Case: Anup Kumar Sheth Vs. Reliance Industries Limited &amp; Another

shares in Reliance Petroleum Ltd. If the exchange ratio was unfair to Reliance Industries, it would have been more than fair to the other Company. He has also drawn our attention to various judgments of the Supreme Court to canvass that the scope of inquiry in this Court is limited.10. One of the judgments is in the case of Re: German Remedies Ltd. reported in (2003) 4 Com.L.J. 89 (Bom.). In this judgment, the Supreme Court held:"It is not for the Court to sit in appeal over the valued judgment of the equity shareholders who are supposed to be commercial men. Commercial men who know their common benefit and interests underlying the proposed scheme, with open eyes, have okayed the swap ratio of 7 to 4 by an overwhelming majority of 90 per cent in numbers and 99 per cent in value of the members present and voting. The limited jurisdiction of the Court is only to see whether the ratio is so wrong or the error is so gross as would make the scheme unfair or unjust or oppressive to the majority of the members or any class of them."Similarly, reliance was placed on Kamala Sugar Mills Ltd. reported in (1984) 55 Comp Cases 308 (Mad).11. The learned senior counsel for the petitioner has, however, relied on a judgment of this Court in J.S. Davar & Anr. v. Dr.Shankar Vishnu Marathe & Ors. reported in AIR 1967 Bombay 456, the relevant portion whereof reads thus:-"(22) On a review of the authorities and from the provisions in section 153 (2) of the Indian Companies Act, 1913, it seems to us clear that the consent of the majority of creditors or shareholders to a scheme does not conclude the issue whether the scheme should be sanctioned. The jurisdiction of the Court which is called upon to sanction a scheme transcends the mere consideration that a majority of those affected by the scheme is willing to submit to the scheme. The creditors of a company may agree to accept a fraction of the amount due to them from the company and yet, on considerations of more lasting importance, like public or commercial morality, the Court may refuse to accept the verdict of the majority. It may also refuse to accept the scheme on the ground that it is not reasonable or that it is not feasible or that there is no chance that it will yield to a smooth and satisfactory execution. By reasonable is generally meant that the arrangement cannot reasonably be supposed by sensible business people to be for the benefit of the class which they represent. The Court will also not sanction the scheme if the facts which would have influenced decision of the majority were not known or disclosed to the majority, or if the sponsors of the scheme have misrepresented the true position of the company. Finally, if the acceptance of the scheme would lead to the stifling of an inquiry into the conduct of the delinquent directors, the Court would be slow to give its sanction to the scheme. Considerations such as those mentioned above must be taken into account by a Court before a scheme is sanctioned but in the very nature of things, it is not possible to enumerate exhaustively the circumstances which a Court is entitled to take into consideration."12. It is true that this Court, in its judgment, held that "the jurisdiction of the Court which is called upon to sanction a scheme transcends the mere consideration that a majority of those affected by the scheme is willing to submit to the scheme". It laid down tests for rejecting a scheme which has the support of the majority. None of the grounds exists in the present case which have been laid down as grounds for rejecting a scheme in this judgment.13. The learned senior counsel has also relied on Miheer H. Mafatlal v. Mafatlal Industries Ltd. reported in AIR 1997 S.C. 506. The Supreme Court held in paragraph 39:"It was submitted that the exchange ratio of equity shareholders so far as the transferee-company is concerned works very unfairly and unreasonably to them. As per the proposed Scheme 5 equity shares of transferor-company are to be exchanged for 2 equity shares of transferee-company. So far as this contention is concerned it has to be kept in view that before formulating the proposed Scheme of Compromise and Amalgamation an expert opinion was obtained by the respondent-company as well as the transferor-company, viz., MFL on whose Board of Directors appellant himself was a member. M/s. C.C. Chokshi & Co., a reputed firm of Chartered Accountants, having considered all the relevant aspects suggested the aforesaid exchange ratio keeping in view the valuation of shares of respective companies. It must at once be stated that valuation of shares is a technical and complex problem which can be appropriately left to the consideration of experts in the field of accountancy."14. It was also contended that the learned Company Judge had refused to entertain the matter which was brought to his notice before the matter was decided. This was by one Rasiklal S. Mardia, who has also filed Appeal (Lodging) No.463 of 2009, which was also called, and the learned counsel appearing for him was also heard. We have seen the letter, which was received. It was not, as a matter of fact, an application. It was a letter to the learned Chief Justice of High Court of Bombay, and it stated: "Please find enclosed herewith the copy of my letter of even date addressed to the Honble Chief Justice of Gujarat High Court. The contents of the letter is self-explanatory and I do not repeat the same for the sake of brevity." Thereafter, it stated: "From the reproduced newsreport, I found that Reliance Industries Ltd. has also filed the Amalgamation Petition before the Honble Bombay High Court." This letter could not be treated as a response to the notice issued by the learned Court in the Company Petition.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]14. It was also contended that the learned Company Judge had refused to entertain the matter which was brought to his notice before the matter was decided. This was by one Rasiklal S. Mardia, who has also filed Appeal (Lodging) No.463 of 2009, which was also called, and the learned counsel appearing for him was also heard. We have seen the letter, which was received. It was not, as a matter of fact, an application. It was a letter to the learned Chief Justice of High Court of Bombay, and it stated: "Please find enclosed herewith the copy of my letter of even date addressed to the Honble Chief Justice of Gujarat High Court. The contents of the letter isand I do not repeat the same for the sake of brevity." Thereafter, it stated: "From the reproduced newsreport, I found that Reliance Industries Ltd. has also filed the Amalgamation Petition before the Honble Bombay High Court." This letter could not be treated as a response to the notice issued by the learned Court in the Company Petition.