HINDUSTAN LEVER EMPLOYEES' UNION versus HINDUSTAN LEVER LIMITED AND ORS

Citation: [1994] SUPP. 4 S.C.R. 723 · Decided: 24-10-1994 · Supreme Court of India · Bench: A.M. AHMADI · Disposal: Dismissed

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Judgment (excerpt)

HINDUSTAN LEVER EMPLOYEES' UNION 
A 
v. 
HINDUSTAN LEVER LIMITED AND ORS. 
OCTOBER 24, 1994 
B 
(A.M. AHMADI, CJ, R.M. SAHAI AND S.C. SEN, JJ.] 
Companies Act, 195~Sections 393 and 394-Amalgamation or merger 
of two companies-Approval of-Jurisdiction of Court-Expression 'Public 
interest'-Scope-Scheme for amalgamation between a subsidiary company C 
of a multi-national and an Indian based company-Objective of national 
economy-Exchange ratio-Method of determination of 
By an order dated 3rd March, 1994, the Court u/s 391/394 of the 
· Companies Act sanctioned the Scheme of Amalgamation of the Tata Oil 
M_ills Company Limited (TOMCO) with the Hindustan Lever- Limited D 
(HLL), a subsidiary of Uni Lever, a London based multi national company. 
The Scheme provided for transfer and vesting in HLL of the undertaking 
and business of TOMCO together with assets and abilities excluding 
certain assets and/or litense right to use certain premises; transfer of 
employees of TOMCO to HLL on the basis that their service shall be E 
deemed to be continuous and the conditions of service after the transfer 
shall not be less favourable; preferential allotment of equity shares to UL 
of face value of Rs. 10 each at the price of Rs. 105 per s~are so as to ensure 
Its post amalgamation shareholding level at 51 % of the equity capital of 
HLL, etc. etc. The Scheme was approved by 99.72% of equity shareholders 
In terms of values and 86.72% in terms of numbers. 
F 
Nominal shareholders of TOMCO, Federation of Employees Union 
of both the TOMCO and HLL and Consumer Education and Research 
Center filed five appeals u/s 391 (7) against the judgment and o.rder of the 
High Court sanctioning the Scheme of Amalgamation. The appellants 
alleged that the scheme should not be sanctioned for (i) statutory violation G 
of Section 393 (l)(b) of the Act in not making required disclosures in the 
explanatory statement; (ii) violation of share exchange ratio being grossly 
loaded in favour of HLL; (iii) ignoring the effects of provisions of the 
Monopolies and Restrictive Trade Practices Act; (iv) interest of employees 
of both the companies was not adequately taken care of; (v) preferential H 
723 
724 
SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R. 
A allotment of shares less than market price to Unilever which was not in 
pnblic interest and. (vi) malafides on account of existences of quid pro quo 
between Unil~ver and Tata Sons Ltd. All the five appeals were dismissed. 
The High Court held that there was no violation of Section 391(1)(a) and 
the claim that the disclosure in the explanatory statement were not as 
B required was 'without basis as it was not established that the statement did 
not disclose correct financial position of TOMCO; that the petitioner 
failed to es~blisb any fraud or prejudice; that a well reputed valuer of a 
renowned firm of chartered accountants and a Director of TOMCO deter· 
mined the exchange ratio by combining all three well known methods, 
namely, the net worth method, the market value method and the earning 
C 
method and lb• mere fact that the determination done by slightly different 
method might have resultod in different conclusion would not justify 
interference unless it was found to be unfair; that the approval to scheme 
of merger should not be withheld till the complaint filed before Monopolies 
& Restrictive Trade Practices Commission was finally decided; that inter-
D est of emplqyees of the two companies was adequately taken care of as 
service conditions of TOMCO, the transferor company, having been 
protected it ,could not claim it to be prejudicial either because they were 
not assured of same conditions of service as was operative in HLL or that · 
there was n~ similar provision protecting the interest of HLL employees 
and the apprehension of the employees against probable retrenchment was 
E rejected since such dispute if necessary could be raised in labour court 
and that th~ preferential allotment of shares to UL on less than market 
value was neither illegal nor violative of public interest. The High Court 
having (oun!l that the price of Rs. 105 having been worked out on the basis 
of price earning multiple of 15 based on the last published balance sheet 
F of· HLL, held it was fair and reasonable. This petition bad been filed 
against the Judgment of the High Court. 
One of the shareholders of TOMCO questioned the justification of 
the ratio of allotment of shares, 2 shares of HLL in exchange 

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