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Amalgamation – Companies Act,
1956 – s. 394
The transferor company and
the transferee company filed the petition for sanction of proposed scheme of
amalgamation of the transferor company with the transferee company. The
requirement of conducting the statutory meeting by the equity shareholder of
the transferor company and the transferee company was dispensed with on the
ground that they had already consented to the proposed scheme of amalgamation
and their consent in regard was also filed. The convening and holding of
meeting of secured and unsecured creditors of both the companies was also
dispensed with as there were no secured creditors or unsecured creditors in
these companies. The Official Liquidator pursuant to the notice stated in his
report that he had not received any complaint against the proposed scheme of
amalgamation from any person/party. the Regional Director also stated in his
report that the Central Government had no objection for granting sanction to
the proposed scheme of amalgamation.
The court held that having
regard to facts and circumstances of the case, there did not appear to be any
legal impediment in sanctioning the proposed scheme of amalgamation.
Consequently, sanction was to be granted to the proposed scheme of
amalgamation under section 391 and section 394 for amalgamation of the
transferor company with the transferee company.
Nishraj Traders (P) Ltd.
vs. Madhu Viniyog (P.) Ltd. [2008] 86 SCL 116 (Del.)
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Appeal – Requirement of pre
deposit – Undue hardship – Foreign Exchange Management Act, 1999 – s. 19.
The appellant had acquired
foreign exchange contravening the provisions of section 8 (1) of FERA Act,
1973, thereby rendering him liable to be proceeded under section 50 of the
1973 Act. The Special Director passed an order imposing penalty on the
appellant. The appellant preferred an appeal before the tribunal and filed an
application for dispensing with the requirement for pre-deposit. The Tribunal
passed an order directing deposit of 60% of the penalty amount for the purpose
of entertaining the appeal. An appeal was filed under section 35 which came to
be dismissed by the High Court holding that no case of hardship was made out
either before the tribunal or before it and therefore there was no scope of
interference with the order of tribunal. On appeal to Supreme Court important
question raised was the significance of the expression under section 19 are
‘undue hardship to such person‘ and ‘safeguard the realization of penalty’ .
Further another question that needed to be examined was whether any reduction
of the amount to be deposited as directed by the Tribunal called for.
The Supreme Court held that
the appellant had deposited the amount which has to be deposited. The balance
amount demanded with a view to safeguard the realization of penalty, the
appellant should furnish security as may be stipulated by the Tribunal. On
being done the appeal shall be heard without requiring further deposit if the
appeal was otherwise free from defect.
Monotosh Saha vs. Special
Director, Enforcement Directorate [2008] 86 SCL 121 (SC)
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Association of Company
have a binding effect – Oppression & Management –Companies Act, 1956 – Ss. 397
& 398
A Petition was filed under
section 397 and 398 of the Companies Act, 1956 seeking orders to regulate the
affairs of the company by the petitioner claiming to hold 40 per cent of the
paid-up capital of the company. The respondent questioned the maintainability
of the petition on the ground that the petitioner was never the shareholder of
the company and the minutes of the meeting disclosing the consent of the board
of directors for transfer of shares in favour of petitioner has been
fabricated.
The articles of association
of a company have a binding effect on the company and its members and also
between the members inter se in relation to their rights as such members, and
therefore , the company and the members are bound by the articles. Any
transfer of shares in violation of the articles of association would not be
binding on the company.
The court dismissed the
petition on the ground that none of the requirements of the articles of
association dealing with transfer of shares were met in respect of the
transfer impugned by the respondent. The acquisition of shares by way of
transfer on the part of the petitioner in violation of the articles of
association was non est in the eyes of law. The petitioner failed to mention
that he was the shareholder in the complaints and had no explanation for
non-production of the original share certificate by the petitioner. The
petitioner could not claim to be a shareholder or did not have locus standi to
seek remedy for any of his grievances under section 397 & section 398 of the
Companies Act, 1956.
M. Sreenivasulu vs.
Mansani Construction P. Ltd (2008) 144 Comp Case 634 CLB .
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Buy Back of shares –
Companies Act, 1956 – s. 77A
The company Sasken
Communication Technologies Limited a public limited company incorporated under
the provisions of the Companies Act, 1956 and its shares are listed on the
Bombay Stock Exchange (BSE) and the National Stock Exchange of India Limited (NSE).
It shall be referred to hereinafter as the company. The Board of Directors of
the company in its meeting decided to purchase the equity shares of the
company. This buy-back of shares by the company had to be in accordance with
the provisions of section 77A of the Act and the Securities and Exchange Board
of India (Buy-Back of Securities) Regulations, 1998 (The Directors also
resolved in their meeting that the buy-back would be completed within a period
of 12 months from the date of their resolution in one or more branches from
time to time and the same shall be out of the free reserves of the company.
They also decided that the buy-back shall be by the methodology of open market
purchases through the stock exchanges as prescribed by the Act and the
regulations. The public notice-cum-public announcement was published in two
national Dailies offering to buy-back equity shares.
Before concluding, the
tribunal held that the other directions that were issued to the company was
directed to place its buy back orders at or above the market price and was
further directed to start with the buy-back immediately. The tribunal issued
that SEBI could direct the company to place the buy orders above the market
price. As a matter of fact, it is no part of Sebi’s duty to advise a purchaser
regarding the price at which he needs to put in his buy orders. Such a
direction could not be issued. Section 77A(4) mandates that every buy-back
shall be completed within 12 months from the date of the passing of the
resolution by the board of directors. When the law allows the company to
complete the buy-back within 12 months, it has the option to start with the
same at any time which it thinks is appropriate for the buy-back. It cannot be
compelled to complete the buy-back soon after the passing of the resolution as
has been directed by Sebi. There is nothing in the regulations either to
suggest that the buy-back should be completed at the earliest and the appeal
is allowed.
Sasken Communication
Technologies Limited vs. Securities and Exchange Board of India Dated :
26-9-2008 Appeal no. 102 of 2008 (Mumbai)
http://www.sebi.gov.in.
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Manipulating Trading –
SEBI Act, 1992 – s. 15T
This appeal has been filed
under section 15T of the Securities and Exchange Board of India Act, 1992
against the order dated 28-2-2008 passed by the whole time member of the SEBI
restraining the appellant from accessing the capital market in any manner
whatsoever for a period of one year, for violation of various regulations of
the Securities and Exchange Board of India (Prohibition of Fraudulent and
Unfair Trade Practices relating to Securities Market) Regulations, 2003 (FUTP
Regulations, for short). The restraint order was first passed as an ad interim
ex parte order by the Board. The sequence of events leading to the passing of
the impugned order by the Board started off with an investigation conducted by
the Board into the unusual price movements of the scrip of Mega Corporation
Ltd. Based on the findings of the investigation, the Board charged the
appellant with manipulating the market in its own shares by several means.
According to the show cause notice which was issued by the Board, a group of
persons connected with the appellant indulged in a large number of trades
among themselves only to generate large trading volumes which resulted in rise
in the price of the scrip. The show cause notice further alleged that the
appellant sought to generate investor interest in its scrip by publishing
false and misleading announcements in the press about the company’s prospects
and business plans which projected unduly high revenues and profits for the
company. It was also alleged that the company reported a huge profit in their
annual results for the year 2004-05 by manipulating their books of account to
induce the investors to buy the shares of the company.
The Tribunal held that the main charge of manipulative trading in its own
shares by the appellant fails in the absence of any link being established by
the respondent Board between any of the traders with the appellant company.
The charge of making false and misleading announcements as also that of
manipulation in the annual accounts of 2004-05 in order to lure investors also
does not succeed. Therefore, the appeal is allowed and the impugned order is
set aside.
Mega Corporation Ltd. vs.
Securities and Exchange Board of India – Dated 15-10-2008. Appeal No. 60 of
2008 (Mumbai) http://www.sebi.gov.in/
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Mortgage – Companies Act,
1956 – s. 125 & 126.
The plaintiff filed a suit to
recover a sum from the defendant and also sought for a declaration that the
said amount was secured by a mortgage in its favour of various movable and
immovable properties including the property –in-question. The said property
was charged in favour of the plaintiff which was registered under section 125.
Subsequently, a winding-up petition against the defendant was filed and
defendant gave a statement that it would not dispose of the immovable
property. However defendant sold the property to the purchaser who in turn
sold the property to the applicant. Hence the plaintiff took out notice of
motion and the court receiver was appointed to take the possession of all the
properties of the defendant including the properties in question. Hence, the
applicant filed the chamber of summons seeking setting aside of order on
ground that they were in actual physical possession of the said property by
having purchased the same and contended that mortgage was not valid. The
plaintiff contend that the applicant had acquired only the right to redeem the
said mortgage by paying the mortgage debt and they could not have acquired any
right higher than what defendant itself had.
The court dismissed the
chamber summons and clarified that in the event of the suit being dismissed or
in the event of the plaintiff’s mortgage not being enforced, the rights, of
the applicant were to be kept open, both in respect of sale proceeds as well
as property. Further the applicants were at a liberty to redeem the mortgage
property as permissible in law.
Bank of Baroda vs.
Official Liquidator of Alpio Finance Ltd. (2008) 85 SCL 354 (Bom.)
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