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Judgment
Geoffery Manners & Co. Ltd. who are the petitioners in Company Petition No. 659 of 1986 propose to transfer, what is described in the Scheme as the "Drug Undertaking" of Geoffery Manners & Co. Ltd. to John Wyeth (India) Limited, who are the petitioners in Company Petition No. 658 of 1986. Under this scheme all assets, machinery and equipment as described in the scheme as also lease-hold and tenancy rights in the premises occupied by the Drug Undertaking, permits, quota rights, industrial and other licences relating to the drugs which are being manufactured at the said drug undertaking at Ghatkopar as also all privileges, rights and benefits in relation thereto are being transferred to John Wyeth (India) Limited. Geoffery Manners & Co. Limited hold 60 per cent. of shares in John Wyeth (India) Limited. It is the case of both the companies that until now, at the said drug undertaking, Geoffrey Manners & Co. Limited were manufacturing various drugs for John Wyeth (India) Limited. Now the said drug undertakings is being transferred to John Wyeth (India) Limited on terms and conditions which are set out in the Scheme. Thus only one of the undertakings of the transferor company is being transferred to the transferee company.
This Scheme has been unanimously approved by the shareholders of both the Companies. The present petitions however, are being opposed by Bharatiya Kamgar Sena, Bombay which is the trade union to which, inter alia, the workers of Geoffrey Manners & Company Limited, who are engaged in the activities of the said drug undertaking belong. The opposition is, therefore, on behalf of the employees of Geoffrey Manners & Co. Ltd. working at the said drug undertaking either in their factory at Ghatkopar or in their offices at Veer Savarkar Marg, Bombay and at Udyog Bhavan, Ballard Estate, Bombay as also all employees including the field staff of the Ethical''s Division of Geoffrey Manners & Co. Limited since all these work in the Drug undertaking which is being transferred under the said scheme. According to the employees they will be adversely affected by this scheme. Under the scheme all these employees are being compulsorily transferred to John Wyeth (India) Limited. They have pointed out that Geoffrey Manners & Co. Limited is a prosperous company and has made good profits over the years. As against this John Wyeth (India) Limited is a loss making concern. The employees, therefore, will be adversely affected by their transfer to John Wyeth (India) Limited. They have also pointed out that they have filed a complaint under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, before the Industrial Court at Bombay, complaining about the said compulsory transfer on various grounds which are set out in their complaint. The complaint is numbered as Complaint ULP No. 649 of 1987.
In this connection Mr. J. B. Chinoi who appears for John Wyeth (India) Limited has given a summary of the results of the said Company from the year 1973-1974 upto 1986-1987. It seems that from 1973-1974 till 1982-1983 John Wyeth and Brothers Limited (India Branch) were carrying on business in India. Throughout this period this company made profits ranging from Rs. 36.97 lakhs per year to Rs. 15.21 lakhs per year. Only in the year 1982-83 the said company made a loss of Rs. 2.69 lakhs. Thereafter John Wyeth (India) Limited was constituted and the business is now being carried on by John Wyeth (India) Limited. For the year 1983-84 the Company made a profit of Rs. 32.21 lakh before tax and profit of Rs. 7.40 lakhs after tax. In the year 1984-85 the Company made a loss of Rs. 32.42 lakhs after tax. In the year 1985-86 the Company made a loss of Rs. 4.35 lakhs after tax and in the year 1986-87 it is estimated that the Company will make a profit of Rs. 27 lakhs after tax. Looking to these figures it cannot be said that the transferee Company is wholly a loss-making concern or is in such a condition that it will not survive. The Company has also produced its balance sheet estimated as on 31st October 1986 and from this balance sheet also it cannot be said that the substratum of the Company is gone that it is not in a position to function.
My attention was drawn by Mr. Puri, learned Advocate for the Bharatiya Kamgar Sena to certain notes made by the auditors in the balance-sheets of John Wyeth (India) Limited relating to a Writ Petition filed by John Wyeth and Brothers Limited, India Branch against Government of India in respect of the selling price of certain drugs, in respect of which an appeal is pending in the Supreme Court. I am informed by Mr. Puri that in view of certain orders which have been passed in similar other petitions the Company is likely to lose in this petition. If so, the Company may become liable to pay a sum of about Rs. 87 lakhs. There is, therefore, some substance in this grievance which is made by the workmen.
Mr. Chinoi on behalf of both the Companies states that under the scheme there is no desire to compulsorily transfer the workmen engaged in the drug undertaking to John Wyeth (India) Limited. He submits that under the scheme, protection is given to those employees of the drug undertaking who wish to join John Wyeth (India) Limited, under clause 9(a) of the Scheme which is as follows :
"9(a) JWIL undertakes to engage on and from the effective date all permanent employees of GM engaged in the Drug activity of GM at their factory at Ghatkopar, Bombay, and also at their Offices at Veer Savarkar Marg, Bombay, and at Udyog Bhavan, Ballard Estate, Bombay and all employees (including the field staff) of the Ethicals Division of GM located all over India, and who are in the employment of GM on the same terms and conditions on which they are engaged as on the effective date by GM without any interruption of service as a result of the transfer. JWIL agrees that the service of all such employees with GM upto the effective date shall be taken into account for purpose of all retirement benefits to which they may be eligible in GM on the effective date. JWIL further agrees that for the purpose of payment of any retrenchment compensation, such past service with GM shall also be taken into account".
In the scheme, however, under clause (1) the definition of "Drug Undertaking" includes under clause 1(c) all permanent employees of Geoffrey Manners and Company Limited engaged in the said undertaking at the factory at Ghatkopar, Bombay, at their offices at Veer Savarkar Marg, Bombay and at Udyog Bhaven. Ballard Estate, Bombay and all employees, including the field staff of the Ethical''s Division located all over India. Under clause 4(a) the entire drug undertaking of Geoffrey Manners and Co. Limited stand transferred to John Wyeth (India) Limited. Under the scheme therefore the said workmen get automatically transferred to John Wyeth (India) Ltd., although with the safeguards provided under clause 9(a). I have not been shows any provision of law under which workman can be compulsorily transferred from one Company to another.
Mr. Chinoy, on behalf of both the companies, is agreeable that the scheme should be modified so that the works of the Drug Undertaking are not thus transferred. The scheme is, therefore, by consent of both the companies and their Directors, hereby modified in pursuance of the provisions of clause 14 of the scheme as also u/s 392 of the Companies Act so as to exclude from the definition of "Drug Undertaking" sub clause (c) in clause (1). Sub clause 1(c) is deleted from the scheme. Further under the scheme the employees who are engaged in the Drug undertaking as covered by the description given in the original sub clause 1(c) shall have the option to join John Wyeth (India) Limited if they so desire. The option shall be exercised within one month of the effective date as defined in the scheme or within such other time as may be agreed upon between the parties. In the event of any employee or employees so joining John Wyeth (India) Limited they shall be protected by the provisions of clause 9 of the said scheme. The employees who elect to remain with Geoffrey Manners and Co. Limited shall be entitled to all such rights and remedies as they may be entitled to in law. They shall be entitled to proceed with the pending complaint under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act.
The Regional Director, Company Law Board, has filed an affidavit setting out that the ratio of share in the transferee Company which is being issued to the shareholders of the transferor company is not fair because the Drug Undertaking is being transferred at the written down value of Rs. 20 lakhs. This value of the Drug Undertaking is only the written down value. No material is placed before me to show that the ratio of 5 shares in John Wyeth (India) Limited being allotted per every 72 shares in Geoffrey Manners & Co. Limited is unfair. Both the shareholders of the transferor Company as well as transferee Company have unanimously approved of the scheme and of the number of shares being given to the shareholders of the transferor company in the transferee company. At the meeting of shareholders of Geoffrey Manners & Co. Limited, shareholders holding 27,36,000 shares out of a subscribed and issued capital of 28,80,000 shares voted in favour of the scheme. None else was present or voted against it. At the meeting of shareholders of John Wyeth (India) Limited votes were cast in favour of the scheme by the shareholders holding the entire issued and subscribed shareholders of 300,000 shares in the Company.
It should also be remembered that only one of the undertakings of the transferor company is being transferred to the transferee company. The Regional Director has pointed out that John Wyeth (India) Limited incurred a loss of Rs. 32 lakhs in 1984-85. The fact that for the year ending 31st October, 1985. M/s. John Wyeth (India) Limited showed a loss of about Rs. 32 lakhs cannot be taken in isolation. It has to be viewed in the light of the overall assets and general reserves of M/s. John Wyeth (India) Limited as against liabilities. For the year ending 31st October 1986 the company estimates a profit after tax of about Rs. 27 lakhs. In these circumstances and looking to the fact that the shareholders of both the companies have unanimously accepted the ratio of shares to be allotted, there is no reason to refuse sanction to the scheme. Both the companies are closely held companies and the transferee company has a 60 per cent. share holding in the transferor company. The scheme therefore also does not affect the public at large.
In the circumstances the scheme modified as aforesaid is sanctioned. There will also be an order in terms of prayers (b), (c), (d) and (e). The complaint filed by the Bharatiya Kamgar Sena against Geoffrey Manners and Co. Limited, referred to above, may be decided on merits. The Company to pay to the Regional Director, Company Law Board the costs of this petition fixed at Rs. 300/-.
Company Petition No. 658 is on behalf of John Wyeth (India) Limited, the transferor company. There will be the same order as above in this petition, save and except that no directions are required in this petition regarding the complaint pending before the Industrial Court since this complaint is not on behalf of the workers of John Wyeth (India) Limited.
On the application of Bharatiya Kamgar Sena the operation of this order is stayed for a period of 2 weeks. Bharatiya Kamgar Sena to give 48 hours notice to both companies of any application that may be preferred by them.