Pannalal Bhansali vs Bharti Telecom Limited

2026 INSC 213 Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No. 7655 of 2025

Pannalal Bhansali ...Appellant Versus

Bharti Telecom Limited & Ors. ...Respondents

with

Civil Appeal No. 9862 of 2025 Civil Appeal No. 9601 of 2025 Civil Appeal No. 9797 of 2025 Civil Appeal No. 7666 of 2025 Civil Appeal No. 9478 of 2025 Civil Appeal No. 9599 of 2025 Civil Appeal No. 9849 of 2025 Civil Appeal No. 13824 of 2025

JUDGMENT

K. VINOD CHANDRAN, J.

1. The appellants, investors in a minority, cry foul on the

allegation of their being arbitrarily disgorged of their Signature Not Verified Digitally signed by Deepak Guglani Date: 2026.03.10 shareholdings and eased out of the 1st respondent company, (BTL 16:30:38 IST Reason:

for brevity) in a grossly unfair manner, making a sham of an

Page 1 of 55 Civil Appeal No. 7655 of 2025 etc. evaluation fixing the share price at an unreasonably low value.

Shorn of the details, the 1st respondent, a closely held company

having 1.09% of its shareholding with individuals, decided to

reduce its share capital under Section 66 of the Companies Act

20131 by cancelling 28,457,840 equity shares held by the identified

minority shareholders by paying an amount of Rs.163.25/- per

equity share of Rs.10/- each. The resolution was passed by a

Special Resolution with a majority of more than 99.90%, the

sanction for which was sought before the National Company Law

Tribunal (the NCLT hereinafter). The NCLT found that the decision

to deduct the Dividend Distribution Tax from the price fixed for the

individual shares was arbitrary and directed the BTL to pay the

identified individual investors; without the tax deduction,

Rs.196.80/- per equity share. BTL acceded to the NCLT’s order but

thirty-five of the shareholders, those who voted in favour of the

reduction of share capital, filed appeals before the National

Company Law Appellate Tribunal (NCLAT hereinafter),

unsuccessfully, some of whom are before us; precisely eleven of

1 For brevity ‘the Act of 2013

Page 2 of 55 Civil Appeal No. 7655 of 2025 etc. them. The intervention attempted by some others were disallowed

by us.

2. Sri. K. Parmeshwar, learned Senior Counsel led the

arguments on behalf of appellants and forcefully urged the

unfairness in the fixation of share value, which edged out the

individual investors with a raw deal for the shares held for long.

The Directors and the majority have a fiduciary relationship with

not only the Company but also with the minority, negated totally in

fixing the share prices. The challenge according to Sri.

Parmeshwar is on three counts which are subtly encapsulated as

the Manner, the Method and Matter, which he styles as the three

objectionable Ms. The manner being the procedure followed, the

method being the measure employed in valuation and the matter

being the very low price determined. Insofar as the manner is

concerned, it is pointed out that the Board resolution does not

speak of a request made by the shareholders to give them an

escape route, which is included in the notice of the General

Meeting; misleading since such a request was absent. The Board

peremptorily decided to reduce the shareholding and entrusted

the valuation to the company’s own internal auditor’s associate, a

related entity. Though a fairness report was obtained, it has the

Page 3 of 55 Civil Appeal No. 7655 of 2025 etc. same date as the valuation report, indicating the hasty manner in

which valuation and fairness evaluation were proceeded with, a

clear sham.

3. Further, there were essential aspects of valuation as revealed

from documents, which were relevant insofar as the consideration

of the value fixed for reduction of shareholding, which was never

supplied to the independent shareholders, who were in a minority.

Those were merely kept in the registered office as indicated from

the notice of the General Meeting, which is insufficient as has been

declared by the decisions of this Court. Despite some of the

shareholders having asked for a copy of the valuation and fairness

reports, the same were not supplied. There are serious procedural

infractions and inadequate, misleading disclosures, in violation of

the mandate of Section 102 of the Act of 2013, which vitiates the

entire process of reduction of shareholding. On a summing up of

the procedural infractions, it is urged that the explanatory note of

the General Meeting is a ‘tricky notice’ for : (i) it does not have a

summary of or the valuation report itself, (ii) non-disclosure of the

methodology adopted in valuation; reference not being made to

the share value of Bharti Airtel Limited (BAL for brevity), a

subsidiary company the shareholding in which is the only business

Page 4 of 55 Civil Appeal No. 7655 of 2025 etc. of the first respondent company and (iii) the valuation having been

made by an interested entity. The ‘tricky notice’ disabled an

informed decision by the individual shareholders, is the

contention, fortified with decisions. This encompasses the

challenge to the manner in which the procedure was carried out.

4. Insofar as the methodology is concerned, it is argued that the

BTL, earlier listed in the Stock Exchanges was delisted between

1999-2000 and BAL was incorporated as a subsidiary. On the BAL

launching an IPO in January 2002, it was listed on the Bombay Stock

Exchange and the majority shareholding of the first respondent in

BAL fell considerably, making BAL & BTL associate companies. It

was by a rights issue brought out in the year 2016 and the resultant

capital increase in BTL, BAL again became a subsidiary of BTL.

Since, the BTL’s only business was the investment made in BAL, the

share price fixed of BTL should have been fixed with reference to

the share value of BAL. The valuation report indicates the share

value of BAL at Rs.368.22/- as it’s listed price while the value of BTL

was calculated based on the market value of BAL and the Net Asset

Value of BTL. More importantly, arbitrarily and without legal

sanction, the method of Discount for Lack of Marketability (DLOM)

was applied to further reduce the value of share. The method of

Page 5 of 55 Civil Appeal No. 7655 of 2025 etc. DLOM applied is against the accepted norms of valuation as has

been deprecated internationally too, as revealed from the

judgment of the Court of Appeal of Singapore in Kiri Industries

Ltd. v. Senda International Capital Ltd.2 The reliance on Professor

Aswath Damodaran’s opinion also is not relevant, since it applies to

valuation of private companies plagued with illiquidity. The

method applied hence is arbitrary and unfair is the contention.

5. Insofar as the material irregularity, the price fixation is

argued to be wholly deficient and arbitrarily low. It is argued that

in the year 2001, the first respondent had offered an exit price of

Rs.96/- per share and later in the year 2006 @ Rs.400/- per share.

There was a private offer by a commodity broker in the year 2007

@ Rs.2000/- per share. Reliance is also placed on the various

purchase offers, as produced at Annexure 2 series, in the

Convenience Compilation. It is based on the capital infusion of the

rights issue that the first respondent again rose to the position of a

holding company of BAL and in the year 2018 for the induction of a

foreign entity, an estimate of fare share value was made by a

qualified agency, which put the per share price @ Rs.310/- as is

2 [2022] SGCA (I) 5

Page 6 of 55 Civil Appeal No. 7655 of 2025 etc. evident from Annexure A5. It is at this price SingTel purchased

49% of the shares in BTL. The reduction of the share capital then

made was intended at edging out the investors from amongst the

public, who were in a minority, in which circumstance there should

have been a higher standard of fairness and transparency applied.

6. The reference to market value is no basis since the investors

had remained in the company for long, admittedly even without

payment of dividends. A fair value for their exit from the company

cannot be equated with the fair market value. The several offers

made for buy-back and purchase at a higher value and the value

at which SingTel purchased shares in the BTL, almost simultaneous

to the reduction in share capital would definitely regulate valuation

under Section 66. Reference is also made to Section 68 and Section

230 of the Act of 2013, respectively of a voluntary exit and one

based on compromise which procedure ought to have been

applied to bring in the standard of fairness even under Section 66,

which is an involuntary purchase made by the majority in

oppression of the minority shareholders; a forced exit. The

material defect is the low value of the share fixed for the exit of the

minority shareholders. Sri. Parmeshwar while summing up

cautions that we would be laying down the law with respect to

Page 7 of 55 Civil Appeal No. 7655 of 2025 etc. edging out of minority shareholders, which necessarily has to

satisfy the judicial conscience with a higher standard of fairness

than applicable in a voluntary or optional exit or an exit by

compromise, especially since it is the majority will running

roughshod over the minority rights.

7. Sri. Masoom K. Shah, learned counsel appearing in one of the

appeals, for the appellant while adopting the submissions of Sri.

Parmeshwar, points out a defect in the constitution of the NCLAT

insofar as it being comprised of two Technical Members and one

Judicial Member. Reliance is placed on Union of India v. Madras

Bar Association3 (2010-MBA) (paragraph 120 (xii)) to contend that

a Constitution Bench of this Court deprecated the practice of a

majority of Technical Members sitting in a Bench of the NCLT or

the NCLAT, which substitutes the High Court. In anticipation, to

preempt that contention, it is pointed out that there cannot be

raised a ground of acquiescence, insofar as the defect going to the

root of jurisdiction by reason of the illegal composition, as has

been held in State of M.P. v. B.R. Thakare4. Sri Shah also points

out from the valuation report and the documents pertaining to

3 (2010) 11 SCC 1 4 (2002) 10 SCC 338

Page 8 of 55 Civil Appeal No. 7655 of 2025 etc. various associates of the agency which carried out the valuation

that it has an inextricable link and connection with the Internal

Auditor of BTL. The one who signed the valuation report itself is in

the Board of the internal auditor, thus, throwing a cloud of absence

of impartiality on the valuer, coupled with a bias in favour of the

majority shareholders revealing a collusion in arriving at a lower

value of shares for the exit of the individual members from the

public; which does not augur well on the facts of the case

especially on the minority shareholders being given a raw deal

and forced out of their shareholding.

8. Sri Sumit Kumar, learned counsel appearing for one of the

appellants refers to Annexure A7 in C.A. No.2864 of 2021, wherein

there was a status quo order, which is even now in force; and

reduction of share capital having been made in the interregnum,

falling flat, requiring immediate resumption of shares. The

valuation made by the Custodian also is pointed out to assail the

price fixed now.

9. Sri Ramji Srinivasan & Sri. Shyam Divan learned Senior

Counsel appearing for BTL commenced their arguments with

Section 423 of the Act, which jurisdiction the appellants have

invoked, wherein there should be a clear question of law raised,

Page 9 of 55 Civil Appeal No. 7655 of 2025 etc. which is absent in the present case. Every legal requirement has

been complied with for the reduction of share capital under

Section 66 of the Act of 2013 and there is no violation complained

of but for a mere allegation of prejudice which the appellants have

failed to substantiate as real and compelling, enabling this Court

to interfere. Valuation is dependent on multiple factors and not

possible of mathematical certainty. It is urged that in the formation

of companies, the shareholders come together and enter into a

contract or charter as revealed from the Articles of Association to

which each of them are bound. The decisions are of the majority of

such shareholders, failing which there would be mayhem and no

corporate entity would be able to perform its functions and arrive

at its collective goal of realizing its objectives. In the present case,

it is pointed out that the appellants, eleven in number and those

before the NCLAT, thirty-five in number do not together satisfy the

definition of a minority as coming out from Section 244 of the Act of

2013. Neither do they have the number of shareholders, nor do

their total value of shareholding satisfy the minimum requirement

thereunder of a minimum 100 persons or 1/10th of the share value,

thus disabling even an application for oppression or

mismanagement on their combined efforts.

Page 10 of 55 Civil Appeal No. 7655 of 2025 etc.

10. It is pointed out that there is no valuation provided under

Section 66 as would be the requirement under various other

provisions of the Act of 2013 which demolishes the ground of an

interested valuation having been taken up by a related agency of

the internal auditor of the company. Even otherwise on that sole

ground prejudice cannot be found unless it is shown in reality.

Section 66 does not require a valuation and the safeguards as

provided therein of a special resolution being passed in the

General Meeting of the Company and more importantly

confirmation by the Tribunal have been scrupulously followed.

Though, a valuation is not mandated as per the Section, definitely

there should be some method by which a fair value is arrived at

insofar as providing an exit for the identified shareholders. A

Valuer was appointed who is an agency, with its associates, having

a global presence and a reputation in corporate matters including

financial aspects. When the company could have done the

valuation by itself, then thought it fit to appoint an independent

valuer only to ensure transparency and to avoid a contention of

bias being raised. The valuer had examined the books of accounts

and submitted the valuation report, which was scrutinized by

Page 11 of 55 Civil Appeal No. 7655 of 2025 etc. another agency who had also affirmed the valuation as fair and

reasonable by its fairness report.

11. The fact that the valuer was a sister concern of BTL’s Internal

Auditor does not bring forth any conflict of interest or validate the

contention of lack of independence. The Internal Auditor as is

mandated by the guidelines issued by the Institute of Chartered

Accountants of India (ICAI) is an independent agency appointed

by the Company for the purpose of carrying out audit, as per the

mandate of the Act of 2013. The mere fact that the signatory of the

report valuing the shares of BTL was in the Board of Directors of

BTL’s Internal Auditor does not create any conflict or relation

insofar as the affairs of BTL. The Internal Auditor acts as an

independent agency and so did the valuer on accepted accounting

norms. It is reiterated that the same was affirmed by an

independent agency and it also was affirmed as a fair and true

valuation by two other agencies having no connection with BTL or

the Internal Auditor as was sought for by the Custodian who is a

party in Civil Appeal No. 2864 of 2021. The valuation and fairness

report being on the same date only denotes the day of issuance

and is no reflection of the time taken for evaluation.

Page 12 of 55 Civil Appeal No. 7655 of 2025 etc.

12. On facts it is pointed out that BTL having been delisted from

all stock exchanges made a buy-back offer of Rs.96/- per share in

the year 2001, which was the only buy-back offered by the

company itself. One of the promoters of BTL, Bharti Overseas

Trading Company had offered Rs.400/- per share in May 2006. But

for that there is nothing substantial brought out from the various

documents produced as to a clear value of the share of BTL, whose

only investment was in BAL. In 2016, there was a rights issue which

increased the share base exponentially causing significant

lowering of the monetary value of the shares. This was followed up

with a preferential allotment of shares at the rate of Rs.310/- per

share in favour of a Strategic Long-Term Promoter, SingTel, so as

to infuse funds into the company. The share value for the said

transaction was on the basis of the prevailing market price of BAL

and in accordance with the applicable FEMA regulations

mandating a certain floor price. In any event, there can be no

equation of the share price determined for preferential allotment

to the present reduction of shares. Therein the investors were

entering into a strategic partnership in the business which

definitely would have required a premium to be paid on the share

value. It is also pointed out that BAL share value fell sharply from

Page 13 of 55 Civil Appeal No. 7655 of 2025 etc. January 2018 to May 2018 due to the tariffs imposed and the fierce

competition in the telecom market, which also impacted the share

value of BTL. There is no misrepresentation insofar as the

shareholders having requested for a buyback, which is evident

from the Minutes of the various AGMs, some of which were handed

over across the Bar. The shares having been delisted and there

being no payment of dividend for long coupled with a constant

clamor for buy-back the reduction of share capital was proposed,

by which measure the Company out of its own funds, would

purchase the shares of the identified shareholders which had no

marketability.

13. We were taken through the valuation report, figure by figure

and page by page pointing out the manner in which the valuation

was arrived at and the DLOM applied at the rate of 25%, at the

minimum, for reason of the existing illiquidity, approved by Indian

Accounting Standards as brought out in the ICAI Valuation

Standards. The valuation as earlier pointed out was approved in

the fairness report issued by a totally different agency. The same

was placed in the Board of Directors and a resolution was passed

subject to the approval of the shareholders for which notice was

issued as per Annexure A18. The notice specifically indicated the

Page 14 of 55 Civil Appeal No. 7655 of 2025 etc. relevant documents having been kept in the Registered Corporate

Offices of BTL, available for inspection between 19.06.2018; the

date of notice and 26.07.2018; the last day of receipt of postal ballot

or e-voting. It is emphasized that there can be no case raised of the

relevant documents having not been supplied, especially since the

voting period extended over a month and in fact the Advocate of

one of the investors had inspected the documents and sought for

further details as is evident from the e-mail projected by the

appellants themselves. It is emphatically contended that 99.90% of

the equity shareholders of BTL passed and approved a special

resolution and 76.35% of the identified shareholders present and

voting also voted in favour of the special resolution approving the

share value of Rs.196.80/-. No Objection Certificates were also

received from all the creditors and hence, the petition under

Section 66 of the Act seeking confirmation of the scheme of capital

reduction before the NCLT.

14. The NCLT as is the mandate, called for a report from the

Regional Director of the Department who confirmed compliance of

the procedure prescribed under the Act for reduction of capital.

The NCLT having confirmed the capital reduction after looking at

the objections filed by public shareholders, the NCLAT has also

Page 15 of 55 Civil Appeal No. 7655 of 2025 etc. approved the same. There is hence no scope for interference,

especially since no prejudice is shown. It is pointed out that the

capital reduction was proceeded with immediately after the rights

issue which put the identified shareholders in a position enhancing

their shareholding exponentially, especially since the rights issue

offered 115 shares at par for Rs.10/-, as against every single share

held by an investor. Hence, the capital reduction after the rights

issue put the investors in a very favorable position and the

appellant in Civil Appeal No. 7655 of 2025 who would have

obtained Rs.16 lakhs before the rights issue, on the very same

valuation went home with an astronomical amount of Rs.47.30

crores. The fair value cannot be fixed at the ipse dixit of the

investor, and it has to be with reference to the market value. There

cannot be a fair value fixed divorced from the market value,

especially in the case of BTL which had no other commercial

activity other than the investment in BAL. The shares of BAL were

listed in the stock market, and the value therein could not have

been adopted for BTL which was the holding company, having only

investment in the listed company; the shareholdings of which

holding company was not marketable by reason of the delisting. It

is pointed out that the identified investors are neither fly-by-night

Page 16 of 55 Civil Appeal No. 7655 of 2025 etc. operators nor persons unfamiliar to investor domains but are

shrewd operators who have earned substantial payouts; though

not by way of periodic dividends which were practically absent, in

the reduction of share capital, despite their shares being locked in

for long. They have waited patiently and benefited with bountiful

yields and crave more on an impulsive caprice, with nothing more

and in total absence of any real prejudice having been shown to

have visited them.

15. Both sides have placed reliance on a host of decisions to

buttress their contentions which we shall refer to, as are

applicable, in the course of our adjudication. We also refer from

the documents in the Convenience Compilation and otherwise

from the specified volumes of the numbered appeals.

Jurisdictional defect on the composition of the NCLAT & the status-quo order:

16. The contention first taken is of the constitution of the Bench of

the NCLAT running foul of the mandate declared in 2010-MBA3.

The Constitution Bench in 2010-MBA3 considered the challenge

against the Companies (Second Amendment) Act, 2002,

constituting the NCLT & NCLAT; pointedly for our purpose, with

reference to Section 10-FL insofar as the constitution of Benches.

Page 17 of 55 Civil Appeal No. 7655 of 2025 etc. Paragraph 120(xii), one of the several corrections suggested,

required two members of the Tribunal to always have a Judicial

Member and any Larger or Special Benches constituted to have

more Judicial Members than Technical Members.

17. Section 10-FL by sub-section (1) provided for the Tribunal to

exercise the powers conferred by Benches constituted by the

President out of which one shall be a Judicial Member and another

a Technical Member. The first proviso empowered the President

of the Tribunal by general or special order to permit Members to

sit single and exercise the jurisdictional powers and authorities of

the Tribunal with respect to such class of cases or matters with

respect to a class of cases, as specified. The above provision is no

more applicable since the Companies Act, 1956 has been replaced

by the Companies Act, 2013. Sections 418A and 419 of the new

statute speak of Benches of the NCLAT and that of the NCLT. The

proviso to sub-section (1) of Section 418A requires a Bench of the

NCLAT to have at least one Judicial Member and one Technical

Member and the proviso to Section 419(3) mandates a similar

composition in constitution of Benches of two Members. Section

419 further provides that the Tribunal shall exercise the powers in

respect of such class of cases or such matters pertaining to a class

Page 18 of 55 Civil Appeal No. 7655 of 2025 etc. of cases as the President by general or special order specifies, by

a Bench consisting of a Single Judicial Member.

18. The provisions leading to the constitution of the NCLT and

NCLAT were again challenged in Madras Bar Association v.

Union of India5 (2015-MBA). Section 419, as we see from the law

reports, was not challenged before the Constitution Bench and

Section 418A came to be introduced by Act 29 of 2020, later to the

decision. Three issues arose in the 2015-MBA5, which were with

respect to (i) the constitution of NCLT and NCLAT, held to be valid;

(ii) qualification of President and the Members of NCLT and

NCLAT, Section 409(3)(a) & (e) as also Section 411(3) held invalid

as making eligible a person other than a Secretary or Additional

Secretary to be a Technical Member and (iii) the constitution of the

Selection Committee for Members; held to be possible if

comprising of only four Members, two from the Judicial side being

the Chief Justice of India or his nominee and a Senior Judge of the

Supreme Court or the Chief Justice of a High Court and two

Secretaries, one from the Ministry of Finance and Company Affairs

and the other from the Ministry of Law and Justice, with the Chief

5 (2015) 8 SCC 583

Page 19 of 55 Civil Appeal No. 7655 of 2025 etc. Justice of India or his nominee having a casting vote; following the

earlier judgment. Thus, ensuring that the Judiciary has the final

say, untrammeled by any governmental influence or interference

in the appointment of a Member of the Tribunal, be it a Judicial

Member or a Technical Member.

19. The provisions as of now do not require a majority of Judicial

Members in the Larger Benches of the NCLT or the NCLAT. We

cannot but notice the extract made in 2010-MBA3 from State of

West Bengal v. Anwar Ali Sarkar6 in the context of Article 14,

applies equally to the issue raised before us, attempting a

distinction drawn between judicial members and technical

members. The extract was made consequent to the finding in

paragraph 102 that “The fundamental right to equality before law

and equal protection of laws guaranteed by Article 14 of the

Constitution, clearly includes a right to have the persons rights

adjudicated by a forum which exercises judicial power in an

impartial and independent manner, consistent with the recognized

principles of adjudication” (sic). Anwar Ali Sarkar6 held that even a

criminal is entitled to set up a defense, and a special trial, as was

6 AIR 1952 SC 75

Page 20 of 55 Civil Appeal No. 7655 of 2025 etc. contemplated in the legislation under challenge though is in public

interest, would interfere with his fundamental rights.

20. Examining the special law contrasted with the ordinary law

of the land, Vivian Bose J. in paragraph 87; Anwar Ali Sarkar6

opined that the test is not merely academic, for equality should be

tested on the collective conscience of a sovereign democratic

republic as to whether substantially equal treatment would be

found by ‘men of resolute minds and unbiased views’. Whether

these men would find it right or proper in a democracy of the kind

we have proclaimed ourselves, is the true test. We respectfully

adopt the definition as applicable to adjudications in every sphere

and branch involving interpretation and resolution of disputes,

complex and simple, both. All adjudicators first and foremost are

or should be reasonable persons having resolute minds and

unbiased views. Though judicial experience is valuable,

administrative officers and technocrats; to whom judicious

consideration is not alien in their long tenures of service dealing

also with quasi-judicial matters, statutory appeals and the like,

when permitted by the legislature to be included as Tribunal

Members to aid, assist and promote a holistic adjudication of

disputes and interpretation of laws, having administrative and

Page 21 of 55 Civil Appeal No. 7655 of 2025 etc. technical ramifications, we cannot after permitting them to sit side-

by-side treat them or their capabilities, with disdain or label them

lower in status or in quality.

21. In the present case, we also have to notice that the Bench was

headed by a Judicial Member and had two Technical Members,

and the opinion was unanimous at the NCLAT. We also find no

parallel infirmity as arising from B.R. Thakare4, wherein a single

Member of the Tribunal, an Administrative Member, was tasked

with the adjudication of a dispute relating to cadre determination

involving interpretation of the respective rules. It was held as a

measure of proper administration of justice that ‘… while allotting

work to a Single Member, whether judicial or administrative, the

Chairman should keep in mind the nature of the litigation and where

questions of law and its interpretation are involved, they should be

assigned to a Division Bench of which one of them is a Judicial

Member’ (sic). No distinction was drawn with reference to the

source from which the Members come and there is no application

to the facts of the present case. As of now, the Companies Act

permits a Single Bench to sit only in the NCLT and that too a Bench

of a Judicial Member. The NCLAT as provided in Section 418A

always comprises of two Members, one of whom is a Judicial

Page 22 of 55 Civil Appeal No. 7655 of 2025 etc. Member or such larger composition where the prescription is only

of the presence of a Member from the Judicial side and not in the

majority.

22. We find absolutely no reason to interfere with the order on

the question raised of the composition of the Bench of the Appellate

Tribunal. We also notice the further contention taken based on the

order of status quo, wherein the first respondent company was not

a party, to only reject it immediately. Obviously, the matter arose

from a scam in which a Custodian was appointed for the sale of

assets of the person involved in the scam, the assets being

represented by the legal representatives. The Custodian had

proceeded to sell the properties belonging to the legal

representatives in which circumstance this Court had issued a

status quo order which binds the Custodian and not the first

respondent company, who was not a party to that proceeding. The

status quo order is only insofar as the preservation of the assets,

which in the circumstance of a reduction of shareholding, as is the

subject matter of the present case, would only have the

consequence of the shareholding being converted to money which

would be held by the Custodian, the disbursement and adjustment

of which would depend on further orders passed by this Court in

Page 23 of 55 Civil Appeal No. 7655 of 2025 etc. the pending appeal. Reference is also made to Annexure-22 in

Civil Appeal No. 2864 of 2021 to contend that the undertaking

before the Custodian to disclose the Special Courts order before

the NCLT was not complied with. The Special Courts order or even

this Court’s as we perceive it has no bearing on the share capital

reduction of BTL. What assumes relevance is the custody of certain

shares being with the Custodian, in which circumstance the

proceeds with respect to that, on reduction of share capital, will

have to be submitted to the Custodian. It does not have any

significance to the reduction of share capital or the proceedings

before the NCLT.

The Manner; The procedural infraction:

23. Under this head is raised issues of; (i) a request from the

shareholders, though disclosed in the notice having not been

indicated in the Board Resolution; (ii) the ‘tricky notice’ issued

insofar as the elements constituting valuation having not been

disclosed, especially the valuation and fairness reports; (iii) the

valuation having been effected by a related agency; (iv) the

fairness report having been issued on the very same date of the

valuation report and (v) the valuation and fairness reports having

Page 24 of 55 Civil Appeal No. 7655 of 2025 etc. not been sent along with the notice and kept out of reach of the

investors by making it open for verification only at the Registered

Office of the Company. As was pointed out by the respondent

company, the shares of the company remained locked in for long

after the initial buyback offer, pursuant to delisting. There were

also no dividends paid, in which circumstance the individual

investors had sought for an exit option at the Annual General

Meetings (AGM), the minutes of which were handed over to us,

across the Bar. That the investors herein did not opt for the

buyback offer and had been holding the shares despite no

payment of dividend for long is crystal clear from the minutes of

the AGM. Also, it is revealed that there were requests made for

buyback or another opportunity by which an exit is provided to the

shareholders. That the company resorted to reduction in share

capital, which in turn provided an exit option, as sanctioned under

the Act of 2013 cannot also be disputed.

24. Even when the request made by the individual shareholders

from the minutes of the AGM was pointed out, there was stiff

opposition by the appellants on the ground that they never asked

for a forced exit from the company. Be that as it may, when it cannot

be denied that the reduction of capital is a valid means, legally

Page 25 of 55 Civil Appeal No. 7655 of 2025 etc. permissible under the Act of 2013 which is also hedged in by

safeguards insofar as a sanction being required by a special

resolution in an extraordinary general meeting with a further

sanction by the Tribunal, wherein the Central Government and the

Registrar of Companies is entitled to offer their opinions; there is

little room to find a request for exit from the investors being

necessary. The Board having decided to go in for a reduction in

capital, which definitely is not a buyback option but would all the

same be an exit measure, there is no infirmity in the notice having

indicated the request made by the investors. Especially since the

shares of the company were locked in and it was decided that the

capital reduction process is the best possible route to provide an

exit opportunity in a fair and transparent manner. The observations

in the notice though not a part of the resolution would have

weighed with the Board of Directors in arriving at a decision for

reduction of capital by purchase of the shares held by the

identified investors, members of the public.

25. The further contention is with respect to a ‘tricky notice’

which is argued on the basis of reliance placed on various

decisions of the High Courts and this Court relying on Baillie v.

Page 26 of 55 Civil Appeal No. 7655 of 2025 etc. Oriental Telephone and Electric Co. Ltd.7 We would in that

circumstance, look at the decision from the source, which coined

the term ‘tricky notice’ and in that context a bit of the history of

corporate law would be apposite. Foss v. Harbottle8 is a leading

precedent in corporate law which brought in the principle of

‘proper plaintiff rule’ wherein the alleged wrongs against a

company had to be agitated by the company itself. There were

exceptions, subsequently carved out, by judicial precedents,

sanctioning an individual action in the event of (i) ultra vires

actions, (ii) a fraud on the minority, (iii) an illegal action by the

majority and (iv) a ‘tricky notice’ without relevant material or

without sufficient disclosure, the last of which is the contention

herein.

26. The term itself was coined in Kaye v. Croydon Tramways &

Co. Ltd.9 which was concerned with an agreement between two

companies for sale of one to the other. The company which was to

be sold called a meeting of its shareholders by a notice issued for

approval of the agreement. The purpose for convening the

meeting as disclosed in the notice was to confirm the agreement of

7 [1915] 1 Ch 503 8 67 E.R. 189 9 [1898] 1 Ch. 358

Page 27 of 55 Civil Appeal No. 7655 of 2025 etc. sale with the purchase price specified and the compensation to be

paid for loss of office of the Directors and the Secretary. The

compensation was based on an arrangement; in deviation of the

original proposal to take over the Directors and the Secretary, to

relieve them of their duties. It was found that the notice was artfully

framed to mislead the shareholders that the entire purchase price

would come to the selling company, making it a ‘tricky notice’,

playing with words to mislead the shareholders to consider a

contract of sale, concealing from them that a large portion of the

purchase money would go into the pockets of the Directors and

Secretary.

27. Baillie7 was again a case in which the decision of the

company was annulled on the ground of a ‘tricky notice’ without

proper disclosure. Therein two special resolutions were under

challenge with respect to enhancement of remuneration of the

Directors in a subsidiary company, completely controlled by the

holding company. The increased remuneration of the Directors of

the subsidiary included 20% of the net profits of that company. On

an auditor’s report pointing out that the remuneration fixed in the

subsidiary company required authorization by the holding

company, a meeting was convened with three resolutions, one of

Page 28 of 55 Civil Appeal No. 7655 of 2025 etc. which required ratification of all actions taken with respect to the

subsidiary, including ratification of the remuneration already paid

to the Directors and the other, authorising the articles to be

altered, bringing in sweeping changes with respect to the

remuneration of the Directors in the subsidiary company. On a

challenge made by the individual shareholder it was found that

there was no disclosure of the actual amount received by the

Directors which was alleged to be enormous and sedulously

concealed. The notice was found to be not frank, not open, not clear

and not in any way satisfactory, making it a ‘tricky notice’.

28. LIC v. Escorts Ltd and Others10 is an authority for the

proposition that a shareholder calling an extraordinary general

meeting of the company is not bound to disclose its reasons as is

incumbent on the management so to do under Section 173(2) of the

Companies Act, 1956. Claude-Lila Parulekar (SMT.) v. Sakal

Papers (P) Ltd. and Others11 dealt with transfer of shares denying

the right of pre-emption to the existing shareholders, the appellant

therein. The decision to raise the issued capital of the company and

to allot the shares at par, to any person whether a member of the

10 (1986) 1 SCC 264 11 (2005) 11 SCC 73

Page 29 of 55 Civil Appeal No. 7655 of 2025 etc. company or not was to be ratified by a General Body Meeting. The

notice issued subsequently for an Annual General Meeting

contained the details of ordinary and special business but no

indication whatsoever of the increase in the share capital and

allotment of shares. It was argued by the respondents that after the

notice of AGM, the Ministry of Finance had given notice extending

the validity of a sanction for a foreign exchange loan, clarifying that

no further extension would be granted, based on which the foreign

financier advised the company to increase its share capital in view

of its expansion programme. This Court held that since the

increase in share capital did not fall within the exceptions carved

out in Article 94, which reflected the substance of Section 173 of

the Act of 1956, it was incumbent for notice to be given not only

indicating the issuance of share capital as a special item of

business but also setting out all material facts relating thereto.

29. We do not think that the notice in the present case is vitiated

by non-disclosure or mis-disclosure merely for reason of the

valuation and fairness report not being placed before the

shareholders. As we found, the measure adopted was a reduction

in capital as permitted by Section 66, hedged in by various

protections but does not require a valuation report as would be

Page 30 of 55 Civil Appeal No. 7655 of 2025 etc. required in other circumstances. A valuation in the process of

reduction of capital was resorted to by the company only to arrive

at a fair value and the fair value arrived, after the deduction of tax

was disclosed in the notice and the method adopted itself was kept

open for verification by the identified shareholders at the

registered office. It was disclosed fully in the proceedings before

the NCLT where the investors objected, despite the special

resolution having been passed with a thumping majority. The

NCLT did not reject their contentions in limine on the ground that

they had participated in the extraordinary meeting convened and

voted in favour of the capital reduction with a majority of 99.90%

of the total shareholders and 76.35 % of the identified shareholders

present and voting in favour of the resolution, but dealt with the

contention of an unfair value having been fixed and rejected the

same on an examination of the attendant facts and figures. We are

quite conscious of our confined jurisdiction under Section 423 of

the Act of 2013, which is to consider a question of law. As held in

Devas Multimedia (P) Ltd. v. Antrix Corpn. Ltd.12 when NCLT &

NCLAT have recorded concurrent findings it is not for this Court to

12 (2023) 1 SCC 216

Page 31 of 55 Civil Appeal No. 7655 of 2025 etc. reappreciate evidence in the usual course. However, we are

obliged to look into the question of whether there is any perversity

in the findings, which it is trite is one of law.

30. A comparison was attempted to be drawn from other

provisions, which also are exit options available to the

shareholders. Section 62 dealing with further issuance of share

capital by sub-section (1)(c) requires a valuation report from a

registered valuer, which in that circumstance would have to be

enclosed with the notice to the existing shareholders. Likewise,

Section 230 of the Act of 2013 under Chapter XV deals with

compromise, arrangement and amalgamation with creditors and

members. When a compromise or arrangement is made with the

creditors or the members, the provision speaks of two motions

before the Tribunal, one to convene a meeting of the creditors or

a class of creditors or members or a class of members to be held

and conducted in such manner as the Tribunal directs. In the first

motion made before the Tribunal, as is evident from sub-section

(2)(v), a valuation report in respect of the shares and the property

and all assets, tangible and intangible, movable and immovable of

the company by a registered valuer is required to be annexed. If

the meeting sanctions the resolution by 3/4th majority, then again

Page 32 of 55 Civil Appeal No. 7655 of 2025 etc. the compromise or arrangement has to be sanctioned by the

Tribunal by an order, for which a second motion is stipulated by

sub-section (6).

31. An amalgamation or merger as contemplated in Section 232

also stipulates a report of the expert with regard to valuation by

sub-section (2)(d). So does Section 236(2) in the context of a

buyback or purchase of minority shares, which is conspicuously

absent in a reduction of share capital, which also results in an exit

of certain shareholders. Similarly, a buyback under Section 68 is

optional and it is for the shareholder to decide whether the

buyback is accepted or not, looking at the value at which the

buyback is offered, which provision also does not stipulate a

valuation report. Hence, whenever a valuation report was found

expedient, it was statutorily required, but not under Section 66.

32. Reduction of share capital can be achieved by a special

resolution and confirmation by the Tribunal, without a report of

valuation from an approved/registered valuer and hence, it does

not fall within the ambit of a relevant material; without the full and

complete disclosure of which the reduction of capital cannot be

acted upon. However, it is pertinent to notice that the company

despite any legal requirement had adopted a valuation exercise,

Page 33 of 55 Civil Appeal No. 7655 of 2025 etc. which was further affirmed in a fairness evaluation by a different

agency, both of which reports were retained in the Registered

Office of the Company, kept open for verification by the investors.

As has been factually found one of the investors, through his

advocate had verified the reports and made a subsequent request

only for the details of the shareholders and raised no dispute

against the value adopted. We have to pertinently also notice that

as argued by the learned Senior Counsel for the respondent, the

individual investors are not fly-by-night operators, but are shrewd

investors who are aware of the changing trends in businesses

especially when the respondent company is only having the

business of holding shares in a telecom company. We do not find

any procedural infraction or misleading disclosure to style the

notice as a ‘tricky notice’. The notice contains the full disclosure as

required in a measure employed for reduction of share capital

under Section 66, which is the price offered by the company which

translates as an exit option for the identified shareholder.

33. On the finding that there was no statutory mandate for a

valuation report for the reduction of a share capital, we could reject

the arguments raised of a related agency having been employed

for valuation, but we proceed to consider the ground of a

Page 34 of 55 Civil Appeal No. 7655 of 2025 etc. perceivable bias raised. The specific argument is that the valuer

was an associate/affiliate of the internal auditor of the company. It

was buttressed by reference to documents, including the valuation

report displaying the same logo, having common

partners/directors and the internal auditor having a controlling

interest in the valuer. There was a contention by the respondent

that no allegation of mala fide or bias can be raised without making

the entity against whom such an allegation is raised, a party to the

lis. We are not persuaded to reject the contention only on that

ground since here the lis was initiated by the company for the

purpose of obtaining a confirmation of the special resolution,

which is strictly not adversarial in nature, but in which the

stakeholders are entitled to raise their objections and argue

against such confirmation. Hence, when an objection is raised as

to the independence or lack of it, of a valuer, it is for the Tribunal

to look into it and if satisfied implead that entity or otherwise reject

it in limine; which later procedure was adopted in the present case.

34. Before us, the learned Senior Counsel appearing for the

respondent company had produced the Basic Principles

Governing Internal Audit which mandates that the internal auditor

shall be free from undue influence and shall resist any undue

Page 35 of 55 Civil Appeal No. 7655 of 2025 etc. pressure or interference in establishing the scope of the

assignments or the manner in which the audit is conducted and

reported. The internal auditor in the nature of an in-house

vigilance machinery, is mandated by the Act of 2013, under

Section 138 read with The Companies (Accounts) Rules, 2014. Rule

13 of the said Rules by its Explanation also permits an employee to

be appointed as an internal auditor, which in the present case has

not been resorted to. Though, distinguished from statutory audits

under Chapter X, the internal auditor, here an outside agency,

merely by their appointment by the company cannot be said to be

related in any manner to the company. Appointment as an internal

auditor, does not bring in a bias with respect to the activities of the

company which would essentially go against the scope and spirit

of an audit carried out of the accounts of the company as an in-

house verification, which is also a statutory requirement, available

for scrutiny before a statutory auditor. It has been held in N.K.

Bajpai v. Union of India13 that bias should be demonstrably real

and present to vitiate an action. Where it is shown that there exists

a real danger of bias the action would attract judicial chastisement

13 (2012) 4 SCC 653

Page 36 of 55 Civil Appeal No. 7655 of 2025 etc. while, if it is only a mere probability or even a preponderance of

probability it cannot affect the action adversely, was the law

declared. We do not find even a probability that the internal

auditor would act in a biased manner, leave alone the valuation

agency which is an affiliate of the former.

35. We have to further notice that the fairness report has been

obtained from a different agency which has no connection with the

internal auditor and in any event, the valuation report is accepted

as valid and proper by the ICICI Securities Limited and SBI Caps

Securities Limited, totally unrelated to the respondent company as

is revealed from Annexures A-30 & A-31 produced in Civil Appeal

No. 2864 of 2021 as obtained by ‘The Custodian, Appointed under

Special Court (Trial of Offences relating to Transactions in

Securities) Act, 1992’ the 2nd respondent in that appeal. All the

more as per the proviso to Section 66(3) the Tribunal considering

the reduction of capital measure has to obtain a certificate from the

Company’s auditor that the accounting standards adopted is in

conformity with that specified in Section 133, which is produced as

Annexure A13 in the application under Section 66 before the NCLT

produced as Annexure-A/14 in the Convenience Compilation.

Page 37 of 55 Civil Appeal No. 7655 of 2025 etc.

36. The fairness report signed on the same day as the valuation

report does not raise any apprehension of levity since the fairness

is of the approach in valuation, which does not require a

threadbare analysis or a reverification of the books of accounts.

The figures are more than explicit and so is the method adopted as

discernible by financial experts. We also reckon the contention

raised by the respondent company that the date of the report

indicates the day of issuance and not necessarily the time taken or

the diligence exercised in arriving at the valuation or even

affirming the fairness.

37. One other contention is of the reports being kept in the

Registered Office not being sufficient based on Firestone Tyre &

Rubber Co. vs. Synthetics and Chemicals Ltd.14 highlighting the

difficulty and disinclination of shareholders to travel to the

Registered Office. We cannot subscribe to the said view at least in

today’s scenario of ease of travel, especially since most of the 35

appellants before the NCLAT lived in Delhi, when the Registered

Office was in Gurgaon, Haryana. Some had their residence at

Mumbai & Pune and only three were abroad, as revealed from the

14 (1971) Comp. Cases 377 (Bom.)

Page 38 of 55 Civil Appeal No. 7655 of 2025 etc. cause title of the order of the NCLAT. None except one thought it

fit to verify the reports. We hence find absolutely no reason to

sustain the procedural infraction on the grounds of non-disclosure

or bias, as alleged by the appellants.

The Method and The Matter; DLOM and the share price:

38. The above aspects are considered together since they are

inextricably linked. The share value determined for reduction of

share capital is termed unfair solely because of the application of

DLOM, which is said to be inapplicable in a situation of this kind

where there is a forced exit of the shareholders. Both sides relied

on Kiri Industries Ltd.2. On a reading of the same, we do not find

any international denouncement of the application of DLOM in all

situations, as argued by the appellants. True, in the aforesaid case

wherein there was a forced buyout as per the order of the

Singapore International Commercial Court, wherein the minority

shareholders were asked to be bought out by the majority

shareholders, DLOM was declined. Insofar as the DLOM principle

is concerned, the decision in Thio Syn Kym Wendy and Others v.

Page 39 of 55 Civil Appeal No. 7655 of 2025 etc. Thio Syn Pyn and Others15 and the decision in Liew Kit Fah and

Others v. Koh Keng Chew and Others16 were referred to. Liew

Kit Fah16 held that liquidity, after all is a valuable attribute of an

investment and the lack of it is a depreciatory factor, giving rise to

application of DLOM in the valuation of unquoted shares. However

this was observed to be laid down in a consent order where there

was no Court order on account of a finding of oppression. The

principle laid down in Thio Syn Kym Wendy15 that DLOM will

apply to illiquid privately held shares, save in exceptional

circumstances proven by the party alleging it, was held to be an

incidental observation which cannot be elevated into a principle of

law. In the context of a Court ordered buyout in an action alleging

oppression, DLOM was found to be inapplicable, not as a universal

principle but more on the facts of that case.

39. Interestingly the Court referred to an article of Professor

Douglas Moll titled “Shareholder Oppression and ‘Fair Value’: of

Discounts, Dates and Dastardly Deeds in Close Corporation” (2004)

54 (2) Duke LJ 293, wherein the distinction between fair value and

fair market value was brought out which we have read, as available

15 [2018] SGHC 54 16 [2020] 1 SLR 275

Page 40 of 55 Civil Appeal No. 7655 of 2025 etc. on the internet. ‘Fair value’, as distinguished from ‘fair market

value’, is the enterprise value; the pro-rata portion of the

company’s overall value as an operating business. ‘Fair market

value’ on the other hand involves the Court valuing the minority’s

share by considering what a hypothetical purchaser would pay for

them. Professor Moll was of the opinion that in a ‘fair market value’

situation, a marketability discount is applied since a hypothetical

purchaser is likely to pay less for shares which lack a ready

market. Professor Moll was also of the opinion that valuation is

inherently contextual and buyout proceedings in the context of an

oppression setting, would make the marketability discounts

inappropriate. The report is an interesting read and affords

insights in the context of an oppressive setting with respect to

Close Corporations, in the United States of America. The

illustrative reference to minority with a 33% shareholding in an

oppressive setting also is distinguishable from the instant case,

which deals with a far lesser minority and in the Indian setting. The

statutory language was also pertinently pointed out as standing

against a marketability discount being applied, when the specific

term used was ‘fair value’ as distinguished from ‘fair market value’,

employed in comparable statutes.

Page 41 of 55 Civil Appeal No. 7655 of 2025 etc.

40. It is recognised even by Prof. Moll that investors generally

pay a premium for liquidity and conversely extract discounts for

illiquidity. In the present case, there is no oppression complained

of by the minority shareholders and in any event, 11 appellants do

not, by their sheer number or with their combined holdings,

constitute a collective which could validly raise an allegation of

oppression under Section 244 of the Act of 2013. We have to

immediately also notice that the shareholders identified for the

purpose of capital reduction, together far exceeded the minimum

number; one hundred under Section 244. There was no complaint

of any oppressive action existing. All the same in the setting of the

present proceedings, even the objection raised by an individual

shareholder as to the reasonableness of the price fixed has to be

looked into, which pertinently is not in a setting of oppression.

41. In Baillie7, the decision in Foss v. Harbottle8 was noticed and

the exception carved out to the ‘proper plaintiff’ rule even while

rejecting the challenge against the action of its Directors enabling

purchase of the personal properties of the Directors for prices far

exceeding its actual value that too by mortgaging and

encumbering other properties of the company and applying these

proceeds to make the purchases. However, it was observed that it

Page 42 of 55 Civil Appeal No. 7655 of 2025 etc. would not be proper to hold that a society of private persons

associated together in an undertaking, are deprived of their civil

rights inter se, because the Crown or the Legislature has conferred

on them a corporate character to make more attainable, the

common objects. The ‘claims of justice’ then would be found

superior to any difficulties arising out of technical rules regarding

the mode in which the corporations are required to sue. Even in

Foss v. Harbottle8 it was held that if a case arises as to an injury to

a corporation or to some of its members, for which no adequate

remedy remains except that of a suit by an individual corporator

in their private character, requiring protection of those rights

entitled in their corporate character, then the ‘claims of justice’

would override procedural technicalities. It is the said principle

that is enshrined in the Act of 2013 where even when a special

resolution is passed the Tribunal is required to scrutinise a

reduction in capital under Section 66, after hearing all the stake

holders, ex debito justitiae.

42. Coming back to the present case, here the measure

employed was of a reduction in capital as permitted by the statute.

Page 43 of 55 Civil Appeal No. 7655 of 2025 etc. In Re: Reckitt Benckiser (India) Ltd.17 encapsulated the principles

regulating a reduction of share capital after referring to British and

American Trustee and Finance Corporation v. Couper18. The

broad principles distilled were that (i) reduction of share capital is

a strictly domestic concern depending on the decision of the

majority, (ii) if reduction of share capital is approved by a special

resolution, the majority also has the right to decide how it should

be carried out, (iii) reduction of share capital can be brought about

by extinguishing some of the shares while retaining others even in

the same class or making a proportionate reduction for all or even

for some, while for others it is totally extinguished. The reduction

thus can be in any manner and even if it is selective it is

permissible.

43. The reduction of capital was sanctioned by the Board and it

was put up as a special resolution before the general meeting

convened. The special resolution was passed by not only the

majority shareholders but also by 3/4th of the majority individual

shareholders, present and voting, identified for the purpose of

reduction of share capital, which makes it consensual. Even the

17 2005 SCC Online Del 674 18 (1894) SC 399

Page 44 of 55 Civil Appeal No. 7655 of 2025 etc. appellant in C.A. No.7655 of 2025, who holds the majority of the

minority shareholding voted in favour of the special resolution. An

argument was raised that only 733 out of the 4942 identified

shareholders voted and the 3/4th majority from those present and

voting is a mirage. We cannot accept the said contention, first for

reason of the statute not prescribing any majority from the

identified shareholders. Then, the others thought it fit to abstain

and in a democratic set up where the will of the majority reigns

supreme, the abstainers are deemed to have left the choice to

those who vote and they acquiesce to the majority will of those

present and voting in the extraordinary general meeting. It is only

later, finding the application of DLOM that an objection was taken.

Thus there is no oppression setting in the present case and there

can be no distinction drawn from the statutory words employed of

a ‘fair value’ and a ‘fair market value’.

44. The statutory scheme also does not restrict the use of DLOM.

Examining the statutory scheme under Section 66, in addition to

the special resolution and notice to the Central Government and

the Registrar of Companies, sanction is accorded by the Tribunal

for capital reduction only if it is satisfied that the accounting

treatment proposed by the company for such reduction is in

Page 45 of 55 Civil Appeal No. 7655 of 2025 etc. conformity with the accounting standards specified in Section 133

or any other provision of the Act and a certificate to that effect by

the company’s auditor has been filed with the Tribunal, as per the

proviso to Section 66(3); which we have found was furnished.

Section 133 enables the Central Government to prescribe

accounting standards as recommended by the Institute of

Chartered Accountants of India constituted under Section 3 of the

Chartered Accountants Act, 1949 in consultation with and after

examination of the recommendations made by the National

Financial Reporting Authority, constituted under Section 132 of the

Act of 2013. The Indian Accounting Standards (Ind AS) 113

provides for fair value determination as a market based

measurement and not an entity specific measurement, quite

contrary to the statutory scheme found in the United States as

described by Professor Moll.

45. The definition of fair value as per the Ind AS 113 is ‘the price

that would be received to sell an asset or paid to transfer a liability in

an orderly transaction between market participants at the

measurement date’(sic). It is required that when measuring fair

value, an entity shall take into account the characteristics of the

asset or liability, if market participants would take those

Page 46 of 55 Civil Appeal No. 7655 of 2025 etc. characteristics into account when pricing the asset or liability at

the measurement date. These characteristics include, not

exhaustively, but as stated in the Ind AS 113, as an example, the

condition and location of the asset and restrictions if any on the sale

or use of the asset. Hence, the approved accounting standards, as

statutorily brought out, treats the fair price as one linked with the

market especially in the context of Section 66, reduction of share

capital. The Valuation Standards Board ICAI and the ICAI

Registered Valuers Organisation of the Institute of Chartered

Accountants of India has brought out ‘ICAI Valuation Standard 103-

Valuation Approaches and Methods’. The Discount for Lack of

Marketability (DLOM) is one of the subheadings under the heading

“Adjustment and Valuation”. It is stated therein that ‘DLOM is based

on the premise that an asset which is readily marketable commands

a higher value than an asset which requires longer period/ more

efforts to be sold or an asset having restriction on its ability to sell.’

‘Determining an appropriate level of DLOM can be a complex and

subjective process. Accordingly, the specific nature and

characteristics of the asset and the acts and circumstances

surrounding the valuation should be considered.’

Page 47 of 55 Civil Appeal No. 7655 of 2025 etc.

46. Looking at the valuation report it definitely reckoned the

share value of BAL for a reasonable period since that would have a

nexus in deciding the value of shares of BTL whose only business

is investment in the listed BAL. BTL admittedly was not listed

having been delisted in the year 1999-2000 and continued without

any payment of dividend to the shareholders. The only buyout,

which was statutorily prescribed, was offered at the rate of Rs.96/-

per share, long back in the year 2001. In 2006, one of the promotor

firms of BTL had offered to purchase the shares of public

shareholders at Rs.400/- per share. More importantly, BTL

conducted a rights issue in 2016 whereby the existing

shareholders were offered and issued 115 shares for every one

share held by them which resulted in diminishing the monetary

value of BTL shares. The various offers relied on in the

Convenience Compilation, at Annexure 2, even though not

authenticated, reveals only a price of Rs.35-Rs.55 that too before

the rights issue of the shares. A commodity broker is said to have

offered an amount of Rs.2000/- in the year 2007 that too, far prior

to the rights issue. The further issue of share capital for the purpose

of bringing in an investor as a strategic long-term promoter made

a valuation at Rs.310/- per equity share which is not parallel with

Page 48 of 55 Civil Appeal No. 7655 of 2025 etc. the reduction of capital now attempted by the respondent

company. The marketability of the shares is absent, and it has to

be reiterated that the company had not been paying any

dividends. There were also requests made by the shareholders for

an exit option as is revealed from the minutes of the AGMs. In the

totality of the circumstances, the applicability of DLOM cannot be

held invalid and in any event, what has to be looked at by the

Tribunal in scrutinising the scheme of reduction of capital is only

as to whether there was a fair measure employed which cannot be

termed unreasonable or prejudicial to the individual

shareholders.

47. In Re: Reckitt Benckiser (India) Ltd.17 held that when the

matter comes to Court, the satisfaction of the Court is as to whether

(i) there is an unfair or inequitable transaction and (ii) whether the

creditors entitled to object to the reduction have either consented

or are paid or are secured. In Re: Cadbury India Limited19

examined Section 100 of the Act of 1956; analogous to the purpose

of Section 66, to find three requirements; (i) the Articles of

Association should permit a reduction of share capital; (ii) the

19 2014 SCC Online Bom 4934

Page 49 of 55 Civil Appeal No. 7655 of 2025 etc. scheme for reduction should be approved by a special resolution

and (iii) the Court’s sanction (sic- now the ‘Tribunal’) must be

obtained if the special resolution is passed. The consideration of

sanction of the scheme of reduction is regulated insofar as being

(i) not against public interest; (ii) fair and just and not unreasonable

and (iii) not unfairly discriminatory or prejudicial against a class of

shareholders. As for prejudice it was held to be something more

than just receiving less than what a particular shareholder may

desire. To find prejudice there should be an attempt to force a class

of shareholders to divest themselves of their holding at a rate far

below what is reasonable, fair and just; a strategy by which an

entire class is forced to accept something that is inherently unjust.

It was also held that reasonableness can be tested on the basis of

past open offers, extinguishments or buy-backs and the rates at

which they were effected. If the rates offered in the scheme of

reduction is more than the past offers then, the burden on the

objector is exponentially high when raising the plea that the offer

is unfair or unreasonable, to establish real prejudice, palpable

bias and demonstrable arbitrariness. Allegation of violation of

principles of fairness, when raised should be substantiated by

Page 50 of 55 Civil Appeal No. 7655 of 2025 etc. obvious and blatant unfairness as revealed from the consequent

action; which is absent here.

48. Unless the valuation is especially unreasonable it would be a

wrong approach to reject a plausible rationale provided by the

valuer on the mere ground that the objector has a different point of

view. The test insofar as considering a sanction as held in In Re:

Cadbury India Limited19 is as to whether (i) a fair and reasonable

value was offered to the minority shareholders? (ii) The majority of

the non-promoter shareholders have voted in favour of the

resolution? (iii) the resolution read by any fair-minded and

reasonable person, without microscopic scrutiny, finds it to be

egregiously wrong offending the judicial conscience? (iii) the

valuer has gone so off-track that the result of valuation return can

only be wrong? We cannot but notice that all the above tests are

satisfied in the above case. We have already found that a fair and

reasonable value was offered to the minority shareholders and the

majority of the identified shareholders present and voting, voted

in favour of the resolution. Even on a microscopic scrutiny the

valuation cannot be found to be egregiously wrong especially

looking at the previous offers and also the rights issue offered at

par, prior to the reduction of share capital, exponentially

Page 51 of 55 Civil Appeal No. 7655 of 2025 etc. increasing the take aways of the individual shareholders and the

valuation cannot at all be said to have gone off-track, so as to make

it egregiously wrong.

49. In this context, we cannot but notice that the share value now

fixed by the Board and approved by the majority of the

shareholders of the company which on modification by the

Tribunal stands at Rs.196.80/- for each equity share. Even taking

the highest offer at Rs.2000/- by a commodity broker as claimed

by the appellants, prior to the rights issue, as of now on a further

purchase of 115 shares at par, expending Rs.1150/- in the rights

issue, the single share available with the identified shareholders

becomes 116 at the rate of Rs.196.80/-, which by no stretch of

imagination or any standard of scrutiny adopted, can be said to be

unreasonable. Arguments raised on the valuation initiated at the

behest of the Custodian, is available at Annexure A-9 & A-11, both

in the year 2012, based on the purchase offers received. The

purchase offers ranged between Rs.550/- to Rs.3,650/-. The

valuation too by SBI Caps Securities and ICICI Securities ranged

between Rs.12,707/- to Rs.20,215/- after applying discounts

ranging from 20% to 30%. The above valuation was in the year

2012, while consequent to the reduction of share capital, the

Page 52 of 55 Civil Appeal No. 7655 of 2025 etc. Custodian had sought for a verification of the valuation conducted

by the very same agencies. ICICI Securities by Annexure A-30

while affirming the valuation as fair specifically noticed that the

adverse effect by reason of the huge liability created on BAL, by a

ruling of the Supreme Court was not captured in the earlier

valuation. They also emphatically notice that the Valuation was by

a reputed international firm and the Fairness Report by a SEBI

registered category-I merchant banker. SBI Caps Securities also

confirmed the valuation by A-31.

50. We cannot but reiterate that the appellants herein are not

wary investors, cautious retirees or mere speculators, but

seasoned retail investors who blend in equal measure prudence

with quite calculation. The share value of BAL was in the public

domain, being a listed company. The appellants were aware of the

fact that BTL had only investment in BAL, which confined its

operations. The appellants were aware and many had participated

in the rights issue brought about and if not participated, at their

peril. The shareholders were also aware of the price at which

SingTel was brought in, as a strategic long-term promoter,

pursuant to which the reduction of share capital was attempted

which gave them enough material for making an informed and

Page 53 of 55 Civil Appeal No. 7655 of 2025 etc. calculated decision as to whether they should opt for it. Far from

the bullish and bearish trends that regulate the flexible share value

of listed companies in a volatile market, the appellants held on to

the shares of BTL; with zero listing, zero marketability, zero

dividend payment, zero exit options also declining purchase

offers, with the stoic resolve of a feline waiting patiently for its

prey. The move was made when the AGM was constituted quite

realising the price offered for each equity share, which was even

minus the taxes payable by the company. The decision taken at

the EAGM passing the special resolution clinches the issue. Only

on finding the DLOM having been applied, the objections were

raised despite the fact that at the time of EAGM the appellants were

satisfied with the price offered. The objection is only in applying

DLOM with nothing in substantiation as to how the price fixed is

unreasonable. The identified shareholders voted in majority or

abstained, finding the price offered to be reasonable and not

prejudicial, which though pounced upon was resiled from later.

The nature’s wild offers no second pounce at the prey nor do the

hinterlands of financial wilderness and in any event, valuation is an

Page 54 of 55 Civil Appeal No. 7655 of 2025 etc. exercise which is best left to the experts as has been held in Mihir

H. Mafatlal v. Mafatlal Industries Ltd.20

51. On the above reasoning, we reject the appeals.

52. Pending applications, if any, shall stand disposed of.

……...…….……………………. J.

(SANJAY KUMAR)

...………….……………………. J.

(K. VINOD CHANDRAN) NEW DELHI;

MARCH 10, 2026.

20

(1997) 1 SCC 579

Page 55 of 55 Civil Appeal No. 7655 of 2025 etc.