Universal Conveyor Beltings Ltd vs Amrex Marketing Pvt Ltd

1.Universal Conveyor Beltings Ltd Through Managing Director Mr. Arun Kumar Mohata 402-403, Pragati House, 47-48 Nehru Place, New Delhi -110 019 ...Appellant No.1

2.Ravi Kant Maggon R/o B-1/39 Malviya Nagar, New Delhi - 110 017 ...Appellant No.2

3.Arun Kumar Mohata R/o 098 Kallisto Town Homes Jaypee Green Wish Town Sector 128, Noida 201 304 Gautam Budh Nagar, UP. ...Appellant No.3

4.Mahavir Prasad Kaushik R/o B-145, Sector 19, Noida - 201 301 ...Appellant No.4

Vs.

1.Amrex Marketing Pvt Ltd 26, Belvedere Road, Kolkata - 700 027 ...Respondent No.1

2.Vandana Meattle - NRI (Ex Director) R/o 26, Prathviraj Road, New Delhi - 110 003 ...Respondent No.2

3.M/s.Vivro Financial Services Pvt Ltd.

11, Shashi Colony, Opposite Suvidha Shopping Centre, Paldi, Ahmedabad - 380 007 ...Respondent No.3

Company Appeal (AT) No.158 of 2022 Page 1 of 27

4.M/s. Smifs Capital Markets Ltd.

4 Lee Road, Kolkata - 700 002 ...Respondent No.4

5.M/s. Singhi & Co. Chartered Accountants 1704, 17th Floor, World Trade Tower (Tower-B), DND Flyway C-01, Sector 16 Noida - 201 301 ...Respondent No.5

6.The Registrar of Companies, New Delhi 4th floor IFCI tower, 61, Nehru Place New Delhi - 110 019 ...Respondent No.6

Present:

For Appellant : Mr. Ramesh Singh, Sr Advocate and Mr. Gaurav Tanwar, Advocate.

For Respondents : Ms Niharika Ahluwalia and Mr Arpit Sharma, Advocates.

O R D E R ( 15th December, 2022)

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The Appellants have filed the appeal under Section 421 R/w Section 247

of the 'Companies Act, 2013' (hereinafter referred as to the 'Act') against

the impugned order dated 01.07.2022 passed by the 'National Company

Law Tribunal, Bench -VI, New Delhi (hereinafter referred as to 'the

Tribunal') in C.P No. 879/59/ND/2019.

2. The Appellant has sought the following reliefs:

Company Appeal (AT) No.158 of 2022 Page 2 of 27 • To set aside and quash the impugned order dated 01.07.2022

passed by the Tribunal in CP No. 879/59/ND/2019 titled as "Amrex

Marketing Private Limited Vs. Universal Conveyor Beltings Limited &

Ors."

• To hold the CP No.879/59/ND/2019 titled as "Amrex Marketing

Private Limited Vs. Universal Conveyor Beltings Limited & Ors" as not

maintainable and accordingly dismiss the CP No.879/59/ND/2019

pending adjudication before the Tribunal etc.

3. The Appellant company is aggrieved with the order passed by the Tribunal

asking an Independent Valuer be appointed forthwith from the list of

approved valuers of IBBI by the Appellant Company, the services of which

will be compensated by the Appellant Company and has directed the

Appellant company to take further action as per the valuation arrived at

by the Independent valuer.

4. The shares of the Appellant company were listed on New Delhi Stock

Exchange in 1975 and the said stock exchange was derecognized in the

year 2016. The SEBI vide circular dated 30.05.2012 issued guidelines for

facilitating exit to the shareholders of the listed companies by allowing

them to get listed on nationwide stock exchanges after complying with the

diluted listing norms of nationwide stock exchanges or alternatively they

be moved to the Dissemination Board (DB).

Company Appeal (AT) No.158 of 2022 Page 3 of 27

5. The Appellant company was declared Sick Industrial Unit by the BIFR and

was governed by the Sick Industrial Companies Act, 1985 (SICA). The case

of the Appellant company is that it has valued its shares through an

Independent valuer from the panel of expert valuers of the BSE who has

determined the fair value of the shares of the Appellant Company and

based on which a few public shareholders have sold their shares to the

promoters of the said company at the fair value. The Appellant company

has also stated that it has no problem even if the Respondent continue to

remain the shareholder of the company, if they don't want to exit the

company.

6. The Ld. Sr. Counsel for the Appellant has also stated that it has followed

the SEBI Circular and has done its valuation of shares by the empaneled

independent valuer of Bombay Stock Exchange (BSE).

7. The Ld. Sr. Counsel for the Appellant has stated that the Appellant

company has complied with the SEBI circular, appointed valuer and the

Promoter have purchased the shares. He also stressed that the

Respondent No.1 has also made a complaint to the 'Registrar of

Companies' (ROC), 'Ministry of Corporate Affairs' (MCA) which has been

closed by them.

8. The Ld. Sr. Counsel also stated that the valuation report was available for

inspection to the public shareholders at the registered office of the

Company Appeal (AT) No.158 of 2022 Page 4 of 27 Appellant company during the tendering period but the Respondent No.1

did not avail the said opportunity as meant for all public shareholders.

However, Respondent No.1 didn't inspect the valuation report either

during that period or thereafter. As per the Ld. Sr. Counsel for the

Appellant, the sole object of the Respondent No.1 is to advance its own

ulterior motive and cause nuisance to the Appellant.

9. The Ld. Sr. Counsel for the Appellant has cited the following judgments:

• Union of India and Anr. Vs. Paras Laminates (P) Ltd.1 held at para

8:

"8.There is no doubt that the Tribunal functions as

a. Court within the limits of its jurisdiction. It has

all the powers conferred expressly by the statute.

Further- more, being a judicial body, it has all

those incidental and ancillary powers which are

necessary to make fully effective the express

grant of statutory powers. Certain powers are

recognised as incidental and ancillary, not

because they are inherent in the Tribunal, nor

because its jurisdiction is plenary, but because it

is the legislative intent that the power which is

1 (1990) 4 SCC 453

Company Appeal (AT) No.158 of 2022 Page 5 of 27 expressly granted in the assigned field of

jurisdiction is efficaciously and meaningfully

exercised. The powers of the Tribunal are no doubt

limited. Its area of jurisdiction is clearly defined,

but within the bounds of its jurisdiction, it has all

the powers expressly and impliedly granted. The

implied grant is, of course, limited by the express

grant and, therefore, it can only be such powers

as are truly incidental and ancillary for doing all

such acts or employing all such means as are

reasonably necessary to make the grant effective.

As stated in Maxwell on Interpretation of statutes

(11th edn.) "where an Act confers a jurisdiction, it

impliedly also grants the power of doing all such

acts, or employing such means, as are essentially

necessary to its execution".

• Nimish H.Shah and Anr. Vs. Securities and Exchange Board of

India & Anr.2 para 36.

2 W.P(C)7768/2019, CM No. 32308/2019

Company Appeal (AT) No.158 of 2022 Page 6 of 27 "36.The pleas of Mr. Vashisht as noted above are not

appealing. The exit circulars nowhere expressly state

that all the public shareholders need to be given

complete exit. The reliance was placed on the words

"number of outstanding public shareholders" in clause

(VII) of Annexure A of 2016 circular. The words have to

be read in the context when exit offer is given an

escrow account shall be opened in favour of the valuer

/ designated stock exchange wherein, deposit of the

amount on the basis of exit price and number of

outstanding public shareholders shall be made. This is

keeping in view, all the public shareholders shall be

given option to sell their share but it is not necessary

all the public shareholders shall opt to sell their

shares. It was rightly pointed out by Mr. Sethi that

shareholder is also free to reject the buy-back offer and

continues to be a shareholder. So, it follows the

circulars do not contemplate the exit of all public

shareholders. This I also say, in view of the stipulation

in the impugned SEBI Circular "investors who are

willing to remain shareholders of a company and do

Company Appeal (AT) No.158 of 2022 Page 7 of 27 not want to exit, should be allowed". I do not find any

illegality in such a stipulation as it is not necessary for

a shareholder to seek his exit."

• GL Sultania and Anr. Vs. Securities & Exchange Board of India and

Ors.3 para 32 and 84:

"32-These decisions clearly lay down the principle

that valuation of shares is not only a question of

fact, but also raised technical and complex issues

which may be appropriately left to the wisdom of

the experts, having regard to the many

imponderables which enter the process of

valuation of shares. If the valuer adopts the

method of valuation prescribed, or in the absence

of any prescribed method, adopts any recognized

method of valuation, his valuation cannot be

assailed unless it is shown that the valuation was

made on a fundamentally erroneous basis, or that

a patent mistake had been committed, or the valuer

adopted a demonstrably wrong approach or a

3 (2007) 5 SCC 133

Company Appeal (AT) No.158 of 2022 Page 8 of 27 fundamental error going to the root of the matter.

Where a method of valuation is prescribed the

valuation must be made by adopting scrupulously

the method prescribed, taking into account all

relevant factors which may be enumerated as

relevant for arriving at the valuation."

84. We have only referred to some of the objections

raised by the appellants and we must observe that

several other similar objections were raised by

them. We have also noticed the reply of the

respondents and in most cases the observations of

the valuer. It appears to us that the appellant

expects this Court to act as an expert itself. This,

we are forbidden from doing. Unless it is shown

that some well accepted principle of valuation has

been departed from without any reason, or that the

approach adopted is patently erroneous or that

relevant factors have not been considered by the

valuer or that the valuation was made on a

fundamentally erroneous basis or that the valuer

adopted a demonstrably wrong approach or a

Company Appeal (AT) No.158 of 2022 Page 9 of 27 fundamental error going to the root of the matter,

this court would not interfere with the valuation of

an expert. As noticed in Miheer H. Mafatlal (supra),

valuation of shares is a technical and complex

problem which can be appropriately left to the

consideration of experts in the field of accountancy.

So many imponderables enter the exercise of

valuation of shares."

With all the above submissions, the Ld. Sr. Counsel was very much

assertive that the order of revaluation is neither maintainable in law nor

maintainable on fact and hence prayed for allowing the Appeal.

10. Ld. Counsel for the Respondent No.1 submitted that the Appellant

has not intentionally placed on record the documents filed by the

answering Respondent alongwith the Company petition. The Appellant has

concealed that during the relevant period where the fair valuation has been

done in the relevant period in 2018, the earning per share was Rs. 25.21

and its exit offer was only Rs.18.42 per share which reflects a wrong

valuation on the face of it. The Appellants Company has deliberately

concealed material facts that they are allowing concentrating of the equity

share capital of the Appellant company in the hands of its promoters.

Company Appeal (AT) No.158 of 2022 Page 10 of 27

(a) The Ld. Counsel for the Respondent has submitted that they have

provided to the Appellant Company the details of purchase of shares

by Mrs. Sunita Mundhra, Promoter of the Company from public

shareholder 43,000 shares of Bank of Maharashtra on 17.08.2018,

one day before issuing the exit offer. Certain other facts as stated

below were also stated by the Ld. Counsel for the Respondent.

(b) The specific case of R1 which is not denied before the Tribunal that

R4 approached R1 for purchase of shares @ Rs.125/- per share.

(c) The argument of the Appellant is that once a valuation has been

done, even if the same is illegal and shares are undervalued, it is

beyond judicial review. Such a proposition of law would render the

provisions of the Act, and the SEBI Circular dated 10.10.2016

nugatory. There cannot be a situation where the interest of the

minority shareholders is violated and the Tribunal is compelled to

shut its eyes. The Appellant Company is de-listed and public share-

holders are deprived of getting the market value of the shares.

(d) The Appellants continue to act in the most malafide manner and are

guilty of blatant misrepresentation and concealment from this

Tribunal as well.

(e) It is clarified that the SEBI circular dated 10.10.2016 is not subject

of challenge. Thus, Appeal u/s 15(T) of the SEBI Act is not the

Company Appeal (AT) No.158 of 2022 Page 11 of 27 appropriate remedy. Further, the case of Nimish H.Shah (Hon'ble

Delhi High Court) does not state that a manipulated valuation report

is beyond judicial review.

(f) In the most misleading manner, Appellants have simplicitor stated

that SEBI Complaint has been closed. They have concealed that the

complaint was closed as SEBI no longer has jurisdiction for the

reason that the Appellant company is not a listed company.

Thereafter, R1 approached ROC Delhi, which directed that the issue

may be raised before the Tribunal. The Tribunal has rightly noted

that Section 247 of the Act was enacted to protect the interest of

non-promoter shareholders, when fair valuation is required for exit

offers. The minority public shareholder would be left remediless if

the independent valuer is not appointed. In Chembra Peak Estates

Ltd - CP No. 459/BB/2018) the Tribunal has examined the

applicability of this very circular in other case and upheld the

liability of the promoters to give an exit offer and comply with the

SEBI Regulations to protect the interests of the minority

shareholders.

A. The Ld. Counsel for the Respondent has also cited the SEBI Circular

No. CIR/MRD/ DSA/18/2014 dated 22.05.2014 at para 3(v) which is

extracted below:

Company Appeal (AT) No.158 of 2022 Page 12 of 27 "3(v).As per the 'Exit Circular' the exclusively listed

companies, which fail to obtain listing on any other stock

exchange, which do not voluntary delist or which are not

considered as 'Vanishing Companies', will cease to be

listed company and will be moved to the dissemination

board by the existing stock exchange. It shall be the

responsibility of the exchanges which are being

derecognized either on voluntary or compulsory basis, to

place their exclusively listed companies on the

dissemination board. These exchanges shall ensure that

the database of the exclusively listed company is

transferred to SEBI and to those stock exchanges on

whose dissemination board, the shares of these

companies are available."

B. The ld. Counsel for the Respondent has also cited the SEBI Adjudication

Order No. PJ/VP/02/2016 dated 29.02.2016 in respect of para 12 as

depicted below:

"12.In view of the above, I note that SEBI has jurisdiction

and power to initiate Adjudication proceeding on a listed

companies or those companies which intend to get their

securities listed on any recognized stock exchange. In the

Company Appeal (AT) No.158 of 2022 Page 13 of 27 case in hand, SEBI had introduced electronic dealing of

the complaints of the investors, by the respective

companies vide Circular No. CIR/OIAE/2/2011 dated

03.06.20111 R/w Circular No.CIR/OIAE/1/2012 dated

August, 13, 2012 R/w Circular No.CIR/OIAE/1/2013

dated April 17, 2013. Further I note from the records that,

the trading in the scrip of the Noticee company

discontinued w.e.f.03.09.2010 and the scrip was delisted

w.e.f 13.09.2010 on BSE and 15.05.2008 on Calcutta

Stock Exchange Limited i.e. much before the issuance of

the said circular and initiation of adjudication proceeding

against the noticee. Thus the present adjudication

proceedings are in respect of unlisted company where

SEBI has no jurisdiction."

C. The ld. Counsel for the Respondent has also cited the judgment of this

Tribunal in Devinder Prakash Kalra and Ors. Vs. Syngenta India

Limited4 held at para 53:

"53.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

4 CA(AT) No. 220 of 2020

Company Appeal (AT) No.158 of 2022 Page 14 of 27 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."

11. We have carefully gone through the submissions made by Ld. Sr.

counsel/Ld. Counsel for the parties, pleadings available on record, the

order passed by the Tribunal and have the following observations:

a. It is not in dispute that the Appellant company has made exit offer.

Company Appeal (AT) No.158 of 2022 Page 15 of 27 b. It is also not in dispute that one day before the exit offer, its promoters

have purchased lot of shares from Bank of Maharashtra and similarly

inter se purchase has been made during exit offer from specific persons

by the promoters as stated supra.

c. The Tribunal has given lot of thrust on lower valuation of shares and

it seems that it is even less than earning per share. A doubt has also

arisen to the Tribunal why the Appellant company has not provided

Annual Returns and Balance Sheet to the Petitioners for the years

2014-2018 as also the valuation report of the Appellant company. For

brevity and clarity certain observations of the Tribunal is placed herein

below:

Company Appeal (AT) No.158 of 2022 Page 16 of 27 Company Appeal (AT) No.158 of 2022 Page 17 of 27 Company Appeal (AT) No.158 of 2022 Page 18 of 27 Company Appeal (AT) No.158 of 2022 Page 19 of 27 Company Appeal (AT) No.158 of 2022 Page 20 of 27 Company Appeal (AT) No.158 of 2022 Page 21 of 27 Company Appeal (AT) No.158 of 2022 Page 22 of 27 Company Appeal (AT) No.158 of 2022 Page 23 of 27 Company Appeal (AT) No.158 of 2022 Page 24 of 27 d. The Respondent has sought the followings reliefs before the Tribunal

comprising of 6 reliefs mainly and the Tribunal has granted only one

relief i.e. appointing an independent valuer from the panel of valuers

of IBBI in terms of Section 247 of the Act, the cost of which to be borne

by the Appellant Company:

• That one or more an independent valuer be appointed to evaluate

the fair price per equity share of the R1 Company in terms of

Section 247 of the Act the cost of which to be borne by the R1

Company;

• In the event such Fair Price as determined by the Independent

Valuer in terms of prayer(a) above is higher than that of the R7,

necessary orders be passed against the R7 in terms of Section

247, 447 and 448 of the Act.

• In the event such Fair Price as determined by the Independent

valuer in terms of Prayer (a) above is higher than that of the R7,

an order be passed to rectify the Register of Members of R1

company by cancellation of the shares acquired, if any, by the R3

in terms of the purported exit offer as floated by the said

Respondent at an unfair price.

• In the event such Fair Price as determined by the Independent

valuer in terms of Prayer (a) above is higher than that of the R7,

Company Appeal (AT) No.158 of 2022 Page 25 of 27 necessary orders be passed against the R1 to R6 under Section

447 and 448 of the Act.

• That an order be passed disqualifying the R2 to R6 from being a

Director in any Unlisted Public Company in the event they are

held liable for fraud in terms of Section 447 and 448 of the Act.

• That an order be passed disqualifying the R9 from being

appointed as an Auditor of any company and be held liable for

fraud in terms of Section 447 of the Act.

• That such orders as to costs be passed as in the premises the

Tribunal may deem fit and proper etc.

e. We are not commenting at the moment what will be the valuation of

shares but apparently it is difficult to perceive as to how the fair value

can be lower than the earning per share.

f. It is an incumbent duty to the Appellant company to disclose all

material information to its shareholders disclosing thereon even the

justification for the existing price offered by the Promoters which also

seems to be missing in this case.

g. We can only add that if the revaluation done by the valuer registered

with IBBI results into more than 100% increase in the value so

determined by the ex-valuer than the matter for investigation against

Company Appeal (AT) No.158 of 2022 Page 26 of 27 the ex-valuer also be referred to SEBI & BSE for necessary inquiry by

them.

h. In view of above facts and circumstances, we do not find any

inconformity in the order and the appeal deserves to be dismissed and

is dismissed. No order as to costs.

i. The Registry is directed to forward a copy of this order to the Registrar

of Companies, Delhi and the SEBI and BSE.

Pending application, if any, stands disposed of.

[Justice Rakesh Kumar] Member(Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical)

Raushan

Company Appeal (AT) No.158 of 2022 Page 27 of 27