Dinesh Vrajlal Lakhani V/s. Parke Davis (India) Ltd. [2005] 124 Comp Case 728 (Bom) (Bombay High Court)

Issue Raised:-

Whether the objection can be raised by the objectors on the following ground:-

• The swap ratio proposed in the Scheme of Amalgamation was unfair to the shareholders and against the interest of a minority of shareholders of the transferor;
• The detailed valuation report of the Chartered Accountant was not made available to the objectors.

Key takeaways:-

• The Scheme of Amalgamation has received an overwhelming support of 99.94% of the shareholders. The shareholders in their commercial wisdom have thought it fit that the Scheme should be approved.
• The jurisdiction of the Court in such matters is not appellate in nature but is founded on fairness. The Court will not interfere only because the valuation adopted by the Valuer may have been improved upon had another method been adopted.
• What the Court has to ensure is that the determination should not be contrary to law or unfair to the shareholders of the Company which has been merged. In Hindustan Lever Employees Union s case (supra), the Supreme Court held that it is not a part of the judicial process in such a matter “to examine entrepreneurial activities to ferret out flaws”.
• Where more than 95 per cent of the shareholders had agreed to the valuation determined by the Chartered Accountant, the procedural irregularities which were present in it could not vitiate the determination.

Conclusion:-

What the court has to ensure is that the determination should not be contrary the law or unfair to the shareholders of the company which has been merged.