cas 623),

(4) Renuka Datla v. Duphar Interfran Ltd. [2002] 1 Comp LJ 318 ; [2002] 104 (2) Bom LR 15 ; [2004] 121 Comp Cas 631 (Bom),

(5) Piramal Spinning and Weaving Mills Ltd., In re [1980] 50 Comp Cas 514 (Bom) ;

(6) Investment Corporation of India Ltd., In re [1987] 61 Comp Cas 92 (Bom),

(7) Vasant Investment Corporation Ltd., In re [1982] 52 Comp Cas 139 (Bom),

(8) PMP Auto Industries Ltd., In re [1994] 80 Comp Cas 289 (Bom),

(9) ICICI Ltd., In re [2004] 119 Comp Cas 941; [2002] 4 BCR 450,

(10) Reliance Industries Ltd. (unreported).

(B) Mr. Goolam Vahanvati, Advocate General of Maharashtra, appearing for Grasim Industries Ltd., has also supported and referred to and read the following cases in addition to the cases cited above :

(1) Sussex Brick Co. Ltd., In re [1960] 30 Comp Cas 536; [1961] 1 Ch D 289,

(2) Maknam Investments Ltd., In re [1995] 4 Comp LJ 330 ; [1996] 87 Comp Cas 689 (Cal),

(3) Grierson, Oldham and Adams Ltd., In re [1967] 37 Comp Cas 357; [1967] 1 WLR 385 ; [1968] 1 Ch 17 (Ch D).

(C) Mr. Janak Dwarkadas, senior counsel, appearing on behalf of Swastik Trading and Investment Ltd. and also supported the petition by the following decisions :

(1) Brooke Bond India Ltd. v. U. B. Ltd. [1994] 79 Comp Cas 346 (Bom),

(2) Hindustan Commercial Bank Ltd. v. Hindustan General Electrical Corporation ,

(3) Guardian Assurance Company, In re [1917] 1 Ch D 431 (CA).

20. Mr. Virendra Tulzapurkar, senior counsel for the petitioner-company laid the foundation by referring to Miheer H. Mafatlal [1996] 87 Comp Cas 792 (SC), Hindustan Lever Employees' Union [1994] 4 Comp LJ 267 ; [1995] 83 Comp Cas 30 (SC), Nicholas Piramal Ltd. [2004] 121 Comp Cas 623, Renuka Datla [2002] 104 (2) Bom LR 15 ; [2004] 121 Comp Cas 631 and Piramal Spinning and Weaving Mills Ltd., In re [1980] 50 Comp Cas 514 (Bom). He further referred to Investment Corporation of India Ltd., In re [1987] 61 Comp Cas 92 (Bom); Vasant Investment Corporation Ltd., In re [1982] 52 Comp Cas 139 (Bom); PMP Auto Industries Ltd., In re [1994] 80 Comp Cas 289 (Bom); ICICI Ltd. [2002] 4 BCR 450 and Reliance Industries Ltd. Strikingly, the apex court decision is an exemplar on the subject and issue. The well arranged principle (Mafatlal [1996] 87 Comp Cas 792 (SC)) is reproduced as under (page 818) :

"In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the company court has clearly got earmarked.

The following broad contours of such jurisdiction have emerged :

(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.

(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).

(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. 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.

(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).

(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.

(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 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.

(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 bona fide 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.

(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.

(9) Once the aforesaid broad 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.

The aforesaid parameters of the scope and ambit of the jurisdiction of the company court which is called upon to sanction a scheme of compromise and arrangement are not exhaustive but only broadly illustrative of the contours of the court's jurisdiction."

21. The above broad contours have been read and referred to by all the senior counsel including objectors' counsel.

22. From the same judgment, i.e., Miheer H. Mafatlal [1996] 87 Comp Cas 792 (SC), the petitioner's counsel has invited attention to the following paragraph to justify the scope of interference on objection by a few shareholders or objectors to show that the company judge or court has very limited scope to interfere with the majority decision expressed by the shareholders, while sanctioning the fair and reasonable scheme (page 828) :

"So far as the transferee company is concerned, though the appellant was not a director he was a 5 per cent. shareholder who did not think it fit to personally remain present at the time of voting and simply relied upon the proxy. If he was feeling that the scheme was unfair to him or was not going to protect his interest as shareholder in the respondent-company nothing prevented him from remaining present and voicing his grievance before the general body of the equity shareholders and to apprise them of the alleged pernicious effect to the scheme. It is, therefore, too late in the day for him to contend that the scheme was unfair to him and that the family of Arvind Mafatlal had tried to dominate and engineer any adverse pattern of voting at the meeting of the equity shareholders."

23. The apex court's decision in Hindustan Lever Employees' Union [1994] 4Comp LJ 267 ; [1995] 83 Comp Cas 30 (SC) has been referred to in Mafatlal's case [1996] 87 Comp Cas 792 (SC) also. The scope and power of the court for sanctioning such scheme based on the foundation of public interest or public policy or unfair or unconscionable has been laid down and elaborated. The prudent business management test or that the scheme should not be a device to evade the law has been further elaborated. The apex court's decision also emphasizes that such scheme should not result in impeding promotion of industry or should obstruct growth of national economy. Liberalized economic policy is to achieve this goal.

24. The essential paragraphs 5 and 6 are reproduced below (page 39 of 83 Comp Cas) :

"What requires, however, a thoughtful consideration is whether the company court has applied its mind to the public interest involved in the merger. In this regard, the Indian law is a departure from the English law and it enjoins a duty on the court to examine objectively and carefully if the merger was not violative of public interest. No such provision exists in the English law. What would be public interest cannot be put in a strait jacket. It is a dynamic concept which keeps on changing. It has been explained in Black's Law Dictionary as,

'something in which the public, the community at large, has some pecuniary interest, or some interest by which their legal rights or liabilities are affected. It does not mean anything so narrow as mere curiosity, whereas the interest of the particular locality which may be affected by the letters in question. Interest shared by citizens generally in affairs of local, State or national Government.'

It is an expression of wide amplitude. It may have different connotation and understanding when used in service law and yet a different meaning in criminal law or civil law and its shade may be entirely different in company law. Its perspective may change when merger is of two Indian companies. But when it is with the subsidiary of a foreign company, the consideration may be entirely different. It is not the interest of shareholders of the employees only, but the interest of the society which may have to be examined. And a scheme valid and good may yet be bad, if it is against public interest.

Section 394 casts an obligation on the court to be satisfied that the scheme of amalgamation or merger was not contrary to public interest. The basic principle of such satisfaction is none other than the broad and general principles inherent in any compromise or settlement entered into between parties that it should not be unfair or contrary to public policy or unconscionable. In amalgamation of companies, the courts have evolved the principle of prudent business management test or that the scheme should not be a device to evade law. But when the court is concerned with a scheme of merger with a subsidiary of a foreign company, then the test is not only whether the scheme shall result in maximising the profits of the shareholders, or whether the interest of employees was protected but it has to ensure that the merger shall not result in impeding promotion of industry or obstruct growth of national economy. Liberalised economic policy is to achieve this goal. The merger, therefore, should not be contrary to this objective. Reliance on the English decision for Custina, Hoare and Co. Ltd., In re [1933] All ER 105 (Ch D) and Bugle Press Ltd., In re [1961] 31 Comp Cas 369; [1961] 1 Ch D 270 (CA), that the power of the court is to be satisfied only whether the provisions of the Act have been complied with or that the class or classes were fully represented and the arrangement was such as a man of business would reasonably approve between two private companies may be correct and may normally be adhered to, but when the merger is with a subsidiary of a foreign company then economic interest of the country may have to be given precedence. The jurisdiction of the court in this regard is comprehensive."

25. The apex court's decision in Hindustan Lever Employees' Union [1994] 4 Comp LJ 267; [1995] 83 Comp Cas 30 (SC) also clarified that as a result of amalgamation, if it is found that the working of the company is being conducted in a way which brings it within the mischief of any particular Act, it would be open to the concerned authorities to go into and decide the controversy as it thinks fit. In the present case, all the concerned authorities, including the regulatory authority, relevant and related for the purpose of sanctioning of the scheme in question, after due notice, have given their no objection to the scheme. This includes the SEBI, Stock Exchange, Regional Directors and others. The relevant para. 71 is reproduced to clarify the issue further (page 62) :

"As a result of the amalgamation, if it is found that the working of the company is being conducted in a way which brings it within the mischief of the MRTP Act, it would be open to the authority under the MRTP Act to go into it and decide the controversy as it thinks fit."

26. This apex court decision further crystallised the submission of the objectors that a large share of the market will be captured by a particular company and, therefore, the scheme is unfair and unlawful or illegal. No case of illegality or fraud has been pointed out in the present matter, except bald allegations and general statements by shareholders like the objectors. The Supreme Court has further crystallized the effect of unanimous decisions by the shareholders, secured creditors, unsecured creditors and preferential shareholders of the related companies. There are no strong reasons made out to reject the sanction, as prayed. The relevant para. 84 is very clear to support the case of the petitioner in the present case also (page 65) :

"An argument was also made that as a result of the amalgamation, a large share of the market will be captured by the HLL. But there is nothing unlawful or illegal about this. The court will decline to sanction a scheme of merger, if any tax fraud or any other illegality is involved. But that is not the case here. A company may, on its own grow to capture a large share of the market. But unless it is shown that there is some illegality or fraud involved in the scheme, the court cannot decline to sanction a scheme of amalgamation. It has to be borne in mind that this proposal of amalgamation arose out of a sharp decline in the business of TOMCO. Dr. Dhavan has argued that TOMCO is not yet a sick company. That may be right, but TOMCO at this rate will become a sick company, unless something can be done to improve its performance. In the last two years, it has sold its investments and other properties. If this proposal of amalgamation is not sanctioned, the consequence for TOMCO may be very serious. The shareholders, the employees, the creditors will all suffer. The argument that the company has large assets is really meaningless. Very many cotton mills and jute mills in India have become sick and are on the verge of liquidation, even though they have large assets. The scheme has been sanctioned almost unanimously by the shareholders, debenture holders, secured creditors, unsecured creditors and preference shareholders of both the companies. There must exist very strong reasons for withholding sanction to such a scheme. Withholding of sanction may turn out to be disastrous for 60,000 shareholders of TOMCO and also a large number of its employees."

27. Another unreported judgment in Nicholas Piramal (India) Ltd. (since reported in [2004] 121 Comp Cas 623) related to a scheme of arrangement has been referred to consider the objections raised by the objectors in the present matter. This judgment, after considering the merits of the matter, rejected the objection and granted the scheme under Section 394(1) of the Act. This judgment has also considered the striking principles of the apex court's decision in Miheer H. Mafatlal [1996] 87 Comp Cas 792 in paras. 11 and 12, which are reproduced as under (page 630 infra) :

"In proceedings of the nature before the court the governing principles of law are those which the Supreme Court has laid down in Miheer H. Mafatlal v. Mafatlal Industries Ltd. . The Supreme Court while formulating parameters of the jurisdiction under Sections 391 and 394 noted that the sanctioning court must ensure that all the requisite statutory formalities have been duly observed; that the scheme which is put up for sanction of the court is backed up by the requisite majority ; that the concerned meeting 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; that the proposed scheme of compromise and arrangement is not found to be violative of any provisions of law and is not contrary to public policy ; and that the members or class of members or creditors or class of creditors were acting bona fide 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.

In this case there is no dispute about the position that the requisite statutory procedure has been followed and that the resolution has been passed by a requisite majority. The court has no material to come to the conclusion that the majority of the shareholders was coercing the minority of shareholders in order to promote any interest adverse to that of the minority. All the existing shareholders of the petitioner are being allotted shares in the transferee in the same proportion. The shareholders of the petitioner who claim to represent the minority will, therefore, have the same benefits as the other shareholders of the petitioner of the allotment of shares in the transferee company which would then be tradeable in the market upon the listing of the transferee company. In the circumstances, this is not a case where the court can hold, having regard to the objections which are placed before the court, that a reasonable man would say that he would not approve the scheme. The objector only holds 274 shares representing 0.0007 per cent. of the share capital of the petitioner. The objector admittedly did not attend the meeting of the shareholders to raise his objection to the scheme. His explanation is that he had to be present at the factory of the petitioner to supervise the removal of the machinery pursuant to judicial orders in a labour dispute and hence could not remain present. The fact does remain that the petitioner holds a miniscule proportion of the total share capital of the petitioner and that he had not remained present at the meeting of the shareholders."

28. It may be noted that this is also a judgment dealing with a scheme of arrangement. To clarify the facts, para. 2 of the said judgment is reproduced (page 625 infra) :

"The petitioner ('NPIL') has an investment of 93 lakh equity shares each of the face value of Rs. 10 in a company by the name of Gujarat Glass Pvt. Ltd. ('GGPL'). This investment constitutes 53.76 per cent. of the equity capital of the GGPL. Clause 4 of the proposed scheme provides that with effect from July 1, 2003, the appointed date, the investment of NPIL in GGPL shall stand transferred to and vested in a company known by the name of Kojam Fininvest Ltd. ('Kojam'). As consideration for the transfer, Clause 5 of the proposed scheme stipulates that Kojam shall issue and allot shares to every member of NPIL holding fully paid up equity shares in NPIL and whose name appears in the register of members of NPIL on the record date. Kojam is to allot for four equity shares held in NPIL, one equity share of Kojam of the face value of Rs. 10 credited as fully paid up. The scheme has also provided that NPIL Finevest Pvt. Ltd. a wholly owned subsidiary of NPIL shall subscribe for an additional 4,49,199 equity shares each of Rs. 10 of Kojam."

29. Reference was made to Renuka Datla [2002] 104 (2) BLR 15; [2002] 1 Comp LJ 318 ; [2004] 121 Comp Cas 631 whereby a Division Bench of this hon'ble court, based on Majutlal's case [1996] 87 Comp Cas 792 (SC) overruled the objections and sanctioned the scheme and resisted an overwhelming majority of the shareholders. The relevant paragraph 15, 16 and 17 are relevant even for the purpose of approving the scheme in question (page 638 infra) :

"The contention, namely, that disparate interests were lumped together for seeking approval of the resolution and, therefore, the approval of the resolution is invalid, is sought to be buttressed by relying on the judgment of the Supreme Court in Miheer H. Mafatlal [1996] 87 Comp Cas 792. In our view Miheer H. Mafatlal affords no support to the appellant. . .

This clearly presupposes that if the scheme of arrangement or compromise is offered to the members as a class and no separate scheme is offered to any sub-class of members which has a separate interest and a separate scheme to consider, no question of holding a separate meeting of such a sub-class would at all survive ... Consequently when one and the same scheme is offered to the entire class of equity shareholders for their consideration and when the commercial interest of the appellant so far as the scheme is concerned is in common with other equity shareholders he would have a common cause with them either to accept or to reject the Scheme from commercial point of view ... For these reasons a similar argument that a separate meeting of a sub-class of the appellant ought to have been called, was rejected. Finally, the Supreme Court observed, 'It is therefore, obvious that unless a separate and different type of scheme of compromise is offered to a sub-class of a class of creditors or shareholders, otherwise equally circumscribed by the class, no separate meeting of such sub-class of the main class of members or creditors is required to be convened.

In the present case also, neither the Act nor the articles of association recognise anything other than equity shareholders as a class. The only contention urged is that the appellant and similarly placed objectors to the scheme were minority shareholders and as a result of the post scheme transfer of equity shares, the controlling interest in the company would shift. In our judgment, this is hardly a consideration on the basis of which the scheme could be struck down as bad. The same scheme is offered to all shareholders. The share ratio is to be uniformly applied to in all the shareholders of the transferor company. In any event merely because a scheme is propounded for consideration of the court under Section 391 of the Companies Act, 1956, the court is not bound to sanction it as propounded. The court has the jurisdiction and the duty to sanction the scheme subject to such modifications as the court may desire to make. The order of the learned company judge shows that, at the hearing, learned counsel for the respondent-company, agreed that Clauses 5.8, 5.9 and 9.7 of the scheme of arrangement may be deleted from the scheme. This was accepted by the learned company judge as deletion of the said clauses did not in any way alter, affect or prejudice the scheme of the arrangement so as to require reconsideration of the scheme of demerger or approval of the shareholders. It is contended by learned counsel for the appellant that this was not permissible at all. Irrespective of what was conceded before the company judge, if the scheme approved is not something identical to what was approved by the shareholders, the whole thing must be sent back for the approval of the shareholders once again. In our view, this contention is unsound. When a scheme is put before the company court for approval, the company court may approve it wholly or with or without modification or reject the same. If the modification consists merely of deletion of certain clauses which do not affect the rest of the scheme, and if the scheme together with these clauses has already been approved by an overwhelming majority of the shareholders, we do not see why such a scheme, minus the deleted clauses, should once again be resubmitted for approval of the shareholders. Section 392 of the Companies Act, 1956, gives wide power to the company court to make addition to the scheme or omission therefrom solely for the purpose of making it workable. In fact, in S.K. Gupta v. K.P. Jain [1979] 49 Comp Cas 342, the Supreme Court went so far as to say that strictly speaking omission of the original sponsor and substituting another one would not change the basic fabric of the scheme. The Supreme Court in S. K. Gupta [1979] 49 Comp Cas 342, 352, quoted with approval, the observations of the Gujarat High Court in Mansukhlal v. Shah (M. V.), Official Liquidator, Liquidator of Hathising Mfg. Co. Ltd. (In Liquidation) [1976] 46 Comp Cas 279 (Guj) as under (page 291) :

'The court has a continuing supervision over the implementation of compromise and arrangement. Unenvisaged, unanticipated, unforeseen or even unimaginable hitches, obstruction and impediments may arise in the course of implementation of a scheme of compromise and arrangement and if on every such occasion, the sponsors have to go back to the parties concerned for seeking their approval for a modification and then seek the approval of the court, it would be a long-drawn out protracted, time-consuming process with no guarantee of result and the whole scheme of compromise and arrangement may be mutilated in the process. Parliament has, therefore, thought it fit to trust the wisdom of the court rather than to go back to the interested parties. If the parties have several times to decide the modification with the democratic process, the good part of an election machinery apart, the dirt may step in, the conflicting interests may be bought and sold, and, in the process, the whole scheme of compromise and arrangement may be . . .'

Therefore, the Supreme Court observed as under :

'. . . Undoubtedly, the court may decline to act at the instance of a busybody.'"

30. Mr. Goolam Vahanvati, Advocate General, in addition to the above principle, further relied on Sussex Brick Co. Ltd., In re [1960] 30 Comp Cas 536 ; [1961] 1 Ch D 289 and supported the scheme on the foundation that the onus of proof lies upon the objectors to show that such scheme is unfair. He referred to the following paragraphs (pages 538, 539 and 540) :

"That being the undoubted law, I think that the present scheme and present offer are undoubtedly open to criticism, and that a clever business man, a man well versed in company law and matters which influence dealings on the stock exchange, could find a good many loopholes in it. That amounts to this : the scheme is open to criticism; but does that go far enough ? That is the difficulty in the present case. It has not been suggested on behalf of the applicant that there has been any bad faith or any intentional misleading of the applicant, but although the scheme is open to a good deal of criticism, which might be enlarged on at great length in one or more circulars, what exactly the effect on the mind of the shareholders would have been I do not pause to inquire. That the scheme is open to criticism I have no doubt, but can it be said therefore to be unfair ? I think it rather difficult to predicate unfairness in any case in which there has been perfect good faith on the side of the person who is alleged to have been unfair. I think that the applicant is faced with the very difficult task of discharging an onus which is undoubtedly the heavy one of showing that he, being the only man in regiment out of step, is the only man whose views ought to prevail. That is the difficulty he is faced with in the present case.

I agree that certain criticisms set out in the applicant's affidavit show that a good case could be made out for the formulation of a better scheme, of a fairer scheme, of one which would have been more attractive to the shareholders if they could have understood the implications of the criticisms. I have no doubt at all that a better scheme might have been evolved, but is that enough ? Is it necessary to establish the validity of such an offer as put forward in the present case ? Is there any point in the scheme on which a better view might have prevailed, and rather more generous treatment might have been offered to persons whose shares are sought to be expropriated ? A better and fairer offer might have been made, possibly, but I do not think that because a scheme is not 100 per cent. fair or right there is the kind of unfairness with which Maugham J. was dealing in the case to which I have referred. The mere finding of items, or details, in the scheme which are open to valid criticism, is not unfairness consistent with the spirit of that judgment.

A scheme must be obviously unfair, patently unfair, unfair to the meanest intelligence. It cannot be said that no scheme can be effective to bind a dissenting shareholder unless it complies to the extent of 100 per cent. with the highest possible standards of fairness, equity and reason. After all, a man may have an offer made to him and, although he would prefer something better, would be quite prepared to accept it because it was good enough in all the circumstances. It may be that the grounds for criticising the present scheme are not grounds of such a nature as to render the whole thing unfair in the sense in which Maugham J. used the words in the case which I have cited . . .

Without putting my own view as to how this scheme could have been improved and made a little more favourable and a little more fair, perhaps, to the ordinary shareholders, I do not think that unfairness in the sense in which it has been used in the reported cases has been established. It must be affirmatively established that, notwithstanding the view of the majority, the scheme is unfair, and that is a different thing from saying that it must be established that the scheme is not a very fair or not a fair one; a scheme has to be shown affirmatively, patently, obviously and convincingly to be unfair."

31. The principle which he canvassed goes to the root of the present matter. The objectors failed to discharge their onus of proof of allegations of unfair, illegal or against the public policy as contemplated under the Companies Act. The scheme of the Companies Act has to be read and understood in the context in which the Companies Act and its scheme worked for the purpose and benefit of the company and its shareholders. This judgment has been referred to in Mafatlal's case [1996] 87 Comp Cas 792 (SC) also at page 820. Those allegations were without any proof, material and documents. Those allegations were bare allegations without supporting evidence or even basic averments. Those allegations were general and are baseless and without any material.

32. Mr. Goolam Vahanvati further relied on Maknam Investments Ltd., In re [1995] 4 Comp LJ 330; [1996] 87 Comp Cas 689 (Cal) to elaborate further that the case of Sussex Brick and Co., In re [1960] 30 Comp Cas 536; [1961] 1 Ch D 289 as referred to above, has been followed and reappreciated in this judgment and in that case also, after considering the merits of the objection, the court has dismissed the objection and sanctioned the scheme.

33. Mr. Goolam Vahanvati further pointed out that in reference to Grierson, Oldham and Adams Ltd., In re [1967] 37 Comp Cas 357 (Ch D); [1967] 1 WLR 385; [1968] 1 Ch 17, opposition by minority shareholders or individual shareholders cannot be considered against the majority of the shareholders who have accepted the scheme in question. He referred at page 391, to the following paragraph (page 363 of 37 Comp Cas) ;

"The third general observation which arises out of the arguments that have been put forward concerns the question whether the test of the fairness of the offer is fairness to the individual shareholder or fairness to the body of shareholders as a whole. In my judgment, the test of fairness is whether the offer is fair to the offerees as a body and not whether it is fair to a particular shareholder in the peculiar circumstances of his own case. Mr. Gurney-Champion suggested that the contrary was the true view, and he referred in support of that submission to certain remarks made by Vaisey J. in Sussex Brick Co. Ltd., In re [1960] 30 Comp Cas 536; [1961] 1 Ch D 289 which is reported as a note to Bugle Press Ltd., In re [1961] 31 Comp Cas 369 ; [1961] 1 Ch D 270 (CA)."

34. It is settled and approved that the provisions for sanction of scheme by the court are based on "single window clearance system". Reliance has been placed on the reported judgment in PMP Auto Industries Ltd., In re [1994] 80 Comp Cas 289 (Bom). This judgment further elaborates the power of the court to approve or sanction a scheme of amalgamation or arrangement which is for the benefit of the company. The following observations clinch the issue (page 299):

"Thus the position in law appears to be clear. Section 391 invests the court with powers to approve or sanction a scheme of amalgamation/arrangement which is for the benefit of the company. In doing so, if there are any other things which, for effectuation, require a special procedure to be followed--except reduction of capital--then the court has powers to sanction them while sanctioning the scheme itself. It would not be necessary for the company to resort to other provisions of the Companies Act or to follow other procedures prescribed for bringing about the changes requisite for effectively implementing the scheme which is sanctioned by the court. Not only is Section 391 a complete code as held by the courts, but, in my view, it is intended to be in the nature of a 'single window clearance' system to ensure that the parties are not put to avoidable, unnecessary and cumbersome procedure of making repeated applications to the court for various other alterations or changes which might be needed effectively to implement the sanctioned scheme whose overall fairness and feasibility has been judged by the court under Section 394 of the Act."

35. Further reference was made to ICICI Ltd., In re [2002] 4 BCR 450 ; [2004] 119 Comp Cas 941 (Bom), in the matter of amalgamation of ICICI Ltd. in reference to the scheme of amalgamation to resist the objection of objectors in reference to the alleged valuation and production of material before the court to show that valuation arrived at is grossly unfair, or unjust. This court again reconfirmed that the majority of shareholders decision should prevail considering the rule of corporate majority. This judgment had considered Hindustan Lever Employees' Union [1994] 4 Comp LJ 267 ; [1995] 83 Comp Cas 30 (SC) and Piramal Spinning and Weaving Mills Ltd., In re [1980] 50 Comp Cas 514 (Bom) and granted the scheme, as prayed for, by observing as under in para. 14 of the said judgment (page 950 of 119 Comp Cas) :

" In the present case, it is clear that the valuers appointed by the companies together have given their detailed report and have adopted various methods for arriving at the fair exchange ratio. The Reserve Bank of India, which is an independent body even without the knowledge of the petitioner-company and bank, called for the report and it is clear from the contents of the affidavit quoted above that the report submitted to the Reserve Bank of India is also on the similar lines to the report submitted by the valuers appointed by the two companies. Considering the jurisdiction of this court in considering the question of sanction to amalgamation scheme, in my opinion, unless and until the objectors who are challenging the valuation, produce material before the court that the valuation arrived at is grossly unfair, the court will not be justified in withholding its sanction. In the present case no such attempt was made by the objectors."

36.Objectors and objections:

The objections have been raised to the present scheme of arrangement by Mr. Rasik S. Poladia, from Mumbai, V. M. Raaste from Pune, V. Ranganthan and S. Shekar from Chennai. Mr. Poladia has been represented by advocate Mr. Sanjay Jain. The objectors from Chennai have sent their objections in writing to the court by registered post acknowledgment due. The said objections from Chennai dated February 16, 2004, were not as per the prescribed form or procedure of the company rules. They never attended or appeared before the court at any point of time during any dates of hearing or even earlier. The petitioner-company, however, after due inspection, have resisted the said objections by affidavit dated March 22, 2004, and accordingly filed their affidavit in the court, A copy of the said reply-affidavit dated March 22, 2004, has also been sent at the address of the Chennai objectors. No one appeared on behalf of the said Chennai objectors.

37. Mr. Rasik S. Poladia, a shareholder of the petitioner-company, is also a shareholder of Narmada Cement Company Ltd. (NCCL), a subsidiary of the petitioner (L & T). He opposed the scheme of arrangement by filing his affidavit of objection dated March 15, 2004. His shareholding is 100 shares only. Further, he has also filed an additional affidavit dated March 16, 2004. Both these affidavits have been resisted by the petitioner-company through their separate reply dated March 22, 2004. After filing the gist of submissions by the advocate of Mr. Rasik S. Poladia and after closing of the arguments on behalf of the said objector, an additional affidavit dated April 2, 2004, was tendered in court. The said affidavit was resisted and objected to by counsel for the respective companies. However, it was agreed that the documents, basically restructuring agreements and the report of the recommendations of ratio for the issue of equity shares issued by Ernst and Young Pvt. Ltd. and N. M. Raiji and Co., exhibit A and exhibit C, conceded to be taken on record. Exhibit G is a notice issued by the petitioner-company. It was received by the objector Rasik S. Poladia. Exhibit J is the letter dated March 31, 2002, issued by the petitioner-company. Exhibit B is an annual report of Narmada Cement Company Ltd. of 2002-2003 which is objected to by counsel for the petitioner-company to be taken on record. The basic objection is that the averments made in the affidavit dated April 2, 2004, are an afterthought and cannot be accepted after closing of the matter or at least after closing of the matter by learned counsel for the said objector. Mr. Jain, advocate for the objector insisted to consider this additional affidavit to be taken on record in view of para. 1 of the said affidavits. After considering the merits of the matter and the grounds and objections already raised in the first two affidavits of Mr. Rasik S. Poladia as well as in the gist of submissions filed by his advocate, I see no reason to allow this additional affidavit on record. Counsel for the petitioner-company have referred to and pointed out the provisions of the Companies Act and rules made thereunder to show that such affidavits are impermissible and, therefore, must be rejected.

38. One Mr. V. M. Raaste has filed his affidavit dated March 12, 2004 and resisted through the grounds of objection, the scheme of arrangement in question. Mr. Raaste is a shareholder of L & T and of Narmada Cement. His shareholding is only two shares of L & T and four shares of NCCL. Mr. Raaste participated in the meeting and suggested some modification along with Mr. Rasik S. Poladia. Those modifications were rejected by the majority. Mr. Raaste appeared throughout the hearing of the proceedings in person. The petitioner-company has filed reply to Mr. Raaste's affidavit dated March 22, 2004, and vehemently resisted the said grounds of objections. Mr. Raaste, despite the opportunity given, failed to file additional affidavits and written submission and/or failed to engage any advocate. On April 5, 2004, after considering the conduct and attitude of Mr. V. M. Raaste, his application for adjournment of the hearing was rejected. Counsel appearing for all the companies, including the objector Mr. Rasik S. Poladia concluded their arguments. Except Mr. Raaste, no other objectors made any argument or sought time for any further arguments. On April 5, 2004, Mr. Raaste himself fully read his objection in court. By an affidavit/application, he sought further time to argue the matter and to engage an advocate and to file his submissions. His application for postponement of hearing was rejected by separate order dated April 5, 2004. However time was granted, as granted to the parties to file their written submissions or notes, if any, by and/or before April 8, 2004. Counsel for the petitioner-company have filed their written submissions and the last written submissions have been received on April 7, 2004. Even by April 8, 2004, there were no written submissions filed by Mr. Raaste or any other intervener or objector, except referred to above. Later on, two additional affidavits, identical in nature and substance, of Mr. R. Sekar and one Mr. Rangnath were received and brought to notice on April 16, 2004. Therefore, the matters were listed for directions on April 19, 2004. Counsel for the petitioner-companies have already covered all the points and, therefore, not made any additional arguments, as matters were already closed for orders. Mr. Raaste, however, wanted to file an additional affidavit with new documents, which was opposed by counsel for the petitioner-companies, as matters were already closed for orders. They, therefore, submitted that now, no new or additional affidavit can be permitted to be taken on record and to reopen the closed matter. They also contended that now remedy of objections is elsewhere. On April 20, 2004, Mr. Raaste, in spite of the above rejection, in the guise of written submissions, again wanted to file on record, all new reasons and documents. Counsel appearing for the petitioner-companies pointed out that the contents of the additional affidavit dated April 19, 2004, which was rejected by order, are the same. Mr. Raaste's conduct and the whole attitude is only to prolong and postpone the matter and now judgment. Therefore, it was also rejected by an order. It may be noted that Mr. Poladia and Mr. Raaste have common objectives and grounds of objections. Both are aware of each other's objections. The companies have exchanged and provided objection copies to the respective objectors also. The pattern and grounds of objections are the same. All know the respective objections to the scheme. Mr. Raaste's objections and suggestions, supported by Mr. Poladia, were rejected at the February 3, 2004, meeting. Now, both have gone beyond those objections for the first time in the court and raised other objections which cannot be tested or approved by the other majority shareholders and companies and creditors. Therefore also, such objections are not acceptable and/or entertainable.

39. The points of objection of the objectors are as under :

Suppression of material facts and documents, false statements, non-disclosure of all relevant facts and documents, transfer of shares of NCCL in violation of the SEBI (Takeover) Regulations and at a throwaway price will be transfer of Grasim. The scheme is against public policy. The scheme with a third party, i.e., Foundation Trust is not contemplated as the same is not an "arrangement" within the meaning of Section 390 and as such, the petition is not maintainable. Reduction of capital is not bona fide and correct. No procedure, as contemplated under Sections 100 to 104 has been followed. The concentration of business and to hive off of the cement division of Grasim at a throwaway price. No proper valuation report is produced. The report of N. R. Raiji and Ernst & Young is misplaced and incorrect. The meeting of small investors should have been called. The scheme amounts to oppression of minority by the majority. The composition of the audited committee is not in accordance with Clause 49 of the listing agreement and Section 292A of the Companies Act. The auditors have also erroneously certified the compliance with Clause 49. Accounting standards have not been followed. The accounts are silent on various aspects. Statements in the minutes of the meetings are also not correct. The scheme exposes the nexus between the incoming management and the financial institutions. Regulation 20, sub-regulation (4) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and other provisions have not been complied with. The details and controls of L & T Employees Welfare Foundation (Trust) have not been placed on record. It is not an independent trust. Share escrow arrangements have also been challenged. Notices and explanatory provisions are contrary to the provisions of law as they do not give full and relevant details as required. Vital information was furnished to the shareholders through the chairman's letter dated December 31, 2003 and, therefore, such supplement details do not comply with the statutory requirements of the December 21, 2003, notice, even though the meeting was held on February 3, 2004. The whole scheme is favourable to the Grasim and Birla groups and the Birla group will have a controlling interest in the resulting company. The transfer from Grasim to the trust is at a concessional price of 44 per cent. of its value. The fund of the shareholders, in fact, has been passed on to the employees (trust). The brand is proposed to be transferred to the Birlas at a very nominal price of reputed and established petitioner-company (L & T).

40. Mr. Sanjay Jain, learned counsel for the objectors, viz., Rasik S. Poladia has opposed the scheme of arrangement in question and relied on the following cases :

(1) Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd., : This judgment is a landmark judgment to interpret and explain the phrase "public policy of India" as contemplated under Sections 34(2)(b), 28(a), 13(5) and 16(6) of the Arbitration and Conciliation Act, 1996. The enlarged meaning given to those phrases is not in dispute. Specific reliance was made on para. 31 which is reproduced as under (page 727) :

"Therefore, in our view, the phrase 'public policy of India' used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to the narrower meaning given to the term 'public policy' in the Renusagar's case [1994] 81 Comp Cas 171 (SC), it is required to be held that the award could be set aside if it is patently illegal. The result would be the award could be set aside if it is contrary to :

(a) the fundamental policy of Indian law ; or

(b) the interest of India ; or

(c) justice or morality, or

(d) in addition, if it is patently illegal.

Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that the award is against the public policy. The award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void."

No one has disputed the principles laid down by the apex court as referred in the above paragraphs.

(2) Bedrock Ltd., In re [1998] 4 BCR 710 ; [2000] 101 Comp Cas 343 (Bom) (single judge) :

This judgment has been relied upon for the principle that a party seeking discretionary relief from the court must come with clean hands and must not suppress any relevant fact from the court, must refrain from making misleading statements and from giving incorrect information to the court. According to the objector, the petitioner-company is guilty of suppressio veri and suggestio falsi.

(3) S.P. Chengalvaraya Naidu v. Jagannath, :

It is settled law that any order obtained from the court by playing fraud on the court is not permissible. Therefore, at any stage of the proceedings or by any proceeding, a decree, order obtained by dishonest litigants can be set aside. The process of the court cannot be allowed to be abused or misused. That the party whose case is based on falsehood has no right to approach the court and in such cases, the court would refuse to exercise its discretion in favour of such petitioner or party whose actions are not bona fide. It is also settled that withholding of vital documents relating to litigation amounts to fraud on the court and such guilty party is liable to be thrown out at any stage.

(4) State Bank of India v. Alstom Power Boilers Ltd. [2003] 116 Comp Cas 1 (Bom) ; [2003] 5 BCR 421 (DB) :

In this case, reference is made to paragraphs 27 and 28 in support of the submission that the parties-companies should produce or place on record the latest balance-sheet, profit and loss account and the auditor's report as on the date when the matter is actually heard by the court specially when there is a gap between the date of the application and when the court considers the scheme for sanction. The court, in such circumstances, should call for the latest possible information even at and during the course of hearing. In the said judgment, it was clearly observed further that on the facts and circumstances of the case, all the material facts relating to the company including the latest financial position had been on record.

(5) Rex v. Kensington, Income Tax Commissioners Ex parte Edmond de Palignae (Princess) [1917] 1 KBD 486 (CA) :

This foreign judgment referred to and relied on by the objectors' counsel is totally misplaced.

(6) K.K. Modi v. Securities Appellate Tribunal :

41. This judgment was referred to by the objectors to explain the provisions of the Securities and Exchange Board of India Act, 1992 (SEBI), read with the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. No one has disputed the provisions as well as the principle laid down in that judgment refers to the SEBI law. Paragraph 4 of the said judgment deals with valuation report of scheme of arrangement.

42. Discharge of burden of proof:

In my view, the present scheme of arrangement is fair, just and in the interest of the public. Mere allegations of the objectors are not sufficient and what is to be seen by the court in such circumstances has been crystallized in the following words :

"The Chancery Division in Sussex Brick Co. Ltd., In re [1960] 30 Comp Cas 536 ; [1961] 1 Ch D 289, while discussing the scope and the jurisdiction of the, company court, has held at page 291 that (page 538) :

'I think that the present scheme and the present offer are undoubtedly open to criticism, and that a clever businessman, a man well versed in company law and matters which influence dealings on the stock exchange, could find a good many loopholes in if'."

And further that, "That the scheme is open to criticism I have no doubt, but can it be said therefore to be unfair ? I think it rather difficult to predicate unfairness in any case in which there has been perfect good faith on the side of the person who is alleged to have been unfair. I think that the applicant is faced with the very difficult task of discharging an onus which is undoubtedly the heavy one of showing that he, being the only man in the regiment out of step, is the only man whose views ought to prevail."

The Chancery Division has on page 292 also stated that (page 539), "A scheme must be obviously unfair, patently unfair, unfair to the meanest intelligence."

43. In reliance upon the decision in Sussex Brick's case [1960] 30 Comp Cas 536; [1961] 1 Ch D 289, the Chancery Division in Grierson, Oldham and Adams Ltd., In re [1967] 37 Comp Cas 357, 363, 364; [1967] 1 WLR 385; [1968] 1 Ch 17 at page 391 placetum B, has stated, "The third general observation which arises out of the arguments that have been put forward concerns the question whether the test of the fairness of the offer is fairness to the individual shareholder or fairness to the body of shareholders as a whole. In my judgment, the test of fairness is whether the offer is fair to the offerees as a body and not whether it is fair to a particular shareholder in the peculiar circumstances of his own case."

The Chancery Division at page 391 placetum H, has further held that, "The other general observation, which arises from the Sussex Brick case [1960] 30 Comp Cas 536; [1961] 1 Ch D 289, is that the fact that the applicants may be able to demonstrate that the scheme is open to criticism, or is capable of improvement is not enough to discharge the onus of proof which lies upon them."

44. As already noted above, decisions of the Chancery Division have also been recognised and followed by the Calcutta High Court in the matter of Maknam Investments Ltd., In re [1995] 4 Comp LJ 330 (Cal); [1996] 87 Comp Cas 689. In view of this, in my opinion, the objections, as raised, have no substance. Those objections are frivolous and liable to be rejected. All the statutory compliances have been followed. The scheme of arrangement is not against public policy or against the interest of the shareholders of the company or employees or workers. The scheme of arrangement falls within the parameters of the apex court's decision in the case of Mafatlal [1996] 87 Comp Cas 792 and Hindustan Lever Employees' Union [1994] 4 Comp LJ 267 ; [1995] 83 Comp Cas 30 (SC) and other decisions of the High Courts.

45. A few shareholders' cannot oppose such scheme of arrangement, which has been passed by majority and 99.99 per cent. of shareholders and unanimously by the creditors or unsecured creditors. The burden is heavy on such objectors, to prove otherwise, with material and evidence on record. Mere vague and bald averments are not sufficient. Interest of workers and employees, creditors, unsecured creditors, financial institutions have been taken care of and approved. In this background, the objectors or others, are unable to place on record any contrary material. The objectors have failed to discharge their burden to prove their bald and vague allegations. In this background, the court cannot unveil the companies' corporate veil and their commercial wisdom and make the scheme of arrangement, unworkable or delay its implementation, specially when the scheme has been widely advertised and approved by an overwhelming majority and in the absence of even another possible view of the matter. There is no other view or alternative scheme, even suggested or pointed out.

46. It is settled law that the party who alleges must prove its allegations. Majority decisions on significant aspects, unanimous and/or overwhelming, in the meetings dated February 3, 2004, cannot be skate over while approving the scheme of arrangement. The law itself requires to submit such company petition under Sections 391 to 394, after getting more than 75 per cent. majority of votes. It means at the threshold itself, need of law has been complied with. Therefore, the presumption in favour of the scheme cannot be rebutted by a few shareholders, in the present case four objectors, by making bald and vague allegations at such a stage. Having given consideration to the whole aspect of the scheme of arrangement including statutory compliances, the objectors failed to discharge their burden to prove the demerits of the scheme in question. Nothing has been placed on record to prove illegality, unfairness, unrecommendableness of the scheme. Merely giving unsupported and baseless views cannot be accepted specially when the merits of the scheme of arrangement have been recognised and approved by all others. In this case, the above conclusion turns upon the material placed by the parties.

47. The reasons for sanctioning the scheme of arrangement are as follows :

Reasons for sanction of the scheme:

All senior counsel have explained the scheme of arrangement. The basic scheme, as elaborated in the petition, the background as well as rationale for the scheme, envisages that it is with an intention to achieve the global vision in this rampant globalization competitiveness in the national, as well as international market. Its intention can be gathered from the following paragraphs of the scheme of arrangement itself:

"(E) In furtherance of the restructuring agreement and the undertaking between the parties thereto, this composite scheme (as defined hereunder) provides for :

(a) the demerger, upon the effectiveness, of which, the demerged company would hold 20 per cent. of the paid-up capital of the resulting company, the balance 80 per cent. would be held by the shareholders of the demerged company in the same proportion in which shares are held by them in the demerged company ;

(b) the occurrence, on the effective date, of all of the following concurrently :

(i) deposit of the CemCo shares and the L & T shares by each of the L & T and Grasim/Samruddhi respectively in escrow in accordance with the share escrow arrangement (as defined hereunder);

(ii) deposit of the purchase consideration (as defined hereunder) and the sale consideration (as defined hereunder) by each of Grasim and the trust respectively in escrow in accordance with the share escrow arrangement; and

(iii) the announcement to the public of the open offer.

(c) the open offer ;

(d) the occurrence of all of the following concurrently upon the shareholding of Grasim (along with that of its association) in CemCo amounting to at least one share more than 41.5 per cent. of the shares of CemCo:

(i) release of escrow in relation to the CemCo shares and the purchase consideration in accordance with the share escrow arrangement;

(ii) release of escrow in relation to the L & T shares and the sale consideration in accordance with the share escrow arrangement; and

(iii) acquisition of management control.

(e) various other matters consequential or otherwise integrally connected herewith, including the reorganisation of the capital of the demerged company ;

pursuant to Sections 391 to 394 and other relevant provisions of the Act in the manner provided for in this scheme and in compliance with the provisions of Section 2(19AA) of the Income-tax Act, 1961.

(F) In order to impart certainty to, and to facilitate, the transactions contemplated herein, the financial institutions holding equity shares in the demerged company have expressed their in-principle approval to this scheme and have indicated that they are agreeable, in principle, to participate in the open offer.

(G) This scheme is divided into the following parts :

(a) Part I, which deals with the introduction and definitions ;

(b) Part II, which deals with the demerger of the demerged undertaking from the demerged company to the resulting company ;

(c) Part III, which deals with the open offer escrow arrangement (as defined hereunder), management of the cement business, the open offer, the share escrow arrangement in relation to the CemCo shares and the L & T shares, and the acquisition of management control; and

(d) Part IV, which deals with the general terms and conditions applicable to both Parts II and III of this Scheme."

Sectionon I--Open offer escrow arrangement:

40. (a) Grasim shall deposit the consideration for the open offer in escrow with an escrow agent (to be appointed in terms of the open offer escrow arrangement) in the following manner :

(i) deposit of an amount equal to 10 per cent. of the gross value of the open offer within one business day of filing of this scheme of arrangement before the High Court.

(ii) deposit of an amount equal to the remaining 90 per cent. of the gross value of the open offer within 90 days of the date of filing of the report by the chairman of the meeting of L & T's shareholders and creditors, approving this scheme.

The aggregate of the amounts deposited pursuant to Sub-clause (i) and (ii) above is hereinafter referred to as the "open offer consideration".

(b) On the announcement being made to the public in relation to the open offer, the open offer consideration together with the interest, if any, accrued on the same till the making of the public announcement shall be appropriated to an escrow account maintained by a designated investment banker or such other person nominated by Grasim (to be appointed in terms of the open offer escrow agreement) on an interest earning basis, and shall be held in escrow by such person until the completion of the open offer, and shall be distributed to the successful offerees of the open offer in accordance with the terms of the offer letter.

(c) The amounts held in escrow pursuant to Sub-clauses (a) and (b) above shall be invested as provided in the open offer escrow arrangement.

(d) The interest earned on the amount of the open offer consideration held in escrow or invested in accordance with the open offer escrow agreement shall accrue on a proportionate basis to the successful offerees of the open offer. In the event that the open offer is not fully successful, the distribution of interest to the successful offerees will be limited pro rata to the extent of subscription to the open offer.

48. It is clarified that such interest shall not be considered as an increase in the offer price.

49. The arrangements set out in Sub-clauses (a), (b), (c) and (d) above shall hereinafter be referred to as "the open offer escrow agreement".

50. The essentials of the scheme, as submitted by learned counsel for the petitioner, can be crystallized in the following way :

(i) As per the scheme, the cement business of the transferor company (L&T) together with all the assets and liabilities will be transferred to the transferee company (CemCo). The assets pertaining to the cement business will also include all the shares of NCCL as held by the transferor company. Every shareholder, in consideration of such transfer of the transferor company (L & T) holding five shares will be entitled to get two fully paid up shares of the transferee company (CemCo) as per the ratio fixed and decided and approved by the experts and respective shareholders and creditors. Transferor company's (L & T's) remaining business and all assets and liabilities shall continue to remain with the transferor company (L & T). The shareholders of the transferor company (L & T) will continue to be the shareholders of the transferor company (L & T) and in addition to that, they will also become the shareholders of the transferee company.

(ii) The capital of the transferor company (L & T) will be recognised by reduction of the share capital by reducing the face value of the share from Rs. 10 to Re. 1 per share and thereafter consolidating the shares of Rs. 2 fully paid up. Grasim will make an open offer for acquisition of the shares of the transferee company (CemCo) for purchase of shares of the transferee company (CemCo) at Rs. 342.60 per share. The shares of the transferor company (L & T) held by Grasim and Samruddhi will be sold to the trust. The other benefits of the scheme, as envisaged by the management of the companies are set out in the petition.

51. The basic scheme with all substantial details and related material and information has been publicised and notified including the scheme of arrangement and related and concerned documents as per the requirement of law. The scheme provides the objectives of the scheme, remaining and demerged business, liabilities, reconstruction of capital shares entitlement ratio, terms and conditions of open offers, escrow arrangements, management of cement business including specific provisions of assets, dates, contracts, deeds, related liabilities etc., including tax and such other provisions. Care of the employees and its concerned trust is specifically taken. From the scheme, it is also clear that care is taken of various significant aspects of all concerned companies, their respective obligations and liabilities and procedure during the transitional period. Basic accounting process and all its necessary details have been placed on record.

52. Arrangement:

The first and foremost issue is meaning, scope and purpose of "arrangement". The scheme of arrangement in question falls within the ambit of the provisions of Sections 391 to 394 of the Companies Act and the rules made thereunder. The word "arrangement" is not specifically defined under the Companies Act. This scheme of arrangement has the ingredients of demerger and reduction of share capital and scheme of arrangements with the concerned companies and trust, cannot be said to be beyond the purview of Sections of the Companies Act. The scheme of arrangement in question, therefore, is maintainable. The word "arrangement", though not defined specifically, has a wide range and ambit. The present scheme of arrangement is between the petitioner-companies and its shareholders and/or creditors and a trust. By that itself it cannot be said that the scheme of arrangement in question is not maintainable or not sustainable. The scheme is affecting the shareholders and the creditors as the cement division of the petitioners is being transferred to the transferee company. There is no objection raised even by the Regional Director about the maintainability of the scheme of arrangement. It is difficult to reject the whole scheme of arrangement like this, which has definitely an element of demerger and reduction of shares which are a permissible mode of various schemes under the provisions of Sections 391 to 394 merely on technical grounds. Investment Corporation of India Ltd., In re [1987] 61 Comp Cas 92 (Bom), the word "arrangement" has been interpreted in a wider manner. Another case is Guardian Assurance Company, In re [1917] 1 Ch D 431 (CA) to demonstrate that the word "arrangement" has a wide meaning and interpretation, even under the English laws. The extract of the relevant paragraphs are (page 95 of 61 Comp Cas) :

"Mr. Bulchandani has next argued that Section 391 of the Companies Act contemplates that where a compromise or arrangement is arrived at between the company and its creditors and/or the company and its shareholders ; it may approach the court for the sanction of the same. The expression 'arrangement' has been defined in Section 390, Sub-clause (b), which reads as follows :

'390. In Sections 391 and 393 ...

(b) the expression "arrangement" includes a reorganisation of the share capital of the company by the consolidation of shares of different classes, or by the division of shares into shares of different classes or, by both those methods ; and . . .'

53. The proposed scheme does not contemplate a reorganisation of the share capital of the company by the consolidation of shares of different classes. On the other hand, the scheme contemplates an adjustment or modification of rights, and if this be so, then it cannot fall within the ambit of the expression 'arrangement' used in Section 390. In support of his contention as to the import of the word 'arrangement' in Section 390 of the Act, Mr. Bulchandani relied upon the observations in Hindustan Commercial Bank Ltd. v. Hindustan General Electrical Corporation , and the observations in Chowgule and Co. P. Ltd., In re [1972] TLR 2163. Mr. Bulchandani urged that in view of this, the petitioner would not be entitled to come under Section 391 and hence no relief can be granted on this score.

54. I am unable to accept this contention. The word 'arrangement' as set out in Section 390(b) is an inclusive definition and contemplates all arrangements and not only reorganisation of the share capital. This is all the more clear, because the word used is 'includes'.

55. Coming to the case of Hindustan Commercial Bank Ltd. v. Hindustan General Electrical Corporation , I do not see how this case can assist Mr. Bulchandani for in paragraph 27 it has been stated as follows (page 381 of 30 Comp Cas) :

'The word "arrangement" in Section 391 is of wide import. By Section 390, "arrangement" includes reorganisation of the share capital of the company by the consolidation of shares of different classes or by the division of shares into shares of different classes or by both those methods. The court has the power to sanction a scheme of arrangement though the scheme modifies the special rights attached to a class of shares.'

These observations on the contrary support the position that the word 'arrangement' used in Section 391 is inclusive and that a scheme of arrangement which modifies rights of the shareholders can be brought under this section."

56. Guardian Assurance Company, In re [1917] 1 Ch D 431 (CA), the Chancery Division observed as follows (page 448) :

"I think what is proposed to be done in perfect good faith, and for very good business reasons, is not a compromise, but is an arrangement proposed between a company and its members, using the words of Section 120 and that there is no necessity to put such a limitation upon those words as Younger J. felt bound to do. With the greatest possible respect to him, having carefully considered his very able judgment. I am unable to come to the same conclusion as he did.

I think the order ought to be made as asked by the petition.

Warrington L. J. I am of the same opinion. The scheme which we are asked to sanction is no doubt one of a somewhat unusual nature, but for all that it may still be an arrangement within the meaning of the 120th section of the Act."

57. At this juncture, it is necessary to refer to the arrangement in the present scheme in question. It is not a case of amalgamation as contemplated under the provisions of Sections 391 to 394. In the present scheme, there is no transferor company merging into a transferee company and/or is dissolved without winding up. The present scheme admittedly is a composite scheme ; and it envisages a demerger, i.e., the transfer only of the cement undertaking of the petitioner (L & T) to the transferee company, a wholly owned subsidiary of the petitioner-company and the issuance of shares by the transferee company to the shareholders of the transferor company. Both the companies continue to remain in existence. The effect of the scheme is that the shareholders of the transferor company become the shareholders of the transferee company while retaining their shareholding in the transferor company. In the present scheme, the cement assets which were in the transferor company, are now held by the transferee company, who issues shares to the shareholders of the transferee company. The concept of demerger is well-established and explained under the Companies Act as well as under the Income-tax Act. The Bombay High Court, in Nicholas Piramal's case [2004] 121 Comp Cas 623 (Bom), while considering a scheme of arrangement, sanctioned such scheme and therein also proportions of the shares were fixed and accordingly decided as per the proposed scheme of arrangement. Therefore, in the circumstances, I see no reason not to consider the present scheme of arrangement on the merits. The objectors have been unable to point out any other provisions whereby such scheme can be objected to or rejected. Mere general allegations are not sufficient. In the facts and circumstances of the case, the scheme of arrangement, in the absence of any specific bar or limitation, falls within the ambit of Sections 391 to 394 of the Companies Act and is maintainable. These company petitions were already admitted and parties have already acted on that basis and further, all legal formalities have also been completed. Therefore, now there is no reason to accept any objection to the effect that the present scheme of arrangement cannot be sanctioned under the provisions of Sections 391 to 394 of the Companies Act.

58. The word "arrangement" has a very wide dimension. It is a term of wider connotation. Section 390 of the Companies Act itself provides that arrangement includes reorganisation of the shares, share capital of the company by the consolidation of shares of different classes.

59. Unanimous and/or majority decisions:

Mr. Virendra Tulzapurkar, learned senior counsel for the petitioner-company (L & T) read and referred to the Supreme Court judgments and pointed out, after going through the salient features of the scheme, that all the statutory formalities and procedures have been complied with as per the Companies Act and the rules made thereunder. The scheme was approved by 463 members holding 140,210,213 votes who attended the meetings, either in person or through proxies. Only 35 members holding 13,845 who attended the meeting either in person or through proxies voted against the proposed scheme. In the meeting of the unsecured creditors, which was attended by 63 unsecured creditors, entitled together to Rs. 2,487,405,000 value of debts and FDs have unanimously approved the scheme. Equity shareholders who attended the meeting were 620 in number, holding equity shares of transferor company entitled together to 140,240,184 equity shares of Rs. 10 each. The scheme was approved by 463 members against 35 members. Mr. V. M. Raaste objected in the said meeting of equity shareholders held on February 3, 2004, suggested two modifications. The said modifications were put to vote and the said modifications were defeated by an overwhelming majority of votes. The majority decision of the respective shareholders cannot be disrespected at the instance of a few shareholders like the present objectors in this matter. The scheme was approved unanimously. If the secured creditors, unsecured creditors, equity shareholders who are the basic limb of any company like the petitioner-company, approve the scheme with full knowledge, understanding and its effect and as the same is in the interest of the company, based on the expert chartered accountant's report, on technical grounds or objections, as raised by the objectors, such arrangement cannot be disturbed or interfered with by the court. The reference to Hindustan Lever Employees Union's case [1994] 4 Comp LJ 267; [1995] 83 Comp Cas 30 (SC) is relevant at this stage (page 49 of 83 Comp Cas) :

"The overwhelming majority of the shareholders had approved the scheme at the meeting called for this purpose and had approved the exchange ratio. In fact, a proposal for amendment of the exchange ratio was also rejected by and overwhelming majority of 99 per cent. shareholders. There is no reason to presume that the shareholders did not know what they were doing."

60. A few shareholders cannot, in the facts and circumstances of the case, halt or intend to halt such scheme of arrangement for their respective profit or gain or sentiments. A shareholder's right under the company law is well established. The scheme and purpose of the company law and affairs of the company governed by the same provisions which provides that any such decision which is in the interest of the company and its shareholders and members, has to be taken by majority by following due process of law. Once the requisite formalities have been complied with, the due notices and material were placed before the respective shareholders and, after due deliberation, decision has been taken by majority, which is admittedly overwhelming in the present case (99.99 per cent.), the court cannot interfere or suggest or accept the objections of the nature as raised by the objectors in the present case. It is difficult to believe that the objectors have no knowledge of the materials which were placed on record, to demonstrate that the whole scheme of arrangement is bad, unjust or unfair or against public policy or interest. Full opportunity, was available to the shareholders like objectors, to raise their respective objections and in the present case admittedly they have participated and placed and suggested the modifications which, after due deliberation and by majority of shareholders, were rejected. Such objectors now cannot be allowed to raise new grounds to challenge a scheme of this nature piece meal. They should gracefully accept the majority decision.

61. The relevant observation from Reliance Industries is reproduced as under :

"In the absence of existence of any such factor, to my mind, the objection by a shareholder who was not present at the meeting did not put up for consideration of other shareholders these objections and have now raised them before this court, clearly shows that this is merely an attempt to delay the scheme. To my mind the objections by the objectors are not really bona fide which the court ought to consider. In the new liberalised economy where companies to survive and compete have to go global in order to face global competition, courts should stay their hands, unless these objections are such that the sanctioning of the scheme will be against public policy or the economic interest of the country. In this case, there is no such material supporting that aspect."

62. In this case also, objections as raised cannot be considered in view of the above clear observations in this court.

63. A shareholder, in such circumstances, cannot or should not extend his rights which are available under the Companies Act, to oppose such scheme of arrangement to obstruct the whole object and purpose of such scheme. The parties or shareholders attended the meeting and suggested modifications and once their modifications or suggestions were rejected by majority, there is no reason further to reconsider the same view or modification suggested by such objectors especially by the court and to reverse the decision which has been taken by the majority in their respective meetings. Individual shareholders, in no way, can raise any objection on behalf of the creditors or unsecured creditors when admittedly in this case, they have sanctioned and approved the arrangement by unanimous decision in their respective meetings. The objections raised by the objectors in the present case are, therefore, not bona fide and not in the interest of the company at all. The commercial wisdom of the shareholders to approve such scheme in majority has to be respected. Mere bald allegations that scheme is not in the public interest, without material or justification for the said allegation, cannot be accepted. The majority shareholders have taken into consideration the total scheme of arrangement in question. The share exchange ratio which has been fixed after the valuation report of professional and expert auditors, the effect of shares of Narmada Cement Company Ltd. or transfer of cement division or the alleged monopoly or concentration needs to be rejected and for that reason, such scheme of arrangement cannot be interfered with. It is necessary to consider that objectors like Mr. V. Ranganathan and Mr. R. Shekar, who have admittedly not attended the meeting and have not participated in any proceedings, now, cannot be allowed to raise any objection in such a cryptic manner. As per the practice and procedure of the company rules, Mr. V. Ranganathan and Mr. R. Shekhar have not even filed affidavit or application in the prescribed form and no leave of any kind was obtained from the court. The allegations made in their so-called objections are vague, bald and without any supporting material and the same cannot be considered and definitely cannot be a reason to discard the present scheme of arrangement. The apex court in Miheer H. Mafatlal's case [1996] 87 Comp Cas 792 particularised cases like the objectors in question and their objections which are as follows (page 828) :

"So far as the transferee company is concerned though the appellant was not a director he was a 5 per cent. shareholder who did not think it fit to personally remain present at the time of voting and simply relied upon the proxy. If he was feeling that the scheme was unfair to him or was not going to protect his interest as shareholder in the respondent-company nothing prevented Mm from remaining present and voicing his grievance before the general body of the equity shareholders and to apprise them of the alleged pernicious effect of the scheme. It is, therefore, too late in the day for him to contend that the scheme was unfair to him and that the family of Arvind Mafatlal had tried to dominate and engineer any adverse pattern of voting at the meeting of the equity shareholders,"

64. Disclosure of the relevant, necessary and requisite material:

One cannot overlook that 99.99 per cent. shareholders who were present and voted for the scheme never raised any objection like improper disclosure, suppression of material facts and material or that false statements were made or the scheme was unfair, unjust or against the public interest or policy or was not in the interest of the company. No financial institutions have raised such objections, who are approximately 30 per cent. of the share capital of the petitioner-company. The Regional Director, has also not raised any objection to the scheme and in fact, during the course of arguments, considering the merits of the scheme of arrangement, made a statement that the Regional Director has no opposition of any kind to the sanction of the scheme of arrangement except those points which are dealt with earlier. The objectors were unable to prove that there was suppression of material facts and documents or that false statements were made or that there was any failure to perform the duty of disclosure. From the record, it is very clear that it is a statutory requirement that company should provide and declare all requisite material for the purpose of sanctioning the scheme of arrangement in question. The basic material including the scheme of arrangement, restructuring agreement, report dated September 24, 2003, to Ernest and Young Pvt. Ltd. and N. M. Raiji and Co., chartered accountants, memorandum of articles of association of L & T and CemCo, audited balance-sheets and profit and loss accounts of L & T and CemCo for financial year ended March 31, 2003, no-objection letters dated November 19, 2003 and November 25, 2003, from Stock Exchange, Mumbai, and National Stock Exchange of India Ltd. respectively, certified copy of the order of the Bombay High Court dated December 12, 2003, directing the conveying of the meetings etc. were made available for inspection for the shareholders even prior to the date of the meetings at its registered office. The scheme of arrangement itself provides the various details of all the concerned companies and there is full disclosure in respect of Narmada Cement Company Ltd. and its status which is necessary for the scheme. It is not disputed by the objectors or by any other parties that the substantial materials were available on the website of the company. The objectors, despite having full knowledge of those basic documents, have raised these unsupported objections to oppose the scheme. The restructuring agreement, as referred to by Mr. Rasik Poladia in his affidavit dated April 2, 2004, is already referred to in paragraph 13 of the petition. Objectors have full knowledge of the contents of the restructuring agreement and report in question. In so far as the balance-sheet of Narmada Cement Company Ltd. or Grasim in respect of the same is concerned, is not very vital, for deciding the scheme of arrangement between the companies in question. Narmada Cement Company Ltd. (NCCL) and its working accounts, valuation of shares are well within the knowledge of the objectors at least, even though are outside the scope of consideration. The balance-sheet of L & T takes into consideration the requirement of other material document as alleged. For considering the sanction of the scheme of arrangement, the trust deed of the Employees Welfare Foundation, the person in charge of the foundation, the balance-sheet of Narmada Cement Company Ltd., ancillary documents referred to in the restructuring agreement are not vital or at least not material to reject the approval of the scheme in question. The material documents available on record which were perused and published and which are well within the knowledge of the majority shareholders, secured creditors, unsecured creditors and financial institutions, are sufficient for the purpose of considering the sanction of the scheme of arrangement in question. These documents on record read with the averments made in the petition are sufficient to reject the pleas of the objectors that there is suppression of facts and/or material. It may be mentioned here that apart from the balance-sheet of the petitioner-company as on March 31, 2003, the certified copy of the unaudited financial result for nine months period ending on December 31, 2003, as filed with the stock exchanges, has been placed on record along with the present petition, dated February 7, 2004.

65. As noted earlier, the latest financial position has been placed on record which includes the unaudited balance-sheet up to December, 2003. The majority shareholders have not raised any objection in this regard. The creditors and unsecured creditors have taken a unanimous decision to support the scheme of arrangement based on sufficient and requisite disclosure. Therefore, now it is too late for the objectors to raise these objections of non-disclosure of requisite or necessary material. The material placed on record is sufficient to support the scheme of arrangement as placed for sanction. There is nothing on record to substantiate that the scheme is a device to defraud the public or some shareholders. Even otherwise, mere allegations are not sufficient to substantiate such contention. The present scheme of arrangement is sound, reasonable, fair and equitable and accepted by the shareholders in a thumping majority and unanimously by all classes of creditors. In such circumstances, no case is made out to pierce the corporate veil, as alleged.

66. No suppression of material or false statements :

The materials on record, as well as, documents filed in support of the scheme by the concerned companies, are sufficient to consider the scheme of arrangement in question. Once the majority has taken a decision which includes financial institutions, secured creditors and unsecured creditors read with majority of shareholders, that too, after following the due statutory procedure, there is nothing to suggest that there were suppression of facts or there were false statements made by the petitioner at any stage of the proceedings of the sanction of the scheme. All the relevant materials and documents are perused and published and placed on record to justify the sanction of the scheme of arrangement. The Regional Director has also not raised any such objection in his affidavit regarding the same. No other regulatory authority has raised any objections of these nature. In this matter, there is sufficient disclosure of material and documents on record as per the law and procedure. The wrong understanding of accounts or balance-sheet by any shareholder including objectors, cannot be a reason to interfere and recheck the accounts or expertised details furnished by the petitioner-company. The price at which Grasim has agreed to sell the shares of the petitioner-company to the trust is a matter between Grasim and the trust and it has nothing to do with the scheme or has no bearing whatsoever on the scheme. The price fixed by Grasim to be sold to the foundation is based on the valuation report. The reason and foundation and purpose of such price fixation cannot be a matter of scrutiny or interference by the court. For the sanction of the present scheme in question, however, such valuation report is not necessary or even otherwise that itself cannot be the reason to discard the scheme of arrangement in question.

67. The petitioner-companies are bound to provide the documents and information which are required and which are published according to the law and procedure, to the shareholders. This itself means that at the relevant time or at least within reasonable time, those details must or essential for the purpose of sanctioning of the arrangement in question. Thus, non-supply of irrelevant or immaterial documents at a later stage to a few shareholders, which in no way disturbs or disproves the merits of the scheme, cannot be the reason to overlook the material placed on record or before all the majority shareholders, who unanimously approved the scheme.

68. The parties or shareholders must demonstrate on affidavit and material on record to show that those documents which, alleged to be not placed on record, were vital in nature, failing which, the whole scheme would be against public policy or contrary to law. There is no doubt that the concerned companies should follow the legal framework and should consider the public policy interest and welfare of its employees and such scheme or arrangement should be in the larger interest of their shareholder members and for the company's benefit. In this background and in the facts and circumstances of the case, the decision cited by the objectors in Bedrock Ltd., In re [1998] 4 BCR 710 ; [2000] 101 Comp Cas 343 (Bom) (Nijjar J.) is totally distinguishable and cannot be made applicable to the present case. There is no such great irregularity, illegality, fraud or suppression of facts or material placed on record or proved by any contrary material by the objectors. No other competent authority or regulatory authority have even raised such allegations of suppression of facts and/or of false material placed on record by the companies concerned, as alleged by the objectors. It appears in the present case that on the contrary the objectors have twisted the figures, accounts and misread the balance-sheet and schedule to the scheme, just to obstruct and create hurdle in the sanctioning of the scheme in question.

69. Not against public interest or public policy and law :

"Public interest" or "public policy" is a vital element which is required to be considered while sanctioning any kind of scheme. Public interest or public policy has to be read in the context in which it is used or referred. The general principle of public interest or public policy is also necessary to see if a case is made out by placing material and evidence on record. In the present case, the Regional Director has filed the affidavit in pursuance of the notice under Section 394A of the Companies Act and has nowhere even suggested that the scheme in question is not in the interest of the public or its shareholders. The obligations and purpose of giving notice to the Regional Director under the Companies Act cannot be overlooked. If the Regional Director, after considering the material record and report of the Company Registrar and/or report of the chartered accountants, makes a positive statement in the court that they have no objection to consider the scheme of arrangement in question, I see that this itself is a sufficient reason to consider that the scheme of arrangement in question is in the interest of public and/or at least not against the public interest or shareholders interest. After going through the scheme in question and the purpose and background of the scheme, and looking to the interest of the respective companies, there is nothing on record to demonstrate that the whole scheme of arrangement is contrary to law or against any public policy of it is against public interest. Once all the statutory compliances have been complied with, after due notice and publication to all concerned. The scheme of arrangement is based on the expert opinion of professionals, including valuation and allotment of proportional share from all the companies, who have considered the existing provisions of relevant laws and regulatory authorities, like the SEBI, including the no-objection even from the Bombay Stock Exchange and the National Stock Exchange. As referred to above, this arrangement cannot be said to be against public policy or public interest or law. The apex court's decision in Saw Pipes in reference to the Arbitration and Conciliation Act, 1996, elaborated the meaning of the phrase "public policy" in reference to arbitration proceedings. The reliance by the objectors, without referring to actual proof and material on record, in reference to the scheme of arrangement in question is totally misplaced. The public interest, in sanctioning of the scheme of any kind, cannot be decided merely on the basis of general allegations of fraud, illegality or breach of public policy or public interest. There is no material placed on the record to justify the allegations of breach of public policy or public interest or that the scheme is unfair and contrary to the laws. After perusal of the scheme and after hearing all counsel for the respective companies and after considering the objections filed on record, there is nothing to show that the present scheme is against public interest or public policy. The corporate purpose and object of the scheme of arrangement as a whole is fair, just and reasonable on all material aspects.

70. Transfer of shares of (NCCL):

There is nothing demonstrated from record to show that the shareholders of L & T or the shareholders of NCCL are in any way prejudiced or will be affected by the present demerger, as the very same cement division or undertaking which was part of L & T would now vest in the resulting company in which also, the shareholders of L & T and NCCL would have the same right of participation, if they so desire and wish to retain their shares in the resulting company, CemCo. There is nothing material to show that Grasim is not competent to manage the cement business. It is worth to note that after the scheme of arrangement, the shareholders of L & T will have a choice to participate in both the business or exit from either or both, depending upon the prospect of these businesses, as at present both the engineering and cement divisions belong to L & T. It is noteworthy, at this stage, that the shares of NCCL have been delisted as per the Securities and Exchange Board of India (Substantial Acquisition of Sharer and Takeovers) Regulations, 1997 (for short "SEBI Takeover Regulations") by letter of the SEBI dated April 10, 2003, by operation of law. It has been accordingly declared that the existing option to the remaining shareholders of NCCL would be kept open by the acquirer for a period of one year from the date of delisting. The objectors, even though raised vague objections in respect of NCCL, there is nothing to substantiate the same except bald statements. When the majority shareholders, financial institutions, competent authorities have taken note of all these aspects and granted no-objection to proceed with the scheme of arrangement in question, there is no reason to consider such vague allegations of the objectors in respect of NCCL as done in the present case, as pointed out earlier. Anyhow, that itself would not be sufficient to reject the present scheme of arrangement. It may be mentioned here that we are dealing with petitions under Sections 391 to 394 of the Companies Act and not petitions under Sections 397 to 398 of the Companies Act regarding the affairs of any company or of Narmada Cement Company Ltd. (NCCL). As pointed out earlier, the Takeover Code itself is not applicable. By operation of law, the delisting of the shares of NCCL is already in force. The averments are already made in the affidavit of the petitioner-company L & T dated March 22, 2004, in reference to Rasik Foladia's objection affidavit that the delisting of NCCL from the stock exchanges arose as a result of non-promoter shareholders in NCCL having fallen below 10 per cent. as required under the listing requirements of stock exchange. In this background, it cannot be said that the petitioner got the shares of NCCL delisted by ulterior motive or by flouting the takeover regulations and, therefore, any transfer of shares under the Takeover Regulations is void as alleged by the objectors. In the circumstances, therefore, on this ground also, objections, as raised, are unsustainable on the foundation of public policy or public interest or law. The provisions of Section 293(1)(a) of the Companies Act read with judgment reported in Brooke Bond India Ltd. v. U.B. Ltd. [1994] 79 Comp Cas 346 (Bom) at pages 358/359 (Brooke Bond India Ltd.) cannot be overlooked in this reference. The methodology of demerger makes the theory clear that instead of L&T being the holding company of NCCL, CemCo will become the holding company.

71. It is difficult to accept that the shareholders can raise objection on the ground that the valuation of those shares (NCCL) were not made separately, in the facts and circumstances of the case, apart from the fact as observed in Nicholas Piramal's case [2004] 121 Comp Cas 623 (Bom) that such objection of valuation of shares cannot be the ground to interfere with the scheme. Anyhow, that cannot be agitated in the present proceedings as it is outside the scope of the present enquiry also. Therefore, all the objections of the shareholders of Narmada Cement are totally irrelevant as raised by Mr. Poladia and/or Mr. Raaste and others in the present case. It may be noted that Mr. Tulzapurkar, learned senior counsel for the petitioner-company has also made a statement that the shares in NCCL are offered at a price of Rs. 34 per share till October, 2004. Therefore, Mr. Poladia or Mr. Raaste or such other shareholders can sell those shares at the rate of Rs. 34 per share, if they so desire.

72. Payment of stamp duty :

The Regional Director, Department of Company Affairs, in his affidavit has not raised any specific objections so far as the merits of the scheme of arrangement in question are concerned. It is nowhere mentioned that it is against public policy or public interest or that it is against the interest of the shareholders. The basic opposition is of payment of stamp duty as the scheme results in increase of authorised share capital of the transferee company. To this, Mr. Virendra Tulzapurkar, learned senior counsel appearing on behalf of the company conceded that payment of stamp duty will be made as per the law after the scheme is sanctioned by the court and that itself cannot be a ground for opposing the scheme. There is no doubt that the petitioner-companies are bound to pay the requisite stamp duty in accordance with law. Therefore, on this ground itself, at this stage, sanction of scheme of arrangement in question cannot be held up. The scheme has to be sanctioned, subject to payment of the stamp duty in accordance with law.

73. Sections 100 to 104 of the Companies Act:

In the present case, there is no dispute that the due procedure as prescribed under the Companies Act has been complied with in reference to reduction in capital as referred to and relied on in the present petition and necessary orders dispensing with the various procedures have been granted by the court by order, which is reflected in the minutes of the order dated February 13, 2004. Based on the averments made in para. 26 of the petition, the convening of the meeting of the creditors was dispensed with. Therefore, this objection has no force and the cases cited in relation to the same cannot be made applicable to the facts and circumstances of the present case. The scheme itself, therefore, seeks confirmation for the reduction of the share capital in accordance with Sections 100 to 104 of Companies Act as referred to in paragraph 25 to 27 of the petition. Such a combined petition for sanction of a scheme of arrangement and reduction of share capital is maintainable. Hindustan Commercial Bank Ltd. v. Hindustan General Electrical Corporation .

74. No separate procedure for bringing requisite changes :

The provisions under Sections 391 to 394 of the Act are meant to clear the contemplated scheme and related to or concerning other alterations or changes which may be made effectively to implement the sanctioned scheme. PMP Auto Industries Ltd., In re [1994] 80 Comp Cas 289 (Bom) has declared that these provisions are in the nature of a single window clearance system to ensure that the parties are not put to avoidable or unnecessary cumbersome procedure for making a representation or application to the court for various other alterations or changes which may be essential or necessary or consequential to implement the sanctioned scheme. In view of this, on this ground also, scheme cannot be halted.

75. Shares listing of transferor company:

The Regional Director of Company Affairs in his affidavit submitted that as per the Bombay Stock Exchange order or letter dated November 19, 2003, the transferor company should get the shares listed before making public offer. It is worth to note that the Bombay Stock Exchange has not put any such condition. It is stated only that it was recommending the open offer after the listing. As submitted by learned senior counsel for the petitioner-company the open offer will be made as per the scheme only if the scheme is sanctioned by the court and not otherwise. He further contended that such a condition cannot be imposed as the said open offer is not an offer in terms of the Takeover Code. The open offer is an implementation of the scheme which is post sanctioned. This position has been accepted by the SEBI in its letter. Therefore, the shareholders of the transferee company are in no manner affected. In the absence of such condition from the Bombay Stock Exchange, the insistence by the Regional Director, in the circumstances, cannot be accepted. Now, as Regional Director has given no objection to the sanction of the scheme. All consequences or obligations as per the scheme have to be complied with, by the companies. It cannot be further overlooked that those words in the said letter dated November 19, 2003, are just observations and not mandatory conditions imposed by the Bombay Stock Exchange. It is also necessary to note that the open offer is exempt from the purview of the SEBI Takeover Regulations, 1997, in terms of regulation 3(1)(k) which provides that the aforesaid Regulations are not applicable in the cases of unlisted companies.

76. Balance-sheet and accounts--exchange of shares:

The scheme of arrangement itself shows that it is not a scheme of amalgamation, but it is a scheme of demerger. The valuation of shares and/or their proportionate ratio or exchange ratio is based on expert's report of N. N. Raiji and Company and Ernst and Young Co. Pvt. Ltd. and which has been further approved by the board of directors of the petitioner-company and lastly and finally, this share entitlement ratio has also been approved by the shareholders of the transferor company and the transferee company in the court convened meetings. It is settled law in Miheer H. Mafatlal , ICICI Ltd., In re [2002] 4 BCR 450; [2004] 119 Comp Cas 941 (Bom), Duphar Interfran [2002] 104 (2) Bom LR 15; [2002] 1 Comp LJ 318; [2004] 121 Comp Cas 631, Piramal Spinning and Weaving Mills Ltd., In re [1980] 50 Comp Cas 514 (Bom) and Hindustan Lever Employees' Union [1994] 4 Comp LJ 267 ; [1995] 83 Comp Cas 30 (SC) that unless material is shown and produced on record to show that the valuation, as done, was unfair or contrary to the record or material, the court has no reason to interfere with such expertised opinion in proceedings like these. It may be noted here that the valuation of the shares which is mandatory in a scheme of amalgamation may not be necessary in cases of demerger like this since the shareholders continue to hold shares in the transferor company and the shareholders of the transferor companies are also issued shares in the transferee company. In a way, no exchange ratio is required in the present scheme as the shareholders of the transferor company continue to remain as its shareholders.

77. In the present case, no objection of any irregularity in accounts or undervaluation or undervaluation of shares has been raised by the Regional Director and substantiated by others.

78. In reference to valuation of shares in a case of a scheme of amalgamation, reliance was placed on Piramal Spinning and Weaving Mills Ltd., In re [1980] 50 Comp Cas 514 (Bom), whereby the object in respect of valuation of shares alleged to be unfair to the shareholders of the transferor company was rejected by observing as under (pages 516 and 517) :

"The Regional Director has next pointed out that the shares of the transferor-company, according to him, have been undervalued for the purpose of determining how many shares of the transferee company could be given to the shareholders of the transferor company . . .

However, it is not possible for the court to examine the various methods of valuation which are available for valuing the shares of a company. The valuation of shares is a technical matter which requires considerable skill and expertise. There are bound to be differences of opinion as to what the correct value of shares of any given company is. Simply because it is possible to value the shares in a manner different from the one which has been adopted in a give case, it cannot be said that the valuation which has been agreed upon is unfair. What is important in the present case is that all the shareholders of both the companies have unanimously accepted the valuation which has been arrived at by the auditors of the transferor and transferee companies. Under these circumstances, the application cannot be rejected on the ground that the valuation of shares is unfair to the shareholders of the transferor company. In fact, none of the shareholders have complained of any such unfairness.

In this connection Mr. Cooper, who appears for the transferor company, has drawn my attention to the case Grierson, Oldham and Adams Ltd., In re [1967] 37 Comp Cas 357 (Ch D); [1967] 1 WLR 385 ; [1968] 1 Ch 17. The learned judge in that case has pointed out that the question of valuation is obviously one about which opinions may differ. It is possible in cases like this to criticise figures, offers and balance-sheets and argue about matters of fairness and unfairness. Unless the person who challenges the valuation satisfies the court that the valuation arrived at is grossly unfair, the court will not disturb the scheme of amalgamation which has been approved by the shareholders of the two companies. The English case dealt with the right of dissident shareholders to challenge the scheme of amalgamation. The observations apply with a greater force to a case where there are no dissident shareholders or where the shareholders have unanimously approved of the scheme of amalgamation. I see no reason why the court at the instance of the Regional Director of the Company Law Board should examine the question of fairness or unfairness of valuation. The main reason why a notice is given to the Regional Director under Section 394A is to ensure that the public interest is safeguarded when companies propound a scheme of amalgamation. Mr. Chinai, who appears for the Regional Director of the Company Law Board, has stated that there is nothing contrary to public interest in the scheme of amalgamation which is before me."

The scheme was sanctioned in this matter also.

79. The other reliance is also made on the unreported judgment, i.e., Reliance Industries Ltd. whereby, after considering Mafatlal's case [1996] 87 Comp Cas 792 (SC), Piramal Spinning and Weaving Mills Ltd., In re [1980] 50 Comp Cas 514 (Bom) and Grierson, Oldham and Adams Ltd., In re [1967] 37 Comp Cas 357 (Ch D) ; [1967] 1 WLR 385 ; [1968] 1 Ch 17, it was observed as under :

"Placing reliance on the judgment Grierson case [1967] 37 Comp Cas 357 (Ch D) ; [1967] 1 WLR 385 ; [1968] 1 Ch 17, the learned judge observed as under :

It is possible in cases like this to criticise figures, offers and balance-sheets and argue about matters of fairness and unfairness. Unless the person who challenges the valuation satisfies the court that the valuation arrived at is gross unfair, the court will not disturb the scheme of amalgamation which has been approved by the shareholders of the two companies. The English case dealt with the right of dissident shareholders to challenge the scheme of amalgamation."

There is no case for inspection under Section 209A of the Companies Act, as alleged.

80. Concentration of cement business :

The answer to this objection has been clearly decided in the following words also :

"There is nothing shown under any Act, Rule or Regulation or any other law in force under which the company court in the event of a possibility or likelihood of monopoly imposed refuse in exercise of its discretion sanction to scheme of amalgamation. As pointed out by the apex court, it is for the shareholders to decide what is in the best interest of the company and shareholders considering the prudent business management test. There is also nothing on record which would show that; if there would be monopoly which affect the public interest or the economy of the country, which factor would have been a relevant consideration." (Reliance Industries Ltd.),

"As a result of the amalgamation, if it is found that the working of the company is being conducted in a way which brings it within the mischief of the MRTP Act, it would be open to the authority under the MRTP to go into and decide the controversy as it thinks fit.

But there is nothing unlawful or illegal about this. The court will decline to sanction a scheme of merger, if any tax fraud or any other illegality is involved." (Hindustan Lever Employees' Union [1994] 4 Comp LJ 267 ; [1995] 83 Comp Cas 30, 62, 65 (SC)).

81. However, the scope and limitation of Section 391 of the Companies Act to decide this issue is very limited. The petitioner's counsel further contended that there is no such concentration of cement business as alleged. In fact, the shareholders will be benefitted by the alleged concentration, if any. Therefore, subject objections cannot be the reason to oppose the scheme. There are about 30 cement companies in India.

82. Classification of shareholders :

All the classes of the shareholders or members, creditors have been duly represented in all meetings. There is nothing pointed out that they have not acted in good faith, or bona fide. Except mere allegations, no case or materials of oppression or coercing of minority has been proved by the objectors or anybody. This contention of classification has been considered in the decision as reported in Renuka Datla v. Duphar Interfran Ltd. [2002] 104 (2) BLR 15 ; [2004] 121 Comp Cas 631 at paragraphs 12, 15 and 16 one cannot overlook that the scheme has been unanimously approved by the shareholders. Therefore, the class of shareholders as suggested by the objectors is not permissible on law as well as on facts and such objection has no force and substance.

83. As per the provisions of the Section 391 of the Companies Act, as already observed, classification as done was proper and correct. No such objection or suggestion were raised or made by the majority of the shareholders including all class of creditors. Once due notices were issued and published and notified in accordance with the law and requisite meetings were held accordingly such objection of different classes, as raised, cannot be accepted.

84. Welfare of employees--employees trust:

As per the scheme of arrangement, the employees scheme will acquire the holding of Grasim in L & T to the extent of 14.95 per cent. which shares were acquired by the employees trust would achieve the ultimate aim and object of the scheme which is to demerge the cement business into a company eventually controlled by Grasim and leave L & T and its management to concentrate on its core business, i.e., engineering and construction with the aid and assistance and participation and involvement of its employees who would be the beneficiaries of 14.95 per cent. shares of L & T held by the employees trust. This submission of Mr. Dwarkadas who appeared on behalf of Samruddhi Synthetic in support of the petitioner cannot be overlooked. There is nothing on record to show that such scheme which is in favour of Employees Welfare Foundation Trust in question is in any way or unfair or against public policy or bad in law. This is admittedly a scheme where sufficient care has been taken into consideration welfare of the workers or employees, cannot be said to be unfair or against public policy. On the contrary, the exit of Grasim and Samruddhi under the proposed scheme from the petitioner-company by the sale of their shareholdings in the petitioner-company to a trust, established for the purpose of promoting the Employees' Welfare Scheme and measures, would add in preserving the character of ownership and the management of the petitioner-company and help to further modify and enhance their commitment to the petitioner-company. These averments and submissions of the petitioner-company therefore, are an additional factor to sanction the present scheme of arrangement.

85. Trend of objections:

The trend which is noted, is that in such matters where shareholders have admittedly lost their case in the respective meetings as they were unable to convince the majority of shareholders and/or in spite of their objections and the majority decision have been taken against their wish, still on such frivolous and baseless grounds, they are again able to raise such objections before the court to halt and hinder the sanction of the scheme The early sanction of the scheme is the need of the hour, so that companies can proceed further and do their business, which is definitely in the interest of the public at large, specially when the companies have a global vision. Such shareholders, in my view, should be awarded with exemplary costs so that in future they would not interfere with the smooth functioning of such arrangements. This should not be deemed to suggest that the objectors have no right to point out to the court that the scheme in question is against law, illegal, unfair, unjust or contrary to public policy or interest, but such applications must be made at the appropriate time with appropriate material on record and not merely by allegations or bald statements or on vague reasons. However, unless there is specific provision made in the appropriate Court Rules about such friviolous objections, I see no reason to award any exemplary costs against such objectors. Such objections in a given case, may be bona fide or in the interest of the minority shareholders. One cannot overlook that the oppression or any action of majority shareholders if against the minority shareholders or case of oppression or coercion, has a different forum to invoke. While sanctioning the scheme of arrangement, this aspect of coercion or oppression cannot be considered in such a company petition at the instance of such objectors with no material or no justification in support of their allegations of oppression or monopolization or concentration of cement industry, as such. No other objectors/intervenors have filed any written objection or submission and not argued in person or through advocate, except the objections referred to in the judgment.

86. A shareholder who, in spite of notice and knowledge, does not attend any meetings and/or participates and suggests his opinion or places before all other shareholders, his point of view, with material to support and/or never participates in voting, but still, without attending the proceedings, sends written objections without supporting evidence to the court at the last stage.

87. A shareholder who, attends, without sufficient material, participates in the discussion and suggests modifications also, but other majority shareholders, by overwhelming majority, refuse and reject such modification and suggestion, such shareholder, in this background, did not vote but raised objection half-heartedly in the court and opposed the scheme.

88. A shareholder, one who knows every proceedings, participation, but one way or other, just to halt the hearing of the scheme, deliberately appears in person, tries to create and get the court's sympathy on one pretext or the other and requests for adjournment without engaging advocate.

89. In all these cases, the court should award costs and such unhealthy trend should be stopped. Bona fide, prompt and genuine objectors are always welcome, because they assist the court to adjudicate on various aspects from their point of view and that, in the end, results into fair justice.

90. Conclusion :

All the legal and essential and necessary formalities have been complied with by the companies and the petitions 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 all concerned, including the shareholders, creditors and competent authorities. No objections were raised about the non-disclosure of materials or documents.

All the resolutions have been passed unanimously and/or by overwhelming majority in proportion (00.01 X 99.99) and the scheme of arrangement has been approved accordingly with due deliberation and discussion on all issues, including the suggested modifications.

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 financers, auditors, chartered accountants, bankers, creditors, financial institutions and above all company managements, apart from unanimous majority decisions to support the scheme.

Once creditors, financial institutions, experts in respective business and professionals, approved the scheme (of arrangement) unanimously by overwhelming majority of shareholders in the proportion of 99.99 X 00.1, and also approved the scheme after due and effective deliberation on all issues and satisfied by all the classes, in my view also, such determination and/or commercial merits of the scheme need not be gone into or interfered with as a fault finder and/or to pick holes in it, merely because some objections have been taken or raised by some shareholders. There are no strong and cogent reasons made out and pointed out by any one, to disapprove such scheme. No other objectors have pressed their objections or appeared in court to support such objections.

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.

The objections are frivolous, unfair and mala fide and are not within the framework of the law. No evidence or material has been placed to justify or show that the scheme is illegal, unjust or against public policy or interest. Such objectors are estopped from raising such frivolous objections. Their whole object is to halt and to hinder the scheme for ulterior purposes.

In the present case, no other alternative or possible view was explained or suggested, on any material issues, including that 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 know how 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.

The scheme has taken care of all significant aspects of law, public policy and it is based on need and time of particular business and market. The scheme is fair, sound, reasonable and takes into consideration interest of shareholders, creditors, workmen and employees.

The scheme of the Companies Act cannot be overlooked in such a matter. Shareholders carry on business through the medium of the company and cannot act alone or in minority and democratic procedure of resolutions and decisions are well accepted even in company affairs and action.

91. Result:

In view of the above, the sanction of the scheme, as prayed, is granted. Company Petition No. 120 of 2004 is made absolute in terms of the prayers Clauses (a) to (k) with liberty. Parties to proceed in accordance with law.

Costs of Rs. 2,500 to the Regional Director be paid by the petitioner within a period of four weeks from today.

Issuance of drawn up order be expedited.

Parties to act on an ordinary copy of this judgment, duly authenticated by the Company Registrar of this court.

Certified copy expedited.