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TMI Blog2012 (8) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... t:- In the Award the Arbitrator in method adopted by him for valuation has not only considered the value of the assets of the Respondent No. 1 company i.e. the plot of land and the value of the construction thereon, but also the outstanding liabilities , this, in fact, was the correct approach. A perusal of the report of M/s. G.C. Mallick & Associates, Chartered Accountants also reflects this approach. While the report of M/s. Kumar Narang & Co., Chartered Accountants accounts for the current liabilities and unsecured loans, it fails to provide for the contingent property tax liability. The land and building value according to the said report is no doubt higher than that suggested by M/s. G.C. Mallick & Associates, however the report fails to explain the basis for such higher value. In any event it was for the learned Arbitrator to take a decision as to which of the two reports was more reliable & It cannot be said that the learned Arbitrator erred in not going by the report of M/s. Kumar Narang & Co. It is not possible to agree with the submission of the Petitioners that by fixing the value per share of the Respondent No. 1 company at Rs. 450, the learned Arbitrator committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dr. Ramesh Rohatgi contributed Rs. 50,000 each, Dr. Hemant Kumar Rohatgi contributed Rs. 45,000 and Dr. Jaideep Rohatgi contributed Rs.40,000. On 2nd January 1981 a private limited company, South Delhi Maternity Nursing Home Private Limited (Respondent No. 1) was formed with the object of running a maternity clinic. On 26th April 1983 DDA transferred the lease hold rights in the aforementioned plot in favour of Respondent No. 1. On 8th November 1983 the shareholding pattern of Respondent No. 1 in its paid up share capital was as under: 1. Dr. Sharad Rohatgi - 500 shares of Rs. 100 each 2. Dr. Ramesh Rohatgi - 500 shares of Rs.100 each 3. Dr. Hemant Kumar Rohatgi - 450 shares of Rs.100 each 4. Dr. Jaideep Rohatgi - 400 shares of Rs.100 each 4. The partnership capital of Rs. 1,85,000 was converted into the share capital of the company in the same ratio and proportion. 5. On 3rd February 1984 a lease deed in respect of the plot was executed by the President of India in favour of Respondent No. 1 in terms of which Respondent No. 1 was to construct a building on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the Respondent No. 1 company. 8. The Petitioners filed C.P. No. 197 of 1996 under Section 433 of the Companies Act, 1956 in this Court seeking the winding up of the Respondent No. 1 company. Originally in the company petition, Petitioner No.2 Mrs. Swati Rohatgi was not a party. She filed an arbitration agreement with an application dated 3rd September 2001 seeking to be made a party to the arbitration proceedings. The said application was allowed. The two Petitioners, the Respondent Nos. 2 to 5 as well as Respondent No. 1 were party to the arbitration proceedings. 9. In the said proceedings an order was passed by the Court on 8th August 1999 referring the disputes to Justice Avadh Behari Rohatgi (Retd.) as sole Arbitrator in terms of the Arbitration Agreement dated 31st July 1999 entered into between the parties. The operative portion of the said order directed as follows: "All the disputes between the parties regarding the share holding of the said company (namely South Delhi Maternity Nursing Home Private Limited) shall be referred to the sole arbitration of Justice Avadh Behari Rohatgi. The parties of the first parthave agreed to surrender and/or transfer their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 32,40,435. The learned Arbitrator took the average of both values and determined the cost of land as Rs. 1,07,61,125 and the cost of construction as Rs. 31,63,640, thus totalling to Rs. 1,39,24,765. After subtracting the current liability, un-secured loans and house tax liability, the net value was determined as Rs. 1,10,95,824. The report of the chartered accountants fixed the value per equity share at Rs.135 which had to be further reduced by 20% since it was a private company. Thus, the value per share was determined as Rs. 108. 13. The learned Arbitrator went on the basis that there was depreciation in the land prices after 1992. The prices in the past therefore afforded no guidance. The valuation suggested by the Respondent Nos. 2 to 5 was ridiculously low and the Petitioners had "pitched their claim very high". Accordingly, the learned Arbitrator decided to "take a middle path and a balanced view". The learned Arbitrator gave the following reasons for determining the value per share to be Rs. 450:- "What is significant in this case is that there is no vast difference in the value of the land and the cost of construction as estimated by the valuers of both sides. Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue in the company as shareholders. He therefore submitted that the Petitioners were willing to continue in the company and there was no need to adjudicate any dispute whatsoever. Thirdly, he submitted that the finding of the learned Arbitrator that the value per share was Rs.450 was not based on any evidence and was perverse. He submitted that when Dr. Sharad Rohatgi and Dr. Ramesh Rohatgi had been paid Rs.5 lakh each way back in 1992, on the basis of a share value of Rs. 1,000 per share, there was no question of the share value coming down to Rs.450 in 2001. 17. Mr. Vasdev challenged the premise of the learned Arbitrator that the land prices in 2001 had fallen. He contested the report of M/s. G.C. Mallick Associates, Chartered Accountants. Instead he relied on the report of M/s. Kumar Narang Co., Chartered Accountants who determined the share value at Rs. 920 per share. He submitted that there was no basis for rejection of the latter report. Referring to the judgment of the Supreme Court in ONGC Ltd. v. Garware Spg. Corpn. Ltd . [2007] 13 SCC 434 he submitted that since the impugned Award would shock the judicial conscience it should be set aside. Reference was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was limited. The impugned Award did not suffer from any apparent error or any patent illegality to warrant interference. 21. The first issue to be considered is that whether the learned Arbitrator erred in not dealing with the issue of the shareholding pattern of the Respondent No. 1 company. The order referring the disputes between the parties to arbitration no doubt begins by stating that "all the disputes between the parties regarding the share holding of the said company" are being referred. However, it also notes that the Petitioners' Group had agreed to surrender and transfer their shares in the Respondent No. 1 company to Respondent Nos. 2 to 5 or their nominees "for a consideration which will be decided by the learned Arbitrator". The learned Arbitrator was also to decide "the mode and method of payment of the said consideration". Consequently, it was unnecessary for the learned Arbitrator to decide about the shareholding pattern since in any event the Petitioners agreed to transfer all their shares to Respondent Nos. 2 to 5 for a consideration. This Court is, therefore, unable to find any error having been committed by the learned Arbitrator in this regard. 22. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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