NAV CHROME LIMITED Vs. STATE

JUDGEMENT

(1.) The petitioner in Company Petition No. 92 of 1996 is the transferor company while the petitioner in Company Petition No. 93 of 1996 is the transferee company. The main objects of the transferor company are to carry on the business of manufacturing ferrous and non-ferrous metals, alloy steels, special steels, ferro alloys, ferro chrome, etc., and to manufacture electro chemical and electro metallurgical products etc. It is at present engaged in sale and manufacture of minerals, charcoal, machinery, etc. The main objects of the transferee company are manufacture of manganese, calcium carbide, etc. It is at present engaged in manufacture and sale of ferro alloys, sugar and machine building. The transferor company seeks to amalgamate with the transferee company as the result of amalgamation will benefit their optimum utilisation of raw materials, high value spares, consumables, high rate of electrical equipment, etc., resulting in saving of considerable amounts and helping expeditious and economical implementation of expansion projects. In the connected Company Applications Nos. 173 and 174 of 1996, this court directed convening of the meetings of the shareholders. The respective chairpersons have filed their reports showing that the shareholders approved the scheme. As per the scheme, the appointed date is 1/04/1996. As per para 8 of the scheme, the transferee company shall allot to the shareholders of the transferor company four equity shares of the face value of Rs. 10 each for five equity shares of the face value of Rs. 10 each held in the latter company. The transferor company holds 2,25,450 equity shares of Rs. 10 each fully paid and 3,60,800 equity shares of Rs. 10 each partly paid, i.e., Rs. 2.50 per share in the transferee company. On the scheme being effective, the said shares shall not be cancelled but shall be transferred to and vested in a trustee to be appointed by the board of directors of the transferee company who shall sell the same and pay the net proceeds to the transferee company.

(2.) Notice was issued to the official liquidator and the Company Law Board, Southern Region, Madras.

(3.) The official liquidator has filed his report stating that the affairs of the transferor company do not appear to have been conducted in any manner prejudicial to the interests of its members or that of public interest. It is also submitted that while the average quoted value of shares of both the companies is Rs. 46 and Rs. 30, respectively, the intrinsic value of shares is about Rs. 47 and Rs. 46, respectively, and hence the share exchange ratio has to be modified. He has also stated that no provision was made as regards the residual lock-in period in respect of 6,07,900 shares of the transferor company which was a condition stipulated by the Securities and Exchange Board of India at the time of issue of shares to the public by the transferor company through the prospectus. Another objection is that consent of the secured and unsecured creditors of the transferor company has not been obtained.