Avlight Automotives Ltd. & Ors vs Raj Kumar Bhatia & Ors
- CitationCOMPANY APPEAL (AT) NO.348 OF 2024
Ratio decidendi
The rule this decision rests on
The principle that a court or tribunal will not, in an appellate or later proceeding, modify a final earlier order in a manner that amounts to a review of it where that earlier order has become final and binding and was never challenged, so that a party's entitlement to receive dividends on shares under that earlier order cannot be used to defeat its independent entitlement to interest directed by that order. A shareholder's receipt of dividends during the pendency of a share-valuation or buy-out exit direction does not disentitle it to the interest separately directed by the final earlier order, because dividends are received as an incident of continuing shareholding and the earlier order did not curtail that right; to deny the interest on that ground would be to review the earlier order after its finality, which is impermissible. A party which has, in good faith, raised objections to a valuation that are not found frivolous, and which thereafter receives a higher valuation than the one it initially contested, is within its legal right to have raised the dispute and cannot be deprived of interest on the amount found due merely because of that dispute. Where a company has used funds contributed by a shareholder in its business, knowing such funds are refundable, and it is a profit-making company, equity requires that the person who has used the money refund it with interest; the Tribunal, exercising equitable jurisdiction in oppression and mismanagement matters, may direct payment of interest on that basis, and the inherent power of the court to do justice between the parties supports such direction.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
1
NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI COMPANY APPEAL (AT) NO.348 OF 2024 (Arising out of judgement and order dated 29.07.2024 passed by National Company Law Tribunal, New Delhi in CA no.203/2017 in Company Petition No.15/2008). In the matter of: 1. AVLIGHT Automotives Ltd, 325 A, 2nd Floor, Masjid Moth, New Delhi-110049.
2. Shri Anil Anand, Son of Shri DB anand, B-8/12, DLF Phase-2, Gurugram, Haryana,
3. Shri Rajan Sharma, Son of Shri N.L. Sharma, C-72, Park Place, DLF V, Golf Course Road, Sector 54 Gurugaon.
4. Smt Renu Sharma Wife of Shri Rajan Sharma C-72, Park Place, DLF V Golf Course Road, Sector 54 Gurgaon. Appellants
Vs
1. Shri Raj Kumar Bhatia, Son of Shri Jai Dayal Bhatia 843/15 Faridabad. 2
2. Saket Fab (P) Ltd, Plot No.128, Sector 6 Faridabad
3. Mrs Kavita Bhatia Wife of Shri Raj Kumar Bhatia 843/15 Faridabad Respondents
For Appellant: Mr Sudhanshu Batra, Sr Advocate with Mr Zorawar Singh, Ms Peehu Singh, Advocates. For Respondents: Mr Krishnendu Datta, Sr Advocate with Mr Abhishek Kumar, Ms Twinkle Kataria, Mr Akhil N Advocates.
JUDGEMENT
JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)
1. This appeal is against an impugned order dated 29.07.2024 wherein
the Ld. NCLT has held as follows:-
"We heard the Ld. Counsel for the parties sufficiently on different dates of hearing. Apparently, the valuation in terms of the order dated 24.06.2013 was completed on 15.10.2019. Since the Ld. Counsel appearing for the Petitioner is prepared to accept the minimum of the value of the share arrived by the Valuator at the rate of Rs.225 per share, we dispose of the present petition with the direction that the Respondent would pay Petitioner the price of the shares at the rate of Rs.225/- per share at the rate of 12% per year with effect from the expiry of 8 months from 15.10.2019. No cost."
2. The appellant No.1 was incorporated in 1996 with promoter directors
as Appellants No.2, 4 and the Respondent. All the three parties were holding
33.33% shares each. In the year 2003 the rights shares were allotted to
Appellant No.2 and Appellant No.4 and their shareholding went to 84%
approximately and Respondent was left with 15.87% shares. Respondent 3
challenged the allotment of rights issue and filed a Company Petition under
Section 397/398 of the Companies Act, 1956. The said petition was disposed
on 24.06.2013 wherein CLB directed as follows:-
"In view of the conclusions mentioned above, Arun Saxena CA (Mobile 9810037364) has been appointed for valuation of the shares of the company and calculate the share value of the petitioner's shares as on 31.03.2012 within two months hereof. Accordingly, the respondents are directed to provide exit to the petitioners by paying their share money within six months hereof. If the company has failed to pay the share money in the time given, the petitioners are entitled to interest @ 12% from the date after the expiry of six months time given. As to the remuneration of the valuer is concerned, the petitioners and respondents are directed to pay the remuneration to the valuer proportionate to their shareholding in the company. They are at liberty to negotiate the remuneration with the auditor as agreeable to him."
3. The said order dated 24.06.2013 was challenged by the Respondent
herein before the Hon'ble High Court of Delhi. The challenge was dismissed
on 27.01.2016. Against the said order the Respondent went to Hon'ble
Supreme Court by filing SLP, but it was also dismissed in limini.
4. Thereafter the Respondent filed an application before the CLB in respect
of fair valuation of the shares as on 31.03.2012 after due diligence of the
company for the financial year 2011-2012. However, per order dated
13.4.2017 Mr. Arun Saxena, CA recused himself and suggested M/s GSA &
Associates to carry out valuation in a time bound manner and to submit
report. The said valuer gave valuation report dated 08.10.2017 where the
shares of the company were valued at Rs.204.07 per share. Yet again the
Respondent challenged the said valuation report by filing a different Valuation
report dated December, 2017 prepared by one Grant Thronton at its own cost 4
and placed it before the Ld. NCLT. After reconsideration of such report the
value of the share was fixed at Rs.223.57 per share. Even this was challenged
and vide order dated 15.05.2019 the Ld. NCLT held:-
"Objection has been raised by the petitioner to the valuation made by GSA & Associates appointed by this Bench vide our order dated 13th April, 2017. Ld. Counsel appearing for the petitioner submits that they have also taken opinion of the valuation report from M/s Brand which has raised certain objections in respect of transaction with the related parties which effects the valuation. Both parties are agreeable with this observation to be referred back to the valuer so appointed for a fresh reconciliation, if required, in this case. Report be sent to this Bench within 4 weeks. Both sides may assist the valuer on a mutually appointed date."
5. Thereafter an affidavit was filed by M/s GSA Associates as follows:
"4. The matter was taken up for hearing before this Hon'ble Tribunal on 15.05.2019, wherein this Tribunal was pleased to direct that the observations of Grant Thormton LLP, be referred to the firm for a fresh reconciliation with the parties to the present lis. A copy of the order of this Hon'ble Tribunal dated 15.05.2019 in Company Petition No.15 of 2008 is annexed to the affidavit and has been marked as Annexure A. ` 5. Therefore, in compliance with the order dated 15.05.2019 taking into consideration the fresh representations of the parties, which is annexed to this affidavit and has been marked as Annexure B.
6. Ultimately the valuation was fixed in between Rs.225 to Rs.263/- per
share and admittedly the Ld. NCLT vide its impugned order had fixed value
of shares at minimum of Rs.225/- per share and directed the appellant shall
pay to the Respondent the price of shares at the rate of Rs.225/- per share
with interest of 12% per year with effect from expiry of 8 months from
15.10.2019. This direction the appellant has challenged alleging the valuation
report came in the year 2019 and whereas the impugned order has come on 5
29.07.2024 hence the appellant shall only be liable to pay interest with effect
from the date of impugned order i.e. dated 29.07.2024 which is objected to by
the respondents alleging inter alia the appellant was liable to pay interest after
six months of order dated 24.06.2013 but to end litigation the respondent
does not object to the payment of interest as directed per impugned order.
7. It is an admitted fact on 15.10.2019 the second valuation report was
given by M/s. GSA and Associates in which the fair price of shares was
determined between Rs.225.61- Rs.265.90. The said report was filed before
the learned NCLT on 27.11.2019.
8. However the argument of the learned Senior Counsel for the Appellant
is, since the range as provided by the Valuer in its Valuation Report was never
crystalized, there was no question of making payment to the Respondent
despite the Respondent accepting minimum of the range as was given in the
Valuation Report dated 15.10.2019. Admittedly, the Respondent had showed
his satisfaction to the second valuation report but the Appellants had
reservations and it led to passing of an Order dated 29th July, 2024 wherein
the Appellants were directed to pay to the Respondent the share price @
Rs.225 per share along with interest @ of 12% per year with effective from
expiry of 8 months from 15.10.2019.
9. The grievance of the Appellant is, he ought to have been directed to
make the payment w.e.f. July, 2024 when the value of the shares was
crystalized. The argument of the Respondent is they have accepted the
minimum value in 2019 itself.
10. Heard.
6
11. The facts reveal the appellants are enjoying the investment made by the
Respondents, as is evident from the summary of balance sheets filed by the
Respondents, which clearly demonstrate that Appellant No.1's net profits
have grown year by year. Admittedly the pendency of this appeal has delayed
the payment to respondent of their legitimate dues. The same is evident from
the mere fact the Appellants chose to file the objections to 2nd valuation
Report only on 16.04.2024 when NCLT was about to decide the matter and
whereas the respondents always expressed its satisfaction with 2nd valuation
report and did not file any objection to it. A bare perusal of various orders,
including orders dated 24.02.2023, 21.04.2023, 24.04.2023, 05.01.2024,
19.04.2024 and 29.07.2024 would establish the Respondents were always
agreeable to 2nd valuation report and it was the Appellants who had delayed
the entire matter by objecting to the same on every occasion. Vide order
dated 21.04.2023 the Ld. NCLT rather advised the parties to accept the value
of ₹235/- per share, considering the same as average price and though,
Respondents agreed, yet the appellants did not agree to the same. Now vide
the Impugned Order dated 29.07.2024, the Ld. NCLT had merely accepted the
valuation of shares, which already got crystalized in 2nd valuation report on
15.10.2019 itself, when GSA filed it before the Ld. NCLT.
12. The Appellants' contention that Respondents received dividend on their
shares and thus, cannot be allowed payment of interest is again legally
untenable. By receiving payment of dividend, Respondent have merely
exercised their rights as shareholders as it was their statutory entitlement.
Till the time, Respondents continue to be owners of the shares, they were 7
entitled to receive dividends, if declared by the Company. However, the same
cannot be stretched to contend the Respondents are not entitled to receive
interest in terms of order dated 24.06.2013. In fact, such contention is clearly
contrary to the judgment dated 24.06.2013 of Ld. NCLT, which cannot be
reviewed after 12 years as the appellants never challenged the said judgment.
The said judgment has become final and binding upon the parties. The said
judgement did not curtail the right to receive dividends till the shares were
transferred. Thus, in the present appeal, any modification would amount to
review of judgment dated 24.06.2013, which is impermissible under the law.
13. We find though the Respondents did not accept Rs.204.71 in 2017 as
valuation of their shares but admittedly their objections were not found
frivolous and in fact later the valuation per share rather increased. The
respondents thus were within their legal right to raise dispute and of such
genuine right they cannot be deprived of interest.
14. Thus we find no cogent reason to upset a reasoned order of the Ld.
NCLT. There was never any question of further crystalisation of amount after
the 2nd valuation report as the appellants failed to deposit even the minimum
of the range or its average.
15. In Amritsar Swadeshi Woollen Mills Private Limited Vs Vinod Krishan
Khanna and other 2019 SCC OnLine NCLAT 166 the Ld. NCLT had observed
the company had effectively utilised the funds of the shareholder in relation
to its business knowing fully well such funds are required to be refunded and
being a Court of equity while dealing with the matters touched upon
oppression and mismanagement and exercising equitable jurisdiction the 8
Tribunal was unable to accept the stand the interest was not payable.
Admittedly the company is a profit making company and had given dividends
once. The balance sheet of the appellant also show it is a profit making
company and thus it is just and equitable that the person who has used the
money, must refund it with interest. Section 144 of the CPC, no doubt, is a
statutory recognition of pre existing rule of justice, equity and fair play and
even otherwise the Court has inherent jurisdiction to do justice between the
parties.
16. Appellants are thus, liable to pay to Respondents, the total value of their
respective shares @ ₹225/- per share alongwith interest @12% in terms of
impugned order dated 29.07.2024. The appeal is thus dismissed.
15. Pending applications, if any, are disposed of.
(Justice Yogesh Khanna) Member (Judicial)
(Mr. Ajai Das Mehrotra) Member (Technical) Dated:01-08-2025 BM
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