Miheer H. Mafatlal v. Mafatlal Industries — 1996 DIGILAW 1686 (SC)

JUDGMENT S.B.MAJMUDAR (1) LEAVE granted. (2) BY consent of the learned advocates of parties this appeal was taken up for final hearing. We have heard the learned advocates of parties. The appeal is being disposed of by this judgment. (3) THIS appeal by special leave arises out of the judgment and order of a division bench of the High court of Gujarat in Original Jurisdiction Appeal No. 16 of 1994 decided on 12/7/1996. The division bench by the said impugned judgment dismissed the appeal of the appellant and confirmed the order of the learned Single Judge in Company Petition No. 22 of 1994 and sanctioned a Scheme of Amalgamation of two public limited companies, namely, Mafatlal Industries Limited (MIL for short) being the transferee- Company with which Mafatlal Fine-Spinning and Manufacturing Company Limited (MFL for short) being the transferor-Company was to be amalgamated. The learned Single Judge granted requisite sanction to the applicant transferee-Company MIL to amalgamate in it the transferor- Company MFL under Section 391(2 of the Companies Act, 1956 (hereinafter referred to as the Act). In order to appreciate the grievance of the appellant who objected to the Scheme moved by the respondent- Company MIL, as ventilated before us by its learned Senior Counsel Shri Shanti Bhushan, assisted by the learned counsel Shri M.J. Thakore, it will be necessary to glance through a few relevant background facts. Background facts (4) THE respondent-Company MIL which was the petitioner before the learned Single Judge has its registered office at Ahmedabad in Gujarat State. It was incorporated on 20/1/1913 under the name "The New Shorrock Spinning & Manufacturing Co. Limited" and its name was subsequently changed to "Mafatlal Industries Limited" as per the fresh Certificate of Incorporation dated 24/1/1974 consequent upon change of name, as sanctioned by the Registrar of Companies, Gujarat, Ahmedabad. The objects of the transferee-Company MIL as per its Memorandum of Association, inter alia, included activity of carrying on all or any of the businesses such as cotton spinners and doublers, wool, silk, flax, jute and hemp spinners and doublers, linen manufacturers, to work spinning and weaving mills, cotton mills, jute mills and mills of any other description. The authorised share capital of the respondent-Company was Rs. 1,00,00,00,000.00 (Rupees one hundred crores only) divided into 30,05,500 equity shares of Rs. 100.00 each and 69,94,500 unclassified shares of Rs. 100 each. The authorised share capital of the respondent-Company was Rs. 1,00,00,00,000.00 (Rupees one hundred crores only) divided into 30,05,500 equity shares of Rs. 100.00 each and 69,94,500 unclassified shares of Rs. 100 each. The subscribed share capital of the respondent-Company as on 31/3/1993 was Rs.26.30 crores (Rupees twenty-six crores thirty lakhs only) divided into 26,90,000.00 equity shares of Rs. 100 each. (5) THE respondent-Company commenced the business of textiles and had been carrying on the same since incorporation. The respondent-Company is a large multi-division, multi-locational company carrying on diversified activities including manufacturing and sale of textiles, dyes - intermediates and chemicals, professional grade connectors, plastic processing machineries and promoting various companies through Project Promotion Division. (6) THE MFL being the transferor-Company was incorporated on 20/4/1931 under the Baroda State Companies Act and had been carrying on the business of manufacture and sale of textile piece goods and chemicals. Its registered office was situated at Mafatlal Centre, Nariman Point, Bombay. It was engaged in the manufacture and sale of textiles and fluorine-based a chemicals. There were three units of the Textiles Division situated at (1 Vejalpur Road, Navsari, (2 Mazagon, Bombay and (3 Lower Parel, Bombay and the unit of the Chemicals Division was situated at Bhestan, District Surat. (7) THE authorised share capital of the transferor-Company as on 31/3/1993 was Rs.. 30 crores (Rupees thirty crores only) divided into 30,00,000.00 ordinary shares of Rs. 100.00 each. The subscribed share capital of the transferor-Company as on 31/3/1993 was Rs. 26,25,77,100.00 (Rupees twenty- six crores twenty-five lakhs seventy-seven thousand and one hundred only) divided into 26,25,771 ordinary shares of Rs. 100.00 each. Subsequent to 31/3/19933 the transferor-Company had allotted 382 ordinary shares of Rs. 100.00 each. The transferor-Company had also issued and allotted further 1,00,000.00 ordinary shares of Rs. 100.00 each at a premium of Rs. 200.00 per share on conversion of 1,00,000.00 partly convertible debentures of the face value of Rs. 2,000.00 each issued to financial institutions with effect from 1/2/1994 by the transferor-Company. (8) THE transferor-Company MFL is proposed to be amalgamated with the respondent-Company MIL under the following circumstances and for the following reasons: (1 The proposed amalgamation will pave the way for better, more efficient and economical control in the running of operations. (2 Economies in administrative and management costs will improve in combined profitability. (8) THE transferor-Company MFL is proposed to be amalgamated with the respondent-Company MIL under the following circumstances and for the following reasons: (1 The proposed amalgamation will pave the way for better, more efficient and economical control in the running of operations. (2 Economies in administrative and management costs will improve in combined profitability. (3 The amalgamated company will have the benefit of the combined reserves, manufacturing assets, manpower and cash flows of the two companies. The combined technological, managerial and financial resources are expected to enhance the capability of the amalgamated company to invest in larger and sophisticated projects to ensure rapid growth, (4 The amalgamated company will have a strong and large resource base. With a strong resource base, the risk-bearing capacity of the amalgamated company will be substantial. Hitherto, with limited resources and capacity, either company had to forego business opportunities which would otherwise have been profitable to the group. (5 Exports have been identified as a thrust area for both the companies and response in time to customers needs is considered to be critical in this area of operation. An amalgamated company will be strategically better placed to reduce the response time. Customers confidence in dealing with such a mega company ensures timely delivery of large orders. (6 The amalgamated company will be able to source and absorb new technology and spend on research and development, market surveys etc. more comprehensively. (7 More particularly in the Textiles Division, with 5 operating units at the companys disposal, the flexibility in operations will be very much pronounced. The Managers will not be inhibited by capacity constraints and will have the freedom of choosing from various options. (8 Both the companies have been subject to the pressures of raw material price fluctuations and of adverse market conditions in their respective product mix. Hence, the amalgamation will neutralise the adverse effects of contrary business cycles. The operations of one unit will be complementary to the other and a stable profitability will be achieved. (9) THE directors of the respondent-Company MIL and transferor-company MFL approved the proposal for amalgamation of the MFL with MIL and pursuant to the respective resolutions passed by them, the detailed Scheme of Amalgamation was finalised. The directors of both the companies were of the opinion that such amalgamation was in the interest of both the companies. (9) THE directors of the respondent-Company MIL and transferor-company MFL approved the proposal for amalgamation of the MFL with MIL and pursuant to the respective resolutions passed by them, the detailed Scheme of Amalgamation was finalised. The directors of both the companies were of the opinion that such amalgamation was in the interest of both the companies. (10) IT is pertinent to note at this stage that the appellant who has objected to the amalgamation before the High court in the present proceedings so far as the amalgamation of the transferee-Company is concerned, is himself one of the directors of the transferor-Company being MFL. So far as the transferor-Company MFL is concerned, as its registered office is located at Bombay the corresponding application on behalf of the transferor-Company for sanctioning this very Scheme of Amalgamation was moved in the Bombay High court. The appellant at this stage did not object to this very Scheme for Amalgamation on behalf of the transferor-Company of which he was one of the directors and party to the Resolution approving the said amalgamation. The learned Single Judge of the Bombay High court sanctioned the said Scheme on behalf of the transferor-Company. It is not in dispute between the parties that the Bombay High court had already sanctioned this very Scheme on behalf of the transferor-Company. (11) AS the registered office of the transferee-Company is located at Ahmedabad the respondent transferee-Company had approached the High court of Gujarat for sanctioning this very Scheme of Amalgamation on ehalf of the transferee-Company and that application was moved on 8-2- 1994. It is at this stage that the appellant who was one of the shareholders of the transferee-Company filed his objections to the Scheme of Amalgamation moved under Section 391 of the Act. Earlier the learned Single Judge directed convening of a meeting of equity shareholders of the respondent- Company. In the meeting of equity shareholders convened pursuant to the order of the High court, overwhelming majority of the equity shareholders approved the Scheme in the meeting of 22/1/1994 convened at Premabhai Hall, Bhadra, Ahmedabad. The said meeting was attended by 5522 members present in person or by proxy, holding 20,48,513 fully paid equity shares of Rs. 100.00 each aggregating to Rs. 20,48,51,300.00. The said meeting was attended by 5522 members present in person or by proxy, holding 20,48,513 fully paid equity shares of Rs. 100.00 each aggregating to Rs. 20,48,51,300.00. At the said meeting, a resolution was passed without modification by the requisite majority as 5298 members holding 19,36,964 fully paid equity shares voted in favour of the Scheme and 143 members holding 86,061 fully paid equity shares voted against the Scheme. In short, the said meeting by requisite majority approved the proposed Scheme of Amalgamation and report of the Chairman was submitted to the High court. Thereafter the respondent-Company MIL filed Company Petition No. 22 of 1994 under Section 391(2 of the Act. That application was ordered to be published in local newspapers as well as in the Bombay edition of the said newspaper. Notice was also issued to the Regional Director, Company Law Board, Western Region, Bombay. (12) IN response to the notice issued to the central government under Section 394-A of the Act the learned Additional central government Standing Counsel appeared before the High court and submitted to the orders of the court making it clear that the central government is not to make any representation in favour of or against the proposed Scheme. (13) PURSUANT to the public advertisement only the present appellant, the shareholder of transferee-Company holding 40,567 shares in MIL filed an affidavit opposing the Scheme of Amalgamation and Arrangement between the respondent transferee-Company MIL and transferor-Company MFL of which, as noted earlier, he himself was one of the directors and the High court of Bombay which sanctioned this very Scheme on behalf of the transferor-Company had sanctioned the Scheme without any objection being taken by the appellant at that stage. (14) NINE objections were raised by the appellant against the proposed Scheme of Amalgamation as shareholder of the transferee-Company. At this stage we may not mention all these nine objections as ultimately only four objections have survived for our consideration in the present proceedings and to which we will make a detailed reference hereinafter. Suffice it to state at this stage that after a prolonged hearing the learned Single Judge S.D. Shah, J., overruled these objections and by a detailed and exhaustive judgment running over 254 pages covering various aspects of the matters canvassed before him sanctioned the said Scheme moved on behalf of the respondent transferee-Company. Suffice it to state at this stage that after a prolonged hearing the learned Single Judge S.D. Shah, J., overruled these objections and by a detailed and exhaustive judgment running over 254 pages covering various aspects of the matters canvassed before him sanctioned the said Scheme moved on behalf of the respondent transferee-Company. (15) THE division bench of the High court to which the appellant carried the matter in appeal confirmed the aforesaid decision of the learned Single Judge by a well-considered judgment which also ran into 136 pages and that is how the appellant, original objector, is before us in this appeal. Family history (16) IN order to properly appreciate the grievance of the appellant against the proposed Scheme and his role as an objector it will be necessary to note the family history of the appellant and two of the directors of the respondent transferee-Company who have a common ancestor Mafatlal Gagalbhai. The family tree of Mafatlal Gagalbhai projects the following picture: As the aforesaid family tree shows, the appellant Miheer is the son of cousin brother of Arvind Navinchandra who is said to be at the helm of affairs of the transferee-Company along with his son Hrishikesh. As seen from the family tree the common ancestor Mafatlal Gagalbhai who was himself a very astute businessman and entrepreneur had three sons Pransukhial, Navinchandra and Bhagubhai. The eldest son Pransukhial got out of the family prior to the death of Mafatlal Gagalbhai and he died without leaving any issue. Mafatlal Gagalbhai expired on 19-7-1944 and was survived by his two sons Navinchandra and Bhagubhai. On 30/9/1944, the said Bhagubhai died leaving him surviving Hemant, then aged 9 as his only male issue. On 31/8/1955, Navinchandra Mafatlal died leaving him surviving the three sons, Arvind Mafatlal, Yogindra Mafatlal and Rasesh Mafatlal as his male issues. On 16/8/1971, the said Hemant expired leaving behind his only male issue, present objector Miheer, then aged 13. (17) THE said Mafatlal Gagalbhai started different business undertakings and with the passage of time, the family of the said Mafatlal consisting of Navinchandra and Bhagubhai expanded their business undertakings. The said family held controlling interest in different business concerns run through public limited or private limited companies and the members of the family were also partners in partnership firms. (17) THE said Mafatlal Gagalbhai started different business undertakings and with the passage of time, the family of the said Mafatlal consisting of Navinchandra and Bhagubhai expanded their business undertakings. The said family held controlling interest in different business concerns run through public limited or private limited companies and the members of the family were also partners in partnership firms. The pattern which was maintained throughout was that the two sons Navinchandra and Bhagubhai and their families would respectively have an equal interest in companies or in partnership firms. At the time of the death of the said Bhagubhai the said Hemant was just 9 years of age. The business of Mafatlal Group was therefore for all practical purposes managed by the said Navinchandra. At the time of the death of Navinchandra the shareholding of the branch of Hemant Mafatlal in Mafatlal Group of Industries was equal to aggregate shareholding of Arvind Mafatlal, Yogindra Mafatlal and Rasesh Mafatlal. On the death of Navinchandra, the Mafatlal Group was managed by Arvind Mafatlal, Yogindra Mafatlal, Rasesh Mafatlal and late Hemant Mafatlal. Arvind Mafatlal was, however the eldest male member in the family who was always looked upon by Yogindra, Rasesh and late Hemant as an elder in the family and respected. (18) ON 16/8/1971, Hemant Mafatlal died at the young age of 36 years leaving behind him his widowed mother, his wife, his son Miheer (then aged 13 and his two daughters (then aged II and 6. At that time, the Mafatlal family, i.e., the families of Navinchandra and Bhagubhai were running 3 apex companies (1 Mafatlal Gagalbhai & Company Private Limited, (2 Surat Cotton Spinning and Weaving Mills Private Limited and (3 Pransukhial & Company Private Limited. (19) IT is the case of Miheer that when his father expired, the New Shorrock Spinning and Manufacturing Co. Limited was being controlled and managed by Mafatlal Gagalbhai & Co. Limited in which his father and his family had 46.47 shares vis-a-vis 43.66 shares held by the family of Navinchandra Mafatlal. After the death of his father, when Miheer was a minor, it was decided to amalgamate Mafatlal Gagalbhai & Co. Pvt. Ltd. with the New Shorrock Spinning & Manufacturing Co. Limited on 24/1/19744 and the name of the company was changed to the present name i.e. MIL. After the death of his father, when Miheer was a minor, it was decided to amalgamate Mafatlal Gagalbhai & Co. Pvt. Ltd. with the New Shorrock Spinning & Manufacturing Co. Limited on 24/1/19744 and the name of the company was changed to the present name i.e. MIL. (20) ACCORDING to the appellant Miheer, in or around 1979, there were certain disputes and differences amongst Arvind Mafatlal, Yogindra Mafatlal and Rasesh Mafatlal and it was felt that some arrangement should be worked out, whereby there would be a separation and division of the family business concerns amongst the four branches viz. Miheer Branch known as MHM Group, family of Arvind Mafatlal known as ANM Group, family of Yogindra Mafatlal known as YNM Group and family of Rasesh Mafatlal known as RNM Group, It is his further case that Shri C.C. Chokshi, a reputed chartered accountant was requested to prepare a scheme for division of the family business concerns. According to the appellant, Shri C.C. Chokshi prepared a note dated 23/2/1979 making six suggestions for the division of Mafatlal Group of Industries into four groups as there were four family groups. The appellant contends that as per the aforesaid family arrangement the transferee-Company, i.e., MIL was agreed to be put to his share and the other groups which were holding shares in the said transferee- Company were to transfer their shareholdings in favour of the appellant. The appellant contends that however because of some family disputes the appellant fell from the grace of Shri Arvind Mafatlal who was the eldest male member monitoring all these industries belonging to all the groups of the same family, and consequently the family arrangement was not given effect to and that the transferee-Company was not handed over in management to the appellant. (21) ON the other hand the case of the other group headed by Shri Arvind Mafatlal was to the effect that the said family arrangement of 1979 was a given a go-by and the appellant himself agreed to sell his shareholding in the transferee-Company MIL in favour of Arvind Mafatlals Group. A number of litigations took place between the parties in the second half of 1980s. A number of litigations took place between the parties in the second half of 1980s. That on 6/4/1987 Arvind Mafatlal filed Suit No. 10 of 1987 in the High court of Judicature at Bombay for a declaration that there was a valid, subsisting and binding contract to sell shares held .by Rasesh Mafatlal, Yogindra Mafatlal and Miheer Mafatlal, the appellant herein, groups to Shri Arvind Mafatlals group and for a direction that they should sell the shares at a price to be determined by the arbitrator. In the said suit the appellant Miheer filed a counter-claim praying that the family arrangement of 1979 should be enforced and the shareholding of Shri Arvind Mafatlals group and other groups in the transferee-Company MIL should be sold by way of specific performance to the appellant. The aforesaid suit by Arvind Mafatlal and the counter-claim by the appellant are pending for adjudication in the High court of Judicature at Bombay. It is in the background of the aforesaid history of family feud between these warring groups descended from the common ancestor Shri Mafatlal Gagalbhai that the grievance voiced by the appellant in these proceedings has to be appreciated. Rival contentions (22) AS noted earlier though a battle royal was fought between the contesting parties before the learned Single Judge wherein nine objections were raised for adjudication by the appellant, at this stage, the dispute centred round a limited number of contentions which were canvassed for our consideration by the learned Senior Counsel for the appellant. Fourfold submissions for opposing the Scheme were canvassed on behalf of the appellant before us by Shri Shanti Bhushan, learned Senior Counsel. Fourfold submissions for opposing the Scheme were canvassed on behalf of the appellant before us by Shri Shanti Bhushan, learned Senior Counsel. In the first place he contended that the respondent-Company while putting the Scheme for approval of the equity shareholders in their meeting did not disclose the interest of the Directors, namely, Shri Arvind Mafatlal and Shri Hrishikesh Mafatlal belonging to the camp of Arvind Mafatlal in the explanatory statement supporting the Scheme and consequently the shareholders were misled and could not come to an informed decision regarding the approval of the said Scheme with the result that the approval by the majority of equity shareholders to the said Scheme has got vitiated; (2 the Scheme as proposed was unfair to the minority shareholders represented by the appellant and consequently it ought not to have been sanctioned by the court; (3 the Scheme was otherwise unfair to the equity shareholders as the exchange ratio of equity shares of the transferor and transferee-companies was ex facie unreasonable and unfair to the shareholders of the transferee-Company MIL insofar as it provides under the Scheme that two equity shares of the transferee-Company will be allotted against five equity shares of the transferor-Company at their respective face value of Rs. 100.00 per share; and (4 that the appellant represented a distinct class of equity shareholders so far as the respondent transferee-Company is concerned and consequently separate meeting so far as his group is concerned should have been convened by the Company court and as that has not been done the Scheme is liable to be rejected. (23) AS a corollary to the aforesaid contention Shri M.J. Thakore, learned counsel appearing for the appellant, in addition submitted that the voting pattern as adopted in the meeting of equity shareholders which had approved the Scheme by majority, resulted in coercing the minority represented by the appellant and that has rendered the-Scheme unfair and unreasonable and consequently it is required to be rejected. (24) ON the other hand the learned Senior Counsel Shri Sorabjee appearing for the respondent transferee-Company contended that there was no illegality either procedural or substantive vitiating the Scheme and that there was no suppression of relevant material from the shareholders when the Scheme was put to vote. (24) ON the other hand the learned Senior Counsel Shri Sorabjee appearing for the respondent transferee-Company contended that there was no illegality either procedural or substantive vitiating the Scheme and that there was no suppression of relevant material from the shareholders when the Scheme was put to vote. That the personal disputes between the warring groups of the family, namely, Arvind Mafatlal on the one hand and the appellant on the other and which were subject-matter of the pending litigation in the Bombay High court had nothing to do with the question of sanctioning the Scheme for its better economic viability with which the shareholders were concerned and that as the transferor-Company and the transferee-Company were juristic persons and corporate bodies, while considering the question of approving the said Scheme such personal disputes between the directors of the transferee-Company and the director of the transferor-Company were completely irrelevant and were out of consideration of the equity shareholders who were not at all concerned with this type of internal feuds and in any case non-disclosure of such disputes had no adverse effect on the decision of the majority shareholders who had approved the Scheme with a thumping majority of about 95 and the appellant who was objecting to the Scheme was in microscopic minority of 5 of the total voting strength. It was also contended by the learned Senior Counsel for the respondent that it is wrong to assume that the transferee- Company was a family concern and was managed by families. That Shri Arvind Mafatlal and Hrishikesh Mafatlal were only two directors out of thirteen directors of the respondent-Company. These eleven directors did not belong to his family. That even shareholding of Arvind Mafatlals group in the respondent-Company was not substantial and on the contrary about 40 shares were held by outside financial institutions. Even otherwise there was no question of any unfairness underlying the proposed Scheme or that in any way it was unfair to the appellant who never cared even to remain present personally at the time of the meeting of the equity shareholders to put forward his objections and he only sent proxies who had no right to speak at the meeting. That therefore all these objections which he ultimately raised before the High court were an afterthought. That therefore all these objections which he ultimately raised before the High court were an afterthought. It was also contended that there was nothing wrong with the exchange ratio as C.C. Chokshi & Co., a firm of reputed chartered accountants, had considered all the pros and cons underlying the Scheme and had suggested the exchange ratio and such an expert opinion was endorsed by another financial institution ICICI. That the appellant had not chosen to controvert this expert opinion by leading any evidence in rebuttal by any other expert in the field who could have suggested the exchange ratio differently. That the appellants contention that the exchange ratio should have been one share of the transferee-Company against six shares of the transferor-Company was in the realm of mere conjecture and ipse dixit. It was not supported by any expert opinion. Consequently the High court was justified in taking the view both at the stage of the learned Single Judge as well as in appeal by the division bench that the exchange ratio could not be said to be unfair or unreasonable especially when by an overwhelming majority the equity shareholders approved the said Scheme along with the said exchange ratio and had no objection to the allotment of two equity shares of the transferee-Company in exchange for five equity shares of transferor-Company. It was also contended that the appellant himself who was the director of the transferor- Company had approved the same exchange ratio while he acted on behalf of the transferor-Company. He was, therefore, playing hide and seek when it came to the enforcement of the very same exchange ratio at the end of the transferee-Company wherein he was not a director but only a shareholder of merely 5 shares. (25) IT was next contended that the appellant was also an equity shareholder and so far as the other equity shareholders were concerned they constituted the same. class as the appellant. That there was no inter se conflict between the rest of the equity shareholders representing 95 of the voting strength which approved the Scheme and the appellant who represented dissenting 5 votes and consequently there was no question of holding a separate meeting so far as the appellant was concerned. Even otherwise such a separate meeting would not have made any impact on the voting pattern projected by the equity shareholders approving the said Scheme by overwhelming majority. Even otherwise such a separate meeting would not have made any impact on the voting pattern projected by the equity shareholders approving the said Scheme by overwhelming majority. Repelling the additional contention canvassed by the learned counsel for the appellant it was submitted by Shri Sorabjee, learned Senior Counsel for the respondent, that there was no question of coercing any minority by the majority as in the meeting of the equity shareholders the appellant had not thought fit even to remain presentpersonally and had only got represented through proxy for submitting his objection by voting against the Scheme without having any right to address the meeting. Thus the contention regarding alleged suppression by the majority was purely an afterthought especially when in the meeting the group of Arvind Mafatlal had not represented an absolute majority and 40 of the voting was by financial institutions who had no axe to grind against the appellant and who had voted by keeping in view purely commercial and economic interests of equity shareholders and had approved the Scheme in that light. It was, therefore, submitted that the contentions raised on behalf of the appellant deserve to be rejected and the appeal consequently also deserves to be dismissed. (26) IN view of the aforesaid rival contentions the following points arise for our determination: 1. Whether the respondent-Company was guilty of hiding the special interest of its Director Shri Arvind Mafatlal from the shareholders while circulating the explanatory statement supporting the Scheme and whether thereby the voting by the equity shareholders got vitiated. 2, Whether the Scheme is unfair and unreasonable to the minority shareholders represented by the appellant. 3. Whether the proposed Scheme of Amalgamation was unfair and amounted to suppression of minority shareholders represented by the appellant and hence liable to be rejected. 4. Whether separate meeting of minority shareholders represented by the appellant was required to be convened on the basis that the appellants group represented a special class of equity shareholders. 5. Whether the exchange ratio of two equity shares of MIL for five equity shares of MFL was ex facie unfair and unreasonable to the equity shareholders of MIL and consequently the Scheme of Amalgamation on that account was liable to be rejected. 5. Whether the exchange ratio of two equity shares of MIL for five equity shares of MFL was ex facie unfair and unreasonable to the equity shareholders of MIL and consequently the Scheme of Amalgamation on that account was liable to be rejected. (27) HOWEVER, before we deal with the aforesaid points for determination in seriatim, it will be necessary to keep in view the limited scope of the jurisdiction of the Company court which is called upon to sanction the Scheme of Amalgamation as per the provisions of Section 391 read with Section 393 of the Act. Scope of interference by the Company court in sanction proceedings (28) THE relevant provisions of the Companies Act, 1956 are found in Ch. V of Part VI dealing with "Arbitration, Compromises, Arrangements and Reconstructions". In the present proceedings we will be concerned with S. 391 and 393 of the Act. The relevant provisions thereof read as under: "391. (1 Where a compromise or arrangement is proposed- (A) between a company and its creditors or any class of them; or (B) between a company and its members or any class of them; the court may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the court directs. (2 If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, where proxies are allowed under the rules made under Section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company: Provided that no order sanctioning any compromise or arrangement shall be made by the court unless the court is satisfied that the company or any other person by whom an application has been made under sub- section (1 has disclosed to the court, by affidavit or otherwise, all material facts relating to the., company, such as the latest financial position of the company, the latest auditors report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under S. 235 to 251, and the like. 393. 393. (1 Where a meeting of creditors or any class of creditors, or of members or any class of members, is called under Section 391,- (A) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect, and in particular, staling any material interests of the directors, managing directors, managing agents, secretaries and treasurers or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interests, of the compromise or arrangement, if, and insofar as, it is different from the effect on the like interests of other persons; and (B) in every notice calling the meeting which is given by advertisement, there shall be included either such a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of such a statement as aforesaid." The aforesaid provisions of the Act show that compromise or arrangement can be proposed between a company and its creditors or any class of them or between a company and its members or any class of them. Such a compromise would also take in its sweep any scheme of amalgamation/merger of one company with another. When such a scheme is put forward by a company for the sanction of the court in the first instance the court has to direct holding of meetings of creditors or class of creditors or members or class of members who are concerned with such a scheme and once the majority in number representing three-fourths in value of creditors or class of creditors or members or class of members, as the case may be, present or voting either in person or by proxy at such a meeting accord their approval to any compromise or arrangement thus put to vote, and once such compromise is sanctioned by the court, it would be binding to all creditors or class of creditors or members or class of members, as the case may be, which would also necessarily mean that even to dissenting creditors or class of creditors or dissenting members or class of members such sanctioned scheme would remain binding. Before sanctioning such a scheme even though approved by a majority of the concerned creditors or members the court has to be satisfied that the company or any other person moving such an application for sanction under Ss. (2 of Section 391 has disclosed all the relevant matters mentioned in the proviso to Ss. (2 of that section. So far as the meetings of the creditors or members, or their respective classes for whom the Scheme is proposed are concerned, it is enjoined by Section 391(l)(a) that the requisite information as contemplated by the said provision is also required to be placed for consideration of the voters concerned so that the parties concerned before whom the scheme is placed for voting can take an informed and objective decision whether to vote for the scheme or against it. On a conjoint reading of the relevant provisions of S. 391 and 393 it becomes at once clear that the Company court which is called upon to sanction such a scheme has not merely to go by the ipse dixit of the majority of the shareholders or creditors or their respective classes who might have voted in favour of the scheme by requisite majority but the court has to consider the pros and cons of the scheme with a view to finding out whether the scheme is fair, just and reasonable and is not contrary to any provisions of law and it does not violate any public policy. This is implicit in the very concept of compromise or arrangement which is required to receive the imprimatur of a court of law. No court of law would ever countenance any scheme of compromise or arrangement arrived at between the parties and which might be supported by the requisite majority if the court finds that it is an unconscionable or an illegal scheme or is otherwise unfair or unjust to the class of shareholders or creditors for whom it is meant. Consequently it cannot be said that a Company court before whom an application is moved for sanctioning such a scheme which might have got the requisite majority support of the creditors or members or any class of them for whom the scheme is mooted by the company concerned, has to act merely as a rubber stamp and must almost automatically put its seal of approval on such a scheme. It is trite to say that once the scheme gets sanctioned by the court it would bind even the dissenting minority shareholders or creditors. Therefore, the fairness of the scheme qua them also has to be kept in view by the Company court while putting its seal of approval on the scheme concerned placed for its sanction. It is, of course, true that so far as the Company court is concerned as per the statutory provisions of S. 391 and 393 of the Act the question of voidability of the scheme will have to be judged subject to the rider that a scheme sanctioned by majority will remain binding to a dissenting minority of creditors or members, as the case may be, even though they have not consented to such a scheme and to that extent absence of their consent will have no effect on the scheme. It can be postulated that even in case of such a scheme of compromise and arrangement put up for sanction of a Company court it will have to be seen whether the proposed scheme is lawful and just and fair to the whole class of creditors or members including the dissenting minority to whom it is offered for approval and which has been approved by such class of persons with requisite majority vote. (29) HOWEVER further question remains whether the court has jurisdiction like an appellate authority to minutely scrutinise the scheme and to arrive at a an independent conclusion whether the scheme should be permitted to go through or not when the majority of the creditors or members or their respective classes have approved the scheme as required by Section 391 Ss. (2. On this aspect the nature of compromise or arrangement between the company and the creditors and members has to be kept in view. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the court. The court certainly would not act as a court of appeal and sit in judgment over the informed view of the parties concerned to the compromise as the same would be in the realm of corporate and commercial wisdom of the parties concerned. The court certainly would not act as a court of appeal and sit in judgment over the informed view of the parties concerned to the compromise as the same would be in the realm of corporate and commercial wisdom of the parties concerned. The court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the Scheme by the requisite majority. Consequently the Company courts jurisdiction to that extent is peripheral and supervisory and not appellate. The court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to he umpire. The supervisory jurisdiction of the Company court can also be culled out from the provisions of Section 392 of the Act which reads as under: "392. (1 Where a High court makes an order under Section 391 sanctioning a compromise or an arrangement in respect of a company, it- (A) shall have power to supervise the carrying out of the compromise or arrangement; and (B) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement. (2 If the court aforesaid is satisfied that a compromise or arrangement sanctioned under Section 391 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under Section 433 of this Act. (3 The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act under Section 153 of the Indian Companies Act, 1913 (7 of 1913, sanctioning a compromise or an arrangement." Of course this section deals with post-sanction supervision. But the said provision itself clearly earmarks the field in which the sanction of the court operates. But the said provision itself clearly earmarks the field in which the sanction of the court operates. It is obvious that the supervisor cannot ever be treated as the author or a policy-maker. Consequently the propriety and the merits of the compromise or arrangement have to be judged by the parties who as sui juris with their open eyes and fully informed about the pros and cons of the scheme arrive at their own reasoned judgment and agree to be bound by such compromise or arrangement. The court cannot, therefore, undertake the exercise of scrutinising the scheme placed for its sanction with a view to finding out whether a better scheme could have been adopted by the parties. This exercise remains only for the parties and is in the realm of commercial democracy permeating the activities of the concerned creditors and members of the company who in their best commercial and economic interest by majority agree to give green signal to such a compromise or arrangement. The aforesaid statutory scheme which is clearly discernible from the relevant provisions of the Act, as seen above, has been subjected to a series of decisions of different High courts and this court as well as by the courts in England which had also occasion to consider schemes under pari materia English Company Law. We will briefly refer to the relevant decisions on the point. But before we do so we may also usefully refer to the observations found in the oft-quoted passage in Buckley on the Companies Act, They are as under: "IN exercising its power of sanction the court will see, first that the provisions of the statute have been complied with, second, that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bonafide and are not coercing the minority in order to promote interest adverse to those of the class whom they purport to represent, and thirdly, that the arrangement is such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve. THE court does not sit merely to see that the majority are acting bonafide and thereupon to register the decision of the meeting, but at the same time, the court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considered the matter with a view to the interest of the class which it is empowered to bind, or some blot is found in the scheme." In the case of Alabama, New Orleans, Texas and Pacific Junction Rly. Co., Re the relevant observations regarding the power and jurisdiction of the Company court which is called upon to sanction a scheme of arrangement or compromise between the company and its creditors or shareholders were made by Lindley, L.J. as under: "WHAT the court has to do is to see, first of all, that the provisions of that statute have been complied with; and, secondly, that the minority has been acting bonafide. The court also has to see that the minority is not being overriden by a majority having interests of its own clashing with those of the minority whom they seek to coerce. Further than that, the court has to look at the scheme and see whether it is one as to which persons acting honestly, and viewing the scheme laid before them in the interests of those whom they represent, take a view which can reasonably be taken by businessmen. The court must look at the scheme, and see whether the Act has been complied with, whether the majority are acting bonafide, and whether they are coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and then see whether the scheme is a reasonable one or whether there is any reasonable objection to it, or such an objection to it as that any reasonable man might say that he could not approve it." To a similar effect were the observations of Fry, L.J., which read as under: "THE next enquiry is: Under what circumstances is the court to sanction a resolution which has been passed approving of a compromise or arrangement? I shall not attempt to define what elements may enter into the consideration of the court beyond this, that I do not doubt for a moment that the court is bound to ascertain that all the conditions required by the statute have been complied with; it is bound to be satisfied that the proposition was made in good faith; and, further, it must be satisfied that the proposal was at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such a member, might approve of it. What other circumstances the court may take into consideration I will not attempt to forecast." In Anglo-Continental Supply Co. Ltd., Re Ashtury, J., a century later reiterated the very same propositions as under: "BEFORE giving its sanction to a scheme of arrangement the court will see firstly that the provisions of the statute have been complied with; secondly that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bonafide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and, thirdly, that the arrangement is such as a man of business would reasonably approve." The learned Single Judge of the Calcutta High court in the case of Mankarn Investments Ltd., Re relying on a catena of decisions of the English courts and Indian High courts observed as under on the power and jurisdiction of the Company court which is called upon to sanction a scheme of merger and amalgamation of companies: "IT is a matter for the shareholders to consider commercially whether amalgamation or merger is beneficial or not. The court is really not concerned with the commercial decision of the shareholders until and unless the court feels that the proposed merger is manifestly unfair or is being proposed unfairly and/or to defraud the other shareholders. Whether the merged companies will be ultimately benefited or will be able to economise in the matter of expenses is a matter for the a shareholders to consider. If three companies are amalgamated, certainly, there will be some economies in the matter of maintaining accounts, filing of returns and various other matters. Whether the merged companies will be ultimately benefited or will be able to economise in the matter of expenses is a matter for the a shareholders to consider. If three companies are amalgamated, certainly, there will be some economies in the matter of maintaining accounts, filing of returns and various other matters. However, the court is really not concerned with the exact details of the matter and if the shareholders approved the scheme by the requisite majority, then the court only looks into the scheme as to find out that it is not manifestly unfair and/or is not intended to defraud or do injustice to the other shareholders." We may also in this connection profitably refer to the judgment of this court in the case of Employees Union v. Hindustan Lever Ltd. wherein a bench of three learned Judges speaking through Sen, J. on behalf of himself and Venkatachaliah, C.J., and with which decision Sahai, J., concurred, Sahai, J., in his concurring judgment in the aforesaid case has made the following pertinent observations in this connection in the Report: "BUT what was lost sight of was that the jurisdiction of the court in sanctioning a claim of merger is not to ascertain with mathematical accuracy if the determination satisfied the arithmetical test. A company court does not exercise an appellate jurisdiction. SECTION 394 casts an obligation on the court to be satisfied that the scheme for amalgamation or merger was not contrary to public interest. The basic principle of such satisfaction is none other than the broad and general principles inherent in any compromise or settlement entered between parties that it should not be unfair or contrary to public policy or unconscionable. In amalgamation of companies, the courts have evolved, the principle of prudent business management test or that the scheme should not be a device to evade law. But when the court is concerned with a scheme of merger with a subsidiary of a foreign company then the test is not only whether the scheme shall result in maximising profits of the shareholders or whether the interest of employees was protected but it has to ensure that merger shall not result in impeding promotion of industry or shall obstruct growth of national economy. Liberalised economic policy is to achieve this goal. The merger, therefore, should not be contrary to this objective. Reliance on English decisions Hoare & Co. Liberalised economic policy is to achieve this goal. The merger, therefore, should not be contrary to this objective. Reliance on English decisions Hoare & Co. Ltd., Re and Bugle Press Ltd., Re that the power of the court is to be satisfied only whether the provisions of the Act have been complied with or that the class or classes were fully represented and the arrangement was such as a man of business would reasonably approve between two private companies may be correct and may normally be adhered to but when the merger is with a subsidiary of a foreign company then economic interest of the country may have to be given precedence. The jurisdiction of the court in this regard is comprehensive." Sen, J" speaking for himself and Venkatachaliah, C.J., also towed the line indicated by Sahai, J" about the jurisdiction of the Company court while sanctioning the scheme and made the following pertinent observations: "AN argument was also made that as a result of the amalgamation, a large share of the market will be captured by HLL. But there is nothing unlawful or illegal about this. The court will decline to sanction a scheme of merger, if any tax fraud or any other illegality is involved. But that is not the case here. A company may, on its own, grow up to capture a large share of the market. But unless it is shown that there is some illegality or fraud involved in the scheme, the court cannot decline to sanction a scheme of amalgamation. It has to be borne in mind that this proposal of amalgamation arose out of a sharp decline in the business of TOMCO. Dr Dhavan has argued that TOMCO is not yet a sick Company. That may be right, but TOMCO at this rate will become a sick Company, unless something can be done to improve its pERFORMANCE. In the last two years, it has sold its investments and other properties. If this proposal of amalgamation is not sanctioned, the consequence for TOMCO may be very serious. The shareholders, the employees, the creditors will all suffer. The argument that the Company has large assets is really meaningless. Very many cotton mills and jute mills in India have become sick and are on the verge of liquidation, even though they have large assets. The shareholders, the employees, the creditors will all suffer. The argument that the Company has large assets is really meaningless. Very many cotton mills and jute mills in India have become sick and are on the verge of liquidation, even though they have large assets. The Scheme has been sanctioned almost unanimously by the shareholders, debenture-holders, secured creditors, unsecured creditors and preference shareholders of both the Companies. There must exist very strong reasons for withholding sanction to such a scheme. Withholding of sanction may turn out to be disastrous for 60,000.00 shareholders of TOMCO and also a large number of its employees." In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the Company court has clearly got earmarked. The following broad contours of such jurisdiction have emerged: 1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391 (1 )(a) have been held. 2. That the scheme put up for sanction of the court is backed up by the requisite majority vote as required by Section 391 Ss. (2. 3. That the meetings concerned of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members a of that class. 4. That all necessary material indicated by Section 393(l)(a) is placed before the voters at the meetings concerned as contemplated by Section 391 Ss. (1. 5. That all the requisite material contemplated by the proviso of sub- section (2 of Section 391 of the Act is placed before the court by the applicant concerned seeking sanction for such a scheme and the Court gets satisfied about the same. 6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. 6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same. 7. That the Company court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bonafide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same class whom they purported to represent. 8. That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. 9. Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the court are found to have been met, the court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. The aforesaid parameters of the scope and ambit of the jurisdiction of the Company court which is called upon to sanction a scheme of compromise and arrangement are not exhaustive but only broadly illustrative of the contours of the courts jurisdiction. (30) IN the light of the aforesaid settled legal position we will now proceed to deal with the main points for determination indicated hereinabove. (30) IN the light of the aforesaid settled legal position we will now proceed to deal with the main points for determination indicated hereinabove. (31) SO far as this point is concerned it was vehemently contended by the a learned Senior Counsel Shri Shanti Bhushan that the explanatory statement placed for consideration of the meeting of equity shareholders was not a complete statement and relevant material indicating the interest of the Director of MIL Shri Arvind Mafatlal was not placed before the voters with the result that the majority vote supporting the Scheme got vitiated. The explanatory statement which came to be circulated to the voters, namely, the equity shareholders of the transferee-Company MIL alleged as under: "IT is proposed to amalgamate MFL with MIL so as to enable the carrying on of the combined business more economically and advantageously. Amalgamation of both the companies would lead to substantial benefits in view of synergy of operations. The amalgamation of both the companies would give improved capital structure which would lend better flexibility in capital gearing which would enable the amalgamated company to raise required finance at better terms. A larger company would generate more confidence in the investors and with the persons dealing with the company and will afford access to resources easily and at lower costs. The amalgamation of MFL with MIL will pave the way for better, more efficient and economic control in the running operations and would lead to economy in the administrative and management cost, resulting in improving profitability. The amalgamated company will have a strong and large resource funds. The combined technological, managerial and financial resources would enhance the capability of the amalgamated company to invest in larger and sophisticated projects to ensure rapid growth. The amalgamated companys Textiles Division with five operative units at its disposal will have flexibility in its operations." So far as the aforesaid explanatory statement is concerned it gives sufficient indication regarding the pliability and usefulness of the proposed Scheme of Amalgamation of the transferor-Company MFL with the transferee- Company MIL. However the special grievance of the appellant voiced by his learned counsel is to the effect that the real interest underlying the scheme of merger was that of the Director Shri Arvind Mafatlal and his group who were at the helm of affairs of the transferee-Company. However the special grievance of the appellant voiced by his learned counsel is to the effect that the real interest underlying the scheme of merger was that of the Director Shri Arvind Mafatlal and his group who were at the helm of affairs of the transferee-Company. The learned Senior Counsel Shri Shanti Bhushan in this connection submitted that under Section 393(1)(a) of the Act the Company is enjoined to mention in the statement material interest of the Director Shri Arvind Mafatlal in the Scheme which is of a special nature as compared to the interest of other shareholders and it was also necessary to mention the effect of the compromise and arrangement on such special interest of Shri Arvind Mafatlal and as that was not mentioned in the explanatory statement along with which the copy of the Scheme was circulated to the members the majority vote became vitiated. Now a mere look at Section 393(1)(a) shows that the special interest of the director which is required to be brought home to the voters must satisfy the following requirements of the section before it can be treated to be a relevant special interest of the director which is required to be communicated to the voters: 1. The directors interest must be a special interest different from the a interest of other members who are the voters at the meeting. 2. The compromise or arrangement which is put to vote must have an effect on such special interest of the director. 3. Such effect must be different from the effect of compromise and arrangement on similar interest of other persons who are called upon to vote at the meeting. When we enquired of Shri Shanti Bhushan, learned Senior Counsel for the appellant as to which special interest, according to him, of Director Arvind Mafatlal was required to be communicated to the voters as per Section 393(1)(a), he stated that there was a pending litigation between the appellant on the one hand and Shri Arvind Mafatlal on the other in the Bombay High court. That Shri Arvind Mafatlal had sought a declaration in a pending suit against the appellant that the latter was required to sell off his shareholding in the transferee-Company MIL to the plaintiff Arvind Mafatlal who was the Director of MIL. That Shri Arvind Mafatlal had sought a declaration in a pending suit against the appellant that the latter was required to sell off his shareholding in the transferee-Company MIL to the plaintiff Arvind Mafatlal who was the Director of MIL. In this very suit the appellant had filed a counter-claim to the effect that Shri Arvind Mafatlal and his group were required to transfer their shareholding in the transferee-Company in favour of the appellant as per the family arrangement of 1979. Shri Shanti Bhushan in this connection submitted that though the learned Single Judge had taken the view that this type of special interest of Director Arvind Mafatlal was not relevant and germane to the requirement of Section 393(1)(a), the division bench in appeal had taken a contrary view and held that such a special interest was required to be communicated to the equity shareholders in their meeting as per the said provision. In this connection our attention was invited by Shri Shanti Bhushan to the observation of the division bench of the High court at page 325 of the paper-book wherein the division bench observed as under: "MIHEER H. Mafatlal was to get exclusive control to MIL to the exclusion of Arvind N. Mafatlal and his two brothers. Under the proposed family arrangement M. Fine was to be hived off from MIL and the control and management of the M. Fine was to be held by Arvind N. Mafatlal and that of MIL was to be handed over to objector Miheer H. Mafatlal. This family arrangement has suffered rough weather. Suit No. 1010 of 1987 was filed by Arvind N. Mafatlal against Miheer H. Mafatlal and others before the Bombay High court alleging that another agreement subsequent to the said family arrangement has come into existence under which Miheer H. Mafatlal and other brothers of Arvind had agreed to transfer all their holdings in MIL to A.N. Mafatlal, drawing a curtain on the family arrangement of 1979. Miheer H. Mafatlal has filed counter-claim in that suit claiming enforcement of family arrangement of 1979. Miheer H. Mafatlal has filed counter-claim in that suit claiming enforcement of family arrangement of 1979. The said dispute and the outcome thereof will have direct effect on the respective interests of the shares held by A.N. Mafatlal, Miheer H. Mafatlal and other members of the Mafatlal family, and trusts under them." He also invited our attention to the observations of the division bench at page 328 of the paper-book to the effect that having considered the rival contentions and closely examined the scheme of Section 393, they were unable to sustain the conclusion that the facts about the interests under the alleged family arrangements and the effect of proposed arrangement for -amalgamation on such interests were "not required to be disclosed under Section 393(l)(a).