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The Madras High Court on Thursday rejected the objection raised by the UK-based Vodafone against the scheme of amalgamation of Essar Telecommunications Holdings Pvt Ltd with India Securities Ltd, also an Essar company.
Disposing of the petitions filed by Essar Telecommunications and India Securities — under Sections 391 and 394 of the Companies Act, 1956 — to sanction the amalgamation, Mr Justice Vinod Kumar Sharma ruled that as the scheme is beneficial to the transferor and transferee companies, its shareholders and creditors, the Essar arms' petitions were granted.
Board nod
The board of directors of the two companies had approved and adopted the scheme of amalgamation at a meeting on June 4, 2010, subject to confirmation by the Madras High Court.
Vodafone, which had in 2007 acquired 67 per cent stake in Hutchison-Essar from Hutchison, objected to the scheme of amalgamation.
By the proposed scheme of amalgamation, the liabilities were taken over by the transferee company. Therefore, the Judge observed that it could not be said that the right of the third party would be affected.
The only objection that might be raised by any person could be with respect to the local liability of the scheme or it being in violation of any law.
In the absence of any violation of substantial law, merely because certain rights of the third party were going to be affected cannot be the ground to permit the third party to file objections to the scheme.
Once the scheme was in accordance with the statutory provisions of Sections 391 to 394 of the Companies Act and had majority approval, the objection of the petitioner on the locus standi of Vodafone International was upheld, and it was held that Vodafone DV had no locus standi to file objections against the scheme of amalgamation.
Reactions from Vodafone, Essar group
Vodafone, in a statement, has said that the current disclosure to public investors in India Securities Ltd is inadequate. The ISL reverse listing has no bearing on the Underwritten Options over the direct shares in Vodafone Essar currently being exercised and we remain confident that the put and call options will be completed no later than November this year, it added.
A Spokesperson of Essar group said: “The decision of the Madras High Court vindicates our earlier stand that Vodafone indeed did not have any locus standi in relation to this merger as it was neither a shareholder nor a creditor of the relevant companies. The objections filed by Vodafone were intended to delay the merger, and serve their own commercial interests to prevent the discovery of a fair market value of Vodafone Essar Ltd through a market mechanism.”
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