Alps (Pvt.) Ltd. is taking over an unlisted company Mountain Ltd., through the route stipulated under section 395 of the Companies Act, 1956. Alps (Pvt.) Ltd. wants to compulsorily acquire the shares of minority sharehol

Section 395 of the Companies Act, 1956, contains a compulsory acquisition mode for the transferee company to acquire the shares of minority shareholders of the transferor company. Where the scheme has been approved by the holders of not less than nine-tenths (90%) in value of the shares of the transferor company whose transfer is involved, the transferee company may give notice to any dissenting shareholders that it desires to acquire their shares. The scheme shall be binding on all the shareholders of the transferor company (including dissenting shareholders), unless the Court Orders otherwise (i.e., that the scheme shall not be binding on all shareholders). Case Law 1: S Viswanathan v. East India Distilleries & Sugar Factories Limited (1957) 27 Com Cases 175: AIR 1957 Mad 341 held that the power of acquisition of shares of dissentient minority shareholders is not ultra vires the constitution of India. Case Law 2: Benarasi Das Saraf v. Dalmia Dadri Cement Ltd (1958) 28 Com cases 435 (Punj) held that where the scheme or contract has been approved by 90% of the shareholders, the offer of the transferee company will be treated as prima-facie a fair one and the onus will be on the dissentients to show the contrary. Given that Alps (Pvt.) Ltd. is proceeding under Section 395 and assuming the 90% approval threshold is met, the objections of the minority shareholders of Mountain Ltd. may not stand good . The law allows for compulsory acquisition under these conditions, and the burden of proof would be on the dissenting shareholders to demonstrate unfairness or other valid grounds for objection, which is generally difficult against a scheme approved by a substantial majority.