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Judgment
Chopra, J.—The above applications were presented u/s 153(B) of the Indian Companies Act, 1913, which confers power to acquire the shares of shareholders who dissent from a scheme by which one company desires to obtain the transfer to itself of all the shares or a class of shares in another company.
The applicants (in the two consolidated applications) are thirty-seven in number and they hold fully paid-up ordinary shares of Rs. 10/- each of the value of Rs. 1,73,340/- in the transferor company, the Patiala Biscuit Manufacturers Ltd. Rajpura, Respondent No. 1. The subscribed capital of this public limited company is Rs. 30,09,070/-'' detailed as below:
49 Preference shares of Rs. 100/- each, 4900/-3,00,287 ordinary shares of Rs. 10/-each 30, 02870/-1300 deferred shares of Re. 1/- '' 1300/-30,09,070/-(2)
The Pepsu Trading Company Limited, Dal-mia Dadri, Respondent No. 2, the transferee company'', (incorporated as a private limited company on 17-4-54 with a paid-up capital of rupees two lacs" put forward a scheme for acquiring the total shareholding of the transferor company. The offer is contained in a document dated 16-4-1955, was circulated - to its shareholders by the Transferor Co. on 22-4-1955. The main part of the scheme is as under:
The Transferee Company makes an offer involving the transfer of shares in the Transferor Co. on the following terms and conditions:
(i) That this Scheme covers all the shares (Preference, Ordinary and Deferred) in the Transferor Co.
(ii) That the consideration for the shares of the Transferor Company shall be payable as follows.
(a) In cash at the rate of Rs. 100/- for Preference Share of Rs. 100/- each, Rs. 1/4/- for Ordinary Share of Rs. 10/- each, Rs. /2/- for Deferred Share of-Rs. 1/- each.
or (b) In the form of Deposit Receipts of the Transferee Company carrying interest 4 percent, per annum nay able yearly for the amount to-be arrived at according to the rates mentioned in Clause 4 (ii)above; or (a) In the shape of fully paid-up ordinary shares of Rs. 10/- each of Transferee Company at rate of one share against one Preference or ordinary or 100 deferred shares of the Transferee company.
(iii) The shareholders should choose any of the above options and intimate the same while sending the approval. in case no information as to the mode of payment is ''received the consideration shall be paid-in the form of the above said De posit Receipts.
(iv) That the shareholders of the Transferor company intending io approve the Scheme shall communicate their approval with the option re-'' gardins the mode of payment chosen by them,; within four months of the date of the offer on receipt of such approval, the consideration payt able to them shall be passed on to them by the Transferee company through the Transferor. Com-f pany, against surrender of the relevant share scrips. In case any shareholder chooses the option of taking payment in the shape of shares of the Transferee Company and the consideration payable to him results in fraction of a share such factionary amount shall be paid in cash.
The printer''s mistake in the option contained in para 4 (ii) (c) of the above scheme was subsequently corrected as, "In the shape of fully paid up Ordinary Shares of Rs. 10/- each of Transferee Company at the" rate of 10 Shares against 1 Preference Share or 1'' Share against 10 Ordinary Shares or 100 Deferred; shares of the Transferor company."
Before the expiry of four months (viz. before 15th August, 1955) about 79.64 per cent in value of the shareholding of the transferor company accepted the offer. Within a few days thereafter (viz. on 23rd August, 1955), the transferee company issued, a notice individually to each of the dissenting'' shareholders informing them that the offer had- been approved by the holders of not less tnan three-fourths in value of the shares in the trans, dl fervor company and that, unless they assented or obtained an order from court to the contrary, their shares would be compulsorily acquired.
The present applications u/s 153B (I) Indian Companies Act, 1913 were presented by the dissenting shareholders (about 5.75 per cent value) for an order that their shares shall not be compulsorily acquired. Various grounds in order to show that the scheme was unfair and, there fore, not binding on the dissentients were urged But with none of them, because of subsequent change in law, we are a present concerned.
Certain preliminary objections, including one of limitation, were raised in the written re plies submitted by the Respondent but none of them was pressed at the time of final hearing. On the other hand, it was conceded that the applications were in order and also that they were presented within the prescribed period.
Section 153 B was inserted in the Indian Companies Act, 1913, by the Companies (Amendment) Act, 1936. The section reproduced Section 155 of the English Companies Act of 1929, except that it relaxed the stringency of approval by "nine-tenths" in value of the shareholders to "three-fourths". The Indian Companies Act, 1913 has now been repealed by the Companies Act, 1955, (No. 1 of 1956), which came into force on 1-4-56.
Section 395 of the new Act, which corresponds to Section 153 of the repealed Act, raises the ratio of the statutory majority for approval of the scheme to nine-tenths and thus brings it in conformity with the English Law. Sub-section (6) of Section 395 provides that, except for certain alterations mentioned in the Sub-section, the section shall have effect "in relation to an offer made by the transferee company to shareholders of the transferor company before the commencement of this Act". The section, as altered by its Sub-section (6), reads as follows:
"395 (1). Where a scheme or contract involving the transfer of shares or any class of shares in a company (in this section referred to as "the transferor company") to another company (in this section referred to as "the transferee company"), has, within four months after the making of the offer in that behalf by the transferee company, been approved by the holders of not less than nine-tenths in value of the shares affected, the transferee company may, at any time within two months after the expiry of the said four months, give notice in the prescribed manner to any dissenting shareholder, that it desires to acquire his shares; and when such a notice is given, the transferee company shall, unless, on an application made by the dissenting shareholder within one month from the date on which the notice was given, the Court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee company;
(2).................(Omitted).............;
"(3) Where a notice has been given by the transferee company under Sub-section (1) and the Court has not, on an application made by the dissenting shareholder, made an order to the contrary, the transferee company shall, on the expiry of one month from the date on which the notice has been given, or if an application to the court by the dissenting shareholder is then pending, after that application has been disposed of, transmit a copy of the notice to the transferor company and pay or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which, by virtue of this section, that company is entitled to acquire; and the transferor company shall thereupon register the transferee company as the holder of those shares.
"(4) Any sums received by the transferor com-pany under this section shall be paid into a separate bank account & any such sums and any other Consideration so received shall be held by that company in trust for the several persons entitled to the shares in respect of which the said sums or other consideration were respectively received.
"(5) In this section-
(a) "Dissenting shareholder" includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract.
(b).................(Omitted)..............
(6) On behalf of the Respondents, it is contended that Sub-section (6) of Section 395 does not make the provisions of the section applicable to pending actions-and therefore the present proceedings ought to be decided according to the law which existed at the-time when the proceedings were instituted. These-applications arise out of an offer which was approved by the statutory majority before the commencement of the repealing Act.
On such approval, a right in favour of the-transferee Co. to acquire shares of the dissenting shareholders had already accrued and that right could not be taken away by any subsequent legislation. According to Mr. Veda Vyas, learned Counsel for the Respondents Sub-section (6) would apply to cases where the offer is still at a preliminary stage and not to those where the offer has matured into a complete transaction on its acceptance, within the prescribed period, by the holders of more than three-fourths in value of the shares affected.
Counsel is this connection relies upon the well recognised principles of interpretation of statutes, that when the law is altered during the pendency of an action, the rights of the parties are decided according, to the law as it existed when the actions was begun, unless the new statute shows, a clear-intention to vary such rights, & that a statute has not to be construed to have a greater retrospective operation than its language renders necessary. Reliance is also placed on Section 6 of the General Clauses Act, which is expressly made applicable, with respect to the effect of repeals, by Section 658 of the repealing Act.
It is correct that retrospectively of a statute-is not to be presumed. At the same time, it can-pot be denied that the Legislature is in no way prevented from making a statute retrospective. It is competent for the Legislature, in its wisdom, to make certain provisions of an Act retrospective.
In this case, the Legislature, as regards the effect of Section 395, has not left the matter to be determined on the basis of presumptions or by applications of general principles of interpretation. An express provision is made and Sub-section (6) of Section 395 lays down that the section shall apply "in relation to tin offer made by the transferee company to shareholders of the transferor company before the commencement of this Act.
Section 395 comes into operation only when the transferee company desires to force the scheme, after it has been accepted by the statutory fnarjority, upon the dissenting shareholders of the-transferor Co. There is no legal bar to the-acquirement, by transfer, of any number of shares-with the consent of and on the terms settled with the shareholders.
Without having recourse to the section, the transferee company is at liberty to acquire the shares of those who are willing to accept the offer.
Section 395 (1), or for that matter Section 153 B (1). of the repealed Act, entitles the transferee company to acquire the shares of the dissenting shareholders as well, provided the conditions laid down by the section have been strictly complied with,'''' The object of the section is to bring the dissentients in line with the majority and to force them to part with their shares, if the specified conditions are fulfilled.
Even after the scheme is accepted by the statutory majority, the transferee Co. may or may not like to acquire the rest of the shares and it may give notice for the same only to those dissenting shareholders whose shares it desires to ac quire. The company can & is also bound to acquire the shares of those shareholders alone to whom the said notice is duly given.
The conditions which must be fulfilled are: The scheme involving the transfer of shares should I have, within four months after the making of the offer in that behalf by the transferee company. Fees approved by the holders of not less than nine ten the three-fourths according to the repealed Act) in value of the shares to be affected. Within two months after the expiry of the said four months the transferee company should have given Tiotice, in the prescribed manner, to the dissenting shareholders that it desires to acquire their shares.
The of scenting shareholders are then allowed one month''s'' time to apply to the Court for an order that they are not bound to accept the offer, ever though it has received the assent of the statutory majority. The transferee company is bound wait for one month and in case such an application is made, till the decision of that application. The company gets the right and becomes bound to acquire the shares of the non-approving shareholders only after the expiry of this one month or on disposal of the application, if one is made. It is then and then alone that the section comes into operation, in the manner of entitling the -transferee company to pay for the shares of the dissentients and to get its name registered as the holder of those shares. It is thus clear that the right to, acquire the shares (even u/s 153-B of the old Apt) did not & could not accrue to the transferee company as long as the present applications were pending and till they were disposed of.
Till then the only right that accrued to the Co. was one to issue a notice expressing its desire'' to acquire those shares, and that right the Co. had already exercised. Before the right or obligation to acquire the share actually accrued or was incurred and before the operative part of the section had come into play, the Act was re-pealed The affect of it is to bring into operation Section 395 of the new Act, and all subsequent matters are to foe proceeded with in accordance with the provisions of that section.
Section 395 (3) lays down that on the expiry of one month from the date on which the notice has been given, or if an application to the Court by the dissenting shareholders is then pending, after that application has been disposed of, the transferee Co. shall transmit a copy of the notice to the transferor Co. and pay or transfer to the transferor Co. the amount or other consideration representing the price pay able by the transferee Co. for the shares which, "by virtue of this section", that Co. is entitled to acquire.
Suppose, no order to the contrary is made in these applications; the transferee company, after .the applications are disposed of, shall have to proceed under Sub-section (3) of Section 395., The phrase "by virtue of this section" in this Sub-section has been left, as it is even in the altered form in which the section is to apply "in relation to an offer made by the transferee Co. to share-holders of the transferor company before the commencement of this Act".
It necessarily follows that where shares of the dissenting shareholders are to be acquired after the, commencement of the new Act, even in relation to the offers already made, the transferee company shall have to base its right on the provisions of Section 395, of this Act.
As already observed, Section 153-B was inserted in the Indian Companies Act, 1913, by the Indian Companies (Amendment) Act, 1936. The section contained a specific provision relating to the scheme which were approved at any time before the amending Act came into force. The proviso to Section 153-B (1) was in the following terms:
"Provided that, where any such scheme or contract has been so approved at any time before the commencement of the Indian Companies (Amendment) Act, 1936 (XXII of 1936) the Court may by order, on an application made to it by the transferee company within two months after the commencement of that Act, authorise notice to be given under this section at any time within fourteen days after the making of the order, and this section shall apply accordingly, except that the terms on which the shares of the dissenting shareholder are to be acquired shall be such terms as the Court may by the order direct stead of the terms provided by the scheme or contract." According to the above proviso,! where a scheme was approved by the statutory majority before the coming into force of the section, the transferee company was not entitled to acquire the shares of the dissenting shareholders on the terms provided by the scheme but on those settled by the Court. It is significant that this proviso is altogether omitted and no exception with respect to a scheme which might have been approved in accordance with the old Act, is made in the new section.
On the other hand, Sub-section (6) of Section 395 ex pressly provides that, except for the specified sub situations and omissions, the section shall have effect in relation to an offer made by the transferee company to shareholders of the transferor company before the commencement of this Act. The pre sent proceedings arise out of and are in relation to an offer made by the transferee company to shareholders of the transferor company before the commencement of this Act, and therefore the pro ceding shall be governed by the section.
The section does not confer any right on the Court to consider the merits or binding nature of the scheme, so far as its concerns the majority of shareholders who have willingly accepted it. So far as they are concerned the matter, in spite of the section, is complete and the contract gone through.
The only question to be determined is whether the minority shareholders are to be left in possession of their shares or whether they should be compelled to part with them on terms which the other shareholders have accepted. Notice to the applicants, which formed the cause of action and gave rise to the present application was so to say, an offer by the transferee company to purchase or acquire their shares.
This notice was surely "in relation to an offer made by the transferee company to the shareholders of the transferor company"; that makes Section 395 applicable, even though the offer was made before the Act came into force. The intention of. the Legislature is absolutely clear.
Undoubtedly, the intention is to make the section applicable even to offers which were approve-l ed by majority of the shareholders before the| commencement of the Act.
In my judgment, therefore, Section 395 of the new Act (No. 1 of 1956) applics, and since the scheme was n6t:approved by the holders of nine- tenths in value of the shares of the transferor com pany, as required by the section, the applicants are not bound by the schema. The applications are consequently accepted and order made accordingly. In view of the fact that the applicants succeed be cause of the subsequent change in law," the parties'' are left to bear their own costs.