2022 (12) TMI 1152 - AT - Companies Law

Valuation of shares - Sick industrial unit - scheme of exit - Validity of order passed by the Tribunal asking an Independent Valuer be appointed forthwith from the list of approved valuers of IBBI by the Appellant Company - HELD THAT - It is also not in dispute that one day before the exit offer, its promoters have purchased lot of shares from Bank of Maharashtra and similarly inter se purchase has been made during exit offer from specific persons by the promoters - The Tribunal has given lot of thrust on lower valuation of shares and it seems that it is even less than earning per share. A doubt has also arisen to the Tribunal why the Appellant company has not provided Annual Returns and Balance Sheet to the Petitioners for the years 2014-2018 as also the valuation report of the Appellant company. The Respondent has sought the reliefs before the Tribunal comprising of 6 reliefs mainly and the Tribunal has granted only one relief i.e. appointing an independent valuer from the panel of valuers of IBBI in terms of Section 247 of the Act, the cost of which to be borne by the Appellant Company We are not commenting at the moment what will be the valuation of shares but apparently it is difficult to perceive as to how the fair value can be lower than the earning per share - It is an incumbent duty to the Appellant company to disclose all material information to its shareholders disclosing thereon even the justification for the existing price offered by the Promoters which also seems to be missing in this case. There are no inconformity in the order and the appeal deserves to be dismissed and is dismissed.

Issues Involved:
1. Validity of the Tribunal's order for appointing an Independent Valuer.
2. Compliance with SEBI Circulars and valuation norms.
3. Allegations of undervaluation and concealment of material facts.
4. Jurisdiction and powers of the Tribunal under the Companies Act, 2013.

Detailed Analysis:

1. Validity of the Tribunal's Order for Appointing an Independent Valuer:
The Appellant challenged the Tribunal's order directing the appointment of an Independent Valuer from the list of approved valuers of IBBI. The Tribunal had ordered this revaluation to ensure fair valuation of shares for the exit offer, citing concerns over the veracity of the initial valuation. The Tribunal emphasized that the initial valuation appeared to be lower than the earning per share, raising doubts about its fairness. The Tribunal justified its decision under Rule 11 of NCLT Rules, 2016, to meet the ends of justice and protect the interests of non-promoter shareholders.

2. Compliance with SEBI Circulars and Valuation Norms:
The Appellant contended that it had complied with SEBI Circulars by appointing an independent valuer from the Bombay Stock Exchange (BSE) panel and conducting the valuation accordingly. The Appellant argued that the SEBI Circulars did not mandate the exit of all public shareholders and that shareholders had the option to remain with the company. The Respondent, however, alleged that the valuation was manipulated and undervalued, and that the Appellant had concealed material facts, including the earning per share during the relevant period.

3. Allegations of Undervaluation and Concealment of Material Facts:
The Respondent argued that the exit offer price was significantly lower than the earning per share, indicating a flawed valuation. It was also alleged that the Appellant's promoters had purchased shares at a higher price just before the exit offer, suggesting manipulation. The Tribunal noted the lack of transparency and the Appellant's failure to provide necessary documents such as Annual Returns and Balance Sheets for the years 2014-2018. The Tribunal concluded that a fresh valuation by an independent valuer was necessary to ensure fairness and justice.

4. Jurisdiction and Powers of the Tribunal under the Companies Act, 2013:
The Appellant questioned the Tribunal's jurisdiction to order a revaluation under Section 247 of the Companies Act, arguing that it was limited to valuations required under the Act and not SEBI Circulars. The Tribunal, however, cited the Standing Committee of Finance's report on the Companies Bill 2011, which emphasized the need for fair valuation to protect non-promoter shareholders. The Tribunal also referenced Supreme Court judgments affirming that mentioning a wrong provision or non-mentioning of any provision does not vitiate the exercise of power if the authority has the power under law. The Tribunal's power to appoint an independent valuer was traced to the Companies Act and Rule 54 of NCLT Rules, 2016.

Conclusion:
The Tribunal's order for appointing an Independent Valuer was upheld, emphasizing the need for a fair and transparent valuation process to protect the interests of non-promoter shareholders. The appeal was dismissed, with the Tribunal directing the Appellant company to appoint an independent valuer from the IBBI list and cooperate fully in the revaluation process. The Tribunal also highlighted the potential for investigation against the ex-valuer if the revaluation showed significant discrepancies. The Registry was directed to forward a copy of the order to the Registrar of Companies, SEBI, and BSE for further action.

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