BHARTI JYOTINDRA SHAH, W/O. JYOTINDRA SHAH AND ORS. Vs. BOMBAY STOCK EXCHANGE LTD. AND ORS.

JUDGEMENT

(1.) THIS Letters Patent Appeal has been filed praying for the following reliefs:

(2.) THE facts and circumstances giving rise to the present appeal are that the Appellants are some of the shareholders of Indian Metals and Ferro Alloys Limited (for short, "IMFA"), Respondent No. 5 -Company. IMFA had earlier filed a Composite Scheme of Arrangement and Amalgamation of Indian Charge Chrome Ltd. (for short, "ICCL") with IMFA and their respective Members and Creditors before this Court. By an order dated 17th February, 2006, this Court directed to hold an extraordinary general meeting on 23.03.2006. The said meeting of equity shareholders of ICCL and IMFA and their respective creditors was held on 23rd March, 2006. The respective parties had approved the said Composite Scheme of Arrangement and Amalgamation on that date. By Order dated 13th October, 2006, this Court had sanctioned the Scheme of Arrangement and Amalgamation. Pursuant to the said Scheme of Arrangement and Amalgamation, the erstwhile ICCL Shareholders Trust was formed on 30th November, 2006 to implement Clause -13 of the Scheme. Purpose of this Trust was to distribute shares of IMFA (arising due to cancelled cross holdings) within a period of 18 months but in any case not later than a period of 3 years from the effective date, i.e., 17th October, 2006 at a discount of not less than 50% of the market price prevailing at such time to small public ICCL shareholders as on record date of 27th November, 2006. In terms of the approved Scheme offer, letters were sent to 50,000 ICCL shareholders approximately whose names appeared on the record date i.e. 27.11.2006 to receive shares of IMFA. The first closure date of offer letter was 30th September, 2009 as per offer letter dated 14th August 2009 issued to the small public shareholders which was extended from time to time till February, 2010. The Board of Trustees decided in its meeting held on 16th June, 2010 to cancel balance 3,49,466 unpurchased shares lying in the Trust. The said decision was communicated to the Bombay Stock Exchange on 18.06.2010. Two shareholders namely, Smt. Bharti Jyotindra Shah and Jyotindra Ramniklal Shah, Appellant Nos. 1 and 2, have written a letter to the Bombay Stock Exchange that such action is contrary to the sanctioned Scheme and against the letter and spirit of the special provision carved out to protect minority shareholders. A copy of the said letter was also addressed to Registrar of Cooperative Societies, Cuttack stating that cancellation of such shares was illegal. When the matter stood thus, IMFA moved this Court by filing a Misc. Case No. 31 of 2010 in the disposed Company petitions being COPET Nos. 15 and 17 of 2006 for modification of the Scheme of Arrangement and Amalgamation to confirm the reduction of share capital. This Court vide order dated 16.03.2011 modified the Scheme of Amalgamation. Being aggrieved by the said order, the Appellants preferred the present Letters Patent Appeal with the prayer mentioned herein above.

(3.) PER contra, Mr. Ganesh, learned Senior Counsel appearing for Respondent No. 5 submitted that the whole appeal is based on an incorrect premise that the 3,49,366 shares which have been cancelled belonged to small shareholders. In fact, the shares originally were the entitlement of IMFA and never belong to small shareholders. Under Clause 13 of the Scheme these shares were to be offered to individual small shareholders and not to small shareholders as a whole. Therefore, unpurchased shares do not belong to small shareholders but belong to IMFA and since IMFA cannot own its own shares, the same are only liable to be cancelled. The allegation that the cancellation of 3,49,466 shares would result in unjust enrichment of promoters is not at all correct. As the unpurchased shares were not given to the promoters, the said cancellation does not result in any increase or decrease in shareholding of any shareholders in terms of number of shares except the shareholding of the Trust which holds these shares for the benefit of IMFA. The Appellants are not correct to say that the provisions in the trust deed for cancellation of unpurchased share are contrary to the Scheme. Clause 13.1 expressly provides that the trustees shall hold the shares "exclusively for the benefit of IMFA and its successors subject to powers, provisions, discretion and agreement contained in the instrument establishing the aforesaid trust." The Scheme approved by the shareholders including the Appellants empowers IMFA to frame the provisions of the Trust Deed relating to the powers, provisions, discretions, functions and termination of the Trust. Accordingly, in exercise of the said power, IMFA executed the Trust Deed to carry out the object of the Scheme, inter alia, containing the provision for cancellation of unpurchased shares. The power to provide for the terms and details for dealing with these shares in the trust deed was expressly given to IMFA under the Scheme. In any event, the provisions for cancellation of unpurchased shares are in conformity with the object of the Scheme and in line of the Scheme as these shares originally belonged to IMFA and not to small shareholders.