HINDUSTAN LEVER EMPLOYEES UNION Vs. HINDUSTAN LEVER LIMITED

JUDGEMENT

(1.) THE Judgments of the court were delivered by.

(2.) . Merger under the Companies Act, 1956 (in brief 'the Act') of the two big companies - one, Hindustan Lever Limited (HLL), a subsidiary of Unilever (UL), London-based multinational company, and other Tata Oil Mills Company Ltd. (in brief 'TOMCO') the first Indian company founded in 1917 and public since 1957 which has been found by the High court to be still "not financially insolvent or sick company" was <PG>505</PG> unsuccessfully challenged in the High court by few rather nominal shareholders of TOMCO, Federation of Employees' Union of both the TOMCO and HLL, Consumer Action Group and Consumer Education and Research Centre. The attacks varied from statutory violation, procedural irregularities of provisions of the Act to ignoring the effect of the provisions of Monopolies and Restrictive Trade Practices Act, 1969, under valuation of shares, its preferential allotment on less than the market price to the multinational, failure to protect the interests of employees of both the companies and above all being relative of public interest. The High court was not satisfied that either the merger was against public interest or that the valuation of the shares was prejudicial to the interest of the shareholders of TOMCO or that the interest of the employees was not adequately protected. It was held that there was no violation of Section 391(l)(a) of the Act and the claim that the disclosures in the explanatory statement were not as required was without basis as it was not established that the statement did not disclose correct financial position of TOMCO. Nor was there anything to show that the material was not disclosed. The court held that the petitioner failed to establish any fraud or prejudice. On valuation of share for exchange ratio the court found that a well-reputed valuer of a renowned firm of chartered accountants and a Director of TOMCO determined the rate by combining three well-known methods, namely, the net worth method, the market value method and the earning method. The figure so arrived at could not be shown to be vitiated by fraud and mala fide and the mere fact that the determination done by slightly different method might have resulted in different conclusion would not justify interference unless it was found to be unfair. And in that the petitioner failed miserably. The High court did not agree that the approval to scheme of merger should be withheld till the complaint filed before Monopolies and Restrictive Trade Practices Commission was not finally decided as the jurisdiction exercised by the High court under the Act and that by the Commission under MRTP Act were entirely different. Nor did it find any merit in the challenge that interest of employees of the two companies was not adequately taken care of. It was held that service conditions of TOMCO, the transferor company, having been protected it could not claim it to be prejudicial either because they were not assured of same conditions of service as was operative in HLL or that there was no similar provision protecting the interest of HLL employees. The apprehension of the employees against probable retrenchment as the employees of HLL were already surplus was rejected as of no substance since such disputes if necessary could be raised in labour court. On preferential allotment of shares to UL on less than market value the court held that HLL was holder of 51% shares prior to any allotment, therefore the allotment which placed them on a par with same holding was neither illegal nor violative of public interest.

(3.) . Nor is there much merit in the claim of the employees that their interest had not been adequately protected. The scheme of amalgamation provides that all the staff, workmen or other employees in the service of the transferor company (TOMCO) immediately preceding the effective date shall become the staff, workmen and employees of the transferee company. Clause 11.1 provides that their services shall be deemed to have been continuing and not have been interrupted. Clauses 11.2 and 11.3 protect the interest by providing that the <PG>507</PG> terms and conditions of such employees shall not be less favourable and all benefits such as PF etc. shall stand transferred to HLL. The grievance of the employees that no safeguard has been provided for Hindustan Lever Employees' Union appears to be off the mark as it is the interest of the employees of TOMCO which had to be protected. Even the submission that merger will create unemployment or that it may result in many employees of TOMCO being rendered surplus does not carry much weight as these are matters which can be taken care of by the labour court if the contingency arises. The learned counsel for the petitioner time and again took strong exception to the observation made by the High court that any dispute about retrenchment etc. could be adjudicated by the labour court. He vehemently submitted that the availability of remedy after retrenchment should not have coloured the vision of the court to adjudicate upon the reasonableness of the scheme. The submission overlooks the primary duties and functions of a company court in matters of merger. When the court found that service conditions of the merged company shall not be to their prejudice it was fully justified in rejecting the claim of employees as it was neither unfair nor unreasonable. Further the court in its anxiety to be fair to the employees recorded the statement of the learned Advocate General who appeared for HLL that no employee of HLL has been rendered surplus and in such contingency the company has resorted to friendly handshake by either giving lump sum or pension. A scheme of amalgamation cannot be faulted on apprehension and speculation as to what might possibly happen in future. The present is certain and taken care of by clauses 11.1,2 and 3 of the Scheme. And unfriendly throwing out being amply protected by taking recourse to labour court no unfairness arises, apparent or inherent. Nor the claim that merger shall result in 'synergies' can render the scheme bad. Improved technology and scientific methods result in better employment prospects. Anxiety should be to protect workers and not to obstruct development and growth. May be that advanced technology may reduce the manpower but so long as those who are working are protected they are not entitled to hinder modernisation or merger under misapprehension that future employment of same number of workers may stand curtailed. The wage differential arising between employees of two companies cannot result in making the merger unfair since the service conditions of TOMCO workers having been protected they cannot claim that unless they are paid the same emoluments as is being paid by Hindustan Lever the merger was unjust. Various subsidiary submissions that the workers, shareholders were not permitted to attend the meeting or that material facts were concealed from them, does not appear to be correct as when more than 95% of the shareholders have agreed to the valuation determined by the Chartered Accountant all these procedural irregularities cannot vitiate the determination.