Onus on dissenting shareholders: failure to prove an offer unfair where balance sheet figures are not market valuations, so acquisition upheld.

When a statutory nine tenths majority approves a transferee company's acquisition scheme, the onus rests on dissenting shareholders to prove the scheme is unfair; the court held that a balance sheet entry of cost less depreciation does not amount to a representation of market value and cannot alone render an offer unfair, while Stock Exchange quotations and relative market figures are prima facie indicia of value. On the facts, the applicants failed to discharge the heavy onus and did not show the offer lacked a material premium, so the application to restrain compulsory acquisition was dismissed and the appeal allowed.

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Issues: (i) Whether the court should exercise its power under Section 209 of the Companies Act, 1948 (as reproducing the effect of Section 155 of the Companies Act, 1929) to order otherwise and prevent compulsory acquisition of shares on the ground that the transferee company's scheme or offer was unfair to dissenting shareholders.

Analysis: Section 209 permits a transferee company, after approval by holders of not less than nine-tenths in value, to give notice to dissenting shareholders and acquire their shares unless the court on application orders otherwise. Precedent establishes that where a statutory majority accepts an offer, the onus rests on the dissenting shareholder to affirmatively show the scheme is unfair. The court examined whether the balance sheet entry for freehold property (being cost less depreciation) amounted to a representation of market valuation sufficient to render the offer unfair, and whether fuller disclosure or a control premium should have been applied to the offer price. Evidence showed a large disparity between book entry and market value, but the book entry was cost less depreciation and not presented as a market valuation. The market quotations and relative Stock Exchange figures indicated that the offer provided a material premium over prevailing exchange prices. On these facts the applicants failed to discharge the heavy onus required to prove unfairness and the judge's reliance on the balance sheet figure as a valuation was a misdirection justifying appellate interference with the exercise of discretion.

Conclusion: The applicants have not established that the offer was unfair; the appeal is allowed and the application under the section is dismissed (decision in favour of the appellant).

Ratio Decidendi: Where a statutory nine-tenths majority accepts an acquisition scheme, the onus lies on dissenting shareholders to show unfairness; Stock Exchange markings are prima facie indicia of value and a balance-sheet entry of cost less depreciation is not a market valuation for assessing fairness of an offer.

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