Reduction of Share Capital affirmed; court upheld tribunal findings rejecting procedural bias and perverse valuation.

Reduction of share capital was examined for procedural infirmity and valuer bias; court applied statutory text, inspection availability, tribunal concurrent findings and the standard that bias must be demonstrably real, and upheld the reduction. On valuation, the court assessed the use of Discount for Lack of Marketability against accounting and valuation standards and prior offers, applying the test of egregious unreasonableness or perversity for judicial interference; finding the valuation rationale plausible and supported by independent confirmations, the court declined to set aside the price. Appeals dismissed; tribunal conclusions affirmed.

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Issues: (i) Whether the reduction of share capital under Section 66 of the Companies Act, 2013 and the procedure followed (notice, disclosure and independence of valuer) were vitiated by procedural infirmity or bias; (ii) Whether the valuation method applied, specifically the use of Discount for Lack of Marketability (DLOM), and the price fixed for minority shareholders was unreasonable or perverse, warranting interference by this Court.

Issue (i): Whether the procedure followed for reduction of share capital, including the notice, retention of valuation and fairness reports at the registered office, and the appointment of a valuer allegedly related to the internal auditor, amounted to procedural infirmity or bias invalidating the scheme.

Analysis: The Court examined statutory requirements under Section 66 and related provisions, the contents of the notice, availability of valuation and fairness reports at the registered office, participation and voting by identified shareholders, the NCLT/NCLAT scrutiny and findings, and the evidence regarding connections between the valuer and the internal auditor. The Court noted that Section 66 does not mandate a valuation report, that the company had nonetheless obtained a valuation and a fairness report, that the reports were available for inspection and some shareholders inspected them, and that the NCLT and NCLAT examined objections and issued concurrent findings. On the question of valuer independence, the Court applied the legal standard that bias must be demonstrably real and found no real danger of bias, noting independent affirmation of the valuation by unrelated agencies and compliance with accounting certification requirements.

Conclusion: Against the appellants. The Court held that there was no procedural infirmity or demonstrable bias that vitiated the reduction of share capital or justified interference.

Issue (ii): Whether the valuation and the application of DLOM in fixing the exit price were unreasonable or perverse so as to warrant judicial interference under Section 423 of the Companies Act, 2013.

Analysis: The Court considered statutory scheme, applicable accounting and valuation standards (including Ind AS 113 and ICAI valuation guidance), precedent on DLOM (including foreign decisions and scholarly commentary), the factual matrix of BTL (delisted, sole business being investment in a listed subsidiary, history of rights issue and prior offers), and the NCLT/NCLAT findings. The Court observed that valuation is context sensitive, that Ind AS treats fair value as market-based and permits consideration of marketability, and that ICAI standards recognise DLOM as an adjustment requiring consideration of asset characteristics. The Court applied established tests for interference: whether the scheme is unfair or inequitable, whether the valuation is egregiously wrong or perverse, and whether there is demonstrable prejudice. Having regard to prior offers, the rights issue, independent confirmations, and the NCLT/NCLAT scrutiny, the Court found the valuation rationale plausible and not so unreasonable as to offend judicial conscience.

Conclusion: Against the appellants. The Court held that the application of DLOM and the resultant price were not perverse or egregiously unreasonable and did not justify setting aside the reduction.

Final Conclusion: The appeals are dismissed. The Court affirmed the concurrent findings of the NCLT and the NCLAT that the reduction of share capital and the valuation methodology did not suffer from procedural invalidity or such perversity as to warrant interference under Section 423 of the Companies Act, 2013.

Ratio Decidendi: Where Section 66 of the Companies Act, 2013 permits reduction of share capital without a mandatory valuation report, the Court will not interfere with a statutory reduction confirmed by the Tribunal unless the valuation or process is demonstrably unfair, perverse, or vitiated by real and present bias; adjustments for lack of marketability may be applied consistent with applicable accounting and valuation standards and judicial interference is limited to cases of egregious unreasonableness or perversity.

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