TMI Blog2020 (8) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... ot done by him is the best, then we allow him to purchase/acquire the shares of other minority shareholders at a price of ₹ 2100/- and can hold it as per his wish. Power to modify the resolution / scheme approved in the EOGM - Held that:- The undertaking affidavit was filed as per the direction of the NCLT Mumbai, when the Respondent company stated that the shareholders who have voted against the resolution can continue to hold the shares of Respondent company. We also note that the special resolution specifically provides that the said reduction is being approved by the shareholders subject to any terms, modifications or conditions that the NCLT Mumbai may impose and the Board of Directors of the Respondent may agree. We note from the record that the NCLT has given directions and the same has been approved by the Board of Directors of the company. The NCLT has the powers, therefore, the Company has approached for approval of the same and the objectors have objected to the Scheme and the modification has been done. The same modification has been ratified by the Board of Directors. Therefore, it can not be said the NCLT has no power. If we assume that the NCLT has no p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution was passed on 25th October, 2018 by the shareholders whereby the shareholding of the company would get reduced from 22,561,564 fully paid up shares of ₹ 10/- each to 2,17,31,951 fully paid up shares of ₹ 10/- each. 4. In the EOGM held on 25th October, 2018 all except 37 shareholders representing 34,476 equity shares (the objecting shareholders) i.e representing about 0.15% of the total equity Shares have voted for approving the proposed reduction of the Respondent Company. After getting approval from the shareholders the Respondent Company filed Company Petition No.4475/2018 before the NCLT Mumbai for getting its approval under Section 66 of the Companies Act, 2013 and the Rules framed thereunder and Reduction of Equity Share capital of Respondent Company. 5. Before the NCLT, Mumbai, out of 37 shareholders, only 4 shareholders namely (1) Mr.Janak Mathuradas, (2)Mr. Arun Kejriwal, (3)Mr. Monish Bhandari and (4) Oswal Trading Co Pvt ltd filed an objection to the proposed reduction before the NCLT, Mumbai. The Respondent company gave price of ₹ 2100/-per share, offering the objectors to exit. The Respondent company had obtained a fair equity value of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llants stated that they hold only 5464 equity shares and the 96.32% of the total share capital is held by the Respondent company, they realised that the appellants will be outvoted despite genuine concerns regarding reduction and extinguishment and value offered to each shareholder. Therefore, the appellants did not attend the EGOM held on 25th October, 2018. Appellants stated that the Meeting was held and several minority or public shareholders voiced their concern against the capital reduction and voted against the resolution. Appellants stated that the Resolution was passed and the Respondent filed company petition for approval before the NCLT, Mumbai. Appellants further stated that they came to know that one Mr. Janak Mathuradas filed objections to the Company Petition before the NCLT, Mumbai, therefore, the appellants by duly sworn affidavits 11th October, 2019 duly supported that objections filed by Mr. Janak Mathuradas. Appellants stated that the Company has stated that the Respondent shall unconditionally permit such minority or public shareholders who had attended the EGM and voted against the resolution to remain shareholders of the company but since the appellants had vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Respondent further stated that who want to participate in the said reduction and have not appealed against the impugned order, they are approaching the Company for release of payment but the Respondent company is unable to release in view of the stay on the implementation of impugned order. Respondent further state that the Respondent is also facing financial losses and the company has transferred the consideration amount to a separate non-interest being bank account as of date. Respondent stated that they have already filed certified copy of the impugned order with ROC and a certificate confirming registration of the impugned order has also been issued by ROC Pune on 27.12.2019. 12. In Rejoinder filed by the appellant, appellant stated that the respondent has no answer to the ground raised that had the option of retaining shares been part of the Explanatory Statement to the notice convening the EGM, the minority shareholders would have voted differently. Appellant further stated that the respondent has not disputed the fact that the actual undertaking dated 8th November, 2019 was substantially and materially different from the undertaking expressed by the respondent before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Appellant stated that the Resolution was passed and the Respondent filed company petition for approval before the NCLT, Mumbai. Appellant stated that during the EGM the appellant requested for copies of the valuation report as well as the Fairness Opinion procured by Respondent in support of the valuation of ₹ 1854/- per equity share sought to be assigned to the equity shares of the Respondent. Appellants stated that the Respondent required the appellant to sign a confidentiality and hold harmless letter before providing the documents on the ground that the said documents were confidential in nature. Appellant stated that he filed objections to the Company Petition filed by Respondent under Section 66 of the Act for sanction of resolution for capital reduction passed at the EOGM. Appellant stated that the valuation issued by the BSR Associates LLP dated 14.9.2018. The date for valuation is taken as 31st March, 2018 which is much prior to the date of valuation report. Appellant stated that prior to valuation i.e. in November, 2017 the mining and excavation business of the Respondent was hived off to another company namely Epiroc Mining India Ltd. Appellant stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information relied in the valuation report are not even placed before NCLT so as to enable it to verify the reasonableness of the assumptions. Appellant stated that the valuer has even ignored the anticipated enhanced revenues and operational efficiency which the Company expects to derive. Appellant stated that due to the amendment in 2019 to Income Tax Act 1961 corporate tax rates have been reduced, however, the valuation proceeds on the basis of old rates. The fair market value of shares of the company needs to be determined after taking into account the provisions for taxation applicable as on date. Appellant has stated that the appellant had the shares independently valued at ₹ 3627/- per share as against the valuation of ₹ 1854/- 14. In reply on behalf of the Respondents, the Respondent stated that the appellant hold 885 shares of the Respondent company and is attempting to override the collective wisdom and decision taken by the NCLT and 99.84% of the shareholders as well as the majority of the non-promoter. Respondent stated that the appellant has admitted that the appellant can choose not to participate in the said reduction and continue to retain his shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants. Respondent stated that once a notice has been duly served on the parties and they choose not to attend or vote at the meeting it must be presumed that they have no objection the scheme and have given their implied consent thereto. Respondent stated that they have received various requests and email from public shareholders requesting for an exist. Respondent stated that the NCLT has been vested with wide substantive powers under Section 66(3) of the Act whereby it can make an order approving reduction of share capital on such terms and conditions as it may deem fit. Respondent stated that this power has been reiterated under Rule 6 of the Reduction Rules and also finds mention in Form RSC-6 thereby fortifying he fact that the NCLT s powers are wide and substantive. Respondent stated that vide Board Resolution dated 18th September, 2018, the company secretary was granted authority to furnish undertaking affidavit as directed by NCLT, Mumbai. Respondent stated that the mining and rock excavation equipment business was demerged into Epiroc Mining India Ltd in November, 2017 and the shareholders were issued shares at a 1:1 ratio of Epiroc as part of the demerger. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as sought in the earlier appeal. The following reliefs have been sought in the present appeals:- a) Hon ble Tribunal be pleased to quash and set aside the impugned order dated 10th December, 2019 and be further pleased to reject the petition for capital reduction of Respondent. b) Hon ble Tribunal be pleased to appoint an independent valuer to value the shares of the Respondent for the purpose of the selective capital reduction and after consideration of the report of such independent valuer, this Hon ble Tribunal be further pleased to pass such orders as this Hon ble Tribunal deems fit. c) That without prejudice to prayer (a) above and in the alternative to prayer clause (b), this Hon ble Tribunal be pleased to direct the Respondent to extend the option to continue as shareholders to all minority or public shareholders including the appellants. d) Pending the hearing and final disposal of the appeal, the effect, implementation and operation of the impugned order dated 10th December, 2019 be stayed; e) Ad-interim reliefs; costs; etc. 17. We have heard the learned counsel for the parties and perused the record. 18. Before we proceed further we want to place un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmenced from 20th October, 2018 (9 AM) till 24th October, 2018 (5PM) and the shareholders who have voted in favour of the proposed capital reduction considered and approved at the EGM includes the name of Mrs Jayshree Sanjay Damani holding 1892 shares and Ms Yashita Sanjay Damani 261 shares at the time. Learned counsel for the Respondent also argued and shown attendance slip duly signed by Sanjay Damani who attended the meeting on behalf of Yashita Damani. 23. We have considered the submission of the parties on this issue and perused Annexure 1 and Annexure-2 at Pages 11 to 13 of Counter affidavit filed by Respondent. We note that attendance slip has been duly signed by Sanjay Damani who attended Meeting on behalf of his daughter Yashita Damani. In this attendance slip it is clearly mentioned No of shares held is 261. We also perused letter dated 3rd December, 2019 issued by Scrutinizer. The said letter clearly states that Mrs Jayshree Sanjay Damani holding 1892 shares and Ms Yashita Sanjay Damani holding 261 shares voted in favour of the proposed capital reduction through e-voting. Therefore, we are satisfied that the meeting was attended and voting was done through evoting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off to another company namely Epiroc Mining Ltd. Learned counsel for the appellant further argued that an independent valuer. Learned counsel further argued that the valuation is on lower side as he got done the valuation from Jayesh Desai Co which has valued ₹ 3627/- as against Respondent valuation of ₹ 2100/- per share. 29. Learned counsel for the Respondent argued that appellant has deliberately concealed the fact when the mining and excavation business of the Respondent was hived off to another company, the Respondent had issued share at a 1:1 ratio of Epiroc as part of the demerger. Learned counsel for the Respondent argued that Section 66 does not require the company to undertake any valuation exercise for implementing a capital reduction unlike Section 230 and other provisions of the Act. Learned counsel for the Respondent argued that it is settled law that under Section 66 it is for the appellant to establish that the valuation obtained by the Respondent is unreasonable and perverse and in absence thereof the Respondents valuation has to be accepted by the Court. Learned counsel for the Respondent argued that some of the appellants or their family members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.366/2019 has voted against the resolution and as per the affidavit of Respondent the appellant can hold the shares of Respondent company. If the appellant, Mr. Janak Mathuradas feels that the offer price is less and the valuation got done by him is the best, then we allow him to purchase/acquire the shares of other minority shareholders at a price of ₹ 2100/- and can hold it as per his wish. 35. Learned counsel for the appellants argued that the special resolution passed at EGM was illegally modified. Learned counsel for the appellants further argued that the resolution can not be modified by filing undertaking and it can only be modified by shareholders. Learned counsel for the appellants further argued that the NCLT or Board of Directors have no power to modify the same. Learned counsel for the appellant argued that the company by way of affidavit is creating a class within the class of shareholders. 36. Learned counsel for the Respondent argued that this contention has been raised by the appellant for the first time and this was not urged before the NCLT. Learned counsel for the respondent argued that any such fresh submission/contention taken for the first time at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the modification has been done. The same modification has been ratified by the Board of Directors. Therefore, it can not be said the NCLT has no power. If we assume that the NCLT has no power then it means that the scheme approved by the shareholders, whether wrong or right, the NCLT has to approve. We are not satisfied with the argument of the appellants that the NCLT has no power. 39. Thus, we also note that the directions issued by the NCLT and modification proposed by the Board of Directors are the practical method to ensure that the shareholders who want to retain his shares are able to do so which does prejudice them. We also note that the Board has already approved the terms of the impugned order, ratified all actions and steps taken for procuring and implementing the impugned order and also caused a copy of the impugned order to be filed with the ROC, Pune. 40. The other issues raised by some of the appellants that they did not attend the meeting and the resolution has been modified and they may be given another option to vote for the same. On this issue we are of the opinion that the appellants are shareholders of the company and they were issued notice to atten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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