Piyush Dilipbhai Shah & Ors vs Syngenta India Ltd

[Arising out of order dated 27th October, 2020 passed by National Company Law Tribunal, Court No. 1, Mumbai Bench, in CP No. 771 of 2017]

IN THE MATTER OF:

1. Piyush Dilipbhai Shah Nilkantha, 3rd Floor, North South Road No. 5, Juhu Scheme, Vile Parle (West), Mumbai- 400 056 .. Appellant No. 1

2. Sejal Ashish Jhaveri, Nilkantha, 3rd Floor, North South Road No. 5, Juhu Scheme, Vile Parle (West), Mumbai- 400 056 .. Appellant No. 2

3. Samir Kirtikumar Hemani, 72, Pushpak Apartment, 7th Floor, 31- Altamount Road, Mumbai- 400 026 .. Appellant No. 3

4. Amish Narendra Shah, 202, Madhuvan, North South Road No. 1, Juhu Scheme, Vile Parle (West), Mumbai- 400 056 .. Appellant No. 4

5. Rupesh Navanitlal Jhaveri, 401, Anchor Tiara, Bajaj Road, Vile Parle (West), Mumbai- 400 056. .. Appellant No. 5

Vs.

Company Appeal (AT) No. 208 of 2020 Page 1 of 27 Syngenta India Limited, Regd. Office at Amar Paradigm, 110/11/3, Baner Road, Baner, Pune - 411 045 .. Respondent Present:

For Appellants: Mr. Piyush Dilipbhai Shah (Appellant in person representing all Appellants), Sejal Ashish Jhaveri, Samir Kirtikumar Hemani, Mr. Rishikesh Gautam, Amish Narendra Shah and Rupesh Navanitlal Shah, Advocates

For Respondent: Mr. Janak Dwarkada, Sr. Advocate with Mr. Gyanendra Kumar, Mr. Tapan Deshpande, Mr. Robin Grover, Ms. Shikha Tandon, Mr. Jitesh Dhingra and Mr. Ankit Shah Advocates.

JUDGMENT

(5th March, 2021)

KANTHI NARAHARI, MEMBER (TECHNICAL)

Preamble:

The present appeal arises against the order dated 27.10.2020

passed by National Company Law Tribunal, Court No. 1, Mumbai

Bench, Mumbai (in short NCLT) whereby NCLT Mumbai in C.P. No.

771 of 2017 allowed the Company Petition for reduction of share

capital as sought by Respondent No. 1 herein who is the Petitioner

before the NCLT.

Factual Matrix of the case:

2. The First Appellant Party in person herein put forth his

submissions on behalf of other Appellants in a virtual mode method.

Company Appeal (AT) No. 208 of 2020 Page 2 of 27

He submitted that the Appellant Nos. 1 to 5 herein are the

shareholders of the Respondent-Company. The 1st Appellant holds

2150 shares, Appellant No. 2 holds 150 shares, 3rd Appellant holds

1200 shares, the 4th Appellant holds 926 shares and 5th Appellant

holds 500 shares. He submitted that the Respondent-Company

converted into a Public Company and its shares were listed on Bombay

Stock Exchange (in short 'BSE'). However, subsequently its shares

were de-listed since June, 2007. He submitted that the Respondent-

Company, after delisting its shares have public shareholders

compromising 11,81,036 shares, which comes to 3.59% of total paid

up by share capital. These shareholders are minority/non-promotor

shareholders.

3. While so, there is change in promotor group of the Respondent-

Company. The Respondent-Company intend to reduce its equity-share

capital under Section 66 of the Companies Act, 2013 thereby

extinguished all the non-promotor shareholders. The Respondent-

Company issued notice dated 01.11.2017 calling for Extraordinary

General Meeting (in short 'EOGM') to be held on 08.12.2017. The said

EOGM intended to convene and to pass a special business and approve

reduction of the equity share capital by cancelling and extinguishing

in aggregate 3.59% of the total issued, subscribed and paid-up equity

share capital of the Respondent-Company comprising 11,81,036

equity shares at Rs. 5/- each held by the shareholders of the Company.

The Appellants submitted that they had attended the EOGM and

Company Appeal (AT) No. 208 of 2020 Page 3 of 27 opposed the Resolution (along with many shareholders) for reduction

of share capital of the Company. He submitted that only 45 public

shareholders consisting of 29,693 shares had voted in favour and 87

public shareholders consisting of 42,678 shares had voted against the

Special Resolution. He submitted that the reduction of the share

capital extinguished the public shareholders/minority shareholders

would drastically lose out on the future benefit and growth prospect.

He submitted that the company offered a sum of Rs. 2445/- per each

share as mentioned in the EOGM Notice dated 08.12.2017 under the

caption 'consideration' in the explanatory statement issued along with

the said Notice pursuant to Section 102 of the Companies Act, 2013

relating to Special Resolution. Appellants submitted that the

Promotors of the Respondent-Company have not voted in the EGOM

for reduction of share capital. He submitted that in the Explanatory

Statement under the caption 'Taxation' it has been mentioned that the

proposed reduction would be considered as dividend within the

provision of 2(22)(d) of the Income Tax Act, 1961 and the Company will

be liable to pay Dividend Distribution Tax (in short 'DDT') @ 20.358%

in accordance with the provision of Section 115-O of the Income Tax

Act, 1961. He submitted that as per the Explanatory Statement, the

Company would be liable to pay tax on the fair price arrived at by the

Company. However, pursuant to the amendment of the Finance Act,

the shareholders are liable to pay tax w.e.f 01.04.2020. He further

submitted that by virtue of said amendment to the Finance Act and

the Income Tax Act, the shareholders will be put to heavy loss and they

Company Appeal (AT) No. 208 of 2020 Page 4 of 27 may get meagre amount on surrendering their shares. He submitted

that the Respondent-Company is financially sound and has positive

networth. The reduction of the Capital may arise in different

circumstances namely, accumulated business loss, erosion of

networth etc. In the present case, as stated above, the Respondent-

Company is making good profits and therefore the reduction of share

capital especially extinguishing the public shares of the Company is

unjustified. In view of the aforesaid reasoning, he sought various reliefs

as prayed in page-21 of the Appeal Paper Book, namely, allow the

Respondent-Company to bear DDT and direct the Respondent-

Company to re-value the shares of the Company considering the

growth and progress in the past three years i.e., 2018, 2019 and 2020.

He submitted that the valuation was done in the year 2017 and the

learned NCLT passed the order allowing the Application of the

Company on 27.10.2020 thereby from the date of valuation of shares

three years have elapsed and profits made during these three years

have not been taken into consideration. In these three years, the

Company has substantially gained profits and the Appellants are

entitled to share profits of the Company for the reason that the public

shareholders have substantially contributed to the growth of the

Company.

4. Shri Janak Dwarkadas, learned Senior Counsel appearing for

the Respondent-Company replied in detail to the submissions and

averments made by the Appellants herein. He submitted that it is true

Company Appeal (AT) No. 208 of 2020 Page 5 of 27 the shares of the Respondent-Company were listed on the Bombay

Stock Exchange. However, in June, 2017, the equity shares of the

Respondent- Company were de-listed from BSE under SEBI guidelines

pursuant to which the then promotors of the Respondent-Company

holding 84.02% of the share capital of the Respondent-Company

provided the exit option particularly to the public shareholders of the

Company at a price of Rs. 730 per share. However, certain public

shareholders held approximately 3.59% shareholding did not tender

their shares during de-listing offered including the Appellants.

Pursuant to de-listing of shares, Respondent-Company's shares are no

longer traded in any of the stock exchange and hence have lost its

maintainability and legality. The public shareholders thus did not have

any exit route and certain public shareholders expressed their desire

to tender and/or surrender their equity shares. Therefore, the

Respondent-Company decided to reduce, issued subscribed and paid-

up equity shares of the Company by cancelling and extinguishing in

aggregate 3.59% of the total issued subscribed and paid up equity

shares of the company comprising 11,81,036 equity share of Rs. 5/-

each held by public shareholders. He submitted that to maintain

fairness and transparency, the Respondent-Company engaged two

independent Valuers namely M/s Price Waterhouse & Co. LLT,

Chartered Accountant (in short 'PWC') and Haribhakti & Co. LLT (in

short "Haribhakti") to undertake separate independent valuation of

the equity shares of the Respondent-Company to determine the fair

value of the shares. The valuers submitted their reports on 25.10.2017

Company Appeal (AT) No. 208 of 2020 Page 6 of 27 by PWC and on 26.10.2017 by Haribhakti. The PWC arrived at a

valuation of Rs. 2444.70 per equity share. While so, Haribhakti,

Chartered Accountant arrived at a value of Rs. 2333.36 per share. The

Respondent Company also appointed Avendus Capital Private Limited

(in short "Avendus"), a SEBI registered Merchant Banker to provide a

fairness opinion on the Valuation Report of the Independent Valuers.

Avendus issued fairness opinion on 28.10.2017 and confirmed that

the valuation of shares provided by the Independent Valuers is fair and

reasonable from a financial point of view. The Board of Directors of the

Respondent-Company considered the expert reports for the purpose of

arriving at a conclusion for consideration of the amount payable to the

public shares at the Board meeting held on 01.10.2017. The Board of

Directors decided that the higher of the two valuers, arrived at by the

Independent Valuers i.e., Rs. 2444.70 by PWC Auditors considered as

a fair value of the equity shares, Further, the Board considered and

approved the value of Rs. 2445/- per share and passed the requisite

Resolution on 01.11.2017 approving reduction of the share capital.

5. Learned Senior Counsel for the Respondent submitted that

Company decided to hold EOGM and issued a Notice calling for the

EGM to be held on 08.12.2017 to pass special Resolution for reduction

of the share capital. The EOGM was held on 08.12.2017 and in favour

of the Resolution 99.87% votes were cast and against the resolution

0.13% votes were cast; thereby the Resolution was passed in the

EOGM held on 08.12.2017. Thereafter, the Company filed petition

Company Appeal (AT) No. 208 of 2020 Page 7 of 27 before the NCLT, Mumbai seeking its confirmation to the capital

reduction.

6. Learned Senior Counsel for the Respondent further submitted,

in response to the Appellants' objection that the Company passed the

Resolution for reduction of share capital in selective method and the

Companies Act does not permit the selective method of reduction of

the share capital to a particular class of shareholders. In response to

the objection of the Appellant, the learned Senior Counsel submitted

that Section 66 of the Companies Act, 2013 does not discriminate any

class of shareholders for the purpose of reduction of shareholders.

Section 66(1) clearly provides reduction of share capital by a Special

Resolution in any manner. Learned Senior Counsel for the Respondent

submitted that when the words- 'in any manner' is provided under the

aforesaid sub-Section emphasises that there is no discrimination with

regard to any class of shares for the purpose of reduction of the share

capital in the interest of the Company and the shareholders. On the

point of DDT, which has to be borne out by the shareholders w.e.f.

01.04.2020, is concerned, he submitted that it is an admitted fact that

in the explanatory statement to the Notice calling for EOGM dated

08.12.2017 under the caption 'taxation', it has been mentioned that

the Company will be liable to pay Dividend Distribution Tax @ 20.358

% in accordance with the provision of Section 115-O of the Income Tax

Act, 1961. However, in view of change of law, the DDT is now liable to

be paid by an individual shareholder instead of the Company. The said

Company Appeal (AT) No. 208 of 2020 Page 8 of 27 situation has been changed that DDT has now been explicitly

abolished by amendment in the provision of Income Tax Act, 1961 and

it is trait that there cannot be any estoppel contrary to the statutes or

a legal provision. The said relief sought by the Appellants could only

be granted if the Income Tax Act, 1961 abolishing the DDT is declared

as unconstitutional for which the Appellate Tribunal is not correct

forum and the Appellants cannot be allowed to seek the same.

7. Learned Senior Counsel submitted that as stated supra, Section

66(1) of the Companies Act, 2013 expressly permit the Company to

reduce its share capital in any manner including by way of selective

reduction subject to compliance of prescribed procedural

requirements. He submitted that it is a settled principle of law that

reduction of share capital of a Company is a matter of domestic

concern and commercial wisdom of the Company and while reducing

the share capital, the Company can decide to extinguish the some of

its shares without dealing with the same manner as with all other

shares of the same class. He further submitted that the Courts and

Tribunals in India, in a number of cases, have permitted the selective

reduction of share capital treating the same as an internal matter of

Company.

8. Learned Senior Counsel for the Respondent Company relied

upon a judgment of Delhi High Court in the case of Reckitt Benckiser

(India) Ltd., (2005) 122 DLT 612, the Hon'ble High Court held as

under:

Company Appeal (AT) No. 208 of 2020 Page 9 of 27

"(i) The question of reduction of capital is a matter of

domestic concern and the shareholders, passing the

special resolution, can also decide the manner in which

the reduction should be carried into effect.

(ii) It is for the company to decide whether each

member shall have his shares proportionately reduced,

or whether some members shall retain their shares

unreduced, the shares of others being extinguished

totally receiving a just equivalent;

(iii) Selective reduction is permissible within the frame

work of law; and

(iv) The court should be satisfied that the transaction is

not unfair or inequitable, and that all the creditors

entitled to object to the reduction have either consented

or have been paid or secured.

[Emphasis supplied]

9. Learned Senior Counsel for the Respondent-Company relied

upon a decision of the Hon'ble Supreme Court in the matter of

Competition Commission of India Vs. Fastway Transmission Pvt.

Ltd. & Ors. (2018) 4 SCC 316 has also held that the words "in any

manner" are words of wide import and that the said words must be

given their natural meaning. Learned Senior Counsel also relied on

other judgments in support of his contentions.

Company Appeal (AT) No. 208 of 2020 Page 10 of 27

10. Learned Senior Counsel submitted that to pay fair price to the

public shareholders, the Company suo moto appointed two

independent Valuers and also appointed Avendus to provide fair

opinion on the Valuers Report of the independent Valuers thereby the

Company has acted in good faith to protect the interest of the public

shareholders and offered higher of the two valuations given by M/s

Price Waterhouse & Co. LLP and Haribhakti & Co. LLP.

11. Learned Senior Counsel for the Respondent submitted that

though the order of NCLT allowing the Application on 27.10.2020,

however, the valuation arrived in 2017 does not vitiate for the reason

that the time taken for the judicial process cannot be considered for

changing the terms on which the Special Resolution was passed.

12. It is submitted that since the Respondent-Company is not a

listed Company, the question of public participation in the equity

market as regards the Respondent Company does not arise. In this

regard learned Senior Counsel relied upon judgment of the Hon'ble

Gujarat High Court in Nirma Limited (2013) SCC Online Guj 8532

observed as under:

"On the contrary it may be noted that as the Petitioner-

Company is already de-listed the shares cannot be

traded in the stock exchanges and, therefore, it cannot

be said that the resolution in question for reduction of

share capital is not in the interest of public or

shareholders."

Company Appeal (AT) No. 208 of 2020 Page 11 of 27

(emphasis supplied)

13. Learned Senior Counsel further submitted that it is well settled

that it cannot be presumed a reduction is against the public interest

merely on the basis of hypothetical assumptions and unless something

specifically shown to administer the same, the burden lies on the above

Appellants to prove the same. However, the Appellants failed to prove

the same.

14. In view of the reasons above, learned senior Counsel submitted

that the Appeal is devoid of merits and liable to be dismissed.

Appraisal:

15. Heard Appellants in person and learned Senior Counsel for the

Respondent-Company, perused the records, documents and citations

relied upon by them.

16. Paragraphs 28 & 29 of the impugned order dated 27.10.2020

passed by NCLT, Mumbai reads as under:

...

"28. In the light of above, the bench is only concerned

with the first issue of objection of the 3.59% of the

minority shareholders as a whole, is with regard to

their legitimate expectation to be adequately

compensated with regard to value of shares. The rights

of minority shareholders qua the Valuation of shares

Company Appeal (AT) No. 208 of 2020 Page 12 of 27 as per the two Valuers and the Fairness report has to

be examined.

29. The second issue regarding method of valuation

and assumptions carried out by the Valuers is

examined below. The method of valuation by both

valuers is as extracted below for ready reference:

17. The first Issue as framed in paragaraph-28 is that the minority

shareholders adequately compensated to their legitimate expectation

with regard to valuation of shares.

In paragraph-29, the Second Issue is with regard to method of

valuation and assumptions carried out by the Valuers was examined.

Learned NCLT, Mumbai has taken into consideration the report

filed by M/s Price Waterhouse & Co. LLP, and the method adopted by

the said Auditors in their Valuation Report. We have seen that the

Valuation Report filed by M/s Price Waterhouse & Co. LLP, which it

arrived at a fair value of share Rs. 2444.70. However, in the valuation

Report (para-6/7) under the caption - Asset Approach- Net Asset Value

Method, Second part of that report reads as under:

"SIL is a going concern with positive earnings and the

historical book values of assets and liabilities are not

considered representative of the earnings potential of

the Company. Accordingly, the NAV method has not

been adopted"

Company Appeal (AT) No. 208 of 2020 Page 13 of 27

18. From the NAV method it is amply clear that the Company is

going concern with positive networth. Learned NCLT has taken into

consideration the valuation report which was made in the year 2017

which was submitted on 25.10.2017 by PWC and on 26.10.2017 by

Haribhakti. Learned NCLT, Mumbai passed its order on 27.10.2020,

almost three years after the submission of valuation report. In our view

the valuation reports as made in 2017 are not as on date when learned

NCLT passed its order on 27.10.2020.

19. We have not gone into the veracity of the methodology adopted

by the Valuers. Even though the learned NCLT framed an issue with

regard to whether the public shareholders constituting 3.59 %

adequately compensated or not. However, the learned NCLT, Mumbai

failed to consider the vital point that the valuation was done in the year

2017 and by the time learned NCLT, Mumbai passed the order, three

years have passed. It is an admitted fact that the Company is a going

concern and the learned NCLT, Mumbai ought to have considered the

value of the shares for the current year.

20. In respect to the Second Issue, it is made clear that we have not

gone into the merits/demerits of methodology adopted by the Auditors.

We are concerned only the economic interest of the public

shareholders who by virtue of cancellation and extinguishing the

shares whether they get their legitimate expectation of the fair value

and whether they have been paid the fair value considering the

performance of the Company.

Company Appeal (AT) No. 208 of 2020 Page 14 of 27

21. The objection of the Appellants that the Company adopted a

selective method for the reduction of the share capital is concerned,

we are not in the agreement with the submission of the Appellants.

Sub-Section 1 of Section 66 of the Companies Act, 2013 reads as

under:

"66. Reduction of share capital

(1) Subject to confirmation by the Tribunal on an application by the company, a company limited by shares or limited by guarantee and having a share capital may, by a special resolution, reduce the share capital in any manner and in particular, may--

(a) extinguish or reduce the liability on any of its shares in respect of the share capital not paid-up; or

(b) either with or without extinguishing or reducing liability on any of its shares,--

(i) cancel any paid-up share capital which is lost or is unrepresented by available assets; or

(ii) pay off any paid-up share capital which is in excess of the wants of the company,

alter its memorandum by reducing the amount of its share capital and of its shares accordingly:

Provided that no such reduction shall be made if the company is in arrears in the repayment of any deposits accepted by it, either before or after the commencement of this Act, or the interest payable thereon."

....

22. In view of the above, we are of the view that the aforesaid Section

permits the Company to reduce the share capital in any manner. We

Company Appeal (AT) No. 208 of 2020 Page 15 of 27 are also of the view that there is no discrimination adopted by the

Company in the present case. It is also an admitted fact that the shares

of the Company were de-listed from the BSE and the shares of the

public shareholders cannot be tradable.

23. Learned NCLT, Mumbai in paragraph-31 at page 29 (running

page 65 in Appeal Paper Book) has given its views, which is reproduced

as under:

..

"In view of the ratio laid down in the above

judgements, this bench is of the view that the objector

to the scheme has not shown that the valuation is ex-

facie unreasonable, i.e., so unreasonable that it cannot

on the face of it be accepted, the valuation method

adopted by the valuers are unacceptable, or are based

on patently erroneous assumptions and lastly if the

Valuations are vitiated by fraud or malafides. The

Minority shareholders are objecting to the said scheme

on three basic grounds that the petitioner company

after a lapse of 10 years and post delisting are opting

for reduction of capital, that the China Chem company

is buying out the petitioner company and the scheme

is sanctioned by CCI and finally their legitimate

expectation of receiving certain amounts in lieu of

rights attached to the shares in comparison to the price

Company Appeal (AT) No. 208 of 2020 Page 16 of 27 offered by Buyer. The minority shareholders have not

obtained an independent Valuation Report nor have

they pointed out the defects of the valuation reports

and fixation of share price looking at the past values

and projected values for the next ten years. This Court

has no power or jurisdiction to exercise any appellate

functions over the scheme. It is not a valuer. It does not

have the necessary skills or expertise. It cannot

substitute its own opinion for that of the shareholders.

Its jurisdiction is peripheral and supervisory."

..

24. Learned NCLT, Mumbai was of the view that the minority

shareholders having not obtained an independent valuation report nor

have pointed out the defects in the Valuation Report and fixed the

share price looking at the past valuation and projected values for the

next 10 years. Further it is observed that the NCLT has no power or

jurisdiction to exercise any appellate functions. It is not a valuer. It

does not have necessary skills or expertise. It cannot substitute its own

opinion for that of the shareholders. Its jurisdiction is peripheral and

supervisory, not appellate.

25. Having observed, we have already indicated that we are not going

into the merits of the valuation. However, public shareholders expect

best price for their shares. The share is a movable property and the

Company Appeal (AT) No. 208 of 2020 Page 17 of 27 holders of the share has every right to expect best price and fair value

of its shares.

26. In this regard, Hon'ble Supreme Court in the matter of Bacha

F. Guzdar Vs. Commissioner of Income Tax, Bombay (AIR 1955 SC

74), at paragaraph-8 held as under:

'The true position of a shareholder is that on buying

shares an investor becomes entitled to participate in

the profits of the company in which he holds the

shares if and when the company declares, subject

to the Articles of Association, that then profits or any

portion thereof should be distributed by way of

dividends among the shareholders. He has

undoubtedly a further right to participate in the

assets of the company which would be left over after

winding up but not in the assets as a whole as Lord

Anderson puts it."

27. As per the judgment of the Hon'ble Supreme Court, the

shareholder has every right and entitle to participate for the profits of

the Company.

28. Learned NCLT, Mumbai in paragraph-36 has reproduced the

judgement of the Hon'ble Bombay High Court in Wartsila India

Limited Vs. Janak Mathuradas reported in 2011(1) Bom. C.R. 600

as under:

Company Appeal (AT) No. 208 of 2020 Page 18 of 27

...

"whether the special resolution which proposes to wipe

out a class of shareholders after paying them just

compensation can be terms as unfair and inequitable"

In the affirmative observed that "... In our opinion,

once it is established that non-promoter shareholders

are being paid fair value of their shares... the court will

not be justified in withholding its sanction to the

resolution."

Even the Hon'ble Bombay High Court is also of the view that a

non-promotor shareholders are being paid fair value of their shares...

the Court will not be justified in holding its sanction to the Resolution.

The vital point from the judgment of the Hon'ble Bombay High Court

is that even non-promotor shareholders shall be paid fair value of the

share. What constitutes fair value?

Definition of a fair value (fair market value): "As per

Wharton's law lexicon, the fair market value of a property, other than an

immovable property means the value determined in accordance with the

method as may be prescribed". If a fair value arrives 3 years prior, can

the fair value still subsists or even long lasts for eternity. Even after 3

years, even though the company as a going concern making good

profits and whether the shareholder's are not entitled to the profits of

the Company as held by the Hon'ble Supreme Court, (supra) in Bacha

F. Guzdar Vs. Commissioner of Income Tax, Bombay (AIR 1955 SC

Company Appeal (AT) No. 208 of 2020 Page 19 of 27

74), In our view it is unfair and unjust depriving the fruits of the

company to its share holder's. The NCLT erred in not considering this

aspect.

29. Learned NCLT, Mumbai allowed the application by reducing

share capital. We are of the view that the learned NCLT ought to have

taken latest financial statement of the company to analyse and arrive

at a true and fair value of the company on the basis of current financial

statement.

30. In so far as DDT is concerned in the explanatory statement to

the Notice calling for the EOGM, the Company under the caption

'taxation' has clearly stated that at page-100, Volume-1 of the Appeal

Paper Book that the Company will be liable to pay DDT in accordance

with the provision of Section 115-O of the Income Tax, 1961. However,

in the changed circumstances, the Company has stated that the DDT

was abolished by the Central Government under the Finance Act, 2000

w.e.f. 01.04.2020, thereby the Company will not be in any obligation

to pay DDT. In the Written Submission filed by the Respondent, vide

diary No. 23805 dated 03.12.2020 at paragraph-4, page-2 it is stated

that provision of Income Tax, 1961 as amended by the Finance Act,

2020, the obligation of the Respondent-Company to pay DDT has been

abolished by an amendment in the provision of the Income Tax, Act,

1961. Unless the said amendment is challenged and declared as

illegal, the amendment made in the Income Tax will exist and the same

is enforceable and in operation by the said amendment. We agree with

Company Appeal (AT) No. 208 of 2020 Page 20 of 27 the submissions of the learned Senior Counsel for the Respondent. The

Appellants have not questioned/challenged the amendment to the

DDT. Therefore, we do not interfere with the said provision of law as

amended unless the same is abolished and declared as void by the

Competent Courts.

31. The stand of the Respondent that the statement made by the

Respondent-Company in 2017 in its explanatory statement regarding

payment of DDT was to be in compliance of its legal obligation and

applicable law as in 2017 and cannot by any means considered

promise/estoppel made by the Respondent-Company to its

shareholders.

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.

33. In our view when the statement made in the explanatory

statement with regard to payment of DDT by the Company now taken

a stand that the said DDT was abolished and the shareholders are

Company Appeal (AT) No. 208 of 2020 Page 21 of 27 under the obligation to pay the same. When in such a situation, the

Company takes its stand in a changed scenario, the Company also

should follow the same principles by adopting a method of re-

valuation of shares. The Company cannot take duel stand to its

advantage.

34. The Appellants in their Written Submissions, vide diary No.

23722 dated 25.11.2020 at page-3 at paragraph-h have given a table

showing fair value of shares. However, from the Company Appeal (AT)

No. 220 of 2020 filed challenging the same impugned order by other

shareholders at page-9, paragraph- 8.1.7 of Appeal Paper Book, the

audited financial statements for the years 2018-2019 and Financial

Year 2016-17, a comparative chart in a tabular form has been

produced and detailed notes to Financial Statements as on 31.03.2019

has been filed at Annexure-A6 at page 98 onwards. Page 99 of the same

volume of the Appeal Paper Book shows the Five Years Highlights of

the Company's Finance which is reproduced hereunder:

"Syngenta India Limited

Annual Report 2018-19

Securing the Future

Through Growth, Sustainability and Safety.

Notes to financial statements as at 31 March 2019

(continued)

Company Appeal (AT) No. 208 of 2020 Page 22 of 27 (Currency: Indian Rupees in Lakhs, except share

data)

Financials: Five years' highlights

Year 2018-19 2017-18 2016-17 2015-16 2014-15 Sales 2,91,513 2,71,803 2,87,356 2,92,736 2,90,475 Other 21,641 16,869 13,066 9,197 10,589 Income Total 3,13,154 2,88,672 3,00,422 3,01,933 3,01,064 Income

Profit before tax 73,897 44,003 45,087 46,519 46,086 Provision for tax 23,545 15,724 16,254 14,854 7,043 Profit after tax 50,352 28,279 28,833 31,665 40,043 (excluding other comprehensive income) Dividend (including 1,986 1,982 1,982 1,982 1,982 distribution tax) Dividend percentage 100 100 100 100 100 Share capital 1,647 1,647 1,647 1,647 1,647 Reserves/Surplus 3,24,997 2,76,570 2,50,660 2,24,100 1,94,105 (excluding capital reserves) Net worth (excluding 3,26,645 2,78,217 2,52,307 2,25,747 1,95,752 capital reserves)

Capital employed-a 3,26,645 2,78,217 2,52,307 2,25,747 1,95,752 ROCE(percentage)-b 15.41 10.16 11.43 14.03 20.46 RONW (percentage)- 15.41 10.16 11.43 14.03 20.46 c EPS(Rs.) 152.84 85.84 87.52 96.12 121.56

35. Since the Company Appeal (AT) No. 220 of 2020 also arises out

of the same impugned order, therefore, we have taken into

consideration the Annual Report of the Financial Year 2018-19 of the

Company for the purpose of better appreciation. From the bird's eye

view, it is crystal clear that the Profit After Tax (PAT) for the Financial

Year 2016-17 has been shown as Rs. 288.33 lakhs whereas for the

Financial Year 2018-19 it shows Rs. 503.52 lakhs. The earning per

shares (EPS) for the Financial Year 2016-17 has been shown as 87.52

Company Appeal (AT) No. 208 of 2020 Page 23 of 27 lakhs whereas for the Financial year 2018-19 it shows as Rs. 158.24

lakhs. The net worth of the Company for the Financial Year 2016-17

is shown as Rs. 2,52,307 lakhs whereas for the Financial Year 2018-

19 it is shown Rs. 3,26,645 lakhs. In a broad look at the figures, it is

amply clear that the Company had made its growth substantially and

also made good profits.

36. As held by Hon'ble Bombay High Court Wartsila India Limited

Vs. Janak Mathuradas reported in 2011(1) Bom. C.R. 600, supra,

once it is established that non-promoters' shareholders are being paid

fair value of their shares, Court will not be justified in withholding its

sanction to the resolution.

37. We are of the view that the public shareholders/non-promotors'

shareholders have not been adequately compensated for the reason

that the valuation done in the year 2017 had been taken into

consideration even after three years it was passed. We are of the view

that there is a drastic change in the growth of the Company. We are

also of the view that the public shareholders kept away from

participation in the profits, which is against the principle laid down by

the Hon'ble Apex Court in Bacha F. Guzdar case.

38. As held by the Hon'ble Supreme Court in Bacha F. Guzdar Vs.

Commissioner of Income Tax, Bombay (AIR 1955 SC 74), supra,

"on buying the shares an Investor becomes entitled to participate in

the profits of the Company in which he holds the share if and when

Company Appeal (AT) No. 208 of 2020 Page 24 of 27 the Company declares, subject to the Articles of Association that the

profits or any portion thereof should be distributed by way of dividends

among the shareholders."

39. The principle laid down by the Hon'ble Supreme Court is that

the shareholders are entitled to the profit of the Company, the only

way to do justice to the public shareholders/non-promotor

shareholder is to revalue the shares of the Company by appointing

independent valuers and whatever the fair price arrived at by

independent valuers, the same shall be paid to the public

shareholders. It is clear that if the Company makes profits, the same

need to be shared with the public shareholders/non- promotor

shareholders which are exiting from the Company by surrendering

their shares. As stated supra, we are not going into the veracity of the

fairness of the valuation reports and not finding fault with the

valuation done by the Valuers. We also hold that the reduction of the

share capital is in accordance with law and we do not interfere with

the same. We are concerned that the public shareholders/non-

Promotor shareholders, economic interest need to be protected by

paying latest fair value arrived at by the independent valuers

whichever is higher.

40. One of the submissions made by the learned Senior Counsel for

the Respondent that post 2017 if the Company makes losses whether

the public shareholders/non-promotor shareholders will bear the

losses. In answer to the said query in a share market, the shareholders

Company Appeal (AT) No. 208 of 2020 Page 25 of 27 always expect better price. For example, if the shares are traded in

stock exchange, the shareholders will not be having any control over

the market. Essentially, one has to go by the trading of shares in the

stock exchange, whereas in the case of unlisted shares, the shares are

controlled by the Board/management and admittedly, from the Annual

Report it shows that the Company is making profits and has good net

worth. The shareholders in a Company has every right to sell their

shares as and when they get good price meaning thereby the

shareholders have every right to trade shares as and when they get

good price. However, in the present case the Company passed its

resolution for reduction of the share capital to an extent of 11,81,036

equity shares constituting 3.59 %. Since in the EGM, the majority

shareholders approved the reduction of share capital, public

shareholders/non-promotor shareholders have no option except to

surrender their shares to the Company by extinguishing their shares

and exit from the Company whatever price is fixed by the Company.

Therefore, the shareholders in the present case expects justification

from the Courts/Tribunals. Even though the public shareholders/non

promotor shareholders had objected to the reduction of share capital

in the EGH but the majority shareholders i.e. promotor group having

majority, passed the resolution in favour of reduction of share capital.

CONCLUSION:

41. In view of the foregoing reasons, we pass the following orders:

i) The Company is hereby directed to revalue the shares by

a registered/independent valuers to value the shares of

Company Appeal (AT) No. 208 of 2020 Page 26 of 27 the Company and the Company shall pay the fair price

arrived at by the valuer based on the latest audited

accounts of the Company;

ii) The Company is directed to place all the audited accounts

of the Company as required by the valuer to value the

shares;

iii) Further the Company is directed to pay higher value of

share arrived at by the valuer.

iv) We accordingly modify the order dated 27th October, 2020

passed by National Company Law Tribunal, Mumbai in

above terms.

42. We clarify that we do not interfere with the reduction of share

capital as allowed by the learned NCLT Mumbai. However, we only

direct to revalue the shares by taking into consideration the latest

balance sheet and statement of accounts. Further, we do not interfere

with respect to the Dividend Distribution Tax (DDT) since there is an

amendment to the Income Tax Act, 1961. The Appeal is allowed in

above terms.

No orders as to cost.

[Justice Jarat Kumar Jain] Member (Judicial)

(Kanthi Narahari) Member(Technical)

New Delhi

Akc Company Appeal (AT) No. 208 of 2020 Page 27 of 27