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2021 (3) TMI 264 - AT - Insolvency and BankruptcyReduction of share capital - minority shareholders adequately compensated to their legitimate expectation with regard to valuation of shares - method of valuation and assumptions carried out by the Valuers - HELD THAT:- From the NAV method it is amply clear that the Company is going concern with positive networth. Learned NCLT has taken into consideration the valuation report which was made in the year 2017 which was submitted on 25.10.2017 by PWC and on 26.10.2017 by Haribhakti. Learned NCLT, Mumbai passed its order on 27.10.2020, almost three years after the submission of valuation report. In our view the valuation reports as made in 2017 are not as on date, when the learned NCLT passed its order on 27.10.2020 - We have not gone into the veracity of the methodology adopted by the Valuers. Even though the learned NCLT framed an issue with regard to whether the public shareholders constituting 3.59 % adequately compensated or not. However, the learned NCLT, Mumbai failed to consider the vital point that the valuation was done in the year 2017 and by the time learned NCLT, Mumbai passed the order, three years have passed. It is an admitted fact that the Company is a going concern and the learned NCLT, Mumbai ought to have considered the value of the shares for the current year. Method of valuation and assumptions carried out by the Valuers - HELD THAT:- It is made clear that we have not gone into the merits/demerits of methodology adopted by the Auditors. We are concerned only the economic interest of the public shareholders who by virtue of cancellation and extinguishing the shares whether they get their legitimate expectation of the fair value and whether they have been paid the fair value considering the performance of the Company - The objection of the Appellants that the Company adopted a selective method for the reduction of the share capital is concerned, we are not in the agreement with the submission of the Appellants. There is no discrimination adopted by the Company in the present case. It is also an admitted fact that the shares of the Company were de-listed from the BSE and the shares of the public shareholders cannot be tradable. It is crystal clear that the Profit After Tax (PAT) for the Financial Year 2016-17 has been shown as ₹ 288.33 lakhs whereas for the Financial Year 2018-19 it shows ₹ 503.52 lakhs. The earning per shares (EPS) for the Financial Year 2016-17 has been shown as 87.52 lakhs whereas for the Financial year 2018-19 it shows as ₹ 158.24 lakhs. The net worth of the Company for the Financial Year 2016-17 is shown as ₹ 2,52,307 lakhs whereas for the Financial Year 2018-19 it is shown ₹ 3,26,645 lakhs. In a broad look at the figures, it is amply clear that the Company had made its growth substantially and also made good profits - the public shareholders/non-promotors’ shareholders have not been adequately compensated for the reason that the valuation done in the year 2017 had been taken into consideration even after three years it was passed. We are of the view that there is a drastic change in the growth of the Company. The shareholders in a Company has every right to sell their shares as and when they get good price meaning thereby the shareholders have every right to trade shares as and when they get good price. However, in the present case the Company passed its resolution for reduction of the share capital to an extent of 11,81,036 equity shares constituting 3.59 %. Since in the EGM, the majority shareholders approved the reduction of share capital, public shareholders/non-promotor shareholders have no option except to surrender their shares to the Company by extinguishing their shares and exit from the Company whatever price is fixed by the Company. Therefore, the shareholders in the present case expects justification from the Courts/Tribunals. Even though the public shareholders/non promotor shareholders had objected to the reduction of share capital in the EGH but the majority shareholders i.e. promotor group having majority, passed the resolution in favour of reduction of share capital. The Company is hereby directed to revalue the shares by a registered/independent valuers to value the shares of the Company and the Company shall pay the fair price arrived at by the valuer based on the latest audited accounts of the Company - The Company is directed to place all the audited accounts of the Company as required by the valuer to value the shares. The reduction of share capital as allowed is upheld - appeal allowed.
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