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2020 (1) TMI 278 - AT - Companies LawOppression and mismanagement - Prohibitory injunction against Respondents from effecting transfer of shares of the Appellants - application for release of interim payment of amount deposited by the Respondents - share price conversion in separate escrow account with HDFC Bank, Bhavnagar Branch - HELD THAT - The Consent Terms recorded by the Tribunal amount to a Consent Decree notwithstanding the fact that the Company Petition was kept pending for formal disposal after admitting the Valuation Report and follow up action. Since, part consideration admittedly stands deposited by the Respondents in an Escrow Account, there was no justification in withholding its release in favour of the Appellants. Of course, the Tribunal could have insisted upon simultaneous delivery of share certificates by the Appellants while releasing such part payment and made provision for the balance payment either by furnishing of Bank Guarantees or any other appropriate mode. Any infirmity in the Valuation Report, more so, when it was restricted to alleged fraud only in the context of non-application of proper methodology would not warrant withholding of the part consideration as any variation in the value of shares would not affect the Appellants right to claim/ recover the same. Respondents to release the amount of ₹ 5,95,00,000/- to the Appellants immediately against the share price - Appellants are directed to handover the shares alongwith duly singed Transfer Forms to the Registry of the Tribunal (National Company Law Tribunal, Ahmedabad Bench) - Appeal allowed.
Issues:
Release of interim payment for share price conversion, challenge to valuation report by respondents, withholding of part payment, legal infirmity in the impugned order. Issue 1: Release of Interim Payment The appeal was against the rejection of the appellants' application for the release of interim payment deposited by the respondents towards share price conversion. The Tribunal had kept the Company Petition pending for the exchange of share/consideration. The appellants argued that they were entitled to the amount deposited as an interim measure. The respondents resisted, citing challenges to the Valuation Report and withdrawal of the offer to acquire shares of minority shareholders. The Tribunal noted the appointment of an Independent Valuer and the objections raised by the respondents but still withheld the payment, leading to the appeal. Issue 2: Challenge to Valuation Report The respondents challenged the Valuation Report, alleging fraud by the Independent Valuer. The Tribunal considered the objections and the withdrawal of the share acquisition offer. The Tribunal's decision was influenced by the challenges to the Valuation Report and the pending application by the respondents. The appellants were deprived of the payment without fault on their part. The Tribunal's decision was criticized for not considering the hardship faced by the Independent Valuer and for focusing on the methodology used, which did not necessarily invalidate the report unless influenced by extraneous considerations. Issue 3: Withholding of Part Payment The Tribunal's decision to withhold the part payment was deemed unjustified as the Consent Terms recorded by the Tribunal clearly outlined the agreement between the parties for the purchase of shares at a determined value. The Consent Terms amounted to a Consent Decree, and the withholding of payment was seen as unwarranted. Any infirmity in the Valuation Report, especially related to the methodology used, did not justify withholding the part payment as it did not affect the appellants' right to claim the amount. Issue 4: Legal Infirmity in the Impugned Order The Appellate Tribunal found grave legal infirmity in the impugned order and ruled in favor of the appellants. The order directed the respondents to release the amount for the share price, the appellants to hand over the shares, and the Tribunal to ensure the completion of the transaction promptly. The Tribunal's decision was overturned, and the appeal was allowed in favor of the appellants, highlighting the importance of honoring the Consent Terms and ensuring timely payments in such matters.
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