2025 (8) TMI 339 - AT - Companies Law

Appellants Must Pay Rs.225 Per Share Plus 12% Interest, Dividends Don't Waive Interest Rights Under Section 24

The NCLAT upheld the order directing appellants to pay respondents the share value of Rs.225 per share with 12% interest, dismissing the appeal. The ... Crystallization of valuation of shares fixed by the valuer as on 15.10.2019, for the purpose of payment to minority shareholder - argument of the Respondent is they have accepted the minimum value in 2019 itself - HELD THAT:- The Appellants' contention that Respondents received dividend on their shares and thus, cannot be allowed payment of interest is again legally untenable. By receiving payment of dividend, Respondent have merely exercised their rights as shareholders as it was their statutory entitlement. Till the time, Respondents continue to be owners of the shares, they were entitled to receive dividends, if declared by the Company. However, the same cannot be stretched to contend the Respondents are not entitled to receive interest in terms of order dated 24.06.2013. In fact, such contention is clearly contrary to the judgment dated 24.06.2013 of Ld. NCLT, which cannot be reviewed after 12 years as the appellants never challenged the said judgment. The said judgment has become final and binding upon the parties. The said judgement did not curtail the right to receive dividends till the shares were transferred. Thus, in the present appeal, any modification would amount to review of judgment dated 24.06.2013, which is impermissible under the law. Though the Respondents did not accept Rs.204.71 in 2017 as valuation of their shares but admittedly their objections were not found frivolous and in fact later the valuation per share rather increased. The respondents thus were within their legal right to raise dispute and of such genuine right they cannot be deprived of interest - there is no cogent reason to upset a reasoned order of the Ld. NCLT. There was never any question of further crystalisation of amount after the 2nd valuation report as the appellants failed to deposit even the minimum of the range or its average. In Amritsar Swadeshi Woollen Mills Private Limited Vs Vinod Krishan Khanna and other [2019 (5) TMI 606 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI] the Ld. NCLT had observed the company had effectively utilised the funds of the shareholder in relation to its business knowing fully well such funds are required to be refunded and being a Court of equity while dealing with the matters touched upon oppression and mismanagement and exercising equitable jurisdiction the Tribunal was unable to accept the stand the interest was not payable. Admittedly the company is a profit making company and had given dividends once. The balance sheet of the appellant also show it is a profit making company and thus it is just and equitable that the person who has used the money, must refund it with interest. Section 144 of the CPC, no doubt, is a statutory recognition of pre existing rule of justice, equity and fair play and even otherwise the Court has inherent jurisdiction to do justice between the parties. Appellants are thus, liable to pay to Respondents, the total value of their respective shares @ ₹225/- per share alongwith interest @12% in terms of impugned order dated 29.07.2024 - appeal dismissed. ISSUES: Whether the valuation of shares fixed by the valuer as on 15.10.2019 can be considered 'crystalized' for the purpose of payment to the minority shareholder.Whether interest at the rate of 12% per annum is payable from the expiry of 8 months from the valuation date or only from the date of the impugned order dated 29.07.2024.Whether receipt of dividends by the shareholder precludes entitlement to interest on the share price amount due.Whether the order dated 24.06.2013 directing payment of share value and interest is final and binding and can be reviewed after a lapse of several years.Whether delay caused by the majority shareholders in accepting the valuation report affects the entitlement to interest by the minority shareholder. RULINGS / HOLDINGS: The valuation report dated 15.10.2019 by the valuer fixing the share price range between Rs.225 to Rs.263/- per share was held to have 'crystalized' the value of shares for payment purposes, and the NCLT rightly directed payment at the minimum rate of Rs.225/- per share.The appellants are liable to pay interest at 12% per annum 'with effect from expiry of 8 months from 15.10.2019' as per the order dated 24.06.2013, and not from the date of the impugned order dated 29.07.2024.The receipt of dividends by the respondent shareholder does not bar entitlement to interest on the share price amount; dividends represent statutory rights and do not affect the right to interest on delayed payment of share value.The order dated 24.06.2013 directing payment and interest has become 'final and binding' and cannot be reviewed or modified after 12 years, especially as the appellants did not challenge it within the prescribed time.The delay in payment caused by the appellants' objections and failure to accept the valuation report has no effect on the respondent's right to interest, as the appellants have been enjoying the benefits of the investment. RATIONALE: The Court applied the directions contained in the order dated 24.06.2013 under Sections 397/398 of the Companies Act, 1956, which mandated valuation and payment of shares with interest if payment was delayed beyond six months.The Court relied on the principle that once a valuation report is accepted or not validly challenged, the share price is considered 'crystalized' and enforceable for payment purposes.The Court rejected the argument that dividends received negate the entitlement to interest, emphasizing that dividends are a statutory entitlement for shareholders and separate from the right to interest on delayed payment.The Court referred to equitable principles under Section 144 of the Civil Procedure Code and inherent jurisdiction to ensure justice, recognizing that the majority shareholders utilized the funds and must refund with interest.The judgment reaffirmed that final orders on valuation and payment cannot be reopened or reviewed after a long lapse of time, especially when no timely challenge was made, thereby upholding the sanctity of finality in judicial decisions.The Court noted the delay caused by the appellants in raising objections to the valuation report and held that such delay cannot prejudice the respondent's right to receive interest as compensation for the use of funds.