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TMI Blog1958 (12) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ate could be processed into marketable tea. The Company used to sell its tea leaves to a neighbouring company called Kil Kotagiri Tea and Coffee Estates Company Ltd., which will hereinafter be referred to as the Kil Kotagiri Company. Perumal held 14,900 ordinary shares and Mahajan held 5,900 ordinary shares in the company on the material date. On August 31, 1955, the Neergundi Company passed a special resolution which ran as follows: "1.That the company be wound up voluntarily. 2.That it is expedient that the business of the company should pursuant to section 208C of the Indian Companies Act, 1913, be transferred to the Kil Kotagiri Tea and Coffee Estates Co. Ltd., upon the terms and subject to the conditions contained in the draft agreement expressed to be made between the company and its liquidators of the one part and the said Kil Kotagiri Tea and Coffee Estates Co. Ltd., of the other part, which draft is verified by the signature of Lionel Aldred a director of the company. 3.That Messrs. John Deavin, Norman Blenkinsop and John Ashton of Messrs. Fraser & Ross, Madras, be appointed liquidators of the company with joint and several powers for the purposes of such winding up at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointing Sri P.S. Chandrasekhara Iyer, retired District Judge and advocate, as the sole arbitrator for determining the price to he paid for 5,900 and 14,900 shares held by D. R. Mahajan and R.T. Perumal respectively in the company. In accordance with this. order Sri P.S. Chandrasekhara Iyer after an elaborate, enquiry passed his award on June 17, 1956. In and by that award he fixed the amount payable as the price of the shares held by Mahajan at Rs. 1,11,731-4-0, and the amount payable for the shares held by Perumal at Rs. 2,82,168-12-0. It may be stated briefly that he arrived at the value of Rs. 18-15-0, per share by first valuing the gross assets of the company and subtracting there from the liabilities thus arriving at the net value of the estate and dividing the same by the number of ordinary shares, namely, 1,08,538. He then took out an original petition, 0. P. No. 275 of 1956, praying that his award may be received and suitable orders may be passed on the petition. This petition was filed under section 14(2) of the Indian Arbitration Act and rule 5 of the rules framed there under. The liquidators of the Neergundi Company filed another petition O.P. No. 330 of 1956, prayi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e award both before this court and before the said arbitrator when severally taxed and noted in the margin hereof with interest thereon at six per cent, per annum from the date of taxation to the date of payment; and in taxing the said costs, advocate's fee at Rs. 5,000 (Rs. five thousand) for each party (treating D.R. Mahajan and R.T. Perumal as one party) be allowed and that the said costs do also include the amounts paid to the arbitrator already by the respondents 3 to 5 in O. P. No. 275 of 1956; 3. That the liquidators, respondents 3 to 5 in O.P. No. 275 of 1956, shall be entitled to set off or adjust the payments they have made to the arbitrator herein in the first instance in the said manner." Respondent 1 is D.R. Mahajan, respondent 2 is R.T. Perumal and respondents 3 to 5 are the liquidators of the Neergundi Company. The appeals now before us were then filed by the two shareholders respectively. Mr. O.T.G. Nambiar, learned counsel for the respondents-liquidators took up a preliminary objection that the appeals were not competent. He mainly relied on the provisions of section 17 of the Indian Arbitration Act which runs as follows: "Where the court sees no cause to remit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an order by the court superseding the arbitration or after arbitration proceedings have become invalid under section 35 ; (c)that an award has been improperly procured or is otherwise invalid. Section 39 confers a right of appeal from certain orders and from no others passed under the Act to the court authorised by law to hear appeals from original decrees of the court passing the order. Such appealable orders include : an order setting aside or refusing to set aside an award. Section 44 enables the High Court to make rules consistent with the Act inter alia as to the filing of awards and all proceedings consequent thereon or incidental thereto. "Court" is defined in section 2(c) as meaning a civil court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit. Mr. Nambiar's contention was that the appeals purport to be against the decree passed by Balakrishna Aiyar J. agreeing to the award and section 17 of the Act prohibits an appeal from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award. According to him such a ground does not exist in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch to set aside the revised award but admittedly objections were filed to the revised award by the two appellants before us mainly on the ground that the order of remittal was itself bad. These objections can be deemed to be applications to set aside the award. He relied on a decision of Chandra Reddi J. in Ramaswami Servai v. Muthiralayee [1954] 1 MLJ 7, in support of his contention. In that case notice of the filing of the award was served on the party. He filed a counter affidavit attacking the genuineness and validity of the award and prayed that the court may be pleased to dismiss the petition but there was no application as such to set aside the award. The learned judge held that the counter affidavit can be tantamount to an application for setting aside the award within the meaning of section 17 of the Arbitration Act. A similar view was taken in Ram Alam Lal v. Dukhan ILR [1952] 2 All 664. It is true that there was no formal order refusing to set aside the revised award but in the circumstances the order accepting the revised award should be deemed to be a composite order comprising an order refusing to set aside the award. vide Ishwar Dei v. Chhedu AIR 1952 All. 802, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the court remitted an award on any ground other than those specified in that section such an order would be without jurisdiction. We then asked Mr. Nambiar what was the remedy of the party aggrieved by such an invalid remittal. Mr. Nambiar frankly stated that there was no remedy so far as he could see. We do not think that we could subscribe to this result unless we are forced to. In our opinion one of the grounds on which a revised award can be sought to be set aside is that it was the result of an invalid order of remittal. That was the first objection which the appellants took in their counter affidavits. In this view it is not necessary to consider the other contention of Mr. Gopalaswami Aiyangar that section 39 of the Act would have no application to an appeal under the Letters Patent as it deals only with appeals from one court to another. We hold that the appeals are competent. On the merits the only question which arises is whether Balakrishna Aiyar J. was justified in remitting the award made by the arbitrator on June 17, 1956. The power of the court to remit an award to the arbitrator for reconsideration is contained in section 16 of the Indian Arbitration Act. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value per each share. The following extract from his award gives details of the calculation: The valuation will be as follows: Fixed assets. Freehold land ... Rs. 16,87,750 Buildings ... „ 1,54,935 Plant and machinery ... „ 19,627 Furnitures ... „ 10,801 Rs. 18,73,113 Add motor cycle, etc . as per liquidators' statement Rs. 6,28,365 Rs. 25,01,478 Less liabilities Rs 4,44,617 Net value of estate as on 1-7-1955 Rs. 20,56,86 Number of ordinary shares at Rs. 2 each Rs. 1,08,538 Value per share : Rs. 18-15-0 (omitting pies in the calculation) The amount payable for Mr. Mahajan's 5,900 shares is ... Rs. 1,11,731-4-0 The amount payable for Mr. Perumal's 19,500 shares is ... Rs. 2,82,168-12-0 In the course of his award the arbitrator confessed that no direct precedent was available as to how the interest of a dissentient member should be valued under section 2o8-C(3) of the Companies Act. He came to the conclusion that the interest of a dissentient shareholder was to be value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how much would a reasonable man have been prepared to pay for that interest. No doubt a prudent purchaser would take into account the value of the assets of the company in making his offer, but that would be only one consideration and the price of the interest cannot be expressed as a fraction of the net assets of the company." After holding that the arbitrator had proceeded on a completely wrong legal basis in determining the value of the interest of the dissentient member he proceeded to indicate the various considerations and factors which should be taken into account in arriving at the proper price to be fixed. The learned judge wound up his judgment thus: "I recognise that it is not at all easy to make allowance for all these varying circumstances. None the less the final conclusion must represent the result of the examination of these factors. The question is not what is the net value of the assets of the company, and what is the fraction thereof that is represented by the shares which the dissentients hold. The question is : If the interest of the dissentients is sold as a block, what money will it bring ? That is the question for which an answer must be found. I have set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding the shares in a company ? Farwell J. in Borland's Trustee v. Steel Brothers and Co. Ltd. [1901] 1 Ch. 279, observed at page 288 : "A share is the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with section 16 of the Companies Act, 1862. The contract contained in the articles of association is one of the original incidents of the share. A share is not a sum of money settled in the way suggested, but is an interest measured by a sum of money and made up of various rights contained in the contract, including the right to a sum of money of a more or less amount." The shareholders are not in the eye of the law part-owners of the undertaking. The undertaking is something different from the totality of the shareholdings. vide Short v. Treasury Commissioners [1948] 1 KB. 116 at 122. Reference was made by Mr. Gopalaswami Aiyangar, learned counsel for the appellants to section 211 of the Indian Companies Act, which runs thus: "Subject to the provisions of this Act as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was still liable to any future calls for payment of the liabilities of the company. Sir Malins V.C. held that as the shares were sold by him to the liquidators after the transfer he ceased to be a member of the company and his name must, therefore, be taken off the list of contributories. The court of appeal reversed the decision of the Vice Chancellor and held that under section 161 the liquidators had no power to release the dissentient shareholder from his liability to the creditors but only to purchase such interest as he had in the assets of the company and consequently that the shareholder's name must be put on the list of contributories. The following observations of Mellish L.J. at page 102 must be understood in the context of the actual points which arose for decision in that case, He said : "The section says that a dissentient shareholder may give notice to the company ' either to abstain from carrying such resolution into effect, or to purchase the interest held by such dissentient member at a price to be determined in manner hereinafter mentioned.' What is the meaning of the words ' purchasing the interest held by such dissentient member' ? Does it mean purchasing his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertaining the value of the company's assets which consisted of gold mines in India and shares in another company having gold mines in India, the liquidator took out summons for liberty to issue a commission to India for the examination of witnesses there. It was held by Chitty J. that the court had jurisdiction to order such a commission. In the course of his judgment Chitty J. dealt with an argument that the liquidator must value the interest of the dissentient member according to the valuation which had been made in the agreement between the old company and the new company of the interest of the other non-dissentient members thus : "Now I think that the fact of such a valuation being the basis upon which a reconstruction has been effected is to be carefully considered and to have due weight given to it, but it is not in itself conclusive so as to fix the proper price which the liquidator should pay in respect of the interest of a dissentient member. Where a new company is purchasing the assets of a company in liquidation and the new company brings new capital into the concern, it does not at all follow that the price per share as fixed between the company in liquidation and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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