MJHEER H. MAFATLAL versus MAFATLAL INDUSTRIES LTD.

Citation: [1996] SUPP. 6 S.C.R. 1 · Decided: 11-09-1996 · Supreme Court of India · Bench: N.P. SINGH

Judgment (excerpt)

MJHEER H. MAFATLAL 
v. 
MAFATLAL INDUSTRIES LTD., 
SEPTEMBER 11, 1996 
[N.P. SINGH AND S.B. MAJMUDAR, JJ.] 
Company Law : 
Companies Act, 1956: Sections 391 to 393. 
Amalgamation-Scheme of-Sanction-Granting of-Factors to be 
considered-By Company Court-Jurisdiction of-Broad contours laid 
down--Creditors or. members must anive at inf onned decision based on 
relevant material for approving schemc:-Scheme as a whole was to be just, 
fair and reasonable to creditors or members without coercing mi1101ity. 
A 
B 
c 
D 
Amalgamation-Scheme of-Approved by majority shareholde1"j~ 
Sanction of-By Company Cowt-Alleged bona fide action of maj01ity 
shareholders or supression by the minority shareholders-Consideration 
for-Held : Bona fides of majolity shareholde1"j' acting as group to be ex-
amined-Not bona fides of pe1w11 whose personal interest might be different E 
from that of voters as a class-Fwthe1; glievance of bona fides of maj01ity 
voiced before General Body meeting itself-In the circumstances of the case, 
Scheme of Amalgamation could not be said to be unfair to min01ity 
shareholders. 
Amalgamation-Scheme of-Mi1101ity equity shareholders-Convening 
of separate meeting of-Held : No separate meeting of the sub-class of 
min01ity shareholders to be convened unless different type of scheme of 
compromise offered to them-If same scheme offered to entire class of equity 
shareholders no separate meeting of 111in01ity shareholders required to be 
convened. 
The respondent transferee-company was a large multi- Division, 
multi-locational company carrying on diversified activities including 
manufacturing and sale of textiles. The appellant was a director in the 
transferor-company which had been carrying on the business of manufac-
ture and sale of textile piece goods and chemicals. 
1 
F 
G 
H 
2 
SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. 
A 
The transferee-company moved an application before the High Court 
B 
for sanctioning lofa scheme of Amalgamation of the transferor-company 
with the transferee-company. H was at this sfage that ~he appellant who · 
was one of the shareholders of the transferee-company filed his objections 
under Section 391 of the Companies Act, Earlier the High Court directed 
convening of a meeting of equity shareholders of the respondent trans-
feree-company. In the meeting an overwhelming majority of equity 
shareholders approved the scheme of Amalgamation. Thereafter the 
respondent transferee-company filed Company Petition before the High 
Court under Section 391(2) of the Act. The Single Judge sanctioned the 
said scheme of Amalgamation which was confirmed in appeal by the 
C 
Division Bench of the High Court. Being aggrieved the appellant preferred 
the present appeal. 
On behalf of the appellant it was contended that the respondent 
transferee-company was guilty of hiding the special interest of its director 
D 
from the shareholders thereby the voting by the equity shareholders got 
vitiated; that the scheme of Amalgamation was unfair, unreasonable and 
amounted to supression of minority shareholders represented by the ap· 
pellant and hence liable to be rejected; that a separate meeting of minority 
shareholders represented by the appellant was required to be convened on 
E 
the basis that the appeJiant's group represented a special class of equity 
shareholders; and that the exchange ratio of equity shares of the transferor 
and transferee companies was ex f acie unfair and unreasonable to the 
shareholders of the transferee-company. 
On behalf of the respondent transferee-company it was contended 
F 
that the personal disputes between the directors of the transferee and 
transferor. eompanies were out of con·sideration of the equity shareholders 
and in any case non~disclosure of such disputes had no adverse effect on the 
decision ofthe majority shareholders who had approvedthe Scheme with a 
thumping majqrity of a about 95% and the appellant who was objecting to 
G the Scheme was in microscopic minority of 5% of the total voting strength; 
that the appellant never cared even fo be present at the meeting of the equity 
shareholders to put forward his objection and he only sent proxies who had 
no right to speak at the meeting; that the exchange ratio was suggested by 
experts and approved by an overwhelming majority of the equity 
shareholders; and that the appellant himself who was the director of the 
H 
transferor-company had approved the scheme of Amalgamation. 
--
MIHEERH.MAFAT

Excerpt shown. Read the full judgment & AI analysis in Lexace.