Judgment :- N.V. BALASUBRAMANIAN, J. This petition is filed for the grant of sanction to the scheme of amalgamation of the transferor-company, M/s. American Remedies Limited with the transferee-company, Dr. Reddy's Laboratories Limited (hereinafter referred to as the "DRL Ltd."). The transferor-company herein was the transferee-company in another scheme of amalgamation which was considered by this court in C.P. Nos. 464 and 465 of 2000 and this court, by order of even date, granted sanction to the said scheme of amalgamation. The transferor-company which was the transferee-company in C.P. No. 465 of 2000 has filed this petition for the grant of sanction to the scheme of amalgamation with DRL Ltd. The transferor-company herein was originally incorporated as American Remedies Private Limited on January 7, 1986, under the provisions of the Companies Act, 1956 (hereinafter referred to as "the Companies Act"), which was later changed into a public limited company on July 1, 1990. The authorised and issued, subscribed and paid up share capital of the transferor-company as on March 31, 1999, are as under : "SHARE CAPITAL : Authorised : 80, 00, 000 equity shares of Rs. 10 each divided into Rs. 8, 00, 00, 000 2, 00, 000 redeemable preference shares of Rs. 100 each and 60, 00, 000 equity shares of Rs. 10 each. Issued, subscribed and paid up capital : 52, 65, 400 equity shares of Rs. 10 each Rs. 5, 26, 54, 000 (a) Of the above 32, 08, 800 equity shares of Rs. 10 each fully paid up represents bonus shares allotted by capitalisation of reserves. (b) Of the above, 15, 020 equity shares of Rs. 10 were allotted as fully paid up pursuant to a contract without payments being received in cash. The petitioner has set out the objects of the transferor-company and also its financial position. In so far as the transferee-company, DRL Ltd. is concerned, the said company is having its registered office at Hyderabad. The financial position and its objects are set out in the petition. The petitioner has set out the objects of the transferor-company and also its financial position. In so far as the transferee-company, DRL Ltd. is concerned, the said company is having its registered office at Hyderabad. The financial position and its objects are set out in the petition. Before considering the scheme of amalgamation, it is relevant to mention here that with a view to takeover the business and the company of M/s. Softcaps Private Limited (transferor-company in C.P. No. 464 of 2000), a shareholders agreement dated February 25, 2000, was entered into between M/s. Softcaps Private Limited, M/s. American Remedies Ltd., the petitioner-company herein, and all the shareholders of M/s. Softcaps Private Limited as listed in the annexure to the said agreement, and under the agreement, it was agreed to allow the petitioner-company herein to acquire the entire issued shareholding of 4, 005 equity shares of M/s. Softcaps Private Limited, and accordingly, it is stated, the petitioner-company herein have acquired 4, 005 equity shares of M/s. Softcaps Private Limited and the petitioner-company is the holding company of M/s. Softcaps Private Limited. The transferee-company, DRL Ltd. had acquired 36, 44, 274 equity shares of Rs. 10 each in the transferor-company and DRL Ltd. had also offered to acquire 10, 53, 100 fully paid up equity shares of the transferor-company representing 20 per cent. of the voting share capital at a price of Rs. 175 per share and in the bargain, acquired 7, 70, 000 shares representing 14.62 per cent. of the voting share capital. The scheme of amalgamation has to be considered in the light of the above takeover of the business of M/s. Softcaps Private Ltd., the transferor-company in C.P. No. 464 of 2000 by the petitioner-company herein as well as the take-over of the business and company of the transferor-company herein by the transferee-company, DRL Ltd. In the petition it has been stated that the amalgamation of the transferor-company with DRL Ltd. would enable the amalgamated company to carry on the combined business more economically and efficiently and the amalgamated company would have the benefit of the combined reserves, manufacturing assets and cash flows of both the companies. It is stated that the amalgamation would result in improved capital structure enabling the amalgamated company to raise the required finance on better terms and afford access to resources easily, at lower cost. It is stated that the amalgamation would result in improved capital structure enabling the amalgamated company to raise the required finance on better terms and afford access to resources easily, at lower cost. In the petition, the advantages that would accrue from the amalgamation are also set out. It is stated that the board of directors of the transferor-company, at the meeting held on March 6, 2000, approved the scheme of amalgamation. In the meeting, it was resolved that the entire undertaking of the transferor-company would be merged with DRL Ltd. subject to the approval of the shareholders and confirmation by this court as well as by the High Court of Andhra Pradesh. It is stated that the board of directors of the transferee-company, DRL Ltd. also, at the meeting held on March 6, 2000, approved the scheme of amalgamation. The scheme of amalgamation as found in annexure A-5 provides for the transfer of all assets and liabilities of the amalgamating company in favour of DRL Ltd. The scheme contains usual clauses for the transfer of undertakings and for continuation of legal proceedings. The scheme also contains a clause dealing with the profit that would accrue in favour of the transferor-company after the effective date. In so far as the swap ratio is concerned, the scheme contains a clause that for every 12 equity shares of Rs. 10 each held by the shareholders in the transferor-company, one equity share of Rs. 10 each in the transferee-company, DRL Ltd. credited as fully paid up would be allotted. The scheme also provides that DRL Ltd. is operating in Hyderabad at leased premises and its employees have already been retrenched in accordance with the provisions of section 25FF of the Industrial Disputes Act, 1947, and similar steps would be taken in so far as the Ambattur unit is concerned. The scheme contains a list of employees who would be affected by the retrenchment. The Regional Director, Southern Region, Department of Company Affairs, Chennai, has filed an affidavit wherein it is pointed out that all the employees of the transferor-company would either be retrenched or they are put to notice of retrenchment. The scheme contains a list of employees who would be affected by the retrenchment. The Regional Director, Southern Region, Department of Company Affairs, Chennai, has filed an affidavit wherein it is pointed out that all the employees of the transferor-company would either be retrenched or they are put to notice of retrenchment. However, the director of the transferor-company has filed an affidavit stating that clause 10 of paragraph No. 21 of the petition would be modified to the effect that all the staff, workmen and other employees on the permanent rolls of the transferor-company on the date of order shall become the staff, workmen and employees of the transferee-company, DRL Ltd. and their services would be continuous and uninterrupted. It is relevant to mention here that the affidavit has been filed only by the director of the transferor-company and no such affidavit has been filed by and on behalf of the transferee-company, DRL Ltd. and there is no doubt that if the scheme is sanctioned, it would be subject to the condition that the service conditions of the employees are protected. Then, it is necessary to consider the objection raised by one of the shareholders of the transferor-company, by name, P. B. Gopalan. Before considering the objection, it is relevant to mention here that on the basis of the directions of this court, the meeting of the shareholders of the transferor-company was held on July 15, 2000, and the chairperson of the meting has filed a report stating that the meeting was attended either in person or by proxy by 79 shareholders holding together 45, 92, 680 shares of Rs. 10 each of the total face value of Rs. 4, 59, 26, 800. It is stated that out of 79 shareholders, one shareholder did not vote and out of the remaining 78 shareholders, 77 shareholders voted in favour of the scheme and approved the scheme of amalgamation and one shareholder voted against the scheme of amalgamation. It is seen from the report of the chartered accountants that the paid up share capital of the transferor-company is Rs. 5, 26, 54, 000 and the transferee-company, DRL Ltd. is holding 45, 84, 470 shares of Rs. 10 each of the total face value of Rs. 4, 58, 44, 700 and other shareholders are holding shares ranging from 10 to 1500. 5, 26, 54, 000 and the transferee-company, DRL Ltd. is holding 45, 84, 470 shares of Rs. 10 each of the total face value of Rs. 4, 58, 44, 700 and other shareholders are holding shares ranging from 10 to 1500. The shareholder, who has voted against the resolution, has filed his objection and this court ordered notice to the dissenting shareholder. He also appeared in person and raised his objection. I heard Mr. Krishna Srinivas, learned counsel appearing for the petitioner, the objector and also learned counsel appearing for the Central Government. There is no doubt that the issued paid up share capital of the transferee-company DRL Ltd. is Rs. 2, 648.73 lakhs and it has reserves of Rs. 40, 012.14 lakhs and its miscellaneous expenditure is Rs. 1, 747.59 lakhs. The balance-sheet as on March 31, 2000, shows that DRL Ltd. has reserves and surplus of a sum of Rs. 4, 35, 16, 30, 000 and its secured and unsecured loans come to Rs. 1, 74, 65, 95, 000. Its fixed assets and net current assets after taking into account its current liabilities and provisions come to Rs. 2, 23, 39, 31, 000. As already noticed, even after taking over the liabilities of the transferor-company in C.P. No. 464 of 2000, DRL Ltd. would be in a financially sound position. There is no doubt about it. The only issue that arises is whether the scheme of amalgamation is fair or not. The main objection of the objector is that he is having 200 shares in the transferor-company and is getting a dividend of Rs. 400 per annum at 20 per cent. The swap ratio, as already seen, is fixed at 1 : 12, and according to the objector, after the merger, he would be getting 16 shares in DRL Ltd. with the dividend of Rs. 48 per annum. According to him, for the investment of Rs. 15, 000 the rate of return would be less than 1 per cent. According to him, after the merger, to get a dividend income of Rs. 400 on 16 shares of DRL Ltd. the rate of dividend should be as high as 250 per cent. which is highly impossible. He therefore submitted that the swap ratio should be liberalised in view of the huge financial loss that may be incurred by him. According to him, after the merger, to get a dividend income of Rs. 400 on 16 shares of DRL Ltd. the rate of dividend should be as high as 250 per cent. which is highly impossible. He therefore submitted that the swap ratio should be liberalised in view of the huge financial loss that may be incurred by him. He referred to an illustration that if a house owner files a petition for revision upwards of the rent which at present does not fetch him even 1 per cent. return, the court may not suggest that he may sell the house and put the sale proceeds in fixed deposits to get a better return, and submitted that the scheme of amalgamation is not fair. On the other hand, Mr. Krishna Srinivas, learned counsel appearing for the petitioner submitted that the objection is not sustainable. According to him, the shareholders holding in the transferor-company 45, 92, 470 shares of Rs. 10 each of the total value of Rs. 4, 59, 24, 700 approved the scheme of amalgamation and the dissenting shareholder is having 200 shares and when a large majority of shareholders approved the scheme of amalgamation, the objection raised by the dissenting shareholder is not sustainable in law. He submitted that the value of the shares would increase manifold if the merger takes place and the exchange ratio has been fixed on the basis of the expert's opinion which has been approved by the majority of shareholders having 99.97 per cent. voting rights. Learned counsel submitted that the transferor-company has incurred loss and on the other hand, the transferee-company is financially sound and the merger would give benefit to the dissenting shareholder also. Learned counsel in this connection referred to the report of the chartered accountants and also relied upon the decision of the Supreme Court in Miheer H. Mafatlal v. Mafatlal Industries Ltd., the decision of this court in Kamala Sugar Mills Ltd., In re and the decision of the Bombay High Court in Blue Star Ltd., In re 2000 (2) CompLJ 245 (Bom); 2001 (104) CC 371. Learned counsel also referred to the relevant passages of the decisions. Learned counsel also referred to the relevant passages of the decisions. Learned counsel relied upon the decision of this court in the case of Coimbatore Cotton Mills Ltd., In re and the decisions of the Supreme Court in the cases of CWT v. Mahadeo Jalan and in Hindustan Lever Employees' Union v. Hindustan Lever Ltd. Learned counsel also relied upon the decisions of the Calcutta High Court in the matter of Carron Tea Co. Ltd. 1966 (2) CompLJ 278; Katni Cement and Industrial Co. Ltd., In re and in Hindustan General Electric Corporation Ltd., In re, He also relied upon the decision of the Bombay High Court in the case of Piramal Spinning and Weaving Mills Ltd., In re. It is now necessary to consider the decisions relied upon by counsel appearing for the petitioner before considering the objection raised by the objector. In Miheer H. Mafatlal's case the Supreme Court held as under : " * However, court cannot have jurisdiction like an appellate authority to minutely scrutinise the scheme and to arrive at 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 , sub-section (2). The court certainly would not act as a court of appeal and sit in judgment over the informed view of the concerned parties to the compromise as the same would be in the realm of corporate and commercial wisdom of the concerned parties. 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 court's 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 the umpire. 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 the umpire. 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, 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. " The Supreme Court in the above decision also laid down the following law : " * In this connection we may also refer to a decision of Maughm J., Hoare and Co. (No. 2), In re 1933 All(ER) 105wherein it was laid down that where statutory majority had accepted the offer the onus must rest on the applicants to satisfy the court that the price offered is unfair. In this connection following pertinent observations were made by the learned judge : 'The other conclusion I draw is this .... 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 any strong grounds, is to be entitled to set up its own view of fairness of the scheme in opposition to so very large a majority of shareholders 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 otherwise in such a case as I have before me, unless it is affirmatively established that notwithstanding the views of a very large majority of shareholders, the scheme is unfair.' We may also refer to a decision of the Madras High Court in Kamala Sugar Mills Ltd., In re dealing with an identical objection about the exchange ratio adopted in the scheme of compromise and arrangement. The court observed as under : 'Once the exchange ratio of the shares of the transferee-company to be allotted to the shareholders of the transferor-company has been worked out by a recognised firm of chartered accountants who are experts in the field of valuation and if no mistake can be pointed out in the said valuation, it is not for the court to substitute its exchange ratio, especially when the same has been accepted without demur by the overwhelming majority of the shareholders of the two companies or to say that the shareholders in their collective wisdom should not have accepted the said exchange ratio on the ground that it will be detrimental to their interest.' These observations in our view represent the correct legal position on this aspect. We may also keep in view that in the present case not only expert like M/s. C.C. Chokshi and Co. had suggested the ratio but another independent body ICICI Security and Finance Company Limited reached the same conclusion which was conveyed by its letter dated November 10, 1993, to the company approving of the entire scheme along with suggested ratio. " In Hindustan Lever Employees' Union v. Hindustan Lever Ltd., Supreme Court considered the question of power of the court while sanctioning a scheme of amalgamation and held as under : " * The question is what method should be adopted for arriving at a proper exchange ratio. The usual rule is that shares of the going concern must be taken at the quoted market value. This principle was also recognised by this court in the case of CWT v. Mahadeo Jalan. In this case, Mr. Malegam adopted a combination of three well-accepted methods to arrive at the fair value of the shares. The methods are : (I) the yield method; (II) the asset value method; and (III) the market value method. After considering all the relevant factors, the valuer recommended an exchange ratio of two equity shares of HLL for every 15 ordinary shares of TOMCO. Mr. Dholakia has contended that a combination of two methods of valuation was condemned by this court in the case of CGT v. Smt. Kusumben D. Mahadevia. The valuation of the shares done by Mr. Malegam was clearly erroneous and contrary to the principles laid down by this court in that case. Mr. Dholakia has contended that a combination of two methods of valuation was condemned by this court in the case of CGT v. Smt. Kusumben D. Mahadevia. The valuation of the shares done by Mr. Malegam was clearly erroneous and contrary to the principles laid down by this court in that case. The observations made by this court in Smt. Kusumben D. Mahadevia's case, were in connection with the valuation of shares of a going concern under the provisions of Wealth tax and Gift-tax Acts and the rules framed thereunder. Under those two Acts, at the material time, valuation had to be done on the basis of the price which, in the opinion of the Assessing Officer, the shares would fetch if sold in the open market. Both section 6 of the Gift-tax Act and section 7 of the Wealth-tax Act had adopted the same principle of valuation. If that method of valuation is adopted, then the exchange ratio fixed in this case cannot be described as unfair to the company's shareholders in any way. If profits earning method had been adopted, the ratio would have been very much worse for TOMCO shareholders. This problem of valuation in the case of amalgamation of two companies has been dealt with by Weinberg and Blank in the book Take-overs and Mergers, in which it has been stated that some or all of the following factors will have to be taken into account in determining the final share exchange ratio : (1) The stock exchange prices of the shares of the two companies before the commencement of negotiations or the announcement of the bid. (2) The dividends presently paid on the shares of the two companies. It is often difficult to induce a shareholder, particularly an institution, to agree to a merger or a share-for-share bid if it involves a reduction in his dividend income. (3) The relative growth prospects of the two companies. (4) The cover (ratio of after tax earnings to dividends paid during the year) for the present dividends of the two companies. The fact that the dividend of one company is better covered than that of the other is a factor which will have to be compensated for at least to some extent. (5) In the case of equity shares, the relative gearing of the shares of the two companies. The fact that the dividend of one company is better covered than that of the other is a factor which will have to be compensated for at least to some extent. (5) In the case of equity shares, the relative gearing of the shares of the two companies. The "gearing" of an ordinary share is the ratio of borrowings to the equity capital. (6) The values of the net assets of the two companies. Where the transaction is a thorough-going merger, this may be more of a talking-point than a matter of substance, since what is relevant is the relative values of the two undertakings as going concerns. (7) The voting strength in the merged enterprise of the shareholders of the two companies. (8) The past history of the prices of the shares of the two companies. It will, therefore, appear that in the case of amalgamation a combination of all or some of the methods of valuation may be adopted for the purpose of fixation of the exchange ratio of the shares of the two companies. It is to be noted that even in such a situation, the book value method has been described as 'more of talking point than a matter of substance'. " In CWT v. Mahadeo Jalan, the Supreme Court held as under : " * The general principle of valuation in a going concern is the yield on the basis of average maintainable profits, subject to adjustment, etc. The 'maintainable profits' would be a certain percentage (say 80 per cent.) of the net profits of the company, after deduction of taxes payable by it and this would be a measure of potential yield per share. " In Kamala Sugar Mills Ltd., In re this court construed the provisions of section 391(2) of the Companies Act and laid down the law as under : " * Under section 391(2) of the Companies Act, 1956, a scheme of amalgamation should be approved by a majority in number representing three-fourths in value of the members or class of members present and voting either in person or by post. The court has to ensure that the majority of the members have been acting bona fide and the minority has not been overridden by the majority having interests of its own clashing with those of the minority whom they seek to coerce. The court has to ensure that the majority of the members have been acting bona fide and the minority has not been overridden by the majority having interests of its own clashing with those of the minority whom they seek to coerce. This can be gathered from the fact as to whether any shareholder objects to the scheme. The court has to further see that the scheme as a whole is a reasonable and fair one and if the court finds that having regard to the general conditions and background and object of the scheme, the scheme as a whole is fair and reasonable, it is not for the court to substitute its judgment for the collective wisdom of the shareholders of the two companies. If the court finds that the scheme is fair and reasonable the burden will be on the objector to show that the scheme is so unfair and unreasonable that no reasonable man would accept it notwithstanding the views of the large majority of the shareholders that the scheme is a fair and reasonable one. ... Once the exchange ratio of the shares of the transferee-company to be allotted to the shareholders of the transferor-company has been worked out by a recognised firm of chartered accountants who are experts in the field of valuation and if no mistake can be pointed out in the said valuation, it is not for the court to substitute its exchange ratio, especially when the same has been accepted without demur by the overwhelming majority of the shareholders of the two companies or to say that the shareholders in their collective wisdom should not have accepted the said exchange ratio on the ground that it will be detrimental to their interest. " In Blue Star Ltd., In re 2000 (2) CompLJ 245 (Bom); 2001 (104) CC 371 the Bombay High Court in considering the objection of shareholders having minuscule minority, held as under : " * It is settled law that the power of the court in sanctioning the scheme is to satisfy itself that the provisions of the Companies Act, 1956, have been complied with and that the class or classes were fully represented and the arrangement was such as a man of business would reasonably approve between the two private companies. In this case, over 98 per cent. of the shareholders including the financial institutions have approved the scheme. In this case, over 98 per cent. of the shareholders including the financial institutions have approved the scheme. The financial institutions were in fact, so vigilant that they moved an amendment resolution and approved the scheme only after the valuation was to their satisfaction. ... It would also not be possible to hold that the shares have been unnecessarily undervalued or that the promoters have been unduly benefited from the scheme. Yet again, it may be that the respondents are not satisfied with the valuation done, but this is no ground for rejecting the valuation which has been done by a renowned firm of chartered accountants. The grievance voiced by the respondents is not shared by more than 98 per cent. of the shareholders. " In Coimbatore Cotton Mills Ltd., In re this court held that in the absence of any allegation of fraud or mala fides on the part of the chartered accountants, the exchange ratio had to be considered as fair and reasonable especially when the same has been approved by an overwhelming majority of shareholders and no shareholder had come forward before the court for opposing the ratio or the scheme. The Calcutta High Court in the matter of Carron Tea Co. Ltd. 1966 (2) CompLJ 278 held as under : " * The court should not sanction a scheme relaying on the wisdom of the board of directors and the approval of the same at a statutory meeting of the shareholders. It is the bounden duty of the court to probe into matters to find out whether the scheme is reasonable and if it finds it is so, unhesitatingly sanction the same. The ordinary law would suggest that the market price of the shares of the amalgamating companies would be the proper basis for determining the ratio of exchange. So the quotation of the stock exchange would be a safe and proper basis for fixing the ratio, unless it is demonstrated that the stock exchange quotation is not reliable and does not represent the true value. " In Hindustan General Electric Corporation Ltd., In re the Calcutta High Court held as under : " * Where in a meeting for the sanction of a scheme, holders of shares of the value of Rs. 6, 42, 700 were present but holders of shares of the value of Rs. " In Hindustan General Electric Corporation Ltd., In re the Calcutta High Court held as under : " * Where in a meeting for the sanction of a scheme, holders of shares of the value of Rs. 6, 42, 700 were present but holders of shares of the value of Rs. 4, 42, 700 alone voted in favour of the resolution and the others remained neutral, voting neither in favour of, nor against, the resolution; Held, that there was a unanimous passing of the resolution and the requisite three-fourths majority contemplated by section 391(2) of the Companies Act, 1956, agreed to the scheme of arrangement. Section 81(1) of the Companies Act, 1956, clearly provides that if a company at a general meeting resolves that newly issued shares should be allotted to persons other than equity shareholders, or otherwise than in proportion to their existing shareholding, such decision prevails and is not open to question. " In Katni Cement and Industrial Co. Ltd., In re, the Bombay High Court laid down the law as under : " * The court can under section 153 sanction a scheme, even though it involves acts which, apart from such provisions would be ultra vires the company; but this rule is subject to the limitation that if the Companies Act contains express provisions enabling the doing of any act in a particular way, the provisions of that enabling section, and not those of section 153 , must be followed. In sanctioning a scheme under section 153 the court must look at the scheme and see whether the Act has been complied with, whether the majority are acting bona fide, 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 of it. The test of reasonable compromise or scheme is whether it is regarded by reasonable people conversant with the subject as beneficial to those on both sides who are making it. The question is, is the scheme made for the common benefit of all the shareholders. The test of reasonable compromise or scheme is whether it is regarded by reasonable people conversant with the subject as beneficial to those on both sides who are making it. The question is, is the scheme made for the common benefit of all the shareholders. The court does not necessarily make any provision in favour of the dissentients, if the court is satisfied that the scheme is reasonable and fair and in the interests of the general body of the shareholders. In any case, under the modern practice, such a provision is not a sine quo non to sanctioning the scheme if it is reasonable and fair." I have considered the various decisions cited supra. The question that arises is whether the share exchange ratio adopted in this case is fair and reasonable. It is no doubt true that while considering the scheme of amalgamation the court is not acting as an appellate authority sitting in judgment over the informed view of shareholders who have taken a conscious decision on the basis of their commercial wisdom that the scheme should be approved with the share exchange ratio mentioned therein. The court should have regard to the collective wisdom of the shareholders when considering the question whether the scheme is fair and to be sanctioned. The view of a large majority of the shareholders should be respected and the court cannot delve deep into the commercial merits and demerits of the scheme ratified by the requisite majority of shareholders. One other principle that has been established is that when the expert has taken into account the market value of shares of both the companies in the case of amalgamation, that should be given due weight. As far as the report of the chartered accountants is concerned, the chartered accountants have taken into account share capital, net worth and earning capacity value of both the companies. As far as the report of the chartered accountants is concerned, the chartered accountants have taken into account share capital, net worth and earning capacity value of both the companies. The chartered accountants have also taken into consideration the expenditure incurred by both the companies on the research and development activities and the projected turnover and the future earnings of the transferee-company, and determined the market price of shares on the basis of the price quoted in the stock exchange which is an approved method of valuation as held by the Supreme Court in CWT v. Mahadeo Jalan and in CGT v. Smt. Kusumben D. Mahadevia wherein the Supreme Court held that in the case of quoted shares, the stock exchange price of shares prevailing on the valuation date would represent the market value of the shares. The chartered accountants found that the value of the quoted shares of DRL Ltd. fluctuated between a high of Rs. 1, 810 and a low of Rs. 668 and determined the average 12 months price of a share at Rs. 1, 121 and the current market price of an equity share as on March 3, 2000, at Rs. 1, 272.20. The chartered accountants also found that the value of equity shares of the transferor-company fluctuated between a high of Rs. 179 and a low of Rs. 38 and determined the average 12 months price of a share at Rs. 93 and the current market price of a share as on March 3, 2000, at Rs. 138.50. It is stated that there was an increase in the value of equity shares of the transferor-company due to the impending amalgamation. The chartered accountants have taken into account the capital appreciation in the value of shares in the event of merger. The chartered accountants have no doubt taken into account the fact that DRL Ltd. continued to declare dividend at 30 per cent. for the past five years and the transferor-company declared dividend at 20 per cent. for the past three years, 15 per cent. for 1995-96 and 10 per cent. The chartered accountants have no doubt taken into account the fact that DRL Ltd. continued to declare dividend at 30 per cent. for the past five years and the transferor-company declared dividend at 20 per cent. for the past three years, 15 per cent. for 1995-96 and 10 per cent. for 1994-95 and no dividend has been declared for the year 1999-2000, and on that basis, the chartered accountants have determined the swap ratio of 1 : 12, that is, for every 12 equity shares of the transferor-company, one equity share in DRL Ltd. The chartered accountants in another report dated April 10, 2000, have taken into account the cash flow projections and adopted the same share exchange ratio 1 : 12. Learned counsel appearing for the petitioner produced before this court the report of M/s. Karra and Co., chartered accountants, dated March 28, 2001, wherein the value of equity shares of the transferor-company has been ascertained on yield basis at Rs. 120 and the value of equity shares of the transferee-company, DRL Ltd. has been ascertained at Rs. 1, 625. Learned counsel also referred to the report of M/s. Ernst and Young Pvt. Ltd., dated June 26, 2000. The said company was requested by DRL Ltd. to render an independent opinion as to the fairness of the methods adopted by the statutory auditors of the DRL Ltd. arriving at the swap ratio. The said company ultimately found that the swap ratio adopted is fair and reasonable. Learned counsel also referred to another report of M/s. Ramachandra Rao and Co., chartered accountants dated March 28, 2001, wherein the chartered accountants opined that dividend yield method of valuation should not be applied where the dividends do not correctly reflect the profit earning capacity. According to the chartered accountants, the earnings per share of DRL Ltd. for the last five years worked out is Rs. 18.40 against Rs. 4.55 in the case of the transferor-company. It is stated that DRL Ltd. declared dividend of Rs. 3 out of the earnings of Rs. 18.40 whereas the transferor-company declared an average dividend of Rs. 1.70 out of the average earnings of Rs. 4.55. It is also stated that in view of the higher percentage retained by DRL Ltd., the net asset value of DRL Ltd. is higher compared to the transferor-company. I have carefully gone through all the reports of the chartered accountants. 18.40 whereas the transferor-company declared an average dividend of Rs. 1.70 out of the average earnings of Rs. 4.55. It is also stated that in view of the higher percentage retained by DRL Ltd., the net asset value of DRL Ltd. is higher compared to the transferor-company. I have carefully gone through all the reports of the chartered accountants. I find that the share exchange ratio arrived at by the above said three chartered accountant firms adopting three different methods is fair. No doubt, there would be a loss of dividend income, which is the main objection of the objector. As already seen, the chairperson of the meeting of equity shareholders of the transferor-company in her report has stated that out of 79 shareholders, 78 shareholders were present and 77 shareholders holding 45, 92, 470 shares of the value of Rs. 4, 59, 24, 700 voted in favour of the resolution approving the scheme of amalgamation and only one person voted against the resolution. The Supreme Court in Miheer H. Mafatlal's case, held that the exchange ratio is one of the items and it is for the equity shareholders to think it fit in their commercial wisdom to accept the scheme as a whole along with the exchange ratio presumably in expectation of better profits in years to come when the amalgamated company would operate and when there would be better prospects of earning greater dividend. The Supreme Court also held that what is required to be considered by the court while sanctioning the scheme is the bona fides of the majority acting as a class and not of one single person. I am unable to accept the submission of the objector that the majority shareholders have acted unfairly to the objector and have not protected his interest. I am of the view what is to be protected is the class interest of minority shareholders falling in the same class along with the majority. It is not the case of the objector that there was an oblique motive in the minds of majority shareholders, particularly in the transferee-company to fructify any adverse commercial interest qua the objector. It is seen that the minority shareholders in the transferor-company have expressed their willingness to continue to be shareholders in the transferee-company, and their rights are also fully protected in the scheme. It is seen that the minority shareholders in the transferor-company have expressed their willingness to continue to be shareholders in the transferee-company, and their rights are also fully protected in the scheme. It is also seen that by adopting various methods of valuation, it was found that the value of the shares in the transferee-company is higher than that of the transferor-company. It is seen that the transferee-company is having high potential market in pharmaceutical line and it has consolidated its position in the formulation of market both domestic and export through brand acquisition and aggressive product launch and the transferee-company has been transformed into a global corporation. It is also seen that the transferee-company has incurred expenditure on research and development activities. It is stated that the transferee-company has taken efforts in the field of research and development and making substantial investments resulting in a good future returns. Though the objector raised an objection that there is a fall or reduction in the return of dividend income if the scheme is permitted to go through and except the objector herein no other has raised the objection. Taking into consideration the position of the transferee-company which has consolidated in the formulation of market both domestic and export and its high potential market in the field of pharmaceuticals and there would be capital appreciation in the value of shares, the objection raised by the objector is not a ground to hold that the scheme is not fair. In the light of the decisions cited supra by learned counsel for the petitioner and various methods of valuation adopted by the chartered accountants and also taking into account that 99.97 per cent. shareholders have approved the scheme with the share exchange ratio 1 : 12, I examined the scheme of amalgamation with great care that is needed to prove that the scheme is fair, particularly when the transferee-company is a company holding more than 84 per cent. of shares in the transferor-company and there was an earlier attempt by the transferee-company to purchase all the shares in the transferor-company. It is seen that majority of shareholders approved the scheme of amalgamation except the objector herein and his objection is not against the scheme of amalgamation, but his concern is with regard to the reduction in the dividend income. It is seen that majority of shareholders approved the scheme of amalgamation except the objector herein and his objection is not against the scheme of amalgamation, but his concern is with regard to the reduction in the dividend income. I am of the view, it is matter for commercial wisdom of the shareholders to approve the scheme of amalgamation. The market value of shares of both the companies have been determined by three chartered accountant firms by adopting different methods of valuation and arrived at the share exchange ratio. In the absence of any defect pointed out by the objector to the valuation of the shares, I hold that the share exchange ratio adopted is fair. I do not find any objectionable features in the scheme of amalgamation. As already mentioned, the services of the employees of the transferor-company should be protected. Accordingly the scheme of amalgamation is sanctioned subject to the condition that the employees of the transferor-company on its permanent rolls should become the employees of the transferee-company without any break in service and their services should be protected. The approval of the scheme is on the condition that the DRL Ltd. should discharge all liabilities arising out of hire-purchase loans, fixed deposits, security deposits, intercorporate loan, unsecured debentures and foreign currency loan and also other liabilities of the transferor-company. The approval of the scheme is also subject to the condition that the transferee-company should fully discharge the liabilities of the creditors of the transferor-company, both secured and unsecured, if any. It is made clear that the proceedings initiated and pending against the transferor-company on or after the transfer date would be continued against the transferee-company and the transferee-company is liable to discharge the liabilities that may arise out of such proceedings. Accordingly, prayers (a) to (d) and (f) to (h) of paragraph 37 of the petition are ordered. Counsel for the Central Government is entitled to costs of a sum of Rs. 5, 000.

American Remedies Limited, In Re v. .