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2014 (5) TMI 1189 - HC - Companies LawValuation of shares - Approval of this Court to a special resolution passed by a majority of Cadbury India's shareholders at an extraordinary general meeting, for reduction of Cadbury India's share capital - Principles of Universal Application. HELD THAT - The only conclusion to be drawn is that there is no valid or tenable objection to the scheme. Given that the originally propounded valuation now stands eclipsed by the Court-ordered valuation, it is this valuation that will have to be taken into account. The valuation of ₹ 2,014.50/- per fully paid up equity share arrived at by the Court-appointed valuer E Y in its second (supplementary) report dated 29th July 2011 is accepted. The petition is made absolute in these terms and on the basis of that valuation. There will be no order as to costs.
Issues Involved:
1. Approval of a special resolution for reduction of Cadbury India's share capital. 2. Objections raised by shareholders against the valuation of shares. 3. Conduct and submissions of the objectors. 4. Legal principles governing the reduction of share capital. 5. Analysis of the valuation methods used by Ernst & Young (E & Y). 6. Final conclusions and orders. Issue-wise Detailed Analysis: 1. Approval of Special Resolution: Cadbury India Limited sought the Court's sanction for a special resolution passed by a majority of its shareholders at an extraordinary general meeting to reduce its share capital. The reason for this reduction was the policy of Cadbury India's parent companies to operate only through branches or wholly-owned subsidiaries. The resolution was approved by an overwhelming majority, including a significant portion of the non-promoter minority. However, some minority shareholders who voted against the resolution filed opposition affidavits. 2. Objections Raised by Shareholders: The objections were primarily from the Samant and Churiwala Groups, who argued that the valuations were unfair and unreasonable. They demanded a higher valuation for their shares, pointing out several alleged deficiencies and errors in the valuations provided by E & Y. They accused Cadbury India and the valuers of bias and unfair treatment of minority shareholders. 3. Conduct and Submissions of the Objectors: The Samant Group's conduct was criticized for being inflammatory, accusatory, and uncivil. They submitted lengthy written arguments containing new material not previously argued in court, which put the Court at a disadvantage. The Court noted that the Samant Group had persistently objected to every proposal and valuation, and their submissions were often unsupported by substantial evidence. 4. Legal Principles Governing Reduction of Share Capital: The Court emphasized that for a scheme to be sanctioned, it must be fair, just, and reasonable, and not against public interest. The valuation must be fair, and the majority of non-promoter shareholders must vote in favor of the resolution. The Court's jurisdiction is supervisory, not appellate, and it must not substitute its own view for that of the valuer unless the valuation is shown to be egregiously wrong. 5. Analysis of the Valuation Methods Used by E & Y: The Court considered two valuation reports by E & Y, which used the Comparable Companies Multiples (CCM) method and the Discounted Cash Flow (DCF) method. The second E & Y report, which included both methods, returned a higher valuation of Rs. 2,014.50 per share. The Samant Group's objections to the methods and weightages used were found to be without substance. The Court noted that valuations are inexact and based on assumptions, and it is not the Court's role to conduct a microscopic examination of the valuation exercise. 6. Final Conclusions and Orders: The Court concluded that there was no valid objection to the scheme and accepted the valuation of Rs. 2,014.50 per share as determined by E & Y. The petition was made absolute on this basis. The Court dismissed the objections and applications filed by other parties, noting that the conduct of the Samant Group did not warrant any further consideration. The Court emphasized the importance of adhering to the principles of fairness and reasonableness in such matters. Final Orders: - The petition was made absolute based on the valuation of Rs. 2,014.50 per share. - No order as to costs. - Company Application No. 71 of 2010 and Company Application No. 120 of 2010 were dismissed.
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