Hyde Engineering + Consulting Inc vs Karan Manocha

Company Appeal (AT) (CH) No. 76 of 2022 (IA No.722 of 2022, IA No.723 of 2022 and IA No.752 of 2022)

(Filed Under Section 421 of the Companies Act, 2013) (Arising out of the `Order' dated 29.07.2022 passed in IA No.1169/2020 in CP/285/241/HDB/2020).1169 by the `National Company Law Tribunal', Division Bench - I, Hyderabad)

In the matter of: M/s. Hyde Engineering + Consulting, Inc. Having its registered office at 6260 Lookout Road, Suite 120,Boulder, CO 80301, USA Represented by Ms.Sama Naga Lakshmi Satyavathi Email: Kerren.Bergman@hyde-ec.com..... Appellant / Petitioner/First Respondent V. Mr. Karan Manocha 38/2, New Palasia, Road No.1, Indore, Madhya Pradesh - 452 001. .....Respondent No.1/Petitioner in Main Company Petition

M/s. Hyde Engineering & Consulting India Private Limited, CIN: U74999TG2009FTC065386 A company incorporated under the Companies Act,1956 Having its registered office at Unit No.306, Manjeera Majestic Commercial Kukatpally Housing Board, Kukatpally, Hyderabad, Rangareddi District, Telangana - 500 072 ..... Respondent No.2

Mr. John Mark Hyde, Former Director, Hyde Engineering & Consulting (India) Private Limited Address:6260, Lookout Road, Suite 120,Boulder, CO 80301, USA Represented by Ms.Sama Naga Lakshmi Satyavathi Email: john.hyde@hyde-ec.com ..... Respondent No.3

Comp. App (AT) (CH) No. 76 of 2022 Page 1 of 23 Mr. Sandeep Puri, Former Director, Hyde Engineering & Consulting (India) Private Limited Address: Unit No.306, Manjeera Majestic Commercial Kukatpally Housing Board, Kukatpally, Hyderabad, Rangareddi District, Telangana - 500 072 Email: Sandeep.puri@hyde-ec.com ..... Respondent No.4 Mr. Charles Thomas Poskie Former Director, Hyde Engineering & Consulting (India) Private Limited Address: 421, Wyoming Circle, Golden CO-80403, USA Represented by Ms.Sama Naga Lakshmi Satyavathi Email: ctposkie@gmail.com ..... Respondent No.5

Present: For Appellant : Mr. P.H. Arvindh Pandian, Senior Advocate For Mr. Pawan Jhabakh, Advocate For Respondent No.1 : Mr. S. Ravi, Senior Advocate For Ms. Shireen Sethna Baria, Advocate

JUDGMENT

(Virtual Mode)

Justice M. Venugopal, Member (Judicial):

Comp. App (AT) (CH) No. 76 of 2022:

The Appellant/Petitioner, (in IA No.1169 of 2020 in CP

No.285/241/HDB/2020), has preferred the present Comp. Appeal AT CH

No.76 of 2022, before this `Appellate Tribunal', on being Aggrieved against

the `impugned order', date7d 29.07.2022 in IA 1169/2020 in

CP/No.285/241/HDB/2020, passed by the National Company Law Tribunal,

Hyderabad Bench-I.

Comp. App (AT) (CH) No. 76 of 2022 Page 2 of 23

2. While passing the impugned order dt. 29.07.2022 in IA 1169/2020

in CP/No.285/241/HDB/2020 (filed by the 1st Respondent/Petitioner),

National Company Law Tribunal, Hyderabad Bench - I, had observed the

following:

"Learned Senior Counsel Shri. S. Ravi, for 2nd Respondent submitted

that, respondents have no objection for appointing the registered

valuer for the purpose of fixed value of equity shares of the 2 nd

Respondent Company. We therefore, without going into merits of the

respective pleas of both sides, and in the interest of the 1st Respondent,

hereby appoint Mr.Mallikarjuna Setty Nethi, (Mobile - 9963606444),

email id-malliknethi[at]gmail.com, as valuer for valuation of shares of

2nd Respondent Company commencing from the Financial Year 2017-

18 to 2021-22. The fee quoted by the valuer has to be borne by both

sides in equal manner and the valuer who has been appointed is hereby

directed to submit the report within a period of one month from the

date of this order.

Accordingly this Application is partly allowed leaving the prayer "to

direct the first respondent to sell the shares held in 2nd respondent

company to the Applicant company, based on the valuation fixed by

the registered valuer appointed by this "Adjudicating Authority" to be

considered after submission of the report by the valuer".

Comp. App (AT) (CH) No. 76 of 2022 Page 3 of 23 and adjourned the matter to 07.09.2022 'For Report and Hearing, the Company Petition'.

Appellant's Contentions:

3. Challenging the correctness, validity and propriety of the

`Impugned Order', dt. 29.07.2022 in IA 1169/2020 in

CP/No.285/241/HDB/2020, passed by the National Company Law Tribunal

Hyderabad Bench - I, the Learned Senior Counsel for the Appellant, submits

that unless there is a finding of an 'Oppression and Mismanagement', by the

'Tribunal', there cannot in `Law', be an `Order' for the `Exercise of

Valuation'. Also that, the 'Issue of Valuation', between the `Parties', will

be of `relevance', only when the `Tribunal', finds that the `Appellant's

Conduct', was an `Oppressive one', under Section 241 of the Companies

Act, 2013.

4. It is represented on behalf of the Appellant, that the 'Tribunal',

cannot be permitted, to apply Section 242 (2) b of the Companies Act, 2013,

in a piece meal manner and the 'Impugned order', merely orders for the

`valuation of Hyde India', without mentioning, who is to purchase 1 st

Respondent's Shares, the plea of the Appellant, that the 'Order for

Valuation', at this stage, is similar to determining matters, pertaining to a

`final relief', without deciding the `Disputed' questions of 'Fact' and

`Entitlement'.

Comp. App (AT) (CH) No. 76 of 2022 Page 4 of 23

5. The Learned Counsel for the 'Appellant', points out any `Order of

Valuation', prior to evaluating the case of an oppression and mismanagement

is `Contrary to Law'. Furthermore, the `impugned order', records that the

matter as regards the `Sale of Shares', would be considered after the

submission of `Report of the Valuer', and by determining the First

Respondent's final relief, the 'Tribunal', has abridged the Appellant's rights

in the 'Company Petition'.

6. The Learned Counsel advances an argument, that the 'Impugned

Order', erroneously presumes the `Appellant's consent', and further the

`impugned order', does not spell out any reason for directing the

'Appointment of the Valuer', and suffers from being an 'unreasoned order'.

7. The Learned Counsel for the Appellant, points out that the

Appellant, was under `no obligation', to purchase the 1st Respondent's

Minority Shareholding and therefore, no requirement of `Valuation', would

arise. Infact, through an Email dt. 30.11.2018, the Appellant, had informed

to the 1st Respondent that it was not obligated to by his Shares and that he

was free to `Sell the Shares', to an outside buyer.

8. The Learned Counsel for the 'Appellant', refers to the `Article 15'

of the Appellant's 'Articles of Association', that the 'Valuation', must be

conducted by the 'Auditors', of the company, Viz., `M/s. Italia and

Comp. App (AT) (CH) No. 76 of 2022 Page 5 of 23 Associates', who were appointed by the 1st Respondent. That apart, the

`Articles', do provide that 'Any Transfer of Shares', of the Company, must

be at a mutually agreed `Fair Price' or a `Price Fixed', by the `Auditors of

the Company'.

9. It is the version of the Appellant, that the 1st Respondent, had

entered into 'unilateral discussions', with the `Valuer', without the

Appellant's knowledge and in reality, the `1st Respondent', held a Meeting

with the `Valuer', on 12.08.2022, without any intimation to the 'Appellant'.

Also that, the meeting between the '1st Respondent' and the `Valuer', behind

the Appellant's back is in itself, an `unprofessional one', and contrary, to an

'established procedure'.

10. The Learned Counsel for the Appellant, brings it to the notice of

this `Tribunal', that the 1st Respondent, had precipitated the matters, by

asking the `Valuer', to proceed with the `Valuation', and also paid the

Valuer's Fee on 27.8.2022.

Appellant's Citations:

11. The Learned Counsel for the 'Appellant', refers to the decision by

the Hon'ble Supreme Court in Shiv Prasad v Durga Prasad and Anr., reported

in 1975 1 SCC 405 at spl page 406, wherein at paragraph 12, it is observed

as under:

Comp. App (AT) (CH) No. 76 of 2022 Page 6 of 23

12. "Every applicant has a right to unconditionally withdraw his application and his unilateral act in that behalf is sufficient. No order of the Court is necessary permitting him to withdraw the application. The Court may make a formal order disposing of the application as withdrawn but the withdrawal is not dependent on the order of the Court. The act of withdrawal is complete as soon as the applicant intimates the Court that he withdraws the application".

12. The Learned Counsel for the Appellant, relies on the decision of the Hon'ble High Court of Bombay in Anil Dinamani v. Chief Officer, Panvel Municipal Corporation 2003 SCC Online, Bom 24, wherein at paragraph 3, it is observed and held, as under:

3. "Every applicant has a right to unconditionally withdraw his application and his unilateral act in that behalf is sufficient. No order of the Court is necessary permitting him to withdraw the application".

13. The Learned Counsel for the Appellant, falls back upon the Judgment of this Tribunal dt.19.01.2022 in CA AT 13 of 2022, between SREI Infrastructure Finance Ltd. v Trinity Alternative Investment Manager Ltd., wherein, at Paragraph 12, it is observed as under:

"... From the bare perusal of the Impugned Order, we are of the view that the Tribunal has the power to make Interim Orders which it thinks fit for regulation of the conduct of the affairs of the Company. On a careful consideration of the contentions projected by both sides, and the pleadings put forward, this Tribunal, keeping in mind the ingredients of Section 241 and 242 of the Act, arrives at the resultant conclusion, without expressing any opinion on the merits of the matter, also not delving deep into the case, as allegations of 'oppression and mismanagement' consist of mixed questions of fact and law, which cannot be decided at this interim stage, directs the NCLT Kolkata Bench to take up the matter on 18.03.2022 without any further adjournments, dealing with all issues raised, in accordance with law.

Comp. App (AT) (CH) No. 76 of 2022 Page 7 of 23

14. The Learned Counsel for the Appellant, adverts to the decision of the Hon'ble Supreme Court in V.S. Krishnan & Ors v.Westfort hi-Tech Hospital & Ors., 2008 3 SCC 363 at spl pgs: 372 and 373, wherein at paragraph 14, it is observed as under:

14. ``In a number of judgments, this Court considered in extenso the scope of Sections 397 and 398. The following judgments could be usefully referred to:

(a) Needle Industries (India) Ltd. and Others vs. Needle Industries Newey (India) Holding Ltd. and Others, (1981) 3 SCC 333 (b) M.S. Madhusoodhanan & Anr. vs. Kerala Kaumudi (P) Ltd. & Ors., (2004) 9 SCC 204. (c) Dale and Carrington Investment (P) Ltd.

& Anr. vs. P.K. Prathapan & Ors., (2005) (d) Sangramsinh P. Gaekwad & Ors. Vs. Shantadevi P. Gaekwad (Dead) Through L.Rs. & Ors. (2005) 11 SCC 314 (e) Kamal Kumar Dutta & Anr. vs. Ruby General Hospital Ltd. & Ors. (2006) 7 SCC 613.

From the above decisions, it is clear that oppression would be made out:

(a) Where the conduct is harsh, burdensome and wrong.

(b) Where the conduct is mala fide and is for a collateral purpose where although the ultimate objective may be in the interest of the company, the immediate purpose would result in an advantage for some shareholders vis- '-vis the others.

(c) The action is against probity and good conduct.

(d) The oppressive act complained of may be fully permissible under law but may yet be oppressive and, therefore, the test as to whether an action is oppressive or not is not based on whether it is legally permissible or not since even if legally permissible, if the action is otherwise against probity, good conduct or is burdensome, harsh or wrong or is mala fide or for a collateral purpose, it would amount to oppression under Sections 397 and

398.

(e) Once conduct is found to be oppressive under Sections 397 and 398, the discretionary power given to the Company Law Board under Section 402 to set right, remedy or put an end to such oppression is very wide.

(f) As to what are facts which would give rise to or constitute oppression is basically a question of fact and, therefore, whether an act is oppressive or not is fundamentally/basically a question of fact".

Comp. App (AT) (CH) No. 76 of 2022 Page 8 of 23

15. The Learned Counsel for the Appellant, cites the decision of the Hon'ble Supreme Court in Shanti Prasad Jain v. Kalinga Tubes, reported in AIR 1965 SC 1535, wherein at Paragraph 18, it is observed and held as under:

18. "These observations from the four cases referred to above apply to s. 397 also which is almost in the same words as s. 210 of the English Act, and the question in each case is whether the conduct of the affairs of a company by the majority shareholders was oppressive to the minority shareholders and that depends upon the facts proved in a particular case. As has already been indicated, it is not enough to show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of s. 397. It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder. It is in the light of these principles that we have to consider the facts in this case with reference to s. 397".

16. The Learned Counsel for the Appellant, refers to the decision of

the Hon'ble High Court of Bombay in Nafan B.V V SAF Yeast Company

Pvt. Ltd., reported in 2015 SCC Online Bom 6553, wherein at paragraph

172, it is held as under:

"For the purpose of valuation of shares, it will be most appropriate that today's date is taken as a reference. The order could thus be in two steps. Part I will be the forward

Comp. App (AT) (CH) No. 76 of 2022 Page 9 of 23 competitive bid for which Muthu Group will have to withdraw the civil suit they have filed and not take any steps based on MOU henceforth and convey its acceptance within a particular period If such willingness is not shown in the stipulated period, then Part II of the order regarding buy-out will come into effect".

17. The Learned Counsel for the Appellant, points out, that the

Judgment of this `Tribunal', dt. 05.03.2021 in Piyush Dilipbhai Shah and

Others v. Syngenta India Limited, 2021 SCC Online NCLAT 142, wherein

at paragraph 32, it is observed as under:

32. ``While so the valuation was done and reports have been submitted by M/s Price Waterhouse & Co. LLP, and Haribhakti & Co. LLP on 25.10.2017 and 26.10.2017 respectively taking into consideration the Company's performance prior to October, 2017. Whether the Company's stand is justified that the valuation report which was done in 2017 and even after three years, the same report could be taken into consideration. We are of the view that the said stand is against the Principles of equity and fair play and also violates principles of natural justice"

18.The Learned Counsel for the Appellant, cites the decision In re

London School of Electronics Ltd., reported in (1986) Ch 211,wherein it was

held that it is part of fairness that the `Shares', should be valued at a date as

close as possible to the `Actual Sale', so as to reflect the Value of what the

`Shareholder', is Selling.

19. The Learned Counsel for the Appellant, relies on the decision In

re Elgindata Ltd. (No.2) (Court of Appeal), reported in 1993 (1) ALL ER

232, wherein, it was held that the `Petitioner', cannot choose to fix a date for

the `Value of the Shares', at or near the time, when the Company's fortunes

were at their peak, if such a course is adopted, it would be highly unfair.

Comp. App (AT) (CH) No. 76 of 2022 Page 10 of 23

20. The Learned Counsel for the Appellant, cites the `order of the

Hon'ble Supreme Court in Petition(s) for Special Leave to Appeal (c) No(s)

33302 of 201'5, between Arunachalam Muthu and Anr. v. Nafan B.V.,

wherein at paragraphs 4 to 7, it is observed as under:

4. ``As regards, the cutoff date for conducting the valuation, it is agreed by both parties that the date should be taken as 31.03.2021.

5. In compliance to the orders passed by this Court from time to time, both the parties have placed the material on record relating to the contributions stated to have been made by them towards the growth of the company. We direct both parties to place copies of the said material before the Auditors to enable them to expedite the process of valuation.

6.The Auditors are directed to provide an opportunity to both the parties to present their case and also take into consideration the material placed before them before assessing the value of the company and thereafter submit a joint report to this Court within a period of six weeks from this date.

7.The expenses of the Auditors will be borne in equal share by both the parties.''

21. The Learned Counsel for the Appellant, refers to the decision in

Nikhil Rubbers Private Limited, In Re, (vide order dt.30.08.2001 in CP

No.27/97 and C.A. No.33/2001), reported in India Kanoon, wherein, at

paragraph 5, it is observed and held as under:

5. "However, since we find that not only there is no finalized balance sheet as on that date and preparation of a balance sheet on that date is also not possible due to the absence of records of the company and in view of the fact that after the filing of the petition there have been events affecting the affairs of the company having bearing on the valuation, it has become necessary to modify that order. The balance sheet as on 31-3-1995 is on record wherein the complete assets and liabilities of the company as on that date have been indicated and audited. Therefore, for the purposes of ascertaining the assets and liabilities, the valuer will take balance sheet as on 31-3-1995 as the basis. Both the

Comp. App (AT) (CH) No. 76 of 2022 Page 11 of 23 petitioners and the respondents are at liberty to bring to the notice of the valuer alt the events that had taken place after this date up to the date of our order (25-9-2000) which would have a bearing on the valuation of the shares and the valuer will take all these aspects into consideration in determining the value of shares. All other directions in regard to the valuation as contained in our order dated 29-12-2000 will remain as they are, Both the parties 'shall submit their oral and written submissions latest by 10-10-2001 to the valuer who will prepare his draft valuation report by 10-11-2001. Thereafter, the parties should react to the draft valuation report by 25-11-2001. The final report of the valuer should be made available to the parties by 15-12-2001. On receipt of the valuation report, the respondents should pay the consideration for the 50 per cent share of the company to the petitioner within 30 days"

22. The Learned Counsel for the Appellant, refers to the Judgment of

the Hon'ble High Court of Bombay, in Prudence Maynard v. Mundhra

Container Freight Station (P) Ltd. and Ors., reported in 2017 SCC Online

Bom 10221, wherein, it is observed as under :

1st Respondent's Submissions:

23. The Learned Senior Counsel for the 1st Respondent / Petitioner contends that there is correspondence to exhibit that there was an `Agreement', between the Appellant and the 1st Respondent buy out of 1st Respondent's Shareholding in Hyde India, resting upon the last physical year, managed by the 1st Respondent viz., Financial year 2017-18, using `Discounted Cash Flow ('DCF') Valuation Method'.

24. In this connection, the Learned Counsel for the 1st Respondent / Petitioner points out that the 1st Respondent / Petitioner had stated that "... it was agreed and committed by John [viz. Respondent No.3] and yourself that my shares would be... valued ... on the basis of the Financial ... Audits for Hyde India for the Fiscal Year 2017 - 2018 ... the shares as agreed would be valued as of that date and not on the next Fiscal Year (2018-2019) as

Comp. App (AT) (CH) No. 76 of 2022 Page 12 of 23 suggested in your emails. ... Jul 2018 ... Chuck [viz. Respondent No. 5], you and I revisited this topic ...it was clarified that the valuation method (DCF) was to be used for valuing my shares."

and submits that the Appellant, had not denied this 'Agreement', and had consented to the same.

25. The Learned Counsel for the 1st Respondent, refers to one Mr. Simon Forder (then Director for Hyde India and CEO for the Appellant) acting on behalf of the appellant, had stated that "this is the methodology we have used for Hyde USA valuation, and we, as the board have a fiduciary responsibility to value the affiliates in the same manner."

26. The Learned Counsel for the 1st Respondent points out that the perusal of 'Valuation Report' of the Appellant, conducted, to value its `own Shares', prior to the launch of `ESOP', it is evident that the Discounted Future Earnings (DFE) and Valuation, based on transaction multiples i.e., Price / EBITDA ("P/E") were the two methods used by the Appellant.

27. The Learned Counsel for the 1st Respondent comes out with a plea that the Appellant firstly made an offer to buy out the First Respondent's Shareholding on 04.11.2018, and this offer was resting upon falsification of more than INR 2 Crores of Profit after Tax, while arriving at `Valuation of Shares', held by the 1st Respondent. As a matter of fact, the offer had falsification of PAT Numbers, spanning three different fiscal years and was made 36 years after the purported AGM of financial year 2017-18 and 2 years and 1 year after the Annual General Meetings of financial year 2016 and 17 and Financial Year 2015-16 respectively. Besides these, the 5th Respondent, had stated that 'The Board met Friday [i.e. 2nd November 2018]', which was also 34 days after the purported AGM of FY 2017-18.

Comp. App (AT) (CH) No. 76 of 2022 Page 13 of 23 Therefore, the contra averment of the Appellant that 'the offer ... was based on then available figures', is an incorrect and false one and amounting to, falsification of PAT numbers knowingly.

28. According to the 1st Respondent, the 1st Respondent had pointed out the falsification of numbers to the Appellant, while stating that 'cited profit figures ... do not match the profit disclosed in the filed financial statements. Furthermore, the Appellant had five different times had categorically stated that any `Valuation of Shares', can only be done by a Valuation Firm, thus, contradicting their current position, now that the valuation, must be done by the 'Company's Auditors'.

29. Besides the above, it is projected on the side of the 1st Respondent that the Appellant, in their Offers dt. 04.11.2018 and 05.02.2021, had `Violated the Foreign Exchange Management Rules', which clearly provide the `Valuation', must be done using the `DCF Method', Merchant Banker' or a `Chartered Accountant'. Also that, since the `Offer', it is incorrect to state the application is infructuous one and merely misguided one, since the Offers violated the spirit of amicable settlement as directed by the 'Adjudicating Authority', being based on falsified PAT numbers, in negation to the `Companies Act' and `FEMA Rules' and neither conducted by a `Registered Valuer' nor in accordance with the multiple commitments of the Appellant.

30. The Learned Counsel for the 1st Respondent, adverts to the fact that the `IA', seeking 'withdrawal of the Application, was not preferred by the Appellant, before the hearing, by the 'Adjudicating Authority'/ 'Tribunal', as required under Rule 44 (2) of NCLT Rules, 2016. Because of the fact that the Application was never withdrawn, the `Adjudicating

Comp. App (AT) (CH) No. 76 of 2022 Page 14 of 23 Authority', after detailed hearing and considering the arguments from both sides, passed no orders', permitting the withdrawal of the Application.

31. The Learned Counsel for the 1st Respondent points out that the `Impugned Order', does not affect the rights and liabilities of the Appellant and in any event, the Appellant cannot claim prejudice, caused by such a Valuation Report. The Appellant's conduct is far from being based on equity, it loses the Right', to seek an equitable relief from this 'Appellate Tribunal' and hence, the instant `Appeal', may be dismissed to secure the ends of justice.

1st Respondent's Citation:

32. On behalf of the 1st Respondent, a reference, is made to the `Order' of this `Tribunal' in Archer Power System Pvt. Ltd. v. Cascade Energy Pvt. Ltd and Ors. (vide Comp. App AT No. 203 of 2017 dt. 23.07.2020), wherein at paragraphs 22, 23, 24 and 39, it is observed that ...'administrative orders passed by courts or judicial orders that do not affect the rights or liabilities of a party are not appealable... Consequently, as per the law laid by the Hon'ble Supreme Court, such an order is not appealable... On this ground alone, the instant appeal, ought to be dismissed... Hence the NCLT had the power and authority to make the impugned order having found that it was essential, to meet the ends of justice in the instant case.'

Glimpse of 'Valuation':

33. Be it noted, that a 'Valuation of an Asset', is an 'Approximation', ofcourse, resting upon the 'Best Judgment' of an 'Expert Valuer', and the 'Tribunal', may not substitute the views of an Expert. No wonder,

Comp. App (AT) (CH) No. 76 of 2022 Page 15 of 23 'Valuation', is only a tool to assist a `Management', in 'Decision Making'. A Valuation, in respect of the `Shares' (in an option to buy out Shares), is a question of fact and the `Tribunal', will not interfere on such a question of fact, if it is resting upon the relevant materials 'on Record'.

34. A 'Valuer', who values the `Shares', shall conduct `Valuation', required under the Act, as per rules. As per Section 247 (2) of the Companies Act, 2013, the 'Valuer', appointed under sub section (1), shall make an impartial, true, and fair valuation, of any Assets, which may be required to be valued, is to exercise due diligence, while performing the functions of Valuer, make value in accordance with such rules as may be.

35. Undoubtedly, 'Valuation', is the realm of corporate and commercial wisdom of parties and the role of a `Tribunal', is of course, peripheral and supervisory, in the considered opinion of this `Tribunal'.

36. It must be borne in mind that, it is neither the mandate of Law nor within the `Court' / `Tribunals' purview of enquiry, to question the Valuation, in the manner conducted.

37. In fact, to treat as unimportant' a 'Method of Valuation', of shares, in scheme of Reduction, it must be exhibited that the chosen 'Method of Valuation', is such, that it resulted in an artificially depressed or 'Contrived Valuation', well below what a fair, prudent person may think about in a careful and cautious manner, as opined by this 'Tribunal'.

38. The 'Valuation of Shares', can be impeached not only for Fraud, but also for 'Mistake or Miscarriage of Justice'. Also the 'Valuation of Shares', can be impeached on the basis that it affect the `Shareholders', who had submitted the `Shares'.

Comp. App (AT) (CH) No. 76 of 2022 Page 16 of 23 Not an exact Science:

39. There is no two opinion of a prime fact that the `Valuation of Business', is not an 'exact science' and for an 'informed Judgment', number of factors are to be considered.

40. It cannot be gainsaid that the 'Disgruntlement' or 'Unhappiness of an individual', or a `group of persons', is not Yardstick / Tape, by which a `Share valuation', can ever be tested.

41. A 'Tribunal', is to see only a manifest unreasonable, or manifest fraud, involved in the matter. Further, an opinion tendered by a Valuer(s) must in the absence of any other compelling circumstance, be accepted as affording a reasonable and proper basis for the `Valuation of Shares'.

42. No doubt, the choice of an 'Appropriate Valuation Approach', is to be employed, in a given 'Valuation Project', is on the Judgment of a 'Valuer'.

Option to 'Buy out Shares':

43. A 'Buy out Order', creates a circumstance in which a person or group gains control of a company by buying all are most of its Shares and the 'Tribunal', in exercise of its Discretionary Power, may make an order providing for the 'Exit' of one of the `Groups of Shareholders', any other company, to run smoothly, if such an order is just and equitable, in the circumstances of the case as per decision in Synchron Machine Tools P Ltd., v. U.M. Suresh Rao), reported in 1994, 79 Comp case p 868 (Ker).

Pecuniary Compensation:

44. An 'oppressor, make compensation to the person, who had suffered at his hands.' In the illuminating words of 'Blacks Law Dictionary',

Comp. App (AT) (CH) No. 76 of 2022 Page 17 of 23 `Damages', mean `pecuniary compensation' or `indemnity', which may be received in courts, by 'any person' who has suffered loss, detriment / injury, whether to his 'Person', 'Property' or 'Rights through an 'Unlawful Act' or 'Omission' or 'Negligence of another'.

45. When a company or any other person suffers loss or injury because of wrong, improper and misleading statements in the 'Report of Valuer', he can claim damages from the 'Valuer'.

Appraisal:

46.It transpires that the Appellant/Petitioner Company/2nd Respondent company, had preferred an IA No. 1169 of 2020 in CP No.285/241/HDB/2020 (under Rule 11 of NCLT Rules, 2016) against the 1st Respondent / Petitioner (in CP No.285/241/HDB/2020), mentioning that the 1st Respondent / Petitioner, had filed main Company Petition and that he has `10% of Shareholding', in the `2nd Respondent/Company' (M/s Hyde Engineering and Consulting India Pvt Limited, Telangana and one of the reliefs, is for `Valuation of Shares', of the 2nd Respondent company / 1st Respondent company

47. In fact, being a Majority `Shareholder', the Applicant company/2nd Respondent company, intends to buy the `Shares' of the 1st Respondent / Petitioner (in Main Petition), who is having 10% of the total Shareholding in the 2nd Respondent company / 1st Respondent company.

48. In reality, in IA No.1169 of 2020 in CP No.285/241/HDB/2020, the Petitioner company / 2nd Respondent Company, had prayed for the relief of appointing the `Registered Valuer', to fix the `Share Value of Equity Shares' of the `2nd Respondent Company i.e. M/s Hyde Engineering and Consulting (India) Pvt. Ltd. Also, an order was prayed, directing the 1st

Comp. App (AT) (CH) No. 76 of 2022 Page 18 of 23 Respondent / Petitioner in the main Company Petition) to sell the `Shares', held by in the 2nd Respondent company / 1st Respondent company M/s Hyde Engineering and Consulting (India) Pvt. Ltd. to the Petitioner Company / 2nd Respondent company, based on the 'Valuation', fixed by the 'Registered Valuer', appointed by the 'Tribunal'.

49. Before the 'Tribunal', the 1st Respondent/Petitioner, in his counter in IA No.1169 of 2020 in CP No.285/241/HDB/2020, had averred among other things that he has no objection to the Applicant company / Respondent No.2, buying out his 10% Shareholding in 2nd Respondent/1st Respondent/company, subject to his receiving payment for the 10% shareholding calculated as per valuation of 2nd Respondent / 1st Respondent company for the financial year 2017-18, together with interest on the amount payable, calculated from the date of filing of Audited Financial Results for the financial year 2017-18 by the 2nd Respondent / 1st Respondent company, and this was because of the previous assurance given to the 1st Respondent / Petitioner, in February 2018, vide email dated 04.11.2018 by the Petitioner company / 2nd Respondent, to buy out his `Shareholding', based on the `Valuation of the Equity Shares', for the financial year 2017-18.

50. Added further, the 1st Respondent / Petitioner, in his counter to IA No.1169 of 2020 in CP No.285/241/HDB/2020, had proceeded to point out that because of the failure of the Petitioner company / 2nd Respondent, having failed to follow its assurance and buy out the 10% shareholding, the 1st Respondent, was put to an immense hardship and legal cause and hence the legal cause may be avoided by the `Tribunal', to be paid to him by the Petitioner Company / 2nd Respondent.

51. Moreover, the 1st Respondent / Petitioner, while acknowledging the receipt of dividend, on his 10% Shareholding from the 2nd Respondent / 1st Respondent Company, in all fairness had offered that the said sum may

Comp. App (AT) (CH) No. 76 of 2022 Page 19 of 23 be deducted from the final payment towards purchase of his Shareholding to be made by the Petitioner Company /2nd Respondent. Besides this, the Dividend Distribution Tax, on the said dividend, should not be claimed from the First Respondent / Petitioner.

52. To put it precisely, the 1st Respondent, had in para 6 of the counter to IA No.1169 of 2020 in CP No.285/241/HDB/2020, had proceeded to significantly point out that, 'he would be glad to settle the matter amicably if he is paid his rightful valuation for his 10% Shareholding in the Respondent No.2 / Respondent No.1 Company, along with accrued interest and legal costs incurred by him.'

53. The First Respondent / Petitioner, had pointed out that the Application under Rule 11 of NCLT Rules, 2016, may be admitted by the `Tribunal', and appoint a `Registered Valuer', to fix a `Fair Value', for the `Equity Shares' of the 1st Respondent / Petitioner, based on the audited financial 1st Respondent / Company for the fiscal year - financial year 2017-

18.

54. Besides the above, the 1st Respondent / Petitioner, had stated in its `Reply', that the `Tribunal', may grant the prayer of Applicant Company / 2nd Respondent, to buy out the 'Equity Shareholding' of the 1st Respondent / Petitioner at a fair and proper value of the company, in respect of the Financial year 2017-18, along with the accrued interest and legal costs, incurred by the 1st Respondent / Petitioner and on payment of the same, within a time bound manner.

55. In the instant case, this 'Tribunal', pertinently points out in the Counter Affidavit filed by the 1st Respondent / Petitioner (vide page 65 in Diary No.791 dt. 23.8.2022 in CA (AT) CH No.76 of 2022) to IA No.1169 of 2020 in main CP No.285/241/HDB/2020, wherein at paragraph 6, the 1st

Comp. App (AT) (CH) No. 76 of 2022 Page 20 of 23 Respondent / Petitioner, had stated that, he would be glad to settle the matter amicably, if he is paid his rightful valuation for his 10% Shareholding in the Respondent No.2 / Respondent No.1 Company along with the accrued interest and legal costs, incurred by him.

56. Also that, in paragraph 8 of the Counter Affidavit to IA No. 1169 of 2020 in Main CP No.285/241/HDB/2020, the 1st Respondent / Petitioner, had stated before the `Tribunal', Hyderabad Bench - I, that, it may grant the prayer of the Applicant Company / Respondent No.2, to buy out the `Equity Shareholding' of his, at a fair and proper valuation of the company for the Financial Year 2017-18, along with the accrued interest and legal costs incurred by him etc.

57. It is an axiomatic 'Principle in Law' that, an 'Admission' is the best piece of evidence, against the 'Maker' and it conclusively binds the Party. Looking at from that perspective, the averments of the 1st Respondent / Petitioner at paragraph 6 and 8 of the Counter to the IA No. 1169 of 2020 in main CP No.285/241/HDB/2020, are tacit 'Admissions and that the 1st Respondent/Petitioner, is bound by the same in true Letter and Spirit, without any deviation, whatsoever, as opined by this 'Tribunal'.

58. At this stage, it is worthwhile, for this `Tribunal', to recall and recollect the Judgment of the Hon'ble Supreme Court of India dt.16.07.2003 in Central Bank of India Vs. Vrajlal Kapurchand Gandhi & Anr. (vide Civil Appeal 4634 of 2003), reported in 'India Kanoon', wherein, it is observed that ``Statements of fact as to what transpired at the hearing recorded in the judgment of the court, are conclusive of the facts so stated and no one can contradict such statements by affidavit or other evidence. If a party thinks that the happenings in Court have been wrongly recorded in a judgment, it is incumbent upon the party, while the matter is still fresh in the minds of the

Comp. App (AT) (CH) No. 76 of 2022 Page 21 of 23 Judges, to cull the attention of the very Judges who have made the record. That is the only way to have the record corrected. If no such step is taken, the matter must necessarily end there. It is not open to a party to contend before this Court to the contrary. This Court cannot launch into an enquiry as to what transpired in the High Court. It is simply not done. Public policy and judicial decorum do not permit it. Matters of judicial record in that sense are unquestionable. However, the Court can pass appropriate orders if a party moves it contending that the order has not correctly reflected happenings in Court.''

59. Coming to the plea taken on behalf of the Appellant' in the 'Memorandum' of the instant `Appeal', to the effect, that there was 'No such Consent', between the `Parties', regarding the `Appointment' of the 'Valuer', and further, 'there was no occasion' or basis or material to `allow', the prayer for `Appointment of an Valuer', and the same was done only in the garb of allowing the Appellant's IA 1169 of 2020 in main CP No.285/241/HDB/2020, this Tribunal', keeping in mind of the Hon'ble Supreme Court decision in Central Bank of India v. Vrajlal Kapurchand Gandhi and Anr., is of the earnest opinion that, it is for the Appellant, to take necessary steps, in contradicting the 'Statements of Fact', during the hearing recorded in the `impugned order' of the 'Tribunal', (which are conclusive of facts so mentioned / recorded, as a matter of judicial record), stating that the order was not correctly reflecting the happenings, before the 'Tribunal'.

60. Be that as it may, this 'Tribunal', on a careful consideration of divergent contentions advanced on either side, on going through the `Impugned Order', dt.29.7.2022 in IA 1169 of 2020 in main CP. No.285/241/HDB/2020, on the file of NCLT, Hyderabad, Bench - I, and also taking into account the surrounding facts and circumstances of the present

Comp. App (AT) (CH) No. 76 of 2022 Page 22 of 23 case in a holistic manner, without any simmering doubt, comes to a resultant conclusion that the 'Order', assailed by the 'Appellant', does not in any manner affect his 'Rights and Liabilities', and in any event, no prejudice is caused to him, by the issuance of direction, by the 'Tribunal', to the `Valuer', to submit a 'Valuation Report', to be considered after submission of a `Report', by the Valuer, of course by the NCLT, Hyderabad, Bench - I.

Furthermore, this 'Tribunal', pertinently points out, that the 'Impugned Order' of the NCLT, Hyderabad, Bench - I, dt. 29.07.2022 in IA 1169 of 2020 in main CP. No.285/241/HDB/2020, does not in any way infringe the Rights and Liabilities of the Appellant' and hence, the instant Company Appeal is not per se maintainable. Viewed, in that perspective, the instant 'Appeal', sans merits and it fails.

Disposition:

In fine, the instant Company Appeal (AT) (CH) No. 76 of 2022, is dismissed, for the reasons assigned by this 'Tribunal'. The connected pending `IA No.722 of 2022, IA No.723 of 2022 and IA No.752 of 2022 are closed. No costs.

[Justice M. Venugopal] Member (Judicial)

[Naresh Salecha] Member (Technical) 24/4/2023 TM

Comp. App (AT) (CH) No. 76 of 2022 Page 23 of 23