-: 1 :- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICITON COMPANY PETITION NO 423 OF 2008 CONNECTED WITH COMPANY APPLICATION NO. 255 OF 2008 In the matter of Sections 391 & 394 of the Companies Act, 1956; And In the matter of Scheme of Arrangement and Amalgamation between Sovereign Trading Enterprises Limited, Tracklightning Finance And Investments Limited and Royaltern Finance And Investments Private Limited with Indokem Limited and their respective shareholders. Sovereign Trading Enterprises Limited …. Petitioner AND COMPANY PETITION NO 424 OF 2008 CONNECTED WITH COMPANY APPLICATION NO. 256 OF 2008 Tracklightning Finance And Investments Limited … Petitioner AND COMPANY PETITION NO 425 OF 2008 CONNECTED WITH COMPANY APPLICATION NO. 257 OF 2008 Royaltern Finance And Investments Private Limited … Petitioner AND COMPANY PETITION NO 426 OF 2008 CONNECTED WITH COMPANY APPLICATION NO. 258 OF 2008 Indokem Limited ..... Petitioner Mr.Hemant Sethi i/b Hemant Sethi & Co. advocates for Petitioners Mr. S. Ramakantha Dy. OL in C.P No. 423 to 425 of 2008 Ms Neeta Masurkar i/by S.K Mohapatra for the Regional Director in all the Petitions . CORAM : S.A BOBDE , J. DATE: 8th AUGUST 2008 P.C. -: 2 :- Heard learned counsel for parties. 1. The sanction of the Court is sought under Section 391 to 394 of the Companies Act, 1956 to a scheme of Arrangement and Amalgamation between Sovereign Trading Enterprises Limited, Tracklightning Finance And Investments Limited and Royaltern Finance And Investments Private Limited with Indokem Limited and their respective shareholders . 2. Counsel appearing on behalf of the Petitioners have stated that they have complied with all the requirements as per directions of this Hon’ble Court and they have filed necessary affidavits of compliance in the Court. 3. The Regional Director has filed his affidavit in reply and has stated that as per valuation report dated 21/12/2007 prepared by Dalal & Shah, Chartered Accountants in respect of recommendation of share exchange ratio between the First Transferor Company ie. Sovereign Trading Enterprises Limited and Transferee Company ie. Indokem Limited appears to be on a higher side ie. 184 equity shares of Rs 10 each fully paid up because the valuer has revalued the Investment of Transferor Company No.1 ie. Sovereign Trading Enterprises Limited in Radio Components & Transistors Limited on the basis of market value of its fixed assets, whereas in Transferee Company (listed company) the value of share has been calculated on the basis of original cost of its fixed assets without considering its market value. It is further stated that save as aforesaid, the Scheme is not prejudicial to the interest of Creditors and Shareholders and public. 4. Mr. Sethi the learned counsel appearing for the Petitioners states that valuation is ultimately a matter of experts opinion. There are more than one method of valuation and a valuation would vary if different methods are adopted. The shares are the properties of the shareholders and they are ultimate the best judge of the value they would put on their charges. -: 3 :- Mr Sethi further states that in absence of challenge from the shareholders who are primarily and exclusively interested, the Central Government has no right to object to the exchange ratio. Reliance is placed on Division Bench Judgement of Calcutta High Court reported in 93CWN page542 Bengal Tea verses Union of India. He further states that the valuation report of Dalal & Shah, Chartered Accountants was unanimously approved and adopted by Board of Directors of all the transferor Companies and the Transferee Company. 99.99% of the equity shareholders of Sovereign Trading Enterprises Limited have consented to the proposed scheme . The scheme has been approved by 100% of the equity shareholders of Tracklightning Finance and Investments Limited and Royaltern Finance and Investments Private Limited. In so far as equity shareholders of Transferee Company are concerned, the Scheme has been approved by 91.53% in number and 99.99% in value of the shareholders having validly voted in favour of the Scheme. Transferee Company being listed Company, the Bombay Stock Exchange, Mumbai, have also approved the Scheme by their letter dated 6th February 2008. 5. He further states that as mentioned in Para 6, in valuation report of M/s Dalal & Shah, Chartered Accountants, since Sovereign Trading is an Investment Company, income approach is not considered. Further company is also not listed on any of the stock exchange and therefore Market price approach is not considered. In sum valuation of Sovereign Trading is carried out as per underlying asset approach. 6. Since Indokem is listed on BSE and full fledged operating company (refer to Background of Indokem in Para 2 of valuation report), Valuation of Indokem is carried out by underlying asset approach, income approach and market price approach and fair value is arrived at by ascribing appropriate weight to each of the method. -: 4 :- 7. In absence of any challenge from the shareholders who are primarily and exclusively interested on the question of the ratio of exchange, I am not inclined to interfere in the matter at the instance of the Regional Director. On the facts, it cannot be said that there is any illegality or that any fraud has been committed on the shareholders. 8. The Official Liquidator has filed report in Company Petition Nos. 423 to 425 of 2008 stating that the affairs of Transferor Companies have been conducted in a proper manner and that the transferor companies may be ordered to be wound up. 9. Upon perusal of the entire material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to any public policy. None of the parties concerned have come forward to oppose the Scheme. 10. There is no objection to the Scheme and since all the requisite statutory compliances have been fulfilled, Company Petition Nos. 423 to 426 of 2008 are made absolute in terms of prayer clause (a). 11. The Transferee Company to lodge copy of this order and the Scheme with the concerned Superintendent of Stamps for the purpose adjudication of stamp duty, payable, if any, on the same within 30 days of obtaining the authenticated and/or certified copy of this Order. 12. The Petitioners in all the Companies to pay cost of Rs. 7500/- each to the Regional Director. Petitioner in Company Petition Nos. 423 to 425 of 2008 to pay cost of Rs. 7500/- each to the Official Liquidator, High Court, Bombay. Cost to be paid within 4 weeks from the date of issuance of authenticated copy of order. Petitioner to comply with statutory compliances, applicable, if any. 13. Filing and issuance of the drawn up order is dispensed with. All concerned authorities to act on a copy of this order and scheme duly -: 5 :- authenticated by Company Registrar, High Court, Bombay. ( S.A Bobde. J)