N. SAI SUBRAHMANYAM Vs. WARNER HINDUSTAN LTD.

JUDGEMENT

(1.) These two appeals-one by a shareholder and the other by the Central Government are filed against the judgment dated 21 Sept., 1987, of the learned Company Judge in Company Petition No. 6 of 1987 according sanction under section 394(1) of the Companies Act to the scheme of merger of the petitioner's company, Warner Hindustan Ltd., with Parke Davis Ltd.

(2.) It is necessary to have a factual background examining the controversies raised ; both Warner Hindustan Ltd. and Parke Davis (hereinafter referred to as 'W' and 'P') are registered under the Indian Companies Act. 'P' has its registered office at Bombay and 'W' at Hyderabad. 40% of equity capital in each is held by multinationals, viz., Parke Davis, U.S.A., and Warner Lambert, U.S.A., respectively. The assets of 'W'. are over one crore but the total assets of both are far below Rs. 100 crores. Both the companies among other activities manufacture drugs and pharmaceuticals and are registered under the Industries Development and (Regulation) Act. 'W' holds several licences under the Industries Development and (Regulation) Act (hereinafter called as 'the ID and R Act') and one of it among others relates to the manufacture of two articles, viz., 'PICOLINE' and 'PYRIDINE' (hereinafter referred to as 'the two drugs) specifying the licensed capacity. It appears Parke Davis, U.S.A., was acquired by Warner Lambert U.S.A., and as a result said Warner Lambert Company, U.S.A., has 40% equity interest in both 'P' and 'W'. The Board of directors of 'P' and 'W' agreed upon a scheme of amalgamation of the two companies on the terms and conditions set out in it which among other things stipulates that 1 Dec., 1985, shall be the appointed date for amalgamation. On the application of 'P', the Bombay High Court by its order dated 23 April, 1987, in Company Petition No. 41 of 1987 has accorded sanction to the scheme subject to objection under section 23 of the Monopolies and Restrictive Trade Practices Act, 1969, (for short 'MRTP Act'), to be considered by the Andhra Pradesh High Court where Company Petition No. 6 of 1987 filed by 'W' was at that time pending. It is not disputed that sanction of both the High Courts is necessary for the scheme of amalgamation and merger. 'W' filed Company Application No. 131 of 1986 in this court on 22 Oct., 1986, requesting for convening a meeting of its shareholders to consider the scheme of amalgamation. The petition was ordered on 24 Oct., 1986, and a meeting was also held on 7 Jan., 1987, and the report of the Chairman was submitted to the court on 21 Jan., 1987. In the said meeting, Rs. 12,79,682 shareholders voted in support of amalgamation and 1,149 against it.

(3.) Thereafter, 'W' filed Company Petition No 6 of 1987 on 27 Jan., 1987, for according sanction of the said scheme of amalgamation under section 391 of the Companies Act. On receipt of the notice under section 394A, the Central Government has filed an affidavit opposing the grant of sanction as well as the merger on several grounds. Its case being that 'W' is a dominant company within the meaning of MRTP Act and without prior approval of the Central Government under section 23(1) of the MRTP Act, the court shall not sanction the scheme. A shareholder has also filed an affidavit opposing the sanction of scheme on some other grounds. A reply affidavit has also been filed on behalf of the company.