Compulsory acquisition of minority shares fails where majority shareholders use a controlled transferee company to expropriate the minority.

Compulsory acquisition of minority shares was treated as unavailable where the transferee company was, in substance, promoted and controlled by the same majority shareholders seeking the buyout. The statutory procedure was said to presuppose a genuine acquisition arrangement, not a device to expropriate the minority by bare formal compliance. On the facts, the court exercised its discretion to refuse the acquisition because no persuasive independent justification was shown and the scheme appeared to serve a purpose outside the provision's intended operation. The refusal to compel the minority shareholder to sell was therefore upheld.

---

---

Issues: (i) Whether the statutory procedure for compulsory acquisition of shares could be invoked where the transferee company was promoted and controlled by the very majority shareholders seeking to acquire the minority holding. (ii) Whether, on the facts, the court should exercise its discretion to order otherwise and refuse compulsory acquisition of the minority shares.

Issue (i): Whether the statutory procedure for compulsory acquisition of shares could be invoked where the transferee company was promoted and controlled by the very majority shareholders seeking to acquire the minority holding.

Analysis: The statutory scheme presupposed a genuine arrangement for acquisition in which the offeror was independent of the shareholders from whom the nine-tenths majority was derived. Where the transferee company was, in substance, the alter ego of the majority shareholders and was formed to enable them to expropriate the minority, the case fell outside the ordinary operation of the provision for the purpose of the court's discretion. A bare compliance with the form of the section did not justify using it as a device to evict an unwilling minority without a proper corporate purpose.

Conclusion: The statutory machinery could not be treated as properly invoked merely because the formal threshold was met; the arrangement was a special case against allowing compulsory acquisition against the minority.

Issue (ii): Whether, on the facts, the court should exercise its discretion to order otherwise and refuse compulsory acquisition of the minority shares.

Analysis: The majority shareholders and the transferee company were for practical purposes the same persons, and no persuasive independent justification was shown for forcing the minority out. The transferee company produced no evidence sufficient to rebut the inference that the scheme was being used for a purpose not contemplated by the provision. In those circumstances, the minority shareholder had shown a sufficient basis for the court to decline to permit the statutory power to operate.

Conclusion: The court properly refused to compel the minority shareholder to sell, and the challenge to that refusal failed.

Final Conclusion: The appeal was rejected and the refusal to permit compulsory acquisition of the minority holding was upheld.

---