Lincon Polymers Private Limited & Anr vs Na

1. Lincon Polymers Private Limited ...Appellant(s) 508-515, The Capital-2, Opp. Serenity Lavish, Science City, Sola, Ahmedabad, Gujarat, India, 380060.

2. Lincon Polyplast Private Limited 308, Shanti Mall, Nr. Satadhar Cross Road, Ghatlodia, Ahmedabad, Gujarat, India, 380061.

Versus

..................... ...Respondent(s)

Present: For Appellant : Mr. Navin Pahwa, Sr. Advocate with Mr. Rohan Talwar, Advocate.

ORDER

(Hybrid Mode)

[Per: Ajai Das Mehrotra, Member (Technical)]

The present appeal is filed against the order dated 02.05.2025 of the

Ld. NCLT, Ahmedabad in C.A.(CAA)/17(AHM)2025 wherein application for

first motion of scheme of demerger under Section 230-232 of the Companies

Act, 1956 was dismissed.

2. The brief facts of this case are as under:

i) Lincon Polymers Private Limited had manufacturing facilities, one at

Khatraj and one at Borisana. The Khatraj manufacturing facility was catering 2

to domestic market whereas the Borisana facility was catering to export

market.

ii) It was proposed to transfer the manufacturing facility catering to the

domestic market at Khatraj (Demerged Undertaking) from Lincon Polymers

Pvt. Ltd. and to merge it with Lincon Polyplast Pvt. Ltd. (Resulting Company).

iii) The stated major benefit of the scheme of arrangement was that each

unit will be benefited from a focussed management approach adopted to its

specific market needs (domestic or export) which will allow better control and

management of each unit.

iv) Lincon Polymers Pvt. Ltd. was incorporated on 04.03.1996 whereas

Lincon Polyplast Pvt. Ltd. was recently incorporated on 06.08.2024. Through

application C.A.(CAA)/17(AHM)2025 the applicants sought following

directions from the Ld. NCLT:

a) Dispensation of meeting of equity shareholders of demerged company

(Lincon Polymers Pvt. Ltd.) in view of the consent affidavits given by all the

shareholders.

b) Meeting of the secured and unsecured creditors of demerged company.

c) Dispensation of the meeting of shareholders of Resulting Company in

view of the consent affidavits given by the equity shareholders of Resulting

Company (Lincon Polyplast Pvt. Ltd.).

d) Since there were no secured creditors of the Resulting Company, no

direction was sought.

e) Meeting of unsecured creditors of the Resulting Company.

Company Appeal (AT) No. 108 of 2025 3

3. The Ld. NCLT vide order dated 02.05.2025 dismissed the application

mainly on the following grounds:

(a) The Demerged Company has 5 shareholders and Resulting Company

has 4 shareholders. The shareholding of Sri Pareshbhai B. Patel and Smt.

Anitaben P. Patel is quantitatively different in both the companies. Pareshbhai

B. Patel holds 40.39% and his wife Smt. Anitaben P. Patel holds 3.27% shares

of the Demerged Company. Pareshbhai B. Patel is not a shareholder in the

Resulting Company whereas his wife Smt. Anitaben P. Patel holds 43.72% of

the shares of resulting company. Though both husband and wife together

cumulatively hold 43.72% of shares in both the companies, they are two

different individuals and their shareholding cannot be considered "adjoined".

Since the shareholding pattern for both the companies is different the

valuation report which assumes all the shareholders of demerged and

resulting companies are the same, and their percentage of shareholding is

also same, is not correct. The swap ratio of one equity share of Rs. 10 each

fully paid-up in the Resulting Company for every one equity share of 10 held

in the demerged company "stands negated".

(b) Only 9,38,206 shares have to be issued as per the Scheme whereas it

is stated in the scheme that share capital is increased by 9,40,000 shares.

The application does not provide details about shareholders to whom 1,794

shares will be issued.

(c) The assets and liabilities of Khatraj undertaking are not identified and

segmental accounts for Khatraj undertaking are not furnished.

Company Appeal (AT) No. 108 of 2025 4

4. The Learned Sr. Counsel for the Appellant companies submitted as

under:

i) The Appellant companies are closely held family companies wherein the

shareholders in both entities are nearly identical and the entire stake is held

by one family. All shareholders have furnished affidavits giving their consent

to the scheme and these consent affidavits were placed before the Ld. NCLT.

The Ld. NCLT failed to consider that the present scheme is in the nature of

family arrangement and all the equity shareholders are family members,

therefore, no prejudice is caused to any shareholder in regard to the valuation

or swap ratio. Through clarificatory affidavit filed on 30.04.2025 before the

Ld. NCLT it was clarified that both the companies are family-owned

companies and each shareholder has given his consent to the Scheme.

ii) Details of assets and liabilities of the domestic and the export

undertakings were furnished before Ld. NCLT. These details are again placed

on record at page No. 349 to 359 of the Appeal Paper Book.

iii) It was submitted that there is no proposal to issue additional 1794

shares. Since 9,38,206 shares were to be issued, the authorised share capital

was increased by 9,40,000. The authorised capital was rounded to the nearest

round figure. There was only increase in authorised share capital and no

additional 1794 shares were proposed to be issued, as mistakenly assumed

by the Ld. NCLT.

iv) On valuation and swap ratio, the Learned Sr. Counsel referred to the

following judgments of the Hon'ble High Court of Gujarat:

Company Appeal (AT) No. 108 of 2025 5

(a) Mahavir Weaves Pvt. Ltd., In re (1994) SCC OnLine Guj 201: In the facts of

this case, both the transferee company and the transferor company were

Private Limited companies under the same management. It was noted that in

the said case members were belonging to group of two families and they have

consented to the sanctioning of the scheme without their being any exception.

It was noted that it will not be necessary to go into valuation for the simple

reason that the shareholders who belonged to two families have accorded their

consent to the proposed amalgamation and it would be unnecessary to

burden the companies with extra cost of valuation. On the facts of this case,

the proposed scheme of amalgamation was approved. The relevant para 10

and 14 are extracted below for ready reference:

"10. Having heard learned additional standing counsel on the aforesaid three authorities, it was pointed out to him that in none of the aforesaid three cases private limited companies were concerned. His attention was drawn to the fact that in the present petition the members are belonging to a group of two families and they have consented to the sanction of the scheme without there being any exception. Besides, the companies are having their operations almost intermingled with each other. Added to this is the submission of Mr. Soparkar that the exchange ratio which has been worked out by the Central Government is on the basis of the balance-sheets and that would not display the appreciated value of the assets of the three companies. The fact that the transferee- company has let out the premises as well as some of the machinery to the respective transferor companies would also assume importance. That would also have some effect on the exchange ratio. Mr. Soparkar submitted that it would not be necessary to go into the valuation submitted by the expert for the simple reason that the shareholders who belonged to two families

Company Appeal (AT) No. 108 of 2025 6

have accorded their consent to the proposed amalgamation and if would be unnecessary to burden the companies with extra cost of valuation. Having heard Mr. Soparkar on the question of the exchange ratio, I am of the opinion that bearing in mind the exchange ratio worked out by Central Government at 3 : 2 and the exchange ratio adopted by the company at 1 : 1, in view of the facts and circumstances of the case, I do not find any unreasonableness in the exchange ratio which has been adopted by the three companies. There is, therefore, no reason to disturb the wishes of the share-holders of the company. I find that the above decisions which have been pressed into service by learned additional standing counsel are distinguishable on the facts whereas the basic principle of maintaining the wishes of the statutory majority of the shareholders flowing from the said decisions applies to the present matters with the greater force.

...........

14. In the facts and circumstances emerging from the record of these three petitions and in view of what is stated above, it is ordered that the transferor companies be amalgamated with the transferee-company with effect from April 1, 1993, as per the proposed scheme of amalgamation placed on record annexure "C"

in all these petitions. Consequently, all the rights, liabilities and duties of the transferor companies shall stand transferred to and vest in the transferee-company, namely, Mahavir Weaves Pvt. Ltd., without any further act or deed, and all the liabilities and duties of the transferor companies shall also become the liabilities and duties of the transferee-company and the transferor companies shall stand dissolved, without winding up, in view of the scheme of amalgamation as per annexure "C" being sanctioned."

(Emphasis supplied)

Company Appeal (AT) No. 108 of 2025 7

(b) Takshashila Gruh Nirman Pvt. Ltd., (2012) SCC OnLine Guj 2275: In this

case it was noted in para 3 and 11 of the said judgment that transferee

company and the transferor company are under the same management and

are closely held companies and upon merger there is no interest of either of

the members or of public at large which is going to be adversely affected.

v) The Learned Sr. Counsel also referred to the judgment of this Tribunal

in the case of Indiabulls Real Estate Limited and Others V. Department of

Income Tax, 2025 SCC OnLine NCLAT 85, which was confirmed by the Hon'ble

Supreme Court vide order dated 10.02.2025, wherein this Tribunal had

traced the line of judgments and has held that no interference is warranted

where fair exchange ratio is determined by the experts and approved by

overwhelming majority of shareholders.

5. We have heard the submissions of Learned Sr. Counsel and have

perused the records. The list of assets and liabilities of the demerged domestic

undertaking has been furnished by the Appellant. It is stated that these

details were available with Ld. NCLT. We note that both the demerged

company and the resulting company are family-owned concerns. The

demerged company has 5 shareholders, including Pareshbhai B. Patel and

his wife Smt. Anitaben P. Patel who together hold 43.72% of the shares. The

resulting company has only 4 shareholders. Pareshbhai B. Patel is not a

shareholder in the resulting company but his wife Smt. Anitaben P. Patel

alone holds equal percentage of shares, namely, 43.72%. Effectively, there is

no variation between the shares held by them cumulatively.

Company Appeal (AT) No. 108 of 2025 8

5.2 We also note all the shareholders, whose inter-se rights in shareholding

and swap ratio are of concern to the Ld. NCLT, have given their unequivocal

consent on affidavit to the said scheme of arrangement. Considering

shareholding structure of the two companies, the professional valuation

expert, Den Valuation (OPC) Private Limited, registered with the IBBI, have

given their report on fair exchange ratio.

5.3 This issue was examined by us in Indiabulls Real Estate Limited and

Ors. (supra) wherein we had examined the judicial guidance on the issue of

acceptance of valuation in the scheme of amalgamation. The relevant portion

of the said judgment is reproduced below:

"31. Before deciding whether learned Tribunal was correct in rejecting the Scheme on the issue of valuation on the initial objection raised by the Income Tax Department, we look to judicial guidance on this issue.

It has been held in Cetex Petrochemicals Ltd., re, (1992) 73 Comp Cas 298 (Mad) that the approval by overwhelming majority is a symbol of the soundness of the scheme. The court would not interfere. It cannot substitute with its wisdom the collective wisdom of the shareholders.

32. It was held in Aradhana Beverages & Foods Company Ltd. V Regional Director of Companies, 1998 (46) DRJ 228 where share exchange ratio is determined by experts, and shareholders are satisfied, no interference at the instance of Regional Director is called for. The relevant portion of the said judgment is reproduced below:

"Since as a matter of fact and undisputedly the loan has been subsequently converted into shares, the grievance of the Regional Director in my view does not survive. The shareholders and creditors are better equipped to gauge the value of their shares with reference to market trends & if they have approved the amalgamation, the Regional Director cannot be heard to say that the merger would not be in interest of the shareholders and creditors & consequently in the public

Company Appeal (AT) No. 108 of 2025 9

interest. To my mind in a given case, the interest of the shareholders may or may not be synonymous with the public interest. But in the instant case determination of the share exchange ratio does not affect public interest. Therefore, the submission of the learned counsel for the Regional Director that the amalgamation not being in the interest of shareholders will also be opposed to public interest is untenable as they do not coincide. It may also be noticed that both the transferor and the transferee companies, are the subsidiaries of Pepsico. Both the companies are closely held companies and the share exchange ratio seems to be fair to the shareholders. The Regional Director has not been able to show that the valuation is manifestly unreasonable, unfair and arbitrary. This being so, the judgment of the shareholders must be respected & cannot be disturbed."

(Emphasis supplied)

33. The Court's obligation is to be satisfied that the valuation was in accordance with law and it was carried out by an independent body. While stating so, the Hon'ble Supreme Court in Hindustan Lever Employees' Union v. Hindustan Lever Ltd. and Ors.,1995 Supp (1) SCC 499, has given the following guidance:

"3. 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. It exercises a jurisdiction founded on fairness. It is not required to interfere only because the figure arrived at by the valuer was not as better as it would have been if another method would have been adopted. What is imperative is that such determination should not have been contrary to law and that it was not unfair to the shareholders of the company which was being merged. The Court's obligation is to be satisfied that valuation was in accordance with law and it was carried out by an independent body. The High Court appears to be correct in its approach that this test was satisfied as even though the chartered accountant who performed this function was a Director of TOMCO but he did so as a member of a renowned firm of chartered accountants. His determination was further got checked and approved by two other independent bodies at the instance of shareholders of TOMCO by the High Court and it has been found that the

Company Appeal (AT) No. 108 of 2025 10

determination did not suffer from any infirmity. The company court, therefore, did not commit any error in refusing to interfere with it. May be as argued by the learned counsel for the petitioner that if some other method would have been adopted probably the determination of valuation could have been a bit more in favour of the shareholders. But since admittedly more than 95% of the shareholders who are the best judges of their interest and are better conversant with market trend agreed to the valuation determined it could not be interfered by courts as, "[c]ertainly, it is not part of the judicial process to examine entrepreneurial activities to ferret out flaws. The court is least equipped for such oversights. Nor, indeed, is it a function of the judges in our constitutional scheme. We do not think that the internal management, business activity or institutional operation of public bodies can be subjected to inspection by the court. To do so, is incompetent and improper and, therefore, out of bounds. Nevertheless, the broad parameters of fairness in administration, bona fides in action, and the fundamental rules of reasonable management of public business, if breached, will become justiciable."

(Emphasis supplied)

34. It has been held by Hon'ble Supreme Court in the case of Miheer H. Mafatlal v Mafatlal Industries Ltd. (1997) 1 SCC 579, it is for the equity shareholders acting bona fide in the interest of their class as a whole to accept a particular scheme and once the exchange ratio is 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 (para 39 and 40 of the judgment).

35. Following the said judgment in Miheer Mafatlal, the Hon'ble Gujarat High Court in the case of Gujrat Ambuja Cotspin Ltd., 1998 SCC OnLine Guj 390 : (2001) 104 Comp Cas 397 refused to interfere in the valuation of shares done by the experts.

36. Hon'ble Supreme Court in Duncans Industries Ltd. vs. State of U.P. and Ors. (2000) 1 SCC 633 in paragraph 15 has held as under:

Company Appeal (AT) No. 108 of 2025 11

"15. The question of valuation is basically a question of fact and this court in normally reluctant to interfere with the finding on such a question of fact if it is based on relevant material on record".

Following this Judgment, Hon'ble Supreme Court in the case of G.L. Sultania and Anr. vs. SEBI and Ors. (2007) 5 SCC 133, paragraph 31 and 32 has held that valuation of shares is a technical, complex issue which should be appropriately left to the wisdom of the experts. The relevant portion is as under:

"31. In Duncans Industries Ltd. vs. State of U.P. this court held that the question of valuation is basically a question of fact and this court is normally reluctant to interfere with the finding on such a question of fact if it is based on relevant material on record. Similarly, in Miheer h. Mafatlal v. Mafatlal Industries Ltd. this Court sounded a note of caution observing that valuation of shares is a technical and complex problem which can be appropriately left to the consideration of experts in the field of accountancy. So many imponderables enter the exercise of valuation of shares.

32. These decisions clearly lay down the principle that valuation of shares is not only a question of fact, but also raises technical and complex issues which may be appropriately left to the wisdom of the experts, having regard to the many imponderables which enter into the process of valuation of shares. If the valuer adopts the method of valuation prescribed, or in the valuation, his valuation cannot be assailed unless it is shown that the valuation was made on a fundamentally erroneous basis, or that a patent mistake had been committed, or the valuer adopted a demonstrably wrong approach or a fundamental error going to the root of the matter. Where a method of valuation is prescribed the valuation must be made by adopting scrupulously the method prescribed, taking into account all relevant factors which may be enumerated as relevant for arriving at the valuation".

(Emphasis supplied)

37. Hon'ble Bombay High Court in the case of Alstom Power Boilers Ltd. vs. State Bank of India & IDBI 2002 SCC Online Bom 1084 has held the Company Court has supervisory jurisdiction, and where Scheme is approved by overwhelming majority, the

Company Appeal (AT) No. 108 of 2025 12

dissenting minority shareholders cannot tyrannise the majority. The relevant part of judgement is as under:

"........

28. The parameters of the jurisdiction of the Company Court under Sections 391 to 394 are well established. The limitations put on this jurisdiction can be equated with the jurisdiction of the judicial review under Articles 226 and 227 of the Constitution of India. It is not an appellate jurisdiction. The application under Section 391 for sanction of the scheme of amalgamation cannot be treated as an appeal. The scheme is to be examined by the company court within the limited scope of supervisory jurisdiction".

........

37. To conclude, the scheme was opposed by one unsecured creditor of value Rs. 4.48 lakhs. Barring one such opposition, the scheme was approved by one and all from all the classes. One person cannot dictate his baseless commercial wisdom on the 99% voters. If the majority cannot be allowed to coerce the minority, even the molecule or microscopic minority can never be allowed to stall the scheme approved by almost 100% members. To do so, would be to mock at the vast majority who overwhelmingly are in favour f the scheme. Even minority cannot tyrannise the majority".

........

50. Further, I do no find any unfairness or unjustness in the scheme. The A.P.I.L shareholders have accepted the swap ratio and whatever was computed in the scheme. Commercial wisdom of the A.P.I.L. shareholders cannot be subjected to appeal before this court. In may opinion, broadly the scheme by and large, is fair and just to both the parties and all the shareholders and the creditors and the same deserves to be sanctioned. There is hardly any valid dissent to the scheme which is approved almost unanimously, even by those from the A.P.I.L. who stand to gain less immediately in short ran".

(Emphasis supplied)

38. It has been held by the Hon'ble Gujarat High Court in the case of Alfa Quartz Ltd. vs. Cymex Time Ltd. 1997 SCC Online Guj 265 that even where there are allegations of unfairness of share exchange ratio, court should not interfere as the same has been accepted without demur by the overwhelming majority of the shareholders of the amalgamating companies. The relevant portion of the said judgment is reproduced below:

Company Appeal (AT) No. 108 of 2025 13

"12. It has been pointed out that the shareholders of the transferor-compa-nies are proposed to be allotted more shares which seems to be against the interest of the shareholders of the transferee-company.

13. But against this say, learned counsel Mr. Mavank Buch for the petitioning companies places reliance upon the Supreme Court pronouncement in Miheer H. Mafatial v.

Mafatial Industries Ltd., [1996] 87 Comp Cas 792; [1996] 4 Comp 124, with a view to canvass the principle that, 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 the say of that the shareholders in their collective wisdom should not have accepted the exchange ratio on the ground that it will be detrimental to their interest. The Supreme Court precisely says so, In the petitions on hand there is absolutely no demur by any of the shareholders against the exchange ratio. On the contrary the shareholders of the transferor-companies and transferee-company also have accepted the exchange ratio proposed in the scheme of amalgamation. Therefore, it appears that, it would not be open to me to say that the exchange ratio accepted by the shareholders of the transferor-companies and the transferee company would be prejudicial or detrimental to their interest. Therefore, the above said communication should not come in the way of the petitioning companies. 14. Independently all of these, as a company court, I have been satisfied with the scheme proposed as a whole is just, fair and reasonable from the point of view of all concerned".

(Emphasis supplied)

39. Hon'ble High Court of Calcutta in the case of Suresh Kumar Rungta vs. Roadco (India) Pvt. Ltd. & Ors. has relied upon a judgment of the English Court in Fletcher & Anr. vs. Royal Automobile Club Ltd. reported in (2000) 1 BCLC 331 wherein it was held that if the effect was the same had fraud been practised and it not having been practised, the court should not set aside a judgment on the ground of fraud. The relevant part of the judgement is as under:

"30. The Ld. Judge has relied on the judgment in Fletcher & Anr. v. Royal Automobile Club Ltd. reported in (2000) 1 BCLC 331. On the basis of the said judgment the learned Judge has held that if the effect was the same had fraud been practised and it not having been practised, the

Company Appeal (AT) No. 108 of 2025 14

court should not set aside a judgment on the ground of fraud....."

40. In the case of Challa Rajendra Prasad vs. Asian Coffee Ltd. 1999 SCC Online AP 92, while rejecting the request of the objector seeking details of valuation, the High Court of Andhra Pradesh, following the judgment of Supreme Court in Kamala Sugar Mills Ltd. (1984) 55 Company Cases 308 made following observations:

".....

From this law of the Hon'ble Supreme Court it is clear that it is enough if the expert opinion is obtained regarding the valuation and fixation of the exchange ratio and the mathematical calculation as to how those valuers had arrived at would be a technical and complex problem and should be left to the consideration of such experts in the field of accountancy only". (para 8)

41. Hon'ble Gujarat High Court in APCO Industries Ltd., In re 1995 SCC Online Guj 284 has held that when there is no evidence of fraud or malafides on part of Valuers, and standard method of valuation is followed, the objection to the valuation should be overruled. The relevant part of the judgement is as under:

"14. It is sought to he urged that the exchange ratio of 150 shares to be allotted by the transferee-company for each share held of the transferor-company is, apparently, on a high side. But, it requires to be appreciated that the exchange ratio has been fixed, taking into consideration the apparent rise in the fixed assets of the company as valued and reported by the expert valuer. As indicated above, there is no reason to believe that the valuer can be said to be guilty of submitting an inflated valuation- report, which would not correctly reflect the revaluation reserve. In this connection, a reference is made to the Kerala High Court decision, in the case of Malayalam Plantation (India) Ltd. v. Mathew Philip. [1986] TLR 1753, in which the learned single Judge has taken a view that, when there was no evidence of fraud or mala fides on the part of the persons making the valuation and when the standard method of valuation is adopted, the objection to the valuation should be overruled. Here also, in the instant case before me, there is not only no evidence of fraud or mala fides on the part of the valuer, but even there is no such whisper in the affidavit-in-reply, filed on behalf of

Company Appeal (AT) No. 108 of 2025 15

the Central Government. In view of this factual and legal position, the contention does not appear to be open to the Central Government. The exchange ratio, therefore, cannot be said to be unreasonable or unfair. This requires to be said and emphasised regard being had to the revaluation reserve of the assets of the transferor-company.

15. Thus, it appears that, the petitions require to be allowed and the scheme of amalgamation, as presented along with the same require to be sanctioned. The same is hereby accordingly allowed and sanctioned".

(Emphasis supplied)

42. In the case of M/s Vodafone Essar Ltd. & Ors. and M/s Vodafone Essar Infrastructure Ltd. (Company Petition No. 334/2009), the Delhi High Court examined objections raised by the Income Tax Department concerning the proposed demerger scheme. The objections included concerns about the potential negative net worth of the transferor companies' post-demerger, possibly impairing their ability to meet tax liabilities, and arguments that the scheme might contradict public interest, despite aligning government policies promoting infrastructure sharing. The department also highlighted potential tax evasion risks, though the court clarified that lawful tax avoidance does not inherently render a scheme against public interest. Additionally. disputes over the valuation and accounting treatment of transferred assets were acknowledged, with the court leaving such matters to tax authorities for resolution. Ultimately, the court sanctioned the scheme but preserved the tax authorities' rights to pursue any related liabilities independently. The relevant extract of the judgement is as follows:-

"70. If the Court is indeed to sanction the Scheme, the powers of the Income Tax Department must remain intact. The authorities relied on by the petitioners also support this proposition, with the only exception being a situation where the Scheme itself has only one purpose, which is to create a vehicle to evade the payment of tax, rather than mere avoidance of tax. It is also true that the scope of objection that may be raised by the Central Government and the Regional Director is larger, and that of the tax authorities is confined to the question of revenue. It is not open to this Court, in the exercise of company Jurisdiction, to sit over the views of the shareholders and Board of Directors of the petitioner companies, unless their views were against the

Company Appeal (AT) No. 108 of 2025 16

framework of law and public policy, which, as discussed above, is not the conclusion reached here. It is purely a business decision based on commercial considerations.... ...72. In view of the approval accorded by the equity shareholders, secured and unsecured creditors of the petitioner companies, and the Regional Director, Northern Region, to the proposed Scheme of Arrangement, as well as the submissions of the Income Tax Department, there appear to be no further impediments to the grant of sanction to the Scheme of Arrangement. Consequently, sanction is hereby granted to the Scheme of Arrangement under Sections 391 and 394 of the Companies Act, 1956 on the aforesaid terms while reserving the right of the Income Tax Authorities to the extent stated above".

(Emphasis supplied)

43. The Hon'ble Bombay High Court in Parke Davis (India) Ltd, In re [Company Petition No. 894 of 2002] while deciding the legality of swap share ratio discussed the judgement of Hindustan Lever (Supra) and held that:

"It is clear from the observations that if any objection is raised before the company court to the swap ratio of shares, the enquiry that the court has to make is whether it is contrary to any law, whether the valuation is carried out by an independent body and to find out whether it can be said that the ratio is unfair. The court has to see how the members who are the best judges of their own interest have voted on the resolution. So far as the present case is concerned, it is nobody's case that the swap ratio is contrary to any law. It is also nobody's case that the experts who submitted the valuation report were not independent so far as the question of fairness is concerned. It is clear from the material produced on record that 99.94 percent of the shareholders have voted in favour of the resolution and therefore, in my opinion, when 99.94 per cent, of the shareholders find that the swap ratio is not unfair, this court would not be justified in interfering with the same".

(Emphasis supplied)

44. In the present case valuation has been done by two independent experts using DCF method which is universally accepted and recognised for valuation of shares. No objection/comment regarding competence of valuers is made by

Company Appeal (AT) No. 108 of 2025 17

any concerned party. A Category I Merchant Banker has affirmed the share-swap ratio. It is nobody's case that valuation is contrary to any law. There is no evidence of fraud or malafides on the part of persons undertaking the valuation. The shareholders have approved the Scheme with overwhelming majority of nearly 100%. The creditors have also approved the Scheme with nearly 100% majority. The amalgamating companies have numerous real estate projects and it was only in one project that the joint venture partner had acquired lesser land area. The amalgamating Transferor company is only a developer in this project and was informed later about lesser acquisition of land, after the valuation was done. The valuation has been done under DCF method, which is concerned more about future income than assets of the company. In any case, the profit sharing ratio with joint venture partner (Cornerstone Group, which is an independent unrelated group), was subsequently revised in favour of Embassy Group to ensure similar cash flow. In the conspectus of facts of this case enumerated above, we hold that learned NCLT had no grounds to reject the scheme on the issue of valuation or share swap ratio."

(Emphasis supplied)

5.4 Further, the jurisdictional Gujarat High Court had in the case of

Mahavir Weaves Pvt. Ltd., In re (supra) allowed the scheme of amalgamation

even in the absence of valuation report in family-owned companies. This

judgment has been followed by Hon'ble Gujarat High Court in Takshashila

Gruh Nirman Pvt. Ltd. (supra).

6. Considering the conspectus of facts in this case, that the appellant

companies are closely held family concerns, the valuation and share swap

ratio is worked out by expert IBBI registered Valuers, the shareholders of both

the companies have given their unequivocal consent to the Scheme, we hold

that Ld. NCLT has erred in dismissing the application for first motion seeking

demerger of one unit of Appellant No. 1 company and its merger in the

Company Appeal (AT) No. 108 of 2025 18

resulting company, Appellant No. 2. The impugned order is set aside with the

directions to the Ld. NCLT to issue consequential order regarding

convening/dispensation of meetings within three days of receipt of this order.

With these directions, the present appeal is allowed. Copy of this order be

forwarded to the Ld. NCLT, Ahmedabad, forthwith.

[Justice Yogesh Khanna] Member (Judicial)

[Mr. Ajai Das Mehrotra] Member (Technical)

Place: New Delhi Dated: 26.05.2025 Ram N.

Company Appeal (AT) No. 108 of 2025