TMI Blog2015 (11) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... en 100 shares by Jamal, merely on the basis of errors and alterations in the register of members, no grievance could be made about reduction of Jamal’s shareholding from 250 to 100 allegedly by way of a manipulation. Besides, this aspect of the matter is hardly of any relevance, since, as rightly observed by the CLB, Rajan has neither taken any advantage of denying those 150 shares to Jamal nor any extra benefit to himself and in the end, at any rate, the agreed shareholding of 28.33% was actually allotted to Jamal. No error of law can be found in the analysis of the CLB or its conclusion in this behalf. Second stage of reduction of Jamal’s shareholding, i.e. when Nilesh was inducted, is also adequately explained. As observed by the CLB, Jamal was a party to this arrangement. He actually signed a Supplementary Agreement for the purpose. Nilesh’s commitment as against 28.33% shareholding to be allotted to him was to get the House of Tata’s on board for development of Phase2 and 3. Tatas did after all enter into an agreement with the Company after Nilesh’s induction. The CLB noted that Tata’s association at that stage had greatly benefited the Company inasmuch as the Company could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his shareholding from 50% to 28.33% only on the consideration that he would not be required to fund the project; the admitted fact was that he actually did not contribute any funds for the project besides his initial contribution of ₹ 2.45 crores; and Jamal had nowhere averred or even conveyed through Counsel during arguments that had he been aware that the shares meant for Nilesh and Doshi were to go to Rajan, he (Jamal) would have undertaken the obligations under which the shares were to be allotted. Secondly, there is nothing on record to show that Jamal had any objection to the allotments per se to Nilesh and Doshi. If that is so, the complaint, if any, as noted by the CLB, could only be made by Nilesh and Doshi, according to whom their respective obligations were complied with, if shares were not allotted to them despite such compliance. And finally, the percentage of shareholding, in the ultimate analysis, hardly had any bearing on the order that the CLB actually made. (This aspect will be dealt with later in this order.) There is, thus, no merit in Jamal’s case concerning linkage of Rajan to the allottee entities. In the face of the Shareholders' Agreement, the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before the board, it observed that merely for that reason, the agreement could not be cancelled unless it was found to be against the interests of the Company. The CLB did not find any substance in the alleged association of Stylus with Rajan and found the royalty received to be commensurate with the market rates. None of these conclusions can be faulted. No question of law can be said to arise in connection with these conclusions. On the allegations of rotation of funds, the CLB held that it could not examine day to day transactions; that in a private company engaged in construction work, it was not uncommon that when the company was in need of short term funds, the promoters would bring in money and then when funds are available with the company later, would take the same out; that what was to be examined was whether funds were provided when the Company was in need of them; that it was an admitted position that the project had progressed well, the Company had earned profit of over ₹ 14 crores as on 31.3.2007 and Rajan could manage to save about ₹ 11 crores payable towards penal interest. The CLB found that there was no instance brought to its notice by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Company Appeal No.19 of 2009 With Company Application No.104 of 2010 In Company Appeal No.19 of 2009 In Company Petition No.106 of 2009 With Company Application No.18 of 2010 In Company Appeal No.19 of 2009 With Company Application No.45 of 2010 In Company Appeal No.19 of 2009 With Company Application No.7 of 2015 In Company Application (L) No.50 of 2015 In Company Appeal No.19 of 2009 With Company Appeal No.21 of 2009 In Clb Company Petition No.106 of 2005 With Company Application (L) No.3 of 2014 In Company Appeal No. 19 of 2009 For the Petitioner : Ms. Fereshte Sethna, a/w. Ms. Anooja Menon, Mr. Manan Shukla, Mr. Shantanu Singh and Ms. Khushboo Shah, i/b. Duttmenon Dunmorrsett , Mr. Aspi Chinoy, Senior Advocate, a/w. Mr. M.S. Doctor, Senior Advocate, Ms. Ankita Singhania, i/b. Bachubhai Munim Co. For the Respondent : Mr. Milind Sathe, Senior Advocate, a/w. Mr. Shyam Mehta, Sr. Advocate, Ms. Naira Jejeebhoy, Ms. Spenta Havewala, Mr. Robin Fernandes, i/b. Federal Rashmikant, Mr. Aspi Chinoy, Senior Advocate, a/w. Mr. M.S. Doctor, Senior Advocate, Ms. Ankita Singhania, i/b. Bachubhai Munim Co. JUDGEMENT :. Company Appeal No.19 of 2009 impugns a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also contained a preemption clause and made special provisions for transfer of shares. The Company started with an initial authorized, issued and paid up share capital of ₹ 4.9 crores, which was contributed equally by Jamal and Rajan groups. The initial part payment of ₹ 4.9 crores for the purchase of the subject property was financed out of this contribution. 4. Sometime in 2000, with a view to tap sources for funding of the development project, Rajan and Jamal agreed to take Respondent No.3 Nilesh Parekh ( Nilesh ) on board, by diluting their respective equities of 16.67% each in favour of Nilesh. Nilesh, in turn, would ensure that the house of Tata s, through their property development arm Tata Housing and Development Company Limited, would provide the requisite capital and technical expertise to develop the subject property. A Supplementary Agreement dated 15 June 2000 was accordingly entered into between Rajan, Jamal and Nilesh. Under this agreement each of the three groups represented by them was to subscribe for and hold 33.33% of the issued and paid up shares of the Company and each group was to be entitled to appoint two directors on the board of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany on the part of Rajan and others. 10. By an interim order dated 27 December 2005, the CLB directed that Jamal should be invited to all board meetings and allowed to take part in the deliberations; that status quo in respect of the composition of the board as of date with Jamal as an invitee should be maintained; and that all proposals for sale/lease of the Company s property should be placed before the board for its approval and Jamal should be allowed as an invitee to consider and react to the same. 11. At the hearing of the petition the main contentions of the Appellants were as follows : (a) Jamal was the prime mover as far as the only business of the Company, namely, acquisition and development of the subject property, is concerned; (b) In breach of the terms of the Shareholders Agreement, by false misrepresentation and with malafide intention, Rajan reduced the shareholding of Jamal from 50% to 28.33%, whilst Rajan himself continued to control, through Nilesh, Doshi and others, 71.67% shares in the Company, which was against the original understanding of 50% stake in the equity each of Rajan and Jamal; (c) Jamal was unauthorisedly removed from the board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relationship between the parties had soured so much that in the interest of the Company, parting of ways was the best solution. The CLB, then, considered suggestions of Counsel on both sides (and also the applicable principles) on various alternatives in this behalf. The CLB, firstly, held that since, in the present case, it was Rajan, who had been managing the affairs of the Company, whilst Jamal had not been in participation, it was Jamal who had to exit. Secondly, it held that on the question of valuation of his share, Jamal was only entitled to share profits arising out of the valuation of the land. The CLB then had to determine the date of valuation and the proportionate share of Jamal. The CLB was of the view that the date of valuation should be the date of the filing of the petition. It reckoned 4.35% of the profits arising out of the value of the land as a just and reasonable return on the investment made by Jamal, to which 50% increase could be added to take care of the pendency of the petition for nearly three years, thus taking the profit sharing of Jamal to 6.6% of the profit on the value of the land. The value of the land was taken at the highest price prevailing dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed value, which was impermissible. 14. The appeal basically involves three aspects. The first is the case of oppression made out by the Appellants. This involves the dilution of the equity of Jamal from 50% as originally proposed to 28.33% which it was brought down to as a result of divestment in favour of Nilesh and Doshi. In effect, it is claimed by the Appellants, Rajan himself controlled the balance 71.67% share in the Company through himself and his friends/relations and entities controlled by him including Nilesh and Doshi. The ouster of Jamal from the management is claimed to be another act of oppression. The second aspect is the case of mismanagement. This involves various financial irregularities on the part of Rajan as alleged by the Appellants. We will examine whether the CLB has made any errors of law in drawing its conclusions on these two aspects. The third and the last aspect is the relief granted by the CLB. We will examine if there is any error of law in granting the relief. 15. On the case of oppression : 15.1 The case of the Appellants is that the original Shareholders Agreement between Rajan and Jamal stipulated 50:50 shareholding ratio between the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Company, the relevant clauses were modified to provide for 33.33% shareholding to each of the groups represented by Rajan, Jamal and Nilesh. Clause 5, part of which is quoted above, was substituted by the following clause : The balance consideration of thee purchase price and stamp duty and registration fees (if required ) to be paid by the Company to ParkeDavis India Limited at the time of completion of sale shall be provided by each Group in equal shares. Simultaneously with the Supplementary Agreement, Minutes of Meeting were signed by Rajan, Jamal and Nilesh, which provided as follows : It was agreed between the parties that from the sale proceeds received from the sale and/or disposal in any manner of the property of M/s. Parke Davis (India) Ltd. at Saki Naka, all borrowings including that of Housing Development Finance Corporation Ltd.(HDFC) and/or ICICI should be first paid. Thereafter monies brought in, quantified and accepted by all the parties at ₹ 4 crores each by A Group and B Group excepting monies required for share capital, shall be repaid. Thereafter the terms and conditions regarding division of profit in three shares as per agreement date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of the final order that the CLB had proposed to make. 15.4 None of these conclusions, which form the basis of the CLB s final conclusion against any oppression on account of reduction of Jamal s shareholding, can be faulted on any question of law. The first stage of reduction of Jamal s agreed shareholding, i.e. allotment of 100 instead of 250 out of 500 shares of the Company initially, is adequately explained. Ms. Sethna tried to show some corrections and interpolations in the register of members. The CLB noted in this behalf that not only in the Folio of Akkadian (the Company of Jamal through whom he held the Company s shares), even in other Folios there were corrections and alterations. Secondly, there were no supporting documents to show that Jamal had originally acquired 250 shares of the Company, but that by manipulation of records his shareholding was brought down to 100 shares. The CLB observed that when there was no proof of any consideration paid for even 100 shares by Jamal, merely on the basis of errors and alterations in the register of members, no grievance could be made about reduction of Jamal s shareholding from 250 to 100 allegedly by way of a manipulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement with Doshi unlike in the case of Nilesh. It is common ground, however, that Doshi was brought in so that he could get upto ₹ 15 crores for the project. The allegation is that Doshi purportedly brought in only ₹ 2.72 crores as against the promised ₹ 15 crores and even from this amount, a substantial part was taken away by Doshi, leaving only ₹ 82,100 to his credit. Ms. Sethna even commented about the figure of ₹ 2.72 crores and suggested that there was no proof even for this amount. Mr. Sathe, learned Senior Counsel appearing for Doshi and some corporate entities on his behalf (Respondent Nos. 12 and 13), relied upon a chart showing the funds which went into the purchase of the subject property, including the stamp duty and other components. He submitted that Doshi jointly with Rajan arranged for, and brought in, a large part of these funds. He submitted that when it was imperative that stamp duty to the tune of ₹ 4.93 crores was paid before execution of conveyance of the property, the requisite funds were brought in/arranged by Doshi and Rajan. Out of these funds, a sum of ₹ 2.72 crores was brought in by Doshi himself. There is cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly other ground urged in support of Jamal's case of oppression was his removal as a director of the Company. The CLB, in this behalf, actually held the removal to be illegal and void, acknowledging the same to be an oppressive act. There is nothing, therefore, for this Court to consider further in this behalf save and except the argument of Ms. Sethna that reliefs of reinstatement and other appropriate directions under Section 402 of the Act ought to have been granted in that case, which aspect is considered later in this order. 15.9 The law cited by Ms. Sethna in connection with oppression within the meaning of Section 397 of the Act and also, concerning the reliance upon shareholders' agreement in relation thereto, does not fall for consideration, since I have upheld the conclusions of the CLB on the ground that they are supported by material on record and not vitiated by consideration of any nongermane or irrelevant material. In the face of the Shareholders' Agreement, the Supplementary Agreement and the Minutes of Meeting, the conclusion that there was no oppression of Jammal on account of reduction of his shareholding from 50%, as originally proposed, to 28.33%, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 21 lacs; (iii) there was no document on record reflecting any transaction between Ashwamegh and Lucent and in the absence of such document, it was difficult to determine whether Ashwamegh had obtained any undue benefit from the alleged transaction with Lucent; (iv) Even though as per agreement Rajan had to consult Jamal for disposal of the properties, there was nothing on record that till the disputes arose between the parties, Jamal had tried to exercise such right of consultation; (v) Anyway, such contractual rights could not be enforced in a petition under Sections 397/398; and (vi) The Board could not take any decision on the issue of related parties without proper material (the position being that Jamal was not able to identify the promoters of Ashwamegh, whilst Rajan had categorically stated that Ashwamegh was not a related party). The CLB, was, however, of the view that interest ought to have been recovered from Ashwamegh for delayed payment of consideration, but did not accept the Appellants' case that the agreement with Ashwamegh should have been cancelled. The basis of upholding the transaction notwithstanding acceptance of the case of delayed payment of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion filed under Sections 397 and 398 has to be tested on the allegations made and pleas raised in the petition. The petition merely contains allegations concerning Ashwamegh and does not refer to any acts of oppression or mismanagement concerning Fine Plaza, Ecstacy or Stylus. The allegations concerning these form part of interim applications of the Appellants before the CLB in the original petition. The original petition is not amended to include these. Be that as it may, the CLB has nevertheless proceeded to consider these allegations and found no merit in the same. In Fine Plaza, the CLB found that the Appellants did not establish that it was a related party of Rajan. The CLB also found the consideration of ₹ 22.51 crores received by the Company to be adequate and proper after considering the sales instances placed on record and also the fact that the Registrar had accepted the valuation of ₹ 22.51crores. The CLB did not find any fault with the business decision of the board in selling the area rather than leasing it for rental income. For the same reasons, as in the case of Ashwamegh, the CLB did not find a case made out for cancellation of the Fine Plaza transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jamal's case of mismanagement can be described as perverse. They are all supported by evidence on record; no irrelevant material is considered to arrive at the same; and they are all possible conclusions. No question of law arises therefrom for the consideration of this Court under Section 10F. 17. On the relief granted by the CLB : 17.1 That brings us to the third and the last aspect of the matter, namely, the legality or validity of the relief granted by the CLB in the matter, which, I must admit, engaged much of my attention in the appeal herein. At the first blush, it seemed rather odd to me that even after acknowledging 28.33% share of the Appellants in the first Respondent Company (if not 50% as claimed by Jamal), the consideration for the Appellants' exit from the Company is not the market value of 28.33% share, but 4.35% of the profits arising out of the value of the land, which, with addition of 50% to take care of the pendency of the petition for nearly three years, works out to 6.6%. On a closer scrutiny, however, it not only appears to be a legitimate relief, and therefore, not giving rise to any question of law, but also a reasonable and adequate relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t parting of ways as such as between Rajan and Jamal was not seriously contested by anyone. In fact, both Appellants and Respondents accepted that the solution had to be parting of ways. The question, if at all, was only who exits and at what price. In the premises, the order providing for parting of ways can only be described as a 'no fault' relief, which the CLB may well grant in a petition like this. 17.4 In Needle Industries (India) Ltd. vs. Needle Industries Newey (India) Holding Ltd. (1981) 3 Supreme Court Cases 333 , the Supreme Court held that even though the company in that case failed to make out a case of oppression, the court was not powerless to do substantial justice between the parties. In that case, the question was of placing the parties in the same position in which they would have been had the meeting, complained of as illegally held, been held in accordance with law. The court asked the Indian shareholders to pay a premium on the excess holding or the right shares, which they had originally shown willingness for, and which factor, to some extent, had gone in their favour on the question of oppression. Having had the benefit of that stance, they must, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t negotiations with Parke Davis; But the fact of the matter was that neither of the two had concluded the contract; (b) If Jamal was the prime mover, he could have got the property on his own and there was no need for him to have entered into JVA the next day, i.e. 23.12.1999, with Rajan; (c) The offer of ₹ 49 crores was really a joint offer and the property was acquired by joint efforts; (d) Jamal had (after making an initial equal payment towards the earnest money) expected Rajan to organize the balance payment to Parke Davis and had played no role in ensuring the balance payment to Parke Davis; (e) But for the efforts of Rajan, the Company would not have been in possession of the property and as a matter of fact even the earnest money of ₹ 4.9 crores would have been forfeited by Parke Davis; Rajan not only gave his personal guarantee but also his properties at Khar and Lonavla as collateral security for raising the loan from ICICI for payment to Parke Davis; and (f) The massive and beautiful buildings that had come up on the project site were due to the efforts of Rajan, both in organizing funds and in actively implementing the project, for which Jamal had even com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veral grounds have been urged before me to challenge this valuation of the Appellants' share. It is submitted that the first Respondent being a real estate company, the best way to part would have been to bifurcate the immovable property. That was indeed one of the suggestions made by Counsel for Jamal before the CLB. The suggestion was that the entire project should be partitioned in equal shares between Rajan and Jamal or in the proportion, which the CLB might decide. The other alternatives suggested by Counsel were : (i) sale of the project and division of sale proceeds between the shareholders, (ii) Jamal should get the Company, and (iii) the entire project should be valued as to the date of the order and Jamal should be paid in cash in the determined proportion. In this behalf, what we need to consider is, whether there is any error of law in the CLB rejecting the alternatives suggested by Counsel for Jamal or making valuation the way it did in the impugned order. 17.10 The alternative that Jamal should get the Company has already been discussed above and on that the CLB's conclusion has been found to be in order. Let me now take up the alternative of sale of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and Carrington (2005) 1 SCC 212 , Ramkishore 2004 50 SCL 461 CLB , Vinod Kumar 2005 (5) Bom CR 84 and Re: Bird Precision Bellows [1985] 3 All ER , in support of the case that this was not an unusual order to make and in the facts of the case, was actually a proper order to make. 17.12 The cases relied upon by the Appellants do show that it may well be permissible to divide the business and assets of a company between two groups of shareholders as part of relief under Section 402 of the Act. But that is essentially a matter to be governed by individual facts of each particular case. In Bhola Nath Paper House Limited (supra), a family company, each of the two groups held 50% shares and each had a managing director on the board; the business had been effectively bifurcated and each group was managing separately a godown and a shop, and yet admittedly the business could not be carried on smoothly. A case of oppression and mismanagement was established, though it was not advisable to wind up the company. In the result, the court found the option of dividing the business and assets between the two groups as the only equitable way of parting of the two. In Trackparts of India Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies ought not to be ordered, in the present case, cannot be termed as an unsound exercise of such discretion or actuated by a nongermane consideration. 17.15 That leaves us with the last of the options suggested by the Appellants' Counsel to the CLB, and which the CLB examined in great detail, namely, valuation of the project and payment of his share to Jamal in cash in a determined portion. In arriving at its conclusion on this option, the CLB considered the following : Firstly, despite its conclusion that the Shareholders' Agreement between the parties, being a private agreement, was not binding on the Company, it nevertheless examined Clause 5 of the agreement read with the Supplementary Agreement and Minutes of Meeting of 15 June 2000. It came to a conclusion that Clause 5 operated only upto the stage of acquisition of the land and not to the implementation stage of the project. Secondly, the CLB considered that even assuming the agreement to be applicable to the development stage, profit sharing was to be in proportion to the respective contribution of the groups, which included all types of funding provided by the groups, whether by way of share subscription or loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of interest. The CLB instead proceeded to determine the proportion of Jamal's share in the total valuation arrived at. 17.17 The CLB was conscious that in all cases of valuation concerning a company, the proportion is usually based on the shareholding ratio. But there was a cogent reason in the present case, according to the CLB, to depart from this principle. In the present case, the parties had themselves agreed to sharing of profits in the ratio of funding brought in by them respectively and even otherwise, on an equitable principle, in the peculiar facts of the case, the shareholding could not be taken to determine profit sharing entitlement. The CLB instead proposed a sharing proportion on the basis of the funding proportion. The total cost of the land was ₹ 56.56 crores (including interest for delayed payment and stamp duty), out of which the personal contribution by the parties was to the tune of ₹ 12.17 crores and the balance was financed by the funds brought in by Rajan and others (which funds were also to be treated as part of funding obligations, as discussed above). Thus, Jamal's contribution of funds to meet the cost of land was 4.35%. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to leaving the matter to chance. The CLB, in the premises, was of the view that the date of valuation should be the date of filing of the petition. However, considering the fact that the matter had been pending before it for nearly three years, for no fault of anyone, the CLB fixed a 50% markup on the share of profit to be received by Jamal at the valuation as of the date of the petition. 17.20 Lastly, the CLB had to determine the actual value as of the chosen date. The petition having been filed in December 2004, the highest price prevailing during the last quarter of 2005 was reckoned as the appropriate price to determine the value of the land. It called upon the parties to obtain market rates as of the last quarter of 2005 from reputed real estate agents to enable it to determine the value and arrive at the profit after deducting the total cost of the land without taking into account the interest paid to banks towards the loan for the acquisition of the land. Then from the profits so arrived at, 6.6% would be paid to the Appellants. 17.21 At the same time, the CLB thought it fit to assure unto Jamal a fixed minimum compensation. Considering Rajan's preparedness to off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will consider if the relief awarded is against the law or such that no reasonable person properly instructed in law could have arrived at or is determined on consideration of irrelevant material or omission to consider relevant material. 17.23 Let us now examine, in the light of these principles, whether the valuation exercise carried out by the CLB in the present case can be said to be vitiated and liable to be interfered with by this Court under Section 10F. As noted above, the conclusion of the CLB regarding the valuation comprised of three aspects : (a) the basis of valuation, (b) the proportion of the exiting shareholder's interest and (c) the date of valuation. Let us examine if on any of these aspects the conclusion merits interference on the above principles. 17.24 The CLB obviously made a departure from the ordinary rule of going by the shareholding ratio. But this departure is supported by cogent reasons. It is important to note that the Company was established to purchase and develop the Parke Davis property. Purchase of land and development of real estate envisage large funding and also extensive management of affairs. The CLB's conclusion that the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares would have had at the date of the petition, if there had been no oppression. Once the oppressor has bought the shares, the company can survive. Even the trend of the judgments delivered by the CLB in this behalf shows that the Board has very often leaned in favour of the date of presentation of the petition. As noted above, the CLB found no reason in the facts of the present case to depart from this principle. There is indeed none. In any event, the CLB not only fixed the date of valuation as the date of the petition, but considering the pendency of the petition for about three years, for the fault of none, fixed a 50% markup on the share of the profit determined as at the date of the petition. That was to compensate Jamal for the delay between the presentation of the petition and the order. There is nothing pointed out in the appeal or at the bar to claim that this markup was in any way unfair. The conclusions of the CLB on the date of the valuation and the markup to take into account the impact of the pendency of the petition, thus, cannot be faulted on any ground of law. 17.27 There is one more way of looking at the reasonableness of the compensation. The sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in special restrictions such as compulsory transfers to existing shareholders, preemption rights of other shareholders, etc. In the case of a quasipartnership of this type, the common course would be to fix the price for transfer of shares on a prorata basis according to the value of the shares as a whole and without any discount. In the case of other private companies, irrespective of the nature of the company, it is a matter of common occurrence for a shareholder to acquire shares from another at a price which is discounted because they represent a minority holding. The minority shareholder himself might have acquired the shares purely for investment and played no part in the affairs of the company. In that event, it might well be fair, that he should have been bought out on the same basis. Though there is no universal rule in the case of either of the two categories, these are general principles, which are, of course, subject to exceptions. For example, in a quasipartnership, as explained by the Court in Bird Precision, there may be the case of a minority shareholder whose interests had been unfairly prejudiced by the conduct of the majority, but who had nevertheless so acted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a quasipartnership. Clause 25(10) of the Shareholders' Agreement itself indicated that both Rajan and Jamal had voluntarily agreed in writing that partnership principles would not apply insofar as their association was concerned; the record of the case did not indicate that Rajan and Jamal were equal partners in the sense of being 50% partners each; that it was an admitted fact that Jamal never involved himself actively with the management of the company. On these facts, the CLB held that it would be difficult to apply the quasipartnership principles. The conclusion, which is essentially one of fact (or, at any rate, a mixed question of law and fact), is a reasonable conclusion, which cannot be questioned on a 27 622 Butterworths Company Law Cases (2009) 1 BCLC ground of law in this appeal. 17.30 If the Company was not a quasipartnership, the approach of the CLB in not ordering valuation of shares on a prorata basis cannot be faulted. Jamal's shareholding was obviously a minority shareholding and could very well be valued at a discount. His case appears to be more akin to an investor who holds a minority stake in a private company rather than a quasipartner who co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itable. This Court cannot find fault with this conclusion on any question of law, particularly having regard to the relevant principles for interference with the Board's order under Section 10F. 18. There is, thus, no merit in the appeal. The appeal is dismissed. There shall, however, be no order as to costs. 19. In the companion company appeal (Company Appeal No. 21 of 2009), Rajan and others have challenged those parts of the impugned order by which (i) the CLB held the act of Rajan in declaring the office of director as having been vacated by Jamal as oppressive, (ii) the CLB observed that interest would be recoverable in respect of certain transactions concerning Ecstacy, Millennium, Parshwa etc. and (iii) the CLB ordered the minimum guaranteed compensation of ₹ 30 crores to Jamal. The final order of the CLB providing for parting of ways, as I have observed above, was on a 'no fault principle. The purported acts of oppression concerning the directorship of Jamal and non recovery of interest from certain parties do not bear on the operative order passed in the matter. Indeed, no serious submissions were advanced by learned Counsel for the Appellants in Com ..... 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