2019 (1) TMI 1692 - Tri - Companies Law

Release of interim payment deposited by the Respondent towards the share price conversation in the separate escrow account - restriction in the form of injunction upon the Respondent from transfer of shares of the Petitioner in view of exit offer made by the Respondent - HELD THAT - It is pertinent to mention that during the pendency of IA 127 of 2018, whereby the petitioner has challenged the valuation report dated 25.01.2018 submitted by Deloitte and withdrawal purshis of original offer made under Section 236 of the Companies Act, the petitioner has filed the instant application in IA 389 of 2018 seeking direction upon the respondent (s) to release an amount of ₹ 5,95,00,000/-. On perusal of the record it is found that the said amount is deposited in the escrow account of the company vide order dated 19.07.2018 passed in IA No. 36 of 2018 in cp No. 69 of 2017 as an interim measure so as to protect the interest of applicants. Thus, if at this stage, without disposal and/or deciding IA 127/2018 and withdrawal purshis, any order is passed for disbursement of the amount of ₹ 5,95,00,000/- then, it will not only amount to miscarriage of justice but also amount to review of the order dated 19.07.2018 which is against established principle of law. On perusal of the report of the Independent Valuer, it is found that the independent valuer skipped abovesaid methodologies due to want of information and necessary records which said fact is also admitted in the affidavit in reply filed by the independent valuer. While applying CCM Methodology, the independent valuer has not justified as to why other methodologies are ignored as said above which includes NAV and DCF - it cannot be said that the valuation report is complete in all respects and free from irregularities. Application not maintainable.

Summary

Issues Involved:
1. Interim Payment Release
2. Bank Guarantee Submission
3. Valuation Report Challenge
4. Withdrawal of Offer under Section 236
5. Allegations of Fraud in Valuation

Detailed Analysis:

Interim Payment Release:
The applicant sought an interim payment of ?5,95,00,000/- deposited by the respondent in an escrow account. The tribunal noted that this amount was deposited as an interim measure to protect the applicant's interests. However, the tribunal found that releasing this amount without resolving the pending interlocutory application (IA 127/2018) and the withdrawal pursis would result in a miscarriage of justice and a review of the earlier order dated 19.07.2018.

Bank Guarantee Submission:
The applicant requested that the respondents submit a bank guarantee or bond to secure the balance payment. The tribunal did not specifically address this request in the judgment, focusing instead on the broader issues of the valuation report and the withdrawal of the offer.

Valuation Report Challenge:
The respondent challenged the valuation report prepared by Deloitte, alleging fraud and improper methodology. The tribunal noted that the valuer had not applied mandatory valuation methodologies such as the Net Asset Value (NAV) and Discounted Free Cash Flow (DCF) methods, relying solely on the Comparable Companies Method (CCM). The tribunal found the valuation report incomplete and irregular, as it did not justify the exclusion of other methodologies.

Withdrawal of Offer under Section 236:
The respondent filed a pursis to withdraw the original offer made under Section 236 of the Companies Act, 2013. The tribunal observed that the offer, made on 30.03.2017, should have been completed within one year. Since the transaction was not completed within this period, the offer lapsed. The tribunal emphasized that there is no bar under the Companies Act against the withdrawal of an offer under Section 236.

Allegations of Fraud in Valuation:
The respondent alleged that the valuation report was fraudulent, citing several reasons, including the valuer's failure to consider certain methodologies and reliance on non-comparable companies. The tribunal found these allegations significant and noted that the valuer had not provided a valid reason for excluding certain valuation methods. The tribunal concluded that the valuation report was not free from irregularities.

Conclusion:
The tribunal rejected the applicant's IA 389 of 2018, seeking the release of ?5,95,00,000/-, on the grounds that the valuation report was incomplete and the offer under Section 236 had lapsed. The tribunal emphasized the need to adjudicate IA 127 of 2018 and the withdrawal pursis before any disbursement could be made.