*1* csp.526.11.csd.382.10.csp.527.csd.383.937.sxw kps IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY SCHEME PETITION NO.526 OF 2011 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO.382 OF 2010 Hindustan Unilever Limited. ..Petitioner/Transferor Company WITH COMPANY SCHEME PETITION NO.527 OF 2011 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO.383 OF 2010 Unilever India Exports Limited. ..Transferee Company ............ Mr.R.M.Kadam, Advocate General a/w Mr.A.S.Kamat & Ms.Renuka Shetty i/b Crawford Bayley & Company, for the Petitioner. Mr.Jimmy Avasia a/w Ms.S.V.Bharucha i/b H.P.Chaturvedi, for the Regional Director. Mr.Bhupendra Champaklal Gandhi, shareholder, present in person. ............ CORAM : S.C.DHARMADHIKARI, J. Date : 18th November, 2011. P.C.: 1 This is a petition invoking the powers of this Court under sections 391 to 394 of the Companies Act, 1956 and seeking sanction to the Scheme of Arrangement between Hindustan Unilever Limited and M/s Unilever India Exports Limited and respective shareholders and creditors for transfer of certain assets, liabilities and properties of FMCG Exports *2* csp.526.11.csd.382.10.csp.527.csd.383.937.sxw Business Division of the Petitioner (Hindustan Unilever Limited, Transferor Company) to the Unilever India Exports Limited (Transferee Company). 2 It is stated in the petition that the Petitioner Company was incorporated on 17.10.1933 and thereafter, under went change in its name. After setting out the details with regard to the share capital and the main objects of the Petitioner Company, it has been stated that the Company is engaged in diverse businesses including manufacturing, marketing, distribution and/or sale of soaps, detergents, personal care products, beverages, processed foods, etc. in domestic and export markets. For carrying on its business activities all over India, the Petitioner Company has factories, units, assets and properties in various States of India. A copy of the audited statement of accounts as on 31.03.2011 and a copy of unaudited provisional statement of accounts as on 30.06.2011 are attached to the Transferee Company’s petition. It is stated that the Transferor Company and the Transferee Company have proposed a Scheme of Arrangement under sections 391 to 394 of the Companies Act, 1956 whereby, certain assets, liabilities and properties of FMCG Exports Business Division of the Petitioner Company shall be transferred to the Transferee Company on a going concern basis. The relevant and necessary *3* csp.526.11.csd.382.10.csp.527.csd.383.937.sxw documents have been annexed and it is stated that the Board of Directors of the Transferor Company approved the Scheme of Arrangement by passing a resolution dated 09.05.2011. 3 Material provisions of the proposed scheme are extensively set out in the petition and what is then contended is that by an order made in the Company Summons for Direction No.382/2011 on 23.06.2011, the Petitioner Company was directed to convene a meeting of the members and the same was duly convened. Compliance with the directions in that behalf including issuance of individual notices has been set out and it is stated that one of the Director of the Petitioner Company, namely, Harish Manwani acted as Chairman of the meeting and has forwarded his report along with the resolution of the meeting to this Court. The report reveals that the meeting of equity shareholders was attended by 635 members including proxies and representatives of bodies corporate holding 1424964623 equity shares of Rs.1/- each of the aggregate value of Rs.1,42,49,64,623/-. By consent of the equity shareholders present at the said meeting, the notice and other statements were taken as read and thereafter, these shareholders were invited to speak on the proposed scheme including to seek certain clarifications. 443 members voted in favour of the scheme and 13 members voted against *4* csp.526.11.csd.382.10.csp.527.csd.383.937.sxw the scheme. The value and percentage is then referred and it is contended that members constituting 97.149% in number and representing 99.999% in value voted in favour of the Scheme. That is how the scheme was approved by the shareholders. 4 It is pursuant to the aforesaid compliances, that this petition is placed for hearing and final disposal. Mr.Kadam, learned Advocate General appearing in support of the petition, contends that once compliances that are required to be made in law have been made and the meeting was duly convened and the Chairman’s report stating that overwhelming majority of the equity shareholders have voted in favour of the scheme, then, the same be approved as prayed. Mr.Kadam submits that it is not for this Court to go into commercial wisdom or other aspect in detail inasmuch as it is a decision of the shareholders and they have come to the conclusion that the scheme is in their interest, so also, that of the creditors and general public. Inviting my attention to the affidavit of the Regional Director, Mr.Kadam submits that same does not raise any objection, but points out that one shareholder Mr.Bhupendra Champaklal Gandhi had attended the meeting and raised certain concerns. These concerns have also been raised by him by addressing letters to the Regional Director. The affidavit of the Regional Director merely invites the *5* csp.526.11.csd.382.10.csp.527.csd.383.937.sxw Company’s attention to these concerns of the said shareholder, but states that beyond that there is nothing prejudicial to the interest of the shareholders and creditors. 5 The affidavit of the sole objector, according to Mr.Kadam, sets out the points and objections raised by him at the meeting. He duly attended the meeting although now he complains that the notice of meeting was inadequate. He attended the meeting and spoke in the meeting. Once the scheme has been approved by overwhelming majority, then, the objections which are repeated before the Court on affidavit need not be reconsidered. This Court is not sitting in judgment over the decision of the equity shareholders leave alone their commercial wisdom. In such circumstances, the petition be allowed. 6 Mr.Avasia, learned counsel appearing for the Regional Director, after inviting my attention to the scheme, submits that this Court should issue appropriate clarifications that modifications and other issues relating to the scheme cannot be left to the decision and absolute discretion of the Board of Directors or any committee. The powers which are assumed by the Board in terms of the clauses of the scheme be clarified so as not to exclude the provisions of the Companies Act, 1956 *6* csp.526.11.csd.382.10.csp.527.csd.383.937.sxw and particularly section 392 thereof enabling this Court to take cognizance of the request for modification of the scheme in question. Therefore, a clarification that these clauses would not over ride section 392 be issued in the interest of general public. 7 As far as the objector Mr.Bhupendra Champaklal Gandhi is concerned, he is present in the Court. He has stated that he had during the course of meeting and in correspondence as well pointed out that the Petitioner Company has been registered under the Act of 1913. What the scheme envisages is that certain units and particularly those set out in Schedule-A to the scheme would stand transferred. However, they would be going to a Company which has absolutely no holding and standing in the market. According to the objector, the value of the business which has been built over a period of time and that too at the cost of Rs.70.12 crores, needs to be determined by this Court to arrive at the true valuation. One of the shareholder speaker quoted that one of the property of the Company at Pune is worth more than Rs.70 crores whereas it is now proposed that valuable units are priced at Rs.70.12 crores. This cannot be the real value of whole bunch of huge and large properties at different locations. Therefore, advantage and benefits on the basis of true valuation of these properties needs to be given to the shareholders. It is *7* csp.526.11.csd.382.10.csp.527.csd.383.937.sxw their stake which needs to be enhanced rather than transferring the same to tiny companies. For all these reasons, he submitted that the scheme should not be approved. 8 After perusal of the relevant material and documents including the affidavits on record and hearing the parties, I am of the opinion that the petition deserves to be allowed. The provisions in relation to notice prior to the meeting of the equity shareholders need to be construed in such a way so as not to interfere with the scheme only on the ground of inadequacy of notice. Something more needs to be established including prejudice for want of proper notice. Beyond stating that the notice was received prior to 18 days before the meeting and 21 days notice was not given, will not be enough to interfere with the scheme. More so, when there is no prejudice inasmuch as the objector attended and participated, so also, spoke at the meeting. In these circumstances, the objection on the ground of inadequacy of notice of the meeting to the shareholders cannot be accepted and is accordingly, overruled. 9 As far as the merits of the scheme are concerned, the sole objector has stated that he has expressed his concerns, grievances and objections when he attended the meeting, over the transfer of huge assets *8* csp.526.11.csd.382.10.csp.527.csd.383.937.sxw worth multi crores to the Transferee Company with capital base of Rs.2.51 crores and the issue of shares at a premium in lieu of such transfer of assets by the Petitioner Company. He stated that these are concerns which affect the interest of the shareholders. However, it is not as if these concerns or objections were not allowed to be raised. They were squarely raised at the meeting on own showing of the sole objector. Ultimately, in the democratic process where the scheme was put to vote after concerned parties sought liberty to speak, it was approved by overwhelming majority of the members. It is then not for this Court to find out whether, a decision of the majority is in the interest of shareholders, that would mean sitting in judgment over their commercial wisdom. It has been repeatedly held that even if another view is possible that by itself and without anything more will not enable this Court to interfere with the Scheme. In this case, in the affidavit in rejoinder the objections with regard to the notice have been dealt with and then what has been pointed out is that the proposed transfer of FMCG Exports Business Division of the Petitioner Company to the Transferee Company is at the book value of Rs. 70.12 crores, that has been approved by the Board as also by the shareholders. The book value of assets is certified by the statutory auditors of the Company. The proposed transfer of the division is in favour of a wholly owned subsidiary of the Petitioner Company, therefore, there *9* csp.526.11.csd.382.10.csp.527.csd.383.937.sxw need not be any apprehension that its worth has been undervalued or any arbitrary decision is taken. Ultimately, it is only to facilitate better management and improving efficiency that the decisions of this nature are taken. The benefits to the shareholders of the Transferor Company are in no way reduced or lost. 10 In my view, once the scheme has been found to be in the interest of the shareholders, creditors and general public and that necessary precautions have been taken, then, it is not for this Court to investigate the matter any further. In these circumstances, the objection of the sole objector stands overruled. 11 As a result of the above discussion, the following order:- (a) The Company Scheme Petition Nos.526/2011 and 527/2011 are made absolute in terms of prayer clauses (a) to (e) of the respective petitions. (b) The Transferee Company to lodge a copy of this Order and the Scheme, duly authenticated by the Company Registrar, High Court, Bombay with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable, if any, on the same *10* csp.526.11.csd.382.10.csp.527.csd.383.937.sxw within a period of 60 days from today. (c) The Transferee Company is directed to file a copy of this Order along with a copy of the Scheme of Arrangement with the concerned Registrar of Companies, electronically, along with E-Form 21 in addition to physical copy within 30 days from the date of issuance of the order by the Registry. (d) The Petitioners in both the Company Scheme Petitions to pay costs of Rs.10,000/- each to the Regional Director, Western Region, Mumbai. Costs be paid within four weeks from today. (e) Filing and issuance of the drawn up order is dispensed with. (f) All authorities concerned to act on a copy of this Order along with the Scheme duly authenticated by the Company Registrar, High Court, Bombay. (S.C. Dharmadhikari, J)