1. The petitioners, two in number, hold between them 100 ordinary shares in Parry and Co., Ltd. This company handles numerous line of businesses and one such line is that of being managing agents to other companies. Parry and Co., Ltd., are the Managing Agents of the East India Distilleries and Sugar Factories Ltd. On 18-10-1955 the E.I.D. wrote to the directors of parry and Co, Ltd, offering to purchase from its ordinary shareholders the entire issued ordinary share capital of Parry and Co, on certain terms. The particulars of these are set out in annexure "a" to the counter filed by the Deputy Managing Director of the E. I. D.
Here it is enough to say that the offer was to allot one fully paid share of . 1 each in E. I. D. for every five ordinary shares of Rs. 2 each In Parry and Co. Ltd Alternatively for each ordinary share of Rs. 2 in Parry and Co. Ltd. the E.I.D. offered to pay Rs. 5-8-0 in cash. This offer, however, was subject to one Proviso and it was that in the case of individual holdings in excess of 1,00,000 ordinary shares the price paid would be only Rs. 4-8-0 per share. The shareholders of Parry and Co, were also given the option of combining either of these two alternatives. The otter of B shares was to be open only until the 20th February 1956, and the offer of cash until the 25th February 1956,
2. On 22-10-1955 the Chairman of the Board of directors of Parry and Co, Ltd., communicated copies of the letter that had been received from the E.I.D. to all its ordinary shareholders. A Covering letter was also sent recommending the acceptance of the offer. On 28-1-1956 the Chairman of the Hoard of directors of Parry and Co. Ltd., sent to its ordinary shareholders, at the request of the E.I.D. a copy of the report and accounts of the E.I.D. for the years ended 10-9-1855.
3. On 27-2-1956 the E.I.D. gave notice to the petitioners that upto 24-2-1956 the offer had been approved by the holders of not less than three-fourths in value of the ordinary shares of Parry and Co., Ltd., and that in consequence the E.I.D. in pursuance of See. 153B of the Indian Companies Act, 1913, desired to acquire the. ordinary shares held by the Petitioners in Parry and Co, Ltd. In that letter the E. I. D. also told the petitioners that unless upon an application made to . the court by them on or before the 27th March 1956, the court thought fit to order otherwise, the E.I.D. would be entitled and bound to acquire the shares held by the petitioners.
4. The petitioners who do not want to part with their shares have taken out the present application for an order that "the first respondent is not bound or entitled to purchase the shares that the petitioners held" in Parry and Co, Ltd. Alternatively they want an order that the petitioners are not bound to sell the shares.
5. Mr. Balakrishna Aiyar, the learned advocate for the petitioners, first raised the contention that Section 453-B of the Indian Companies Act, 1913, which, the" E.I.D. claims entitled it to acquire the shares which the petitioners hold in Parry and Co, Ltd, is ultra vires the Constitution. This is how he put his agrUment. Under Article 19(1)(f) all citizens have the right to acquire, hold and dispose of the property as they think fit. The only limitation which the Constitution imposes on this right is that contained in Article 19(5) which runs as follows:
"Nothing in sub-clauses (d), (e) and (f) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law, imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub-clauses cither in' the Interests of the general public or for the protection of the interests of any scheduled Tribe."
The scheduled tribes do not come into the present controversy. The property of the petitioners is now sought to be taken away under Section 153-B of the Indian Companies Act. Unless it can be shown that that section is in the interests of the public and further that the restriction it imposes is a reasonable one it must be struck down He remarked that Section 153-B of the Companies Act does not say that the claim or contract which involves the transfer of the shares of one company to another must be for the public benefit.
As it stands that section. confers on a third person . the right to acquire the property of the petitioners regardless of their will so long as the prescribed majority of shareholders agree to that course. The rights of the petitioners are placed at the mercy of a majority without regard to the question whether the proposition on which they express their opinion is for the public good or not. Such a provision, he said, is bad.
6. It seems to me that this reasoning of Mr. Balakrishna Aiyar proceeds on a misconception of the origin, nature and legal incidents of the property we call a share. A share is undoubtedly moveable property, but. it is not moveable property in the same way in which a bolt of cloth or bag of wheat is moveable Property. Such commodities are not brought into existence by any legis_lative enactment; in fact, no legislative enactment by itself can call them into being. In origin and in nature they are independent of legislative volition, and in normal times there would be no special legislative rules governing their acquisition, transfer or disposal But a share in a company belongs to a totally different category of property. It is incorporeal in its nature, and it consists merely of a bundle of rights and obligations.
Every one of these rights and obligations is created by a statute or under statutory instruments or powers which also define their extent, scope, boundaries and incidents. If the holder of . a share is entitled to participate in the dividends or to vote at an election, of directors or to participate in the meetings of the company it is because the statute enables them to do so. If he can transfer a share and along with it the rights attached to the share to some one else it is because the statute confers on him the requisite power.
Now, the statute which enables him to do all this also specifies the limits. within which he can do it. It prescribes the conditions requisite for the exercise o that power, and, it seems to me that no person can claim a right created by a statute and conferred on him by a statute and at the same time insist that he should be able to exercise that right free front and untrammelled by the limitations and conditions imposed by the statute which is the parent of his right.
7. I shall explain this further Section 2 (16) of the Indian Companies Act defines "share" thus:
"Share" means share in the share capital of the company, and includes stock except when a distinction between stock and shares is expressed or implied."
Section 28 provides.
(1) The shares or other interest of any member in a company shall be moveable Property, transferable in manner provided by the articles of the company.
(2) Each share in a company having a share capital shall be distinguished by its appropriate number."
Then Section 103 requires a company . within three months after it has allotted its shares or within three months after the registration of the transfer of any share, as the case may be, to complete and have ready for delivery the certificates of shares. Rules 95 to 102 of Table A in the first Schedule of the Act confers on the holder of a share the right to receive his dividend. But, this is a right which is qualified and limited by the several conditions laid down in the rules. The holder of a share cannot claim that he is entitled to a fraction of the property of the company and insist on a dividend being paid. A shareholder will not be heard to say that he holds a specific fraction of the property owned by the company, that the company has made so much profit and that he must be paid so much dividend. The rules lay down that no dividend shall exceed the amount recommended by the directors. Rules 80 to 67 of the table A confer on a shareholder the right to vote In person or by proxy at any meeting of the members of the company. Rules 24 et seq formulate the circumstances under which shares may be forfeited. I do not think that when the holder of a share has forfeited his share under the circumstances provided for in the Act and the rules. it will avail him to say that it involves an infringement of the fundamental right conferred upon him by Article 19(1)(f) of the Constitution. Again, under various situations the interest which a Person acquires in a company by reason of his holding a share or shares is liable to be altered without his consent in a variety of circumstances. The memorandum of Association may be altered under Section 12 of the Companies Act to enable the company to sell or dispose of the whole or any part of the undertaking of the company or to amalgamate with any other company or body "of persons (See Section 12 (1) clauses (f) and (g)). The only legal protection that the share holder has is that conferred by Sections 12 (2) and Section 20-A of the Act. The former provides that the alteration shall not take effect until & except in so far as it is confirmed by the Court. The latter provides that no member of the company shall be bound by an alteration made in the memorandum after the date on which he became a member if and so far as the alteration requires him to take or subscribe for more shares than the number held by him on the date or in any way increase his liability to contribute to the share capital of, or otherwise to .pay money to the company. Simllary the articles of a company which vitally affect the shareholder may be. altered under Section 20 of the Act. A shareholder may be also affected in several other ways by the action of the majority, The company may issue Preference shares or it may Issue debentures or it may make further issues of ordinary shares at a discount. All these are matters which would materially affect the Pecuniary interest of the holder of a share, but he cannot object to any of those on the ground that it involves an infringement of his fundamental right under Article 19(1)(f) of the Constitution.
8. When we come to the matter of the transfer of shares we find provision made in that regard in Sections 34 and 35 and elsewhere. Section 54-A prohibits a company limited by shares from buying its own shares or the shares of a public company of which it is a subsidiary except in certain circumstances. Here is one limitation on the untrammelled power of the transfer of shares which the petitioners claim. It will be appreciated that when Section 54-A says that no company shall have any power to buy Us own shares it also at the same time says that a member may not transfer his shares to the company. Yet another restriction upon the power to transfer is to be found in Section 87-F. This section prohibits a company other than an investment company from purchasing shares, or debentures of any company under management by the same managing agent unless the purchase has been previously approved by a unanimous decision of the board of directors of the purchasing company.
Rule 20 of Table A gives power to the directors to decline to register any transfer of shares not being fully paid shares, to a person of whom they do not approve. It also gives them a right to decline to register any transfer of shares on which the company has a lien. Here are other limitations on the untrammelled power of transfer which Is Claimed by Mr. Balakrishna Ayyar.
9. Section 2 (13) empowers a private company to restrict the right to transfer its shares. Now, what Section 153-B does is only to impose another limitation on the untrammelled power of transfer. That section merely Provides that under certain circumstances the majority of members of the company shall have the right to insist that the minority shall convey their shares to the persons to whom they have conveyed their own shares. The statute which creates ihe right of transfer also imposes limitations on the exercise of that right, and, one of those limitations is that laid down in the impugned section. It will have been seen that subject to his right to invoke the assistance of the court and certain authorities created toy the Act, the property which a person acquires by purchasing a share in a company is liable to foe injured in several ways by the decisions and acts of the majority of the members of the com. pany. As I said before, a share is a creature of the statute; its shape, its strength and its mobility are determined by the statute or statutory Instruments and powers. A person who acquires such a creature cannot complain of the qualities inherent in it.
10. I shall now examine the authorities cited before me, Mr. Balakrishna Aiyar the learned advocate for the petitioners referred me to Bankey Singh v Jhingan Singh, (A) Namazi v. Dy Custodian of Evacuee Property, Madras, (B) Jayantilal Laxmishanker v. State of Saurashtra, AIR 1952 Sau, 59 (SB) (C) and Lakshmindra Theertha Swamiar, Sri Shiner Mutt v. Commissioner, H.R.E. Board, (D). Now, a-1 these cases dealt with entirely different statutes and situations and none of them is in point.
11. The true nature of a share has been explained in the well known Borland's Tr. stee's case Borland's Trustee v. Steel Brothers & Co., Ltd., 1901-1-Ch. 279 (E), where it was held that the provision in a company's articles of association compelling a share holder at any lime during the continuance of the company to transfer his shares to particular persons at a particular price are not void as being repugnant to absolute ownership, or as tending to perpetuity. 1 quote from pages 287 and 288:
"It is said that the provisions of these articles compel a man at any time during the continuance of this company to sell his shares to particular persons at a particular price to be ascertained in the manlier pescribed in the articles. Two arguments have been founded on that. It is said, first of all, that such provisions are repunnant to absolute ownership. It is said, further, that they tend to perpetuity............It is the first time that any such suggestion has been made, and it rests, I think, on a misconception of what a share in a company really is.
A share, according to the plaintiff''s argument is a sum of money which is dealt with in a parti-cular manner by what are called for the purpose of argument executory limitations To my mind it is nothing of the sort. A share is the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a serious of mutual covenants entered into by all the shareholders inter se in accordance with Section 16 of the Companies Act, 1862. The contract contained in the articles of association is one of the original incidents of the share. A sharg is not a sum of money settled in the way suggested, but is an Interest measured by a sum of money and made up of various, rights contained in the contract, including the right to a sum of money or more or less amount. That view seems to me to be supported by the authority of New London & Brazilian Bank v. Brockle Bank, (1882) 21 Ch D 302 (F)."
See also 6 Halsburys Laws of England, 3rd Edn. page 252:
"The articles of association of a private company within the meaning of the Act restrict the right to transfer its shares, and the articles of most companies contain some restrictions on the right of transfer. A restriction on the right to transfer shares is not repugnant to the absolute ownership of the shares but is one of the original incidents of the shares attached to them by the contract contained in the articles."
12. In Alien v. Gold Beefs of West Africa Ltd., 1900-1 Ch D 656 (G), the facts were as follows:
"A limited company by one of its articles provided that it should have a lien for all debts and liabilities of any member to the company Upon a11 shares (not being fully paid) held by such member.' The company, by way of purchase money for the property acquired by it, allotted fully paid shares to Z, a nominee of the vendor to the company, Z also applied for and had allotted to him shares not paid up. He was the only holder of fully paid up shares. At his death he was indebted to the company in arrears of calls on the unpaid shares, but his assets were insufficient to pay the arrears.
Thereupon the company, by special resolution under Section 30 of the Companies Act, 1862, altered the above article by omitting therefrom the words not being fully paid, thus creating a lien on Z's fully paid shares."
The Court held that the company had power to alter Its articles by extending its Hen to fully paid shares. At page 672 Lindley M. R. said:
"How shares shall be transferred, end whether the company shall have any lien on them, are clearly matters of regulation properly prescribed by a "company's articles of association. This is shewn by Table A in the schedule to the Companies Act, 1862, clauses 8, 9,
10. Speaking, therefore, generally, and without reference to any particular case, the section dearly authorises a limited company, formed with articles which confer no lien on fully paid up shares, and which allow them to be transferred without any fetter, to alter those articles by special resolution, and to impose a lien and restrictions on the registry of transfers of those shares by members indebted to the company.
But then comes the question whether this can be done so as to impose a lien or restriction in respect of a debt contracted before and existing at the time when the articles are altered. Again, speaking generally, I am of opinion that the articles can be so altered, and that. If they are altered bona fide for the benefit of the company, they will be valid and binding as altered on the existing holders of paid up shares, whether such holders are indebted or not Indebted to the company when the alteration is made."
13. I have already stated more than once that where a person holds a right under a statute he cannot claim a larger right than that conferred by the statute. Put in this way the matter seems to be plain enough. But, in view of the arguments urged at the bar. I shall refer to two cases. One is reported in Laxman v. D. P. Officer, Raigarh. AIR 1953 Nag 51 (H). The petitioner in that case was a ryot holding certain fields in Raigarh District. There were tendu trees and tendu plants in those fields.
The Deputy Commissioner, Raigarh, issued a pamphlet under clause 23 (1) of the Centra! Province States Land Tenure Order, 1949, directing the ryots to sell tendu leaves plucked from the trees and plants in their fields to a certain firm and to no one else. The petitioner challenged the legality of that order. The Court observed,
"The argument then is that clause 23 (1), . thus infringes the fundamental right of a ryot to dispose of property and that it has therefore become void by the operation of Article 31 read with Article 19(1)(f) and (g) of the Constitution. This argument assumes that the ryot had an unfettered right which was taken away by clause 23 (1). The right to collect and appropriate tendu leaves was first confirmed on a ryot by the LandTenure Order. We have, therefore, to ascertain the nature and extent of the right upon consideration of the relevant portions of the Land ' Tenure order.
These provisions are clauses 22 and 23 (11 of the Land Tenure order. We are clear that reading these clauses together it is apparent that the right intended to be conferred was not an unqua lified one but a qualified one. The effect of the Constitution is not to enlarge a proprietary right or any other right in property or in a holding of a citizen before the commencement of the Constitution. Where the right Itself is, as here, of a limited character, it would remain so despite the coming into force of the Constitution."
See afso the observations of Subba Rao J., la Dr. K. C. Nambiar v. State of Madras, (I). On page 355, the learned Judge observed :
"a statutory tenant, the creation of the Act, with certain rights and restrictions cannot accept the rights and complain of the restrictions."
Besides all this, the contentions of Mr. Balakrishna Aiyar wholly ignore the history of human economic development. At a time when every man lived under his own tree it would have been perfectly legitimate. to say that no one should be compelled to go away from under his tree for the benefit of some one else. That would have been right in the days before history began. In recent centuries, trade, manufacture, transport and other economic activities have grown in such a way that to operate them efficiently and successfully large aggregates of capital are required.
To operate a high grade steel plant or a fleet of ocean going ships or air liners or a heavy chemical industry, capital is required in masses which individuals or partnerships cannot ordinarily raise or provide. It is necessary to mobi lise the savings and resources of numerous individuals and this is effected by the machinery oi a joint stock company. The moment that stage is reached the necessity arises for Internal regulation. Rules are required to protect the shareholders from the dishonesty of directors. Rules are required to protect the minority, from being oppressed or exploited by the majority and contrariwise rules are also required to prevent the minority from obstructing the majority.
Various provisions exist in the Companies Act, not always very effective, to bring dishonest directors to heel. When a minority feels that the majority is acting oppressively it can seek redress in the companyCourt. But, situations may well arise when the majority consider that the minority is standing in the way "of what it considers to be an advantageous arrangement and there must be some provision to resolve the deadlock that would otherwise arise and Section 153-B seems to be designed for that purpose. It may be that the persons who are in a minority are wiser and more farsighted. but, if they cannot convert the majority to their point of view and the deadlock persists, a way out must be provided and that is what Section 153-B of the Act seeks to do.
If it wore to be ruled that the section is in valid and ultra vires it may not be long before the machinery of joint stock enterprise is slowed down till it completely stops. That being so, I would be prepared to say, were it necessary to do so, that the limitation imposed by Section 153-B of the Act is a reasonable one & also in the public interest. To hold otherwise would be, it seems to me, to reverse the process of economic growth.
14. Nor can I see anything unjust in the provision. A person who subscribes for or buys shares in a company can by making reasonable enquiries know what exactly he is going in, what rights he would be getting and how they are hedged in. If with full awareness he buys a particular set of rights how can he be heard to complain that it is not larger than what he bargaind for I must overrule the contention of Mr. Balakrishna Aiyar that Section 153-B, is ultra, vires theConstitution.
15. The next question is, are the circumstances of the present case such that the Court should Interfere. Section 153-B, so far as it is now material, runs as follows:
"Where a scheme or contract involving the transfer of shares or any class of shares in a company......to another company......has within four months after the making of the offer.... been approved by the holders of not less than three fourths in value of the shares affected, the transferee company may, at any time within two months after the expiration of the said four months, give notice in the prescribed manner to any dissenting share-holder that it desires to acquire his shares, and where such a notice Is given the transferee company shall, unless on an application made by the dissenting share-holder within one month from the date on which the notice was, given the Court thinks fit to order otherwise, be entitled and hound to acquire those shares.''
It will be seen that this section gives the transferee company a right to acquire the shares held by the dissenting members of the transferor company unless the Court otherwise orders. Now, a Court cannot take away the right which the law confers on a person without good and adequate cause. What will be good and adequate cause the statute does not say, and, this probably for the reason that it is impossiblc to visualise and provide for every possible contingency. When the legislature had declined to enumerate I would not venture to make a catalogue. Obviously, however, certain circumstances are relevant. Where on examining an arrangement the Court feels that it is a wicked thing to do, it will naturally deny to thetransferee the right it claims, under this section. So too if the transaction appears to the Court to be manifestly oppressive or unjust or unfair or unconscionable. Similarly also where the Court is satisfied that the sanction of the majority has been obtained by fraud, deception or other improper means. In this connection the observations of Maugham J., in Re Hoare & Co., Ltd., (1933) 150 LT 374 (J), are pertinent.:
"I have some hesitation in expressing my TieW as to when the Court should think fit to order otherw.se. I think, however, the view of the legislature is that where, not less than ninetenths of the share-holders in the transferor company approve the scheme or accept the offer prima facie, at any rate, the offer must be taken to be a proper one. and in default of an application by the dissenting share-holders, which includes those who do not assent, the shares of the dissentients may be acquired on the original terms by the transferee company. Accordingly I think It is manifest that the reasons for Including the Court to 'order otherwise' are reasons which must be supplied by the dissentients who take the step of making an application to the Court, and that the onus is on them of giving a reason why their shares should not be acquired by the transferee company.
One conclusion which I draw from that fact is that the mere circumstance that the sale or exchange is compulsory is one which ought not to influence the Court. It has been called an expropriation, but I do not regard that phrase as being very apt in the circumstances of the case. The other conclusion I draw is this, that again prima facie the Court ought to regard the scheme as a fair one Inasmuch as it seems to me impossible to suppose that the Court, in the absence of very strong grounds, is to be entitled to set up its own view of the fairness of the scheme in opposition to so very large majority of the share-holders who are concerned.
Accordingly, without expressing a final opinion on the matter, because there may be special circumstances in special cases, I am unable to see that. I have any right to order otherw.se in such a case as I have before me, unless it is affirmatively established that, notwithstanding the views of a very large majority of share-holderd the schema is unfair. There may be other grounds, but I see no other grounds available in the present case for the interference, of the Court"
16. Similar views were expressed in Govt. Telephones Board, Ltd. v. Hormusji Manekji Seerval AIR 1943 Bom 325 (K). In that case Beaumon C. J., observed,
"For myself I accept the view that the burden is upon the dissentients to adduce reasons for thinking that the majority of share-holders were wrong".
Mr. Balakrishna Aiyar the learned Advocate for tne petitioners contended that the present transaction is not a bona fide one at all. . He remarked that the directors of Parry and Co., Lid., obtained a large benefit by this transaction and that as a result of this arrangement they were able to repatriate about Rs. 37.50,000 to England. Now to repatriate this amount, they obtained the consent of the Government of India, and so far as I can see, there is nothing illegal in the operation, The money which the directors of Parry & Co., Ltd., obtained was not money which they received as illegal gratification for pushing the scheme through: on the other hand it was the price of the shares they lawfully hold.
It is not alleged that they made any secre profit: All that appears is that they received a large sum of money in cash, but then, they also sold a large number of shares and they were not paid anything more than what was contained in the offer.
17. Mr, Balakr.shna Aiyar next said that with part of the money which the directors of Parry & Co., Ltd., obtained by selling their shares to the E. I. D. they purchased from Parry and Co., the shares which that company held in the E. I. D. Now. Mr. Narnbiar for the respondents explained that this was done not surreptitiously or improperly but in pursuance of the scheme set out in the letter which the E. I. D. wrote to Parry and Co., Ltd., on 18-10-1955. In paragrph 4 of page 4 of that letter it is stated ;
"Parry and Co., Ltd., has a considerable Investment (amounting to about Rs. 30 lakhs at current market prices) in this company and it is hoped that its directors will, be able to arrange for the purchase of these shares in such a manner as to ensure continuity of interest in the management of the Parry Group of Companies".
A copy of this letter was sent to every share-holder of Parry and Co., and the purchase was reported to all the ordinary share-holders of Parry and Co. Vide Ex. R-9, dated 28-1-1956. In paragraph 1 of Ex. B-9, it is Stated,
"We have to advise that we have now arranged (subject to the conditions set out in paragraph 3 below) for Mr. H. I. wonfor to purchase, or to procure the purchase of, the shares tn the East. India Distilleries and Sugar-Factories Ltd., now held by this company".
And in pargraph 4 of that letter it is explained why this is done : . ,
"This sale has been made In order to comply with the request contained in paragraph 4 of the letter of offer from the.East-India Distilleries and Sugar Factories Ltd., dated I8th October, 1955, that the Directors of this company should make arrangements for the purchase of these shares in such a manner as to ensure continuity of interest in the management of the Parry group of Companies".
18. Even supposing that there was something improper about this sale and purchase - I am not suggesting that there was any Impropriety that would be a criticism of the conduct of the directors of Parry and Co., in relation to their dealings,with the property of Parry and Co. That would not show that the transaction in question, viz., the acquisition of the shares of Parry and Co., by the E. I. D. is in any way improper.
19. Mr. Balakrishna Aiyar raised another point. Parry and Co. has six directors. Two of these directors are also directors of the E. I. D. All the directors of Parry and Co., constitute a private company called the Coromondel Investment Trust Ltd. On 23-2-1956 the C. I. T. wrote to the share-holders of Parry and Co., offering to give them bonus shares in "B" class shares of the E. I. D. This, it was suggested, was an improper way of securing the assent of the majority. I do not agree with this view. The date within which the members of Parry and Co., who held . ordinary shares were "required to intimate their acceptance of this part of the offer made by the E. I. D. expired on the 20th.
The offer of bonus shares by the C. I. T. was made on 23-3-1956, that is to say, after the time fixed for the exercise of the option had expired. It could not therefore have normally influenced the decision of the majority. Mr. Balakrishna Aiyar explained that though the letter is dated 23rd a large number of share-holders of Parry & Co., knew that such an offer would be made. That may well be so, but then it was an offer that was available to all. The position, therefore, would be I am proceeding on the basis that the promise to give bonus shares, was known in advance-that Instead of getting one .1 "B" share in the E. I. D. in exchange for five Rs. 2 shares in Parry and Co., such of those share-holders aq elected to take "B" shares would get in addition an extra share for every four .1. share which they acquired in the E. I. D.
A person who held 20 ordinary shares of Rs. 2 each in Parry and Co., and who elected to take .1 "B" share in the E. I. D. under the terms of the original offer would get four .1 shares. As: a result of the further offer made by the C. I. T. he. would get five shares instead of four.
20. Mr. Balakrishna Aiyar next suggested that human nature being what it is, such an offer would not have been made by the C. I. T. unless it was for their advantage, Normally no doubt a person does not part with the property for nothing, but Mr. Nambiar explained Why such an offer came to be made. In the letter dated 18-10-1955 which the E. I. D. wrote to Parry land Co., it was clearly stated:
"The new "B" shares now being offered in exchange for ordinary shares in your company Will rank for any div.dend which may be declared on the"B" shares after the date of issue of the new shares and will rank in all other respects pad passu with the existing "B" shares. In this respect, we undertake not to declare any further dividend on our "B" share capital until after the date of issue of the new "B" shares, referred to in this offer.
The share capital of the E. I. D. consisted of a , certain number of "A" shares' of the, nominal ' value of 16 sh. each and a certain number of ''B' shares of the normal value of 20 sh. " each, with a view to make all the shares uniform the E. I. D. proposed to capitalise a Portion of its reserves amounting to .20,000 and to utilise the amount in paying up an additional 4 sh. per share on the company's "A" shares. Now these proposals were objected to by a certain number of "B" share-holders, on the ground that it was unfair to them. Their point was that the money of the company was being used to benefit the "A" share-holders while they got nothing.
In order to overcome their opposition the E. I. D. decided to capitalise a further sum of .75,000 out of its reserve and issue bonus shares to the "B" share-holders also in the ratio of 1:4. Now, when the existing "B" share-holders in the E.I.D. got this benefit there was an obligation cast on the E. I. D. to give the same benefit to those share-holders in Parry and Co., who opted to take B shares. That obligation arose by reason of the statement in the letter dated 18th October 1955 that the new shares allotted to the holders of Parry and Co., would rank in every respect pari passu with the existing shares. "And if that promise had not been kept difficulties would arise. On the materials available it is not at all permissible to say that the consent of the majority was obtained by any improper means.
21. Mr. Balakrishna Aiyar nest contended that the price of Rs. 5-8-0 per share which . was offered does not take into account all the assets of Parry and Co, . In paragraph 12 of the petition it is stated.
"Admittedly no price is offered for the goodwill of the (2nd respondent) company; no compensation is paid either for the benefit arising from the agencies held by the firm; nor is any consideration paid for the transfer of a well-knit organisation operating in the main cities of India and holding valuable internal and international connections. In fact E. I. D. will be paying value on investments and none for services."
22. On this point it is necessary to mention that, the market price of the ordinary shares of parry and Co., at the relevant time was Rs. 4-8-0. The offer by the E. I. D. was to Pay one rupee more per share. Mr. Balakrishna Aiyar did not contend that the price offered was less than the market price. In fact, he agreed that the market price was only Rs. 4-8-0 and that the offer was one rupee above the market rate. But his complaint was that the market price would not reflect a!l the hidden resources and strength of a company like that of Parry and Co. That may be so. I had occasion to go into a similar question in Applns. Nos. 553 and 554 of 1956. There I agreed with the view expressed, by Wyan-Parry J., in In re, Press Caps Ltd., 1949 Ch 434 (L) :
"A valuation is only an expression of opinion ......... but the final test of what is thevalue of a thing is what it will fetch if sold."
Mr. Balakrishna Aiyar next said that if the directors of Parry and Co.. had tried to sell the whole block of holdings which they held that they would not have got even Rs. 4-8-0. That may be so, but then, it does not show that the price offered to the Petitioners is unfair.
23. Mr. Balakrishna Aiyar finally stated that no public purpose is served by pushing through this scheme of contract. His complaint was that if this is allowed to go through, "the E. I. D. will control Parrys and not vice, versa, whereas upto now Parrys have been the managing agents'for E. I. D; The advantages of the scheme are all for the E. L D. arid What It gaing "must naturally be lost to the second res pondent."
24. On this argument it is sufficient to say that Section 153-B does not require that the transaction should be in the interest of the public; it is sufficient if the prescribed majority of share-holders agree. It is for the members concerned to decide what is for their benefit and not for the Court to substitute its discretion on what would be advantageous to them.
25. No circumstances have been shown to exist in the case which would justify me in refueing to the transferee company the right which the statute gives to them. The application is therefore dismissed with costs. Advocate's fee Rs. 350/-.