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TMI Blog2019 (1) TMI 1692X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. - IA 389 of 2018 in C.P. No. 69/241-244/NCLT/AHM/2017 - - - Dated:- 24-1-2019 - Hon'ble Ms Manorama Kumari. Member judicial Sr. Advocate Mr. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny did not survive and the present petition would be retained by the Bench for the purpose of exchange of share / consideration and thereafter the Bench may pass an appropriate order disposing the instant petition. 4) Mr. Navin Pahwa, Senior Advocate for the petitioner/ applicant herein, argued in the matter and submitted that order dated 12.10.2017 passed by this Tribunal on the basis of the consent terms amounts to decree, therefore petitioners / applicants herein above should get the amount deposited by the Respondents on the direction of the bench as an interim measure towards share price consideration in separate Escrow Account with HDFC Bank, Bhavnagar Branch, till the final disposal of the case. It is further submitted by the Applicant that, in view of the order dated 12.10.2017, M/S. Deloitte Touche Tohmatsu India LLP, Ahmedabad (herein after referred as Deloitte ) was appointed as an Independent Valuer for valuation of the Respondent No. 1 Company. The Deloitte submitted its valuation report on 25.01.2018, and has arrived at a valuation of the Company at Rs. (₹ 18,76,10,00,000/- One Thousand Eight Hundred Seventy-Six Crores and Ten Lacs Only) and the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition regarding injunction to the action of acquisition of shares of the minority shareholders and cancellation of the same shares by the respondents under the provisions of section 236 of the Act. The Ld. Senior Advocate for the Respondents further submitted that there is no provision in the Act to bar the withdrawal of offer made by the respondents to acquire the shareholdings of the minority shareholders under the provisions of section 236 of the Act, hence this Bench may decide on our pursis for withdrawal which was filed in point of time earlier than the instant application and give the permission to withdraw our offer to acquire the shares of the minority shareholders. Further submitted that without deciding our pursis for withdrawal of offer to acquire shares of minority shareholders u/s. 236 of the Act and Interlocutory Application 127 of 2018, payment cannot be released to the petitioners / applicants herein when the respondent has withdrawn himself from invoking Section 236 of the Act, by filing pursis that apart when the valuation is also challenged by way of IA 127 of 2018 in that event any release of amount without deciding IA 127 of 2018 and withdrawal pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners as well as restructuring of the Respondent No. 1 Company and restriction on transfer of share of Respondent No. 1 Company. That apart as an interim relief, the Petitioner / Applicant prayed for granting of injunction order against the Respondent No. 1 Company from cancelling the share held by the Petitioner in the Respondent No. 1 Company. It is to mention here that the main cause behind filing of CP No. 69 of 2017 under Section 241-242 by the petitioner is that respondent resorted to invoke Section 236 of the Companies Act, 2013 i.e. purchase of minority shareholding. 8) It is alleged in the petition that the respondent No. 1 Company may resort to cancel the shares held by the petitioner (s) in the respondent No. 1 Company by applying the provisions of section 236 of the Companies Act, 2013. Otherwise there are no other reasons or acts of oppression or mismanagement as averred in their CP No. 69/2017. In this respect it is also pertinent to mention herein that the Petitioners being Four (4) in numbers and holding only 2.09% of the total paid up capital of the Respondent No. 1 Company out of the total number of Twelve (12) members of the Respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of the valuation carried out by the Valuer of the respective party and 2. Make their submissions as regards Valuation. iii. The Valuer shall be at liberty to call for any Date, Documents and information required for the valuation exercise. iv. The Valuer shall complete the valuation exercise within a period of ten weeks from the date of the order appointing the valuer. v. The cost of the valuation shall be paid and borne 50% by the company and 50% by the Petitioner No. I. vi. The value of the shares of the Petitioner in the 15t respondent company to be so determined shall be as on 31 st March, 2017. vii. The Independent Valuer shall submit Valuation Reports in three originals to the Registrar of this Hon'ble Tribunal in a sealed envelope within ten weeks from the date hereof. viii. This Hon'ble Tribunal shall communicate to both the parties the date on which the sealed envelope shall be opened. The Petitioners and Respondents shall receive their respective copy of the Valuation Report. ix. The valuation shall be binding on all the parties and shall not be challengeable by any pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Multiples (CTM) Methodology. The Independent valuer was apprised that other minority members had transferred their shares for the purpose of exit at ₹ 2519/- per share in March 2016. However, no valid concrete reason is given by the Valuer for not considering the above valuation. ii. That Article of Association of the company provides for the valuation of shares for transfer amongst the members of the company. That no valid concrete reason is given by the valuation for discarding the provisions of the Article of Association. iii. Independent Valuer had not considered Net Asset Value (NAV) Methodology for determining fair value of shares of the Applicant Company. Non supply of replacement value of assets of the Applicant Company by both the parties is not justifiable. It was not only open but also a duty of the Independent Valuer to find out replacement value of various assets of the Company, in case of absence of the data furnished by both the parties. iv. Independent Valuer decisions not to consider Discounted Free Cash Flow (DCF) Methodology in the absence of mutually agreed upon projections of the company was not correct, the applicant had pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hod is not reliable for reflection of fair value of the shares of the Applicant Company. The NCLT never suggested that even if no material is furnished to them, Independent Valuer must give valuation on the basis of inadequate information, Independent Valuer could have worked out valuation of shares on the basis of existing performance with a rider that valuation can go up or down depending upon future prospect and projection of the company but could not have given a complete go by to one of the well accepted method of valuation (DCF) which are the most appropriate method in the facts and circumstance of the case. Thus, by insisting fora mutually agreed upon Projection which was not possible, Independent Valuer has cleverly avoided one of the internationally accepted and commonly used valuation methodologies i.e. DCF method which is one the widely used method for valuation. Offering absence of mutually agreed upon projection, as an excuse is nothing but a Fraud upon the Applicant. viii. Further, while following CCM Method, non- comparable companies have been taken into account and that too without disclosing and discussing the names of such companies / industries and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 236 stands lapsed. 20) It is further submitted by the learned lawyer of the respondent (s) that there is no bar under the Companies Act, 2013 against the withdrawal of an offer under Section 236 of the Companies Act, 2013. Furthermore, consent term dated 10.10.2017 does not debar respondent (s) group from withdrawing original offer made under Section 236 of the Companies Act, 2013. 21) Considering the facts and circumstances as narrated above, 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/- (Rupees Five Crores Ninety-Five Lakhs only). 22) It is pertinent to mention herein that the petitioner (s) in IA 389/18, in para No. 5, under the head facts of the case has stated as under:- the present application is being filed as Interlocutory Application as per the direction of this Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by such shareholders at a price determined on the basis of valuation by a registered valuer in accordance with such rules as may be prescribed. (3) Without prejudice to the provisions of sub-sections (I) and (2), the minority shareholders of the company may offer to the majority shareholders to purchase the minority equity shareholding of the company at the price determined in accordance with such rules as may be prescribed under sub-section (2). (4) The majority shareholders shall deposit an amount equal to the value of shares to be acquired by them under sub-section (2) or sub-section (3), as the case may be, in a separate bank account to be operated by the transferor company for at least one year for payment to the minority shareholders and such amount shall be disbursed to the entitled shareholders within sixty days: Provides that such disbursement shall continue to be made to the entitled shareholders for a period of one year, who for any reason had not been made disbursement within the said period of sixty days or if the disbursement has been made within the aforesaid period of sixty days, fail to receive or claim payment arising out of such di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this section shall continue to apply to the residual minority equity shareholders, even though,- (a) the shares of the company of the residua/ minority equity shareholder had been delisted; and (b) the period of one year or the period specified in the regulations made by the Securities and Exchange Board under the Securities and Exchange Board of India Act, 1992 (15 of 1992), had elapsed. 25) In the present case, admittedly, the offer was made on 30.03.2017 and transaction ought to have been completed on or before 30.03.2018 as required under Section 236 of the Companies Act, 2013. Since transaction could not be completed within stipulated period of one year, offer under section 236 stand lapsed. Under such situation, if any order is passed in IA 389 of 2018 without deciding on the withdrawal of purshis filed on 20.10.2018 by the respondent (s), then it will cause prejudice to the respondent (s), more so, when the petitioner himself prayed for restrained order in CP No. 69 of 2017 from transfer of share of respondent No. 1 company and/or reduction of share capital of petitioner. Under such circumstances, passing any order in IA 389 of 2018 without deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed valuer after taking into account valuation parameters including return on net worth, book value of shares, earning per share, price earning multiple vis- -vis the industry average, and such other parameters as are customary for valuation of shares of such companies; and (ii) the registered valuer shall also provide a valuation report / basis of valuation addressed to the Board of directors of the company giving justification for such valuation. 29) This being a private limited company, hence Rule 27 (2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 shall apply. On perusal of the affidavit in reply filed by the valuer, it is admitted that the independent valuer has ruled out the applicability of NAV, DCF and CTM methodology and has applied only the CCM methodology to arrive at the valuation of the business of the Respondent No. I Company. (As reflected form para 20 of affidavit in reply filed by the independent valuer). The Net Assets Value (NAV) Methodology as well as Discounted free Cash Flow (DCF) Methodology have not been applied by the independent valuer which is obligatory on the part of independent valuer to come to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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