PARSHURAM DATTARAM SHAMDASANI Vs. TATA INDUSTRIAL BANK LIMITED

JUDGEMENT

(1.) [His lordship after setting out the facts of the case, proceeded:] I shall first take up the points relating to the notice convening the extraordinary general meeting on July 19. In order to appreciate them, it is material to state here that the capital of the Tata Bank was seven and a half crores of rupees, consisting of ten lakhs shares of 11Sectin. 75 each. In respect of each share at the material time Rs. 22-8-0 were oiled in with the result that at that date its paid up capital was two and a quarter crores. The balance sheet of this Bank published before these negotiations commenced relates to the year ending wi March, 31, 1923. It appears from the evidence that about the end of June 1923, the condition of the Bank was not satisfactory. The deposits in the Bank at the e March, 1923 amounted to about Rs. 5,95,00,000, while at the end of June 1923 they had gone down to 3,37,00,000 of rupees. It is also in evidence that the Manager of the Bank had found it difficult to carry on the business of the Bank. At this time the Central Bank had a capital of one crore of rupees consisting of 2,00,000 shares of rupees 50 each. In respect of each share Rs. 25 were paid. A Thus, in June 1923, the condition of that Bank was fifty lacs of rupees paid up capital and thirty lacs reserve fund, with deposits amounting nearly to thirteen crores of rupees. It is also in evidence that the market value of the Central Bank shares was Rs 30 and a little over, and the market value of the Tata Bank shares was Rs. 14-8-0 per share. It may be remembered that in respect of the Centra! Bank shares the shareholders were liable to pay Rs. 25 per share and in respect of the Tata Hank shares the shareholders were liable to pay Rs. 52-8-0 per share. This was the state of the Banks when the negotiations commenced. The result of the negotiations is to be found in the agreement which came to be signed on July 5, 1923, by Mr. Commissariat and the Central Bank of India, Limited. According to that agreement the Central Bank was to take over all the assets and liabilities of the Tata Bank, was to increase its capital so as to be able to give one share of Rs. 50 with Rs. 25 paid up in respect of two shares of the Tata Bank to the shareholders of that Bank It was also a part of the agreement that if a number of shareholders not exceeding one-third of the shareholders did not wish to take shares in the Central Bank they were to be paid at the rate of Rs. 15 per share or such amount as may be fixed under the scheme of arbitration which was provided for in the agreement in accordance with the requirements of Section 213 of the Indian Companies Act. There were other provisions with regard to the payment of the officers and other employees of the Tata Bank, but in substance the effect of the agreement was as I have just stated.

(2.) After this provisional agreement was discussed by the directors the notice in question was issued. I have already referred to the terms of that notice, and along with that notice a circular was issued. It is pointed out in that circular, which was issued by the orders of the Board of Directors, that there was an offer from the Central Bank of India, Limited, to take over the Tata Bank as a going concern on terms of allotting one share of the Central Bank of India, Limited, of the nominal value of Rs. 50 credited as paid up to the extent of Rs. 25 for every two shares in the Tata Industrial Bank, Limited, of the nominal value of Rs. 75 on which the sum of Rs. 22-8-0 per share was paid up. The directors had called for the opinion of the auditors of both the Banks to examine the financial position of the two Banks and it was stated in the circular that the auditors were satisfied that the offer made was fair and equitable and that two shares of the Tata Bank were worth one share of the Central Bank. The result of the amalgamation was stated in the circular to be that the uncalled liability of Rs. 1.05 which then existed on two shares in the Tata Industrial Bank, Limited, would be exchanged for an uncalled or contingent liability of Rs. 25 per share in the Central Bank of India, Limited.

(3.) A reference to the agreement was made in the circular in the following terms:- - An agreement for carrying the proposed amalgamation into effect has been entered into between Mr. Hormnsji Framji Commissariat a shareholder of your company on behalf of your company and the Central Bank of India Limited, which agreement is conditional upon your sanction of the scheme of amalgamation and a copy of the conditional agreement which bears date July 5, 1923, is open for inspection by any member of your company at the registered office.