Compulsory acquisition under Section 209: court refused enforcement where the transferee was effectively the nine tenths majority without independent valuation.

Section 209 permits compulsory acquisition of minority shares but allows the court to order otherwise; where the transferee is effectively identical in substance to the nine tenths majority (incorporated and promoted by that majority) the statutory framework contemplates an independent offeror and the court should scrutinise the transaction. Absent independent valuation evidence subjected to cross examination or an explanation of an overriding company interest, the usual deference to a large majority does not apply. The court should therefore exercise its discretion to protect the dissenting minority; the transferee is not entitled or bound to acquire on the proposed terms and the appeal is dismissed.

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Issues: Whether, under Section 209 of the Companies Act, 1948, a transferee company which is in substance identical with the shareholders representing nine-tenths of the issued capital is entitled and bound to acquire the dissenting minority shareholder's shares on the terms of the proposed scheme and contract, or whether the court should exercise its discretion to order otherwise.

Analysis: Section 209 permits compulsory acquisition of minority shares subject to the court ordering otherwise on an application by the dissenting shareholder. Precedent establishes that where an independent offeror and a large majority of shareholders approve a scheme, the court will not ordinarily substitute its view of a fair price absent strong evidence of unfairness. The circumstances here differ from that ordinary case because the transferee company was incorporated and promoted by the majority shareholders for the purpose of invoking Section 209, and in practical effect the transferee was equivalent to the nine-tenths majority. The statutory language and the parenthetical reference to shares already held by the transferee company indicate the section contemplates acquisition schemes where the offeror is independent of the majority supplying the nine-tenths. Where the offeror and the majority are substantially the same, the risk is that the section will be used as a device enabling majority shareholders to expropriate a minority. On the facts, no adequate evidential answer was provided by the transferee: no sworn valuation evidence subjected to cross-examination and no explanation showing some overriding company interest justifying the acquisition despite the identity of interest. Given these special circumstances, the usual deference to a 90% majority does not apply and the court's discretion should be exercised to protect the minority absent good reason to the contrary.

Conclusion: The court should order otherwise under Section 209 of the Companies Act, 1948; the transferee company is neither entitled nor bound to acquire the minority shareholder's shares on the terms proposed. Appeal dismissed in favour of the respondent.

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