TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 1141
X X X X Extracts X X X X
X X X X Extracts X X X X
....yderabad Bench-I. 2. While passing the impugned order dt. 29.07.2022 in IA 1169/2020 in CP/No.285/241/HDB/2020 (filed by the 1st Respondent/Petitioner), National Company Law Tribunal, Hyderabad Bench - I, had observed the following: "Learned Senior Counsel Shri. S. Ravi, for 2nd Respondent submitted that, respondents have no objection for appointing the registered valuer for the purpose of fixed value of equity shares of the 2nd Respondent Company. We therefore, without going into merits of the respective pleas of both sides, and in the interest of the 1st Respondent, hereby appoint Mr.Mallikarjuna Setty Nethi, (Mobile - 9963606444), email id-malliknethi[at]gmail.com, as valuer for valuation of shares of 2nd Respondent Company commencing from the Financial Year 2017-18 to 2021-22. The fee quoted by the valuer has to be borne by both sides in equal manner and the valuer who has been appointed is hereby directed to submit the report within a period of one month from the date of this order. Accordingly this Application is partly allowed leaving the prayer "to direct the first respondent to sell the shares held in 2nd respondent company to the Applicant company, based on the valua....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....11.2018, the Appellant, had informed to the 1st Respondent that it was not obligated to by his Shares and that he was free to 'Sell the Shares', to an outside buyer. 8. The Learned Counsel for the 'Appellant', refers to the 'Article 15' of the Appellant's 'Articles of Association', that the 'Valuation', must be conducted by the 'Auditors', of the company, Viz., 'M/s. Italia and Associates', who were appointed by the 1st Respondent. That apart, the 'Articles', do provide that 'Any Transfer of Shares', of the Company, must be at a mutually agreed 'Fair Price' or a 'Price Fixed', by the 'Auditors of the Company'. 9. It is the version of the Appellant, that the 1st Respondent, had entered into 'unilateral discussions', with the 'Valuer', without the Appellant's knowledge and in reality, the '1st Respondent', held a Meeting with the 'Valuer', on 12.08.2022, without any intimation to the 'Appellant'. Also that, the meeting between the '1st Respondent' and the 'Valuer', behind the Appellant's back is in itself, an 'unprofessional one', and contrary, to an 'established procedure'. 10. The Learned Counsel for the Appellant, brings it to the notice of this 'Tribunal', that the 1st Respon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h law. 14. The Learned Counsel for the Appellant, adverts to the decision of the Hon'ble Supreme Court in V.S. Krishnan & Ors v.Westfort hi-Tech Hospital & Ors., 2008 3 SCC 363 at spl pgs: 372 and 373, wherein at paragraph 14, it is observed as under: 14. ''In a number of judgments, this Court considered in extenso the scope of Sections 397 and 398. The following judgments could be usefully referred to: (a) Needle Industries (India) Ltd. and Others vs. Needle Industries Newey (India) Holding Ltd. and Others, (1981) 3 SCC 333 (b) M.S. Madhusoodhanan & Anr. vs. Kerala Kaumudi (P) Ltd. & Ors., (2004) 9 SCC 204. (c) Dale and Carrington Investment (P) Ltd. & Anr. vs. P.K. Prathapan & Ors., (2005) (d) Sangramsinh P. Gaekwad & Ors. Vs. Shantadevi P. Gaekwad (Dead) Through L.Rs. & Ors. (2005) 11 SCC 314 (e) Kamal Kumar Dutta & Anr. vs. Ruby General Hospital Ltd. & Ors. (2006) 7 SCC 613. From the above decisions, it is clear that oppression would be made out: (a) Where the conduct is harsh, burdensome and wrong. (b) Where the conduct is mala fide and is for a collateral purpose where although the ultimate objective may be in the interest of the company, the immediate purpose woul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ack of confidence springs from oppression of a minority by a majority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder. It is in the light of these principles that we have to consider the facts in this case with reference to s. 397". 16. The Learned Counsel for the Appellant, refers to the decision of the Hon'ble High Court of Bombay in Nafan B.V V SAF Yeast Company Pvt. Ltd., reported in 2015 SCC Online Bom 6553, wherein at paragraph 172, it is held as under: "For the purpose of valuation of shares, it will be most appropriate that today's date is taken as a reference. The order could thus be in two steps. Part I will be the forward competitive bid for which Muthu Group will have to withdraw the civil suit they have filed and not take any steps based on MOU henceforth and convey its acceptance within a particular period If such willingness is not shown in the stipulated period, then Part II of the order regarding buy-out will come into effect". 17. The Learned Counsel for the Appellant, points out, that the Judgment of this 'Tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd thereafter submit a joint report to this Court within a period of six weeks from this date. 7. The expenses of the Auditors will be borne in equal share by both the parties.'' 21. The Learned Counsel for the Appellant, refers to the decision in Nikhil Rubbers Private Limited, In Re, (vide order dt.30.08.2001 in CP No.27/97 and C.A. No.33/2001), reported in India Kanoon, wherein, at paragraph 5, it is observed and held as under: 5. "However, since we find that not only there is no finalized balance sheet as on that date and preparation of a balance sheet on that date is also not possible due to the absence of records of the company and in view of the fact that after the filing of the petition there have been events affecting the affairs of the company having bearing on the valuation, it has become necessary to modify that order. The balance sheet as on 31-3-1995 is on record wherein the complete assets and liabilities of the company as on that date have been indicated and audited. Therefore, for the purposes of ascertaining the assets and liabilities, the valuer will take balance sheet as on 31-3-1995 as the basis. Both the petitioners and the respondents are at liberty to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en Director for Hyde India and CEO for the Appellant) acting on behalf of the appellant, had stated that "this is the methodology we have used for Hyde USA valuation, and we, as the board have a fiduciary responsibility to value the affiliates in the same manner." 26. The Learned Counsel for the 1st Respondent points out that the perusal of 'Valuation Report' of the Appellant, conducted, to value its 'own Shares', prior to the launch of 'ESOP', it is evident that the Discounted Future Earnings (DFE) and Valuation, based on transaction multiples i.e., Price / EBITDA ("P/E") were the two methods used by the Appellant. 27. The Learned Counsel for the 1st Respondent comes out with a plea that the Appellant firstly made an offer to buy out the First Respondent's Shareholding on 04.11.2018, and this offer was resting upon falsification of more than INR 2 Crores of Profit after Tax, while arriving at 'Valuation of Shares', held by the 1st Respondent. As a matter of fact, the offer had falsification of PAT Numbers, spanning three different fiscal years and was made 36 years after the purported AGM of financial year 2017-18 and 2 years and 1 year after the Annual General Meetings of finan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lant's conduct is far from being based on equity, it loses the Right', to seek an equitable relief from this 'Appellate Tribunal' and hence, the instant 'Appeal', may be dismissed to secure the ends of justice. 1st Respondent's Citation: 32. On behalf of the 1st Respondent, a reference, is made to the 'Order' of this 'Tribunal' in Archer Power System Pvt. Ltd. v. Cascade Energy Pvt. Ltd and Ors. (vide Comp. App AT No. 203 of 2017 dt. 23.07.2020), wherein at paragraphs 22, 23, 24 and 39, it is observed that ...'administrative orders passed by courts or judicial orders that do not affect the rights or liabilities of a party are not appealable... Consequently, as per the law laid by the Hon'ble Supreme Court, such an order is not appealable... On this ground alone, the instant appeal, ought to be dismissed... Hence the NCLT had the power and authority to make the impugned order having found that it was essential, to meet the ends of justice in the instant case.' Glimpse of 'Valuation': 33. Be it noted, that a 'Valuation of an Asset', is an 'Approximation', ofcourse, resting upon the 'Best Judgment' of an 'Expert Valuer', and the 'Tribunal', may not substitute the views of an Exper....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Shares'. 42. No doubt, the choice of an 'Appropriate Valuation Approach', is to be employed, in a given 'Valuation Project', is on the Judgment of a 'Valuer'. Option to 'Buy out Shares': 43. A 'Buy out Order', creates a circumstance in which a person or group gains control of a company by buying all are most of its Shares and the 'Tribunal', in exercise of its Discretionary Power, may make an order providing for the 'Exit' of one of the 'Groups of Shareholders', any other company, to run smoothly, if such an order is just and equitable, in the circumstances of the case as per decision in Synchron Machine Tools P Ltd., v. U.M. Suresh Rao), reported in 1994, 79 Comp case p 868 (Ker). Pecuniary Compensation: 44. An 'oppressor, make compensation to the person, who had suffered at his hands.' In the illuminating words of 'Blacks Law Dictionary', 'Damages', mean 'pecuniary compensation' or 'indemnity', which may be received in courts, by 'any person' who has suffered loss, detriment / injury, whether to his 'Person', 'Property' or 'Rights through an 'Unlawful Act' or 'Omission' or 'Negligence of another'. 45. When a company or any other person suffers loss or injury because of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... February 2018, vide email dated 04.11.2018 by the Petitioner company / 2nd Respondent, to buy out his 'Shareholding', based on the 'Valuation of the Equity Shares', for the financial year 2017-18. 50. Added further, the 1st Respondent / Petitioner, in his counter to IA No.1169 of 2020 in CP No.285/241/HDB/2020, had proceeded to point out that because of the failure of the Petitioner company / 2nd Respondent, having failed to follow its assurance and buy out the 10% shareholding, the 1st Respondent, was put to an immense hardship and legal cause and hence the legal cause may be avoided by the 'Tribunal', to be paid to him by the Petitioner Company / 2nd Respondent. 51. Moreover, the 1st Respondent / Petitioner, while acknowledging the receipt of dividend, on his 10% Shareholding from the 2nd Respondent / 1st Respondent Company, in all fairness had offered that the said sum may be deducted from the final payment towards purchase of his Shareholding to be made by the Petitioner Company /2nd Respondent. Besides this, the Dividend Distribution Tax, on the said dividend, should not be claimed from the First Respondent / Petitioner. 52. To put it precisely, the 1st Respondent, had in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the 1st Respondent / Petitioner at paragraph 6 and 8 of the Counter to the IA No. 1169 of 2020 in main CP No.285/241/HDB/2020, are tacit 'Admissions and that the 1st Respondent/Petitioner, is bound by the same in true Letter and Spirit, without any deviation, whatsoever, as opined by this 'Tribunal'. 58. At this stage, it is worthwhile, for this 'Tribunal', to recall and recollect the Judgment of the Hon'ble Supreme Court of India dt.16.07.2003 in Central Bank of India Vs. Vrajlal Kapurchand Gandhi & Anr. (vide Civil Appeal 4634 of 2003), reported in 'India Kanoon', wherein, it is observed that ''Statements of fact as to what transpired at the hearing recorded in the judgment of the court, are conclusive of the facts so stated and no one can contradict such statements by affidavit or other evidence. If a party thinks that the happenings in Court have been wrongly recorded in a judgment, it is incumbent upon the party, while the matter is still fresh in the minds of the Judges, to cull the attention of the very Judges who have made the record. That is the only way to have the record corrected. If no such step is taken, the matter must necessarily end there. It is not open to a ....