TMI Blog2003 (10) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... for non-inclusion of the said brand of drugs which stood transferred to Solvay Pharmaceuticals BV from Dupen Laboratories Pvt. Ltd. They are not the existing assets of DIL. In fact, the petitioners have put in issue in one of the suits filed by them the legality of transfer and sought for a declaration that DIL continues to be the proprietor of the two brands. The petitioners have agreed to withdraw various suits. In any case, the petitioners cannot be permitted to thwart the terms of the settlement by inviting the valuer or this court to go into the extraneous issue as regards the validity of the transfer or incidental matters. The assets as per the relevant records have to be taken into account by the valuer and that has been done. We, therefore, find no apparent error in excluding those brands. It is not the case of the petitioners that the future earning based valuation is the only reliable method of "earnings based valuation". Moreover, the petitioners have not placed any facts and figures to show that such method of valuation would result in a definite increase in the share value going by independent projections. When there are vast discrepancies between the projection gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the initiative taken by this court while hearing the S.L.Ps., the parties settled the disputes and the terms of mutual settlement were reduced to writing and they were signed by all the parties. This court passed the following order on July 15, 2002, to give effect to the settlement: Counsel for the parties state that the dispute between them has been settled. A copy of the terms of mutual settlement signed by the parties has been filed in court and initialled by the court master. Terms of settlement are recorded. The terms contemplate valuation to be done of the intrinsic worth of the two companies and the value of 4.91 per cent. shares in the said two companies held by the petitioners. Valuation has to be completed within a period of four weeks. The terms of mutual settlement shall form part of this order. Copy of the order be sent to Shri Y.M. Malegam, Chartered Accountant, M/s. S.B. Billimoria and Co., Mumbai-400 038. According to the terms of settlement, M/s. Solvay Pharmaceuticals (R1) and Mr. Vasant Kumar (R3) have agreed to purchase 4.91 per cent. shares held by the petitioners in the two companies, namely, Duphar Pharma India Ltd. (DPIL renamed as Solvay Pharma In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The basic principle and method of evaluation has been stated thus: The intrinsic value of the share would be based on the asset and earnings based value with appropriate weightages given to the two methods. Since the value of a company/business would be more influenced by its earnings value a higher weightage is given to the earnings value as compared to its asset value. The asset value is considered as an integral part of the intrinsic value as it has a persuasive impact. Thus, I have considerel1 the following weightages for determining the intrinsic value- Asset based value 1/3rd weightage Earnings based value 2/3rds weightage The market (for listed company-its market price) based value indicates the value ascribed by the buyer/seller of the share at a given point in time. This is influenced by, *the floating stock and the supply and demand, which gets reflected in the volume and price of market transactions *market perceptions related to- --the overall market --the industry --the company. The recommended value is the higher of the intrinsic value or the market based value. Though rationally speaking, the recommended value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts of the foreign promoter, should be considered in the valuation of the 4.91 per cent. shares in DIL It was contended by the petitioners that DIL was legally entitled to carry on its business in Vertin and Colospa along with other brands. The rights over these two brands were transferred to Dupen Laboratories Private Ltd., and such transfer, according to the petitioner, was in breach of contractual obligations under the Trademark Licence Agreement dated July 15, 1975 etc. The valuer, after referring to the contentions, observed thus: The brands Vertin and Colospa have been purchased by Solvay Pharmaceuticals BV from Dupen Laboratories Private Limited. As such, these are not the assets of DIL. DIL also has no investment in Dupen Laboratories Private Limited. Whatever may be the claims of the petitioners in this matter against the respondents, this is not a matter which should affect the valuation of the shares of DIL. The petitioners have objected to the valuation by filing IA Nos. 2, 3 and 4 of 2002 wherein a prayer has been made to submit a supplementary valuation report after adding control premium to 4.91 per cent. shares and by adopting the OCF method of valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to go by the terms of settlement which is the last word on the subject. The terms do not, either in express terms or by necessary implication, contemplate the valuation by determining the intrinsic worth of 4.91 per cent. shares, having due regard to their special or distinctive characteristics. The terms of the settlement, as already noticed, contemplate the valuation of the intrinsic worth of the two companies-DIL and DPIL as going concerns and the value of 4.91 per cent. shareholding by the petitioners has to be worked out on that basis. As rightly contended by the learned senior counsel for the respondents, if the parties wanted a special treatment to be given to these shares and a control premium or the like has to be added, it should have been specifically and expressly mentioned in the terms of settlement. Such an important aspect would not have been omitted while framing the terms of settlement if the parties had agreed to the valuation on that basis. What has not been said in the terms of settlement in specific and clear terms cannot be superimposed by the court while interpreting the terms of settlement. The language employed in the terms of settlement which we presume w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such method of valuation would result in a definite increase in the share value going by independent projections. When there are vast discrepancies between the projection given by the parties and independent projections have not been provided, the valuer has chosen the best possible method of evaluation by capitalizing the past earnings. In doing so, the future maintainable profits based on past performance is also an element that has gone into the calculation. No prejudice whatsoever is shown to have been caused to the petitioners by the earnings based valuation. The petitioners have relied on the decision of this court in CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 (SC); [1980] 2 see 238. After referring to CWT v. Mahadeo Jalan and Mahabir Prasad Jalan [1972] 86 ITR 621 (SC); [1973] 3 SCC 157 wherein certain principles regarding valuation of shares were laid down, it was observed thus: It is clear from this decision that where the shares in a public limited company are quoted on the stock exchange and there are dealings in them, the price prevailing on the valuation date would represent the value of the shares. But where the shares in a public limited company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be rejected. In the result IA Nos. 2 to 4 of 2002 are liable to be rejected. However, there is one direction concerning the interest which we consider appropriate to give in the given facts and circumstances of the case. Though the grant of interest, as prayed for by the petitioners, from May 31, 2002-the stipulated date of submission of valuation report is not called for, we feel that the ends of justice would be adequately met if the respondents concerned are directed to pay the interest at the rate of 9 per cent. on Rs. 8.24 crores, which is the value of shares fixed by the valuer, for a period of 12 months. True, the petitioners contested the valuation and thereby delayed the implementation of settlement. However, having regard to the bona fide nature of the dispute and the fact that the respondents have retained the money otherwise payable to the petitioners during this period of 12 months and could have profitably utilized the same, we have given this direction taking an overall view. In the result I.As. Nos. 2, 3 and 4 of 2002 are dismissed subject to the above direction as to payment of interest. The S.L.P. (C). Nos. 18035, 18041-18042 of 2002 shall stand disposed of in ter ..... 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