VADLAMUDI RAMA RAO Vs. ASIAN COFFEE LTD

JUDGEMENT

(1.) This group of appeals arise out of the judgment rendered by learned Company Judge allowing the Company Petition No. 199 of 1998 and dismissing the Company Application Nos. 674, 686, 687 and 688 of 1998. The main petition in C.P.No. 199 of 1998 was filed by Asian Coffee Limited (hereinafter referred to as 'ACL') a Public Limited Company, under Section 394 read with Section 391(2) praying for approval of the scheme of amalgamation with Consolidated Coffee Limited (hereinafter referred to as 'CCL') which is also a Public Limited Company. The applications mentioned above were filed by various shareholders of the Company, the chief amongst them being the applicant in C.A.No. 674 of 1998. He holds 60,764 shares as against the nominal shares of 48, 24 and 89 held by the other three applicants. The applicants prayed the Court not to confirm the Scheme of amalgamation at the proposed exchange ratio and to direct the respondent-Company -ACL to work out the share exchange ratio based on the valuation by an independent auditor. The said applications were dismissed by the learned single Judge. Hence these appeals.

(2.) At the outset, it may be mentioned that the Scheme of Amalgamation envisages not only the amalgamation of ACL but also three other Companies with CCL. These three Companies, it appears, filed petitions under Section 394 before the High Court of Karnataka and the same were allowed by the High Court. As ACL has registered Office at Secunderabad, it has moved this Court for similar relief.

(3.) The appellants are aggrieved by one of the terms of the Scheme under which the members of the transferor Company i.e., ACL will get one equity share of Rs. 10/- each in the transferee company i.e., CCL for every six fully paid up equity shares of Rs. 10/- each held by them in ACL. A consequential provision has been made to the effect that the new equity shares in the transferee Company to be issued as above shall rank pari passu in all respects with the existing equity shares of the transferee Company, save and except that such new equity shares will be entitled to dividend in relation to any financial year commencing on or after the appointed date. It is contended that the exchange ratio of 6:1 provided under the Scheme is unfair to the appellants and other shareholders of ACL and there should have been allotment of more number of shares, had an independent and objective assessment been made by the persons in-charge of the management of the Transferor or transferee company. It is therefore contended that the amalgamation on such unfavourable terms to the shareholders of ACL should not be approved. It is suggested, on the basis of report of Chartered Accountants - Narasimha Rao and Associates, that the fair exchange ratio should be atleast 3:1.