1995 (7) TMI 284 - SC - Companies Law

Oppression and mismanagement - Whether the valuation made by Shri M. Vatsaraj on 30-9-1993 was proper and correct? Held that - This appeal is disposed of subject to the direction to the respondents as agreed to by them that they will pay to the appellants an additional amount of ₹ 66 lakhs in the manner provided by the consent terms of February, 1993 and as laid down by the consent order dated 5-3-1993, within a period of eight weeks from today. The amount of ₹ 11 lakhs already deposited by the respondent will also enure for the benefit of the appellants. On payment of this additional amount of ₹ 66 lakhs the directions contained in the judgment under appeal shall become operative and shall be carried out by all concerned.

Issues Involved:
1. Interpretation of Clause 21(3)(a) of the consent terms.
2. Valuation of shares and applicable interest.
3. Applicability and consequences of the default clause (Clause 28(a)).

Issue-Wise Detailed Analysis:

1. Interpretation of Clause 21(3)(a) of the Consent Terms
The primary issue revolves around the interpretation of Clause 21(3)(a) of the consent terms filed in Company Appeal 2/94. This clause stipulates that "the valuation per share made by the expert shall be deemed to be the valuation per share made under the consent order (including the consent terms) dated 5-3-1993 passed by the CLB." The appellants argued that this clause should be read in conjunction with Clause 21 of the February 1993 consent terms, implying that the valuation of Rs. 450 per share by Shri Iyer should be treated as if it was made on 30-9-1993, thereby attracting interest from that date. The respondents contended that the interest should only be payable from the date of Shri Iyer's valuation (21-10-1994), and not retrospectively.

2. Valuation of Shares and Applicable Interest
The valuation of shares initially made by Shri M. Vatsaraj at Rs. 194 per share was contested by the appellants, leading to the appointment of Shri N.V. Iyer who revalued the shares at Rs. 450 per share. The appellants claimed that they were entitled to interest on the new valuation from 30-9-1993, amounting to Rs. 66,13,850, as per Clause 21. The respondents, however, argued that interest was only payable from 21-10-1994, the date of Shri Iyer's valuation. The Court noted that the respondents had agreed to pay an additional Rs. 66 lakhs to settle the interest dispute, thus rendering the appellants' grievance moot.

3. Applicability and Consequences of the Default Clause (Clause 28(a))
Clause 28(a) of the consent terms specifies that if the company fails to make full payment of the purchase price or any two instalments, the appellants would automatically be entitled to purchase the shares of the respondents' group. The appellants argued that the non-payment of the full interest amount constituted a default, triggering Clause 28(a). The Court, however, held that the default clause should be strictly construed and only applies to the non-payment of the full purchase price or instalments, not interest. The Court also noted that the respondents had sought clarification from the Single Judge regarding the interest payment date, indicating a bona fide belief that they were not liable for interest from an earlier date.

Conclusion
The Supreme Court disposed of the appeal by directing the respondents to pay an additional Rs. 66 lakhs to the appellants within eight weeks, in addition to the Rs. 11 lakhs already deposited. This payment was to be made in accordance with the consent terms of February 1993 and the consent order dated 5-3-1993. The Court rejected the appellants' contention regarding the default clause, emphasizing that the clause must be strictly construed and did not apply to the non-payment of interest. The directions contained in the judgment under appeal would become operative upon payment of the additional amount, with no order as to costs.

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