SESA INDUSTRIES LIMITED Vs. STATE

JUDGEMENT

(1.) THESE petitions have been filed for sanctioning a scheme of amalgamation of Sesa Industries Limited, the transferor Company, with Sesa Goa Limited, the transferee Company, but have been objected to, by the Objector Smt. H. Bajaj who presently holds 0.29% of shares in Sesa Industries Limited on the ground that the amalgamation is not bonafide and has been thought of to get out of the mess in which both the said Companies find themselves and to stiffle further investigations.

(2.) SESA Goa Limited (SGL) was incorporated on 25-6-1965 as a Private Limited Company under the provisions of the Companies Act, 1956 and became a Public Limited Company w.e.f. 16-4-1991. Sesa Industries Limited(SIL) was incorporated on 17-5-1993 as a subsidiary of SGL, the latter holding 88.85% of its shares. Vide letter dated 3-7-1993 the SGL informed its share holders to subscribe to the shares of SIL at a premium of Rs.12.50 per share with a promise that the shares of SIL would be listed on the Bombay Stock Exchange after 12 to 18 months, and on 28-8-1993 issued its preferential offer in the ratio of one equity share for every two equity shares held in SGL i.e. Rs.22.50 per share. By letter dated 26-4-1999 SIL had informed its various shareholders including the Objector the reasons for non listing of the shares. Since the shares of SIL were not listed the Objector complained to the Registrar of Companies by her letter dated 24-5-2003. Prior to that on or about 21-4-1999 the Objector filed a Writ Petition, bearing No.1280/99 seeking refund of monies invested in shares but the same came to be dismissed on or about 17-6-1999, inter alia, with an observation that the Objector may have his remedy either under the Contract Act or under the Companies Act. Thereafter on or about 15-1-2000 the Objector filed a Criminal Complaint bearing No.4/S/2000 (renumbered as 111/SW/05) against the Directors of SIL, for offences under Sections 63, 68 r/w 64, 65 and 67 of the Companies Act r/w Sections 403, 406/420 r/w 120B I.P.C. On or about 5-6-2003 the SGL offered to buy back the shares of SIL at Rs.30/- per share, between 30-6-2003 to 29-7-2003. As per the Objector, the share value of SIL share then ought to have been at least Rs.57/- per share. Nevertheless, the Objector who had about 5,31,950 shares of SIL accepted the existing offer and sold the shares pursuant to the said offer at Rs.30/- per share but retained only 57,450 shares which now represents 0.29% of shares in SIL. Mrs. Bhandari, too, accepted the offer and sold her 31950 shares. That was after another Writ Petition bearing No.1604/03 filed by some other share holders seeking direction to the Company that the offer should be withdrawn, failed. Another complaint bearing No.152/SS/04 (renumbered as 125/SW/05) was filed in September, 2003 which is pending before the 14th Court of Metropolitan Magistrate at Girgaum, Mumbai.

(3.) THE scheme therefore came to be approved at the meetings held on 8-5-2006. Three members of SIL and one member of SGL opposed the said scheme but the fact remains that as required under Section 391 of the Act the majority in number and more than three fourths in value of the equity share holders of both the companies have approved the said scheme. In fact the scheme has been approved by more than 99% of the shareholders. In other words, the shareholders of both the companies have approved the scheme as being of commercial advantage to them and that they have done, inspite of the fact that they were aware that certain provisions of the Companies Act were contravened and the authorities were directed to examine the report and take appropriate action. The Official Liquidator in his affidavit dated 10-8-2006 relying on the report of auditors has stated that the affairs of the transferor Company have not been conducted in a manner prejudicial to the interest of its member or the public and that he has no objection for the approval of the scheme. The Official Liquidator in his affidavit dated 10-8-2006, filed on behalf of Regional Director (Central Government) has stated that he has been authorized by the Regional Director (WR) to file the affidavit and has further stated that both the companies were inspected under Section 209A of the Act during the year 2005 and "any violation which may be noticed during the course of inspection, there will be no dilution for initiating legal action under the Act and that will not in any way affect the amalgamation. This part of the controversy was dealt with in paras 13, 14 and 17 of the Order dated 9-2-2007 which can be taken as reproduced herein. The scheme having been approved by all concerned and by 99% of the shareholders of both the companies and the Central Government as well as the Official Liquidator not having objected to the same, the only function of this Court in this supervisory jurisdiction is only to examine and find out whether the scheme is just and fair to the minority of the shareholders and is otherwise not opposed to any law or public interest including the economic interest of the country, though it is contended on behalf of the Objector by her learned Senior Counsel that the Court has a pivotal role to play in terms of the proviso below sub-section (2) of Section 391 of the Act. While learned Senior Counsel on behalf of the Petitioner has contended that the jurisdiction is not inquisitorial. The relief being discretionary, it will be refused in case the aforesaid criteria is not met.