2011 (12) TMI 737 - HC - Companies Law

Court Upholds Company Valuation Order, Rejects Appeal on Valuation Principles

The appeal challenging the Company Law Board's order for the fair valuation of shares was dismissed. The court upheld the valuation by M/s. Vipin ... - Issues Involved:1. Valuation of shares and principles of natural justice.2. Basis for valuation date.3. Reliance on third-party valuation reports.4. Binding nature of valuer's decision.Summary:1. Valuation of Shares and Principles of Natural Justice:The appellant challenged the CLB's order directing the respondent to pay Rs. 3,00,000/- as fair valuation for 1000 shares. The appellant argued that the valuation by M/s. Vipin Aggarwal, Chartered Accountant, did not observe principles of natural justice as no hearing opportunity was given. However, the court noted that the valuer was appointed with the consent of both parties, and the appellant had agreed to the valuation date of 31st March 2008.2. Basis for Valuation Date:The appellant contended that the valuation should be based on the Balance Sheet as on 31st March 2005, alleging that the respondent manipulated the assets and losses between 2005 and 2008 to reduce share valuation. The court found that the appellant had consented to the valuation date of 31st March 2008, and the CLB's practice was to use the balance sheet proximate to the petition date, which was 22nd February 2008.3. Reliance on Third-Party Valuation Reports:The appellant argued that M/s. Vipin Aggarwal relied on M/s. Neeraj and Associates' report without independent valuation of the respondent company's land and building. The court held that as an expert, M/s. Vipin Aggarwal was entitled to rely on any report placed on record by either party. The appellant had not challenged the report of M/s. Neeraj & Associates before the valuation report was furnished.4. Binding Nature of Valuer's Decision:The court emphasized that the valuer's decision, made with the consent of both parties, is binding unless there is evidence of fraud or collusion. The appellant did not impeach the valuer's report on these grounds. The court cited precedents affirming that parties are bound by the valuer's decision if made honestly and in good faith.Conclusion:The appeal was dismissed as it lacked merit. The court upheld the CLB's order and the valuation by M/s. Vipin Aggarwal. Additionally, the respondent agreed to let the appellant retain a Maruti Baleno car, which the court accepted and held the respondent bound by this statement.