IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY SCHEME PETITION NO.69 OF 2010 CONNECTED WITH COMPANY APPLICATION NO.1333 OF 2009. Mather and Platt Pumps Limited........Petitioner/Transferee Company In the matter of the Companies Act I of 1956 AND In the matter of Section 391 to 394 read with section 100 to 103 of the Companies Act, 1956 AND In the matter of Scheme of Arrangement between Allied Centrifugal Pumps Private Limited and Mather and Platt Pumps Limited. Mr.Hemant Sethi i/b Hemant Sethi & Co, Advocates for Petitioner Ms.Soma Singh i/b Mr. S.K.Mohapatra for Regional Director. CORAM : S. J. KATHAWALLA.J DATE : 7th MAY, 2010 PC: 1. Heard learned counsel for parties. 2. The sanction of the Court is sought under Section 391 to 394 read with Section 100 to 103 of the Companies Act, 1956 to the Scheme of Arrangement between Allied Centrifugal Pumps Private Limited, the Transferor Company and Mather and Platt Pumps 2 Limited ,the Transferee Company. This petition is presented by the Transferee Company. The Transferor Company has presented similar Petition before the High Court of New Delhi at New Delhi. 3. The Scheme of Arrangement has been proposed by the Petitioner is three-fold, viz:- (i) Amalgamation of Allied Centrifugal Pumps Private Limited with Mather and Platt Pumps Limited and (ii) Reduction of Share Capital pursuant the purchase of shares from small shareholders pursuant to Clause 18 of the Scheme of Arrangement and (iii) Subsequent reduction and reorganization of share capital of Mather and Platt Pumps Limited pursuant to clause 19 of the Scheme of Arrangement. 4. Counsel appearing on behalf of the Petitioner has stated that they have complied with all the requirements as per directions of this Court and they have filed necessary affidavit of compliance in the Court. Moreover, Petitioner Company undertakes to comply with all statutory requirements, if any, as required under the Companies Act, 1956 and the rules made there under. The said undertaking is accepted. 5. The Regional Director has filed affidavit stating therein that save and except as stated in paragraph 6(a) and 6(b) of the said 3 affidavit, it appears that scheme does not appear to be prejudicial to the interest of shareholders and public. 6. The paragraphs 6(a) and 6(b) of the said affidavit read thus:- (a) The Transferee Company has to comply with the RBI/FEMA regulations for an allotment of share to the shareholders of the Transferor Company. (b) Clause No. 18(1) of the Scheme do not provide for option for continue as shareholder of the Company, which has been extended to those share holders who are having share holding more then 1001 and above in clause no. 18(2) of the Scheme. As both the share holders are pertains to one class of share holders namely equity share holders, as also being small share holders there cannot be any unequal treatment amongst these share holders. As the small share holders, covered by Clause No.18 (1) of the Scheme do not have the privilege of exercise the option to continue as a share holders of the Company, the proposed clause is an attempt to compulsorily remove the small shareholders from the register of members of the Company who are holding up to 1000 shares is against the share holder's democracy. Further there is no 4 provision in the Companies Act to remove members compulsorily against their wishes. It is also on record that during the year 2008 the Petitioner Company has made open offer to acquire the shares from the public. However these small share holders have not accepted the offer and desire to continue to be a share holder of the Company. In view of the above foregoing Clause No. 18(1) of the Scheme is not in the interest of minority share holders and it is prejudicial to their rights to continue as members of the Company. The deponent therefore submits that the Petitioner Company be directed to extend the option which has been extended to share holders covered in Clause No.18(2) of the Scheme to the share holders covered in Clause No.18(1) of the Scheme also with the same terms and conditions incorporated in Clause No. 18(2). 7. So far as the objection of Regional Director in paragraph 6(a) of the affidavit is concerned, the Counsel appearing on behalf of the Petitioner undertakes that the Transferee Company will comply with the RBI/FEMA regulations for issue of share to shareholders of the Transferor Company. The said undertaking is accepted 8. So far as the objection of Regional Director in paragraph 6(b) of the affidavit is concerned, the Counsel appearing on behalf of the 5 Petitioner states the shares of the Petitioner Company were listed on the Bombay Stock Exchange Limited (“BSE”) and Pune Stock Exchange Limited (“PSE”) and consequent to the delisting offer by Wilo SE, the shares of the Petitioner Company were voluntarily delisted from BSE with effect from 3rd February, 2009 and from PSE with effect from 7th February,2009. Apparently, the shares of the Petitioner Company are not freely traded on the floor of the stock exchange and have lost their liquidity. Subsequent to the completion of the delisting process, several shareholders who were unable to participate in the delisting process have approached the Petitioner Company seeking information as to way forward for their investments in the Petitioner Company. The arrangement for reduction of Share Capital pursuant to the purchase of shares from small shareholders was proposed by the Petitioner to enable the Small Shareholders who were unable to take the advantage of the delisting offer to liquidate their investment and not to compulsorily terminate the membership. Further pursuant to the directions of Hon’ ble High Court of Judicature at Bombay vide its order dated 18th December,2009 the Petitioner Company has not only issued notices to these shareholders but also duly convened and held meeting of shareholders on 23rd January,2010. In the report of the Chairman it is stated that the shareholders attending the meeting have unanimously approved the Scheme as whole, though special 6 resolution for reduction and reorganisation of share capital was approved by 93% in number terms. Thus, the shareholders have in their own wisdom understood the commercial justification of the Scheme and approved the same unanimously. On the contrary Clause 18(1) enables the public shareholders to be relieved of their shareholding and to realise their investment which in absence of clause 18(1) would be an un-profitable proposition and dead investment for these small shareholders. 9. The counsel appearing on behalf of the Petitioner further states that in reality, in commercial terms and from practical angle of small shareholders, the scheme is de facto continuance of delisting offer. 10. The counsel appearing on behalf of the Petitioner states that the Petitioner Company has agreed to pay fair value of Rs 275/- per share based on valuation report of Chartered Accountants and fairness report of merchant bankers. The offered price is 10% more than the exit price of Rs. 250/- per share which was determined by reverse book building process in accordance with the aforesaid delisting guidelines. In the light of above it is submitted that the Scheme is not meant for defeating the minority shareholders interest in any way but to give their fair dues on shares which are illiquid. Considering that fair value is being offered voluntarily, the proposed 7 scheme in no way can be considered as prejudicial to small shareholders. 11. The counsel appearing on behalf of the Petitioner further invites my attention to the last paragraph of the affidavit of the Regional Director wherein it is stated that it appears that the Scheme is not prejudicial to the interest of shareholders and public. Thus, it may be concluded that Clause 18 (1) is in consonance with that of shareholders’ democracy. 12. However, the counsel appearing on behalf of the Petitioner placed reliance on the following judgments, viz (i) Simtools Limited (Unreported) passed by this Court in Company Petition No 191 of 2004 connected with Company Application No 543 of 2003 (ii) T.C. I.Industries Limited reported in (2004) 118 Comp Case 773(A.P) and (iii) The Securities & Exchange Board of India Vs. Sterlite Industries (India) Limited reported in (2003) 113 Comp Case 273 (Bom) where similar objections were raised by Regional Director, Department of Corporate Affairs. This issue has also been decided by Division Bench judgment of this Court in Sandvik Asia Limited in Appeal No. 308 of 2004 in Company Petition No. 478 of 2003 in Company Application No. 290 of 2003 where some of the minority shareholders had raised similar objections. In the instant case none of the minority shareholders have come forward to oppose the Scheme and the shareholders in their own commercial wisdom have approved the 8 scheme with requisite majority as required under Section 391 and Special Resolution under section 100 of the Companies Act,1956 without any modification. 13. The counsel appearing on behalf of the Petitioner submits that in view of the above the Scheme of Arrangement as proposed deserves to be sanctioned. 14. In my opinion, the argument of the Regional Director that Clause 18(1) of the Scheme is not in the interest of minority shareholders and it is prejudicial to their rights to continue as member of the Company is not acceptable to this court and cannot be upheld in the light of the fact that, once it is established that small shareholders are being paid fair value of their shares and the fact that in meeting of shareholders scheme as a whole and Special Resolution been approved with requisite majority, really speaking it is not obligatory on the part of the company to provide for such an option to small shareholder and the court will not be justified in withholding its sanction to the Scheme. 15. From the material on record, in my opinion, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. None of the parties concerned have come forward to oppose the Scheme. 16. There is no objection to the Scheme of Arrangement save and except as stated in paragraph 6 herein and since all the requisite 9 statutory compliances have been fulfilled, the Scheme of Arrangement deserves to be sanctioned. Hence, Company Scheme Petition No 69 of 2010, filed by the Transferee Company is made absolute in terms of prayer clause (a) to (k) subject to the Scheme being sanctioned by the High Court of Delhi, at New Delhi in case of the Transferor Company. However as far as prayer (d) and (e) are concerned, it has been rightly pointed out that the Minutes would be submitted after the options is exercised under clause 18.2 and also after the compliance is made with clause 18.7 of the Scheme. Therefore liberty is granted to the Petitioner to apply for relief in terms of prayer clause (d) and (e) at a later stage. Reserving such liberty, Petition is made absolute 17. The Transferee Company to lodge a copy of this order and the Scheme duly authenticated by the Company Registrar, High Court,(O.S), Bombay, with the concerned Superintendent of Stamps for the purpose of adjudication of stamp duty payable, if any, on the same within 60 days from the date of Order. 18. The Petitioner in Company Scheme Petition to pay cost of Rs. 7,500/- to the Regional Director, Western Region, Mumbai. Costs to be paid within four weeks from today. 19. Filing and issuance of the drawn up order is dispensed with. 10 20. All concerned authorities to act on a copy of this order alongwith scheme duly authenticated by Company Registrar, High Court,(O.S) Bombay. (S. J. KATHAWALLA, J)