Ludhiana Berry Ltd. has proposed merger of Jalandhar Berry Ltd. with itself. The merger scheme has been approved by 76% shareholders of Ludhiana Berry Ltd. and 98% shareholders of Jalandhar Berry Ltd. (in value terms). E

Section 391(2) of the Companies Act, 1956 (now Section 230-232 of Companies Act, 2013, with NCLT/NCLAT replacing the High Court) provides that when the court directs the convening, holding and conducting of a meeting of creditors or members or a class of them, a particular majority of the creditors or members or a class of them should agree to the scheme of compromise or arrangement. As per the aforesaid sub-section, the majority required is the majority in number representing three-fourths in value of the creditors or members or a class of them, as the case may be, present and voting in the meeting so convened either in person, or by proxy. After the said meeting agrees with such majority, if the scheme is sanctioned by the court, it shall be binding upon the creditors or members or a class of them, as the case may be. In the given case: Ludhiana Berry Ltd. (Transferee Company): Scheme approved by 76% shareholders. Jalandhar Berry Ltd. (Transferor Company): Scheme approved by 98% shareholders. Both approvals meet the statutory requirement of three-fourths (75%) in value of shareholders present and voting. Decided Case Law: In the case of Punjab and Haryana High Court in Hind Lever Chemicals Limited and Another [2005] 58 SCL 211 (Punj. & Har.) , the court held that the language of Section 391(2) of the Act is totally unambiguous and a plain reading of this provision clearly shows that the majority in number by which a compromise or arrangement is approved should represent three-fourth in value of the creditors/shareholders who are 'present and voting' and not of the total value of the shareholders or creditors of the company. Conclusion: Since the scheme has been approved by the requisite majority (more than 75% in value) of shareholders of both Ludhiana Berry Ltd. and Jalandhar Berry Ltd. who were present and voting, and if the scheme is sanctioned by the Court/Tribunal, it will be binding on all the shareholders, including the dissenting shareholders, of both companies.