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In Re: Suri and Nayar Ltd. Vs. Re: Spraymetal (Pvt.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKarnataka High Court
Decided On
Case NumberCompany Applications Nos. 1763 and 1801 of 1981
Judge
Reported in[1983]54CompCas868(Kar)
ActsCompanies Act, 1956 - Sections 391 and 391(3)
AppellantIn Re: Suri and Nayar Ltd.
RespondentRe: Spraymetal (Pvt.) Ltd.
Advocates:R.N. Byra Reddy and ;K.J. Shetty, Advs. for M/s. King & Patridge, Advs.
Excerpt:
.....compensation rs.75,000/- was granted. - 391 of the companies act, 1956, applicant, suri and nayar limited, bangalore, had prayed for permission and directions to convene the meetings of members of the company as well as company's creditors, secured and unsecured, for the purpose of obtaining their consent to the scheme of amalgamation of the applicant company with m/s......days before these meetings were scheduled to take place an application was made in this court in company application no. 1801/81, by m/s. spraymetal p. ltd. seeking virtually an order recalling the order passed by me in company application no. 1763 of 1981, sanctioning the holding of the meeting. the argument at that time advanced was that certain information was either suppressed or information was given which would tend to mislead the members of the company (suri and nayar) and its creditors and that the object of the exercise of holding meetings was not bona fide to pursue the amalgamation but to defeat the same. in that circumstances there was a prayer to prevent the meetings from taking place. however, sri r. n. byra reddy, the counsel appearing for the applicant, in company.....
Judgment:

Chandrakantaraj Urs, J.

1. In Company Application No. 1763/81, made under r. 67 of the Companies (Court) Rules, 1959, read with s. 391 of the Companies Act, 1956, applicant, Suri and Nayar Limited, Bangalore, had prayed for permission and directions to convene the meetings of members of the company as well as company's creditors, secured and unsecured, for the purpose of obtaining their consent to the scheme of amalgamation of the applicant company with M/s. Spraymetal P. Ltd. Bombay, which was the transferor company. That prayer was granted to the applicant company by an order made by me on September 15, 1981, in the course of which apart from fixing the venue, the date and the time of the meetings, the quorum was also fixed for such of the meetings as were required to be held and an advocate of this court was appointed as chairman of the meetings.

2. Two days before these meetings were scheduled to take place an application was made in this court in Company Application No. 1801/81, by M/s. Spraymetal P. Ltd. seeking virtually an order recalling the order passed by me in Company Application No. 1763 of 1981, sanctioning the holding of the meeting. The argument at that time advanced was that certain information was either suppressed or information was given which would tend to mislead the members of the company (Suri and Nayar) and its creditors and that the object of the exercise of holding meetings was not bona fide to pursue the amalgamation but to defeat the same. In that circumstances there was a prayer to prevent the meetings from taking place. However, Sri R. N. Byra Reddy, the counsel appearing for the applicant, in Company Application No, 1801/81, could not persuade me to postpone the meetings or cancel them. The meetings were allowed to take place to see whether the apprehensions of the applicant in Company Application No. 1801/81 were genuine. The report of the meetings has been since received and taken an record.

3. A perusal of the report of Mr. M. Gopalkrishna Shetty, who was appointed chairman of the meetings, indicated that meetings were held as directed on the date fixed by the court and at the time specified. It is seen that the unsecured creditors' meeting was the 1st to be held at 10 a.m. The number of unsecured creditors of the company was 984, but the meeting could not be continued as only 189 of the unsecured creditors attended personally or by proxy and that fell very much short of the quorum fixed by this court in its order dated September 15, 1981, which was at 51% of the total number and the value of the credit of unsecured creditors. Similarly, in the secured creditor's meeting, which was held at 10.30 a.m. 4 of the 5 secured creditors were present by proxy and voted unanimously against the scheme of amalgamation. That has been recorded by the chairman. He also reports that the credit value of secured creditors who voted against the amalgamation amounts to Rs. 1,52,19,958. 17. The meeting of the shareholders of both equity and preference shares could also not be continued as there were no quorum for those meetings.

4. In the result, three of the four meetings were abortive on account of want of quorum while (at the) one meeting that was held, that of secured creditors, the amalgamation was not approved.

5. In the result, this court has no further jurisdiction to decide as to what the applicant company (Suri and Nayar) should do. Had all the meetings been convened and all the class of members and creditors voted in favour of the amalgamation then perhaps this court would record the same and a wait petition being presented by Suri and Nayar under sub-s. (3) of s. 391 of the Companies Act.

6. As the scheme has not been approved specifically by the secured creditors, it will be virtually impossible for this court to move further in the matter. The report required only to be recorded and the application closed.

7. But, M/s. Spraymetal P. Ltd., has intervened (without an application) and reasserted their earlier arguments that the holding of the meetings as directed by the court by M/s. Suri and Nayar Limited, was a deliberate exercise in order to frustrate the agreement that it had earlier entered into for the scheme of amalgamation. But no material has been placed before this court as to any defect either in the statement which was required to be made by M/s. Suri and Nayar Ltd. u/s. 393(1) of the Companies Act, which was required to be circulated to all the members and creditors, secured and unsecured. Though an attempt was made to point out here and there certain facts, which according to M/s. Spraymetal P. Limited, would tend to prejudice the creditors and the members of the company, who as a result might not accept the amalgamation. If the facts stated were otherwise true, one possibly could not object to the statement u/s. 393 resulting in a bias against the scheme of amalgamation. The purpose of the statement is to give a true and accurate picture to all concerned. Unless per se fraudulent intention should be gathered from such statements, and I am unable to see any such intention the bona fides of the statement required to be made u/s. 393(1) of the Companies Act.

8. Then, next comes the question, whether, the transferor company (being) situated outside the jurisdiction of this court and within the jurisdictions of the High Court of Judicature at Bombay, can this court question the bona fides of the application made by the transferee-company, which is situated in this State and subject to the jurisdiction of this court. I am unable to see, not having commenced any proceedings in furtherance of the scheme of amalgamation of the company in the State of Maharashtra, the propriety of M/s. Spraymetal P. Ltd. to intervene as if they can under the provisions of the Companies Act, compel the amalgamation, which is not contemplated in the scheme of the Companies Act. If there is any breach of agreement between M/s. Spraymetal P. Ltd. and the applicant, M/s. Suri and Nayar, that breach of the agreement must be agitated in another appropriate forum for such remedies as may be available to M/s. Spraymetal P. Ltd. I would not hesitate to hold that in the position explained above M/s. Spraymetal P. Ltd. has no locus standi to intervene in this application.

9. In the result, the report of the chairman is recorded and the Company Application No. 1763/81 is closed.

10. Company Application No. 1801/81 does not survive for consideration any longer as it has become infructuous and the applicant has to locus standi.


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