Bose, J. - (1.) This is a suit by the plaintiffs who are five share-holders of a company known as the Indian Iron & Steel Co. Ltd., for selves and on behalf of the other share-holders of the said company against the said Indian Iron & Steel Co. Ltd. and 8 other persons who are directors of the said company for a declaration that an ordinance known as The Iron & Steel Companies Amalgamation Ordinance 1952 (8 of 1952) and an Act replacing the said Ordinance being Act No. 79 of 1952 are void and inoperative and the Scheme of Amalgamation and merger contained therein is illegal and void and for an injunction restraining the defendants from giving effect to or acting upon the said Scheme of amalgamation and merger, and for certain other reliefs (2) The case of the plaintiffs is that the defendant company being the Indian Iron & Steel Co. Ltd. was incorporated under the Indian Companies Act on or about 11-3-1948 and its business is, inter alia, the manufacture of iron and steel. The authorised capital of the company is Rs. 7,50,000,00/-divided into 50,000,00 Ordinary shares of Rs. 10/-each and 2,50,000 five per cent Preference shares of Rs. 100/- each. The issued and subscribed capital of the company is Rs. 4,05,25,960/-The total properties and assets of the company are valued at Rs. 14,08,15,203/- as at the end of 31-3-1952. The company holds among its investments 11,000,00 ordinary shares of the face value of Rs. 10/- each, valued at Rs. 1,10,00,000/- ss at the end of 31-3-1952, of the Steel Corporation of Bengal Ltd., a company incorporated under the Indian Companies Act having its registered office at No. 12, Mission Row, Calcutta. The Managing Agents of the defendant company and the said Steel Corporation of Bengal Ltd. have at all material times been Messrs. Martin & Burn Ltd., a company also incorporated under the Indian Companies Act and having its registered office at No. 10, Mission Row, Calcutta. It is alleged that some time in 1952 defendants 2 to 9 who are the Directors of the defendant company, formulated a Scheme of amalgamation of the defendant company with the Steel Corporation of Bengal Ltd. without any reference to the shareholders of the defendant company and they approached the Union of India with a request to give effect to that Scheme of amalgamation by promulgating an Ordinance for the purpose. On or about 29-10-1952 the President of India promulgated an Ordinance being the Iron & Steel Companies Amalgamation Ordinance 1952 (8 of 1952). The Heading and Preamble of the said Ordinance were as follows: "An Ordinance to make special provision, in the interests of the general public and the Union, for the amalgamation of certain companies closely connected with each other in the manufacture and production of iron and steel, and for matters connected therewith or incidental thereto. WHEREAS for the purpose of securing, in the interests of the general public and the Union, the efficient and economical expansion and working of the iron and steel industry in India, it is essential that the Steel Corporation of Bengal Limited, and the Indian Iron and Steel Company, Limited, which are engaged in the manufacture and production of iron and steel, should be amalgamated; AND WHEREAS to give effect to the scheme of the Central Government for the expansion of the iron and steel industry and to make available further resources for such expansion, it is necessary that the said companies should be amalgamated with as little delay as possible; AND WHEREAS the amalgamation of the said companies is also in pursuance of successive recommendations made by the Tariff Board and the Tariff Commission; AND WHEREAS Parliament is not in session and the President is satisfied that circumstances exist which render it necessary for him to take immediate action; NOW THEREFORE, in exercise of the powers conferred by clause (1) of Article 123 of the Constitution, the President is pleased to promulgate the following Ordinance: ...... ........ ........ .." etc.
(2.) The said Ordinance provided inter alia (a) that the Steel Corporation of Bengal Ltd. would stand dissolved from 1-1-1953 and from the said date undertaking of the dissolved company would be transferred to and would vest in the Iron & Steel Co., Ltd. and all the properties, profits and assets of the dissolved company would from that date be deemed the properties and profits and assets of the Iron and Steel Co., Ltd. (b) As soon as might be after 1-1-1953 the Iron & Steel Co. would allot to every person registered as shareholder in the dissolved company (i) if he was a holder of Preference share as many Preference shares in the Iron & Steel Co. as are equivalent in number and value to the Preference shares held by him in the dissolved company immediately before 1-1-1953, (ii) if he was a holder of Ordinary shares, four Ordinary shares of Rs. 10/- each in the Iron and Steel Co. for every five Ordinary shares of Rs. 10/- each, held by him in, the dissolved company. (c) Every officer or other servant of the dissolved company would from 1-1-1953 become an officer or other servant as the case might be of the Iron & Steel Co. & every Director of the dissolved company would become, from the said date, a Director of the Iron & Steel Company in addition to the other Directors of the Iron & Steel Company.
(3.) The said Ordinance did not make any provisions regarding the said 11,00,000 Ordinary shares, in the dissolved company held by the Iron & Steel Co. nor any Rules have been framed by the Central Government making any provision in this respect. The defendants 2 to 9, however, it is alleged, had deicide without any authority from the shareholders of the defendant company to sell the said 11,00,000 Ordinary shares in the dissolved company to one Messrs. Dalhousie Holdings Ltd. inter alia on the terms and conditions that the said Dalhousie Holdings Ltd. would sell from time to time the said shares according to the instructions from the Directors of the Company and the sale proceeds less the commission payable to the Dalhousie Holdings Ltd. would be credited to the company and would form part of the working capital of the company. It appears that there has been an actual transfer of these shares to the Dalhousie Holdings Ltd. on or about 6-12-1952. The validity of this transfer has been challenged in another suit being suit No. 4916 of 1952 of this Court.;