TaxTMI 
TaxTMI 
2026 (4) TMI 381
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.... KOB / 2021, as preferred in TCP / 14 / KOB / 2020. 2. The consequential effect of the impugned order was that, the Appellant who has not expressed his willingness to buy the shares at the higher price of Rs. 1,941/- and as per the direction issued by the Judgment of 07.12.2017, as it was rendered in TCP / 67 / 2016 P.M. Johny & Anr. V. M/s. Seaqueen Builders Private Limited & 3 Ors., being the proceedings those were held under Sections 397, 398, 402, 111, 237, 210, 220, 260, 291 & 292 of the Companies Act, 1956, wherein the Appellants were given the first option to buy the shares of the Respondent herein. 3. Primarily, the controversy at hand, would be confined to the determination about the implications, which would be flowing from the order that was passed by the Ld. NCLT on 07.12.2017, as to upto what extent, the latitude which was given therein could be extended for the purposes of determining the propriety of the impugned order, which is subject matter under challenge in the instant Company Appeal. 4. Facts are that, the proceedings of the aforesaid Company Petition being, TCP / 67 / 2016 stood initiated at the behest of the Appellant herein, wherein the Respondent N....
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....tructure of the Directors of the Respondent Company. 13. The Appellant's case was that, since the majority capital in the Company was contributed by them, but, the majority Directors on the Board i.e. the 2nd and 3rd Respondents in the Company Petition they had acted in a dubious manner, in a way that was detriment to the interest of the Respondent Company and the method that was resorted to, by them was in a fashion to keep away the 1st Petitioner, Mr. P.M. Johny who was the single largest shareholder and the Petitioner No. 2 Mr. K.P. Augustine who was a Director away from the affairs and management of the Company despite of having a collective shareholding of over 63% in Respondent Company. 14. The Appellant contended that, as the Respondents herein were trying to misuse their position as Directors and were trying to usurp the majority stakes from the Petitioner by making illegal and fake Share allotments in their name without the knowledge of the Petitioners aiming at to gain control of their Company. Accordingly, the Petitioners have given a challenge to the allotment of Shares in relation to the allotments, which were made on 25.04.2008 and 11.08.2010. 15. Be that at ....
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....y stands vacated. No order as to costs.'' 18. Before we proceed to venture upon the other issues, which had been argued by the Ld. Counsels for the parties. 19. Primarily the controversy, which would be required to be ventured into by this Appellate Tribunal is, as to what would be the parameters which were required to be adopted by the parties to the proceedings, where it was directed for an appointment of an Independent Auditor, who was to take into consideration, the three Financial Years books, the financial standing and the value of the Shares which it carried with effect from 2011 onwards and keeping in view the shareholding pattern as it existed on 30.09.2005, the first opportunity for purchase of the Shares of the Respondents, was given to the Petitioner / Appellant, failing which, the Respondent were then required to purchase the shares of the Petitioner / Appellant. 20. It is this portion of the observation made in the Order of 07.12.2017, which would be the subject matter of scrutiny, as to whether, what rationale inferences could be drawn from the conclusion, which had been extracted herein above. 21. The Appellant had attempted to interpret, that upon the p....
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....y the Appellate Tribunal on 13.12.2018 was that, in their place, the following words are substituted, " shall determine the true and fair value of the shares of the Respondent No. 1 Company, as on the date of its decision, i.e. 07.12.2017''. This was the modification introduced by the Appellate Tribunal to the Order of 07.12.2017 by the Judgment, which was made by the Appellate Tribunal on 13.12.2018. In accordance with the orders passed on 07.12.2017, as well as the order of NCLAT dated 13.12.2018, the Ld. Tribunal was to appoint an independent Auditor to determine the true and fair value of the Company. 23. In furtherance thereto, the Appellant had preferred IA/36/KOB/2020, praying to appoint an independent Auditor as per direction of Ld. NCLT Order dated 07.12.2017, the Ld. Tribunal on 19.02.2020, proceeded to pass an Order in IA/36/KOB/2020, thereby, appointing two independent Auditors to determine the true and fair value of the shares of Respondent Company. Relevant part of the Order dated 19.02.2020 is extracted hereunder: "After hearing the learned counsel for the Applicants and the learned Senior counsel for the respondents and also after perusing th....
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....untant thus appointed to determine the fair value of the shares of Company i.e. one Mr. Suresh T N, he had submitted his Valuation Report on 19.05.2021 valuing the shares of the Respondent No. 1 company at Rs.1,941/- per share, as it was the existing value on 07.12.2017, the Respondents in the Company Petition, had unconditionally accepted the above valuation of Rs.1,941/- per share and recorded their willingness to buy 60,000 shares of the 2nd and 3rd Respondents / Petitioners in the Company Petition. 26. Whereas on the other hand, Dr. Santhakumar, the Chartered Accountant, as suggested by the Appellants herein, in his Valuation Report dated 17.06.2021, had valued the shares of the Respondent No. 1 Company at the rate of Rs.1,115/- per share as existing as on 07.12.2017. 27. But, since there had been differences in the valuation of the shares in the two report as submitted CA Mr. T N Suresh and CA Dr. Santhakumar, because, there were various factors, which was attributed in the report for the purposes of justifying the two valuations, to the value the shares of the Respondent No. 1 Company. 28. In CA / 86 / KOB / 2021 in TCP/14/2020, as it was preferred by the Respondent ....
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....tion which has been decided by the Ld. Tribunal by this impugned order which is under challenge in this Appeal, and more particularly the concern has been raised to the observations which has been made in Para 18 of the impugned order, which is subject matter of challenge, wherein the Applicants to CA / 86 / KOB / 2021 i.e. the Respondents in the instant Company Appeal had accepted the higher Valuation Report as it stood submitted by Mr. Suresh TN, the Chartered Accountant and they have expressed their willingness to purchase the Shares at the rate of Rs.1,941/- per share, owing to the fact that the Appellant i.e. Respondent Nos. 2 & 3 in this Application (CA/86/KOB/2021) have not expressed their willingness to purchase the shares at the higher value as it had been determined by Chartered Accountant Mr. Suresh T N i.e. at the rate of Rs.1,941/- per share. 31. Hence, in the light of observation made in the Order of 07.12.2017, as there was dis-inclination by the Petitioners to purchase the shares, they contended that, as the Appellants herein, who were the Petitioners in the Company Petition had not expressed their willingness to purchase the shares at higher price of Rs.1,941/- ....
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....hat though they had restricted their challenge to the impugned order of 01.12.2021, on the ground with regards to the pattern and modalities adopted by the Chartered Accountants who were thus appointed as an independent Auditors for the purposes of valuation of the shares of Respondent No. 4 Company which has been distinctly fixed by them, as to be Rs.1,941/- per share by CA Mr Suresh T N and Rs. 1,115/- as per the report submitted by CA Dr. Santhakumar. 34. But, on the revival of the proceedings of the Appeal, we will have to bear in mind that, after a lapse of more than 5 years, today a different stand altogether has been taken by the Appellant that, they are willing to purchase the share as per the report of Valuation of the Chartered Accountant Mr Suresh T N i.e. valuing the shares at Rs.1,941/- per share, the said proposal by way of an offer now by the Appellant herein today, has been vehemently opposed by the Respondents. 35. The Ld. Counsel for the Appellant contended that, the entire proceedings resulting into the culmination of the order of 01.12.2021 is bad in the eyes of law because, there was no strict compliance of the order of 07.12.2017, as it was rendered by t....
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....s as settled by Mr. Suresh TN, who had valued the shares at Rs. 1,941/- per share, rather it was Appellant to have expressed willingness to purchase share on the higher value of the Auditors Report. c) Its only upon when, the Appellant will not avail an opportunity to purchase the shares at a fair value, which was settled by the Chartered Accountant, the Auditor, the next opportunity will flow to the Respondent. 38. The contention raised by the Ld. Counsel for the Appellant runs contrary to the finding that has been recorded in the order of 07.12.2017 which shows that, there was offer which was to be extended to them. There was no question of issuing an offer to the Appellant for purchasing of the shares at the fair value price as settled by the Chartered Accountant Mr. Suresh TN because, that offer automatically as per order, already stood in their favour, subject to their own inclination of acceptance of the offer and if there was no extension, for an acceptance of self-contained offer in the order itself, the logical consequences of not extending the offer to purchase the shares of the Respondent Company, it will automatically move to the Respondents at the fair valu....
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....has voluntarily waived of his right by implication since, having not offered to purchase the shares now, at this belated stage, at the rate of the valuation fixed by Mr. Suresh T N, they cannot be permitted to revive back their own waiver of having declined to purchase the shares of the Respondent Company even not having offered to purchase the shares at the fair value as settled by Mr. Suresh, T N and if we looked into the controversy from yet another perspective, if the Appellant now at this stage presses upon to purchase the shares at Rs.1,941/- which is now been offered to be purchased by the Appellant that is based upon the report of Mr. Suresh T N, the Chartered Accountant, it will amount to that, admittedly the Appellant has consequently waived off his rights to put a challenge to the aspect of valuation of the shares as done by the two reports submitted by the Valuers on 19.05.2021 and 17.06.2021 respectively. 43. Since, there had been an apparent failure on part of the Appellant to express their willingness at the earliest available opportunity, as per the directives issued in the order of 07.12.2017, the finding which has been recorded by the Ld. Tribunal that, the fir....
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....er perspective, that the offer as extended by the Appellant at this point of time, to purchase the shares based upon the report of Mr. Suresh T N, the Chartered Accountant of purchasing the shares at the rate of Rs.1941/- will not have any effective financial input bearing, in relation to the interest of the Company for the reason being that, the said shares at the aforesaid rate has already been purchased by the Respondents in the light of the impugned order which is under challenge, the order has already been effected upon. 48. Even otherwise also, the Appellant cannot be an opportunist in his approach in meeting out the controversy as it was flowing from the order of 07.12.2017 and its enforcement upon the submission of the Valuation Report by the two Auditors. For the reason being that, after the submission of the Valuation Report by the two Auditors, the Appellant, who was an opposite party No. 2 to the Application CA/86/KOB/2021, that was preferred by the Respondents wherein to the said Application, the Appellants had filed their Counter Affidavit on 19.09.2021 has challenged the propriety of the Valuers Report that was submitted by CA Mr. Suresh T N holding it, to be unre....
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....nagement of the company so as to enable the outgoing group to establish its own industry by spending considerable time and earn profits with the money which it gets by sale of its shares. 30. It would not be possible to achieve this object if a particular group is directed to sell its shares to the other group at the price to be determined by the third party i.e., an independent firm of Chartered Accountant because though the price of shares would be determined by such Chartered Accountant most scientifically and impartially by taking all the relevant facts into consideration yet such price would only be an 'opinion price' as could be distinguished from the 'competitive price' at which a prospective buyer or seller would opt to buy or sell in competition with the other buyer or seller. This object of adequately compensating the outgoing group of shareholders could be achieved by making both the rival groups to compete with each other in the purchase of shares of the company at a price higher than the one determined by the independent chartered accountants. Therefore, we are of the considered view that the price at which the shares of the JV Co. should be ordered to b....