Case: B.M. Jain and Sons Co. P. Ltd. Vs Bombay Cable Car Co. P. Ltd.. Company Law Board
| Judges | S. Balasubramanian, Chairman |
| Issue | Company Law |
| Citation | [2009] 152 CompCas 537 (CLB) |
| Judgement Date | March 27, 2009 |
| Court | Company Law Board |
Order:
S. Balasubramanian, Chairman
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In this order, I am considering C.A. No. 275 of 2008 in C.P. No. 63 of 1998 filed by the petitioner seeking for setting aside the fair valuation done by the valuers and for determining the fair value afresh and also for setting aside the cancellation of 25,000 shares held by the petitioner in M/s. Bombay Cable Car Co. P. Ltd.
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The facts of the case are: The company was incorporated in 1983 by one Rashid group. In 1988, the Pune City Municipal Corporation awarded a contract to the company to set up a project for passenger rope way system in Pune. To finance the project, the petitioner belonging to the Jain group, joined the company as an equity shareholder with 50 per cent, shares. In January 1994, the Municipal Corporation issued a stop work notice. Aggrieved with the said notice, the company went in for arbitration regarding the disputes with the Municipal Corporation. The arbitrator had awarded an amount of Rs. 2.97 crores in favour of the company. This award was challenged in the Bombay High Court which was pending. The Rashid group had filed a suit in the Bombay High Court for a direction to the petitioner to transfer all its shares to the Rashid group in terms of the investment agreement with the petitioner as it had failed to invest Rs. 1.6 crores in terms of the investment agreement. This suit was also pending.
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During the pendency of the above proceedings, this Board passed a final order on December 8, 2000, disposing of C.P. No. 63 of 1998 (B. M. Jain and Sons Co. P. Ltd. v. Bombay Cable Car Co. P. Ltd. [2002] 108 Comp Cas 91, with the following directions (page 107): "As and when the Bombay proceedings are concluded and if the same goes in favour of the Jain group, the company will purchase the 50 per cent, shares held by the Jain group at a valuation to be done by the statutory auditor of the company. The date of valuation will be March 31, 1999, being the proximate date of the petition which was filed in November, 1998. Once the shares are purchased by the company, we authorise the company, in terms of Section 402, to reduce the share capital to that extent. Till the Bombay proceedings are completed and the valuation of the shares is made, the company will keep the amount to be received under the arbitration award in a bank account and shall not draw any part of it, except towards meeting its expenses in the normal course of business."
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The respondents filed an appeal against this order in the Bombay High Court (Appeal No. 4 of 2003). While dismissing the appeal, by its order dated January 13, 2005 (Sabir Rashid v. B.M. Jain and Sons Co. P. Ltd. [2006] 132 Comp Cas 224), the Bombay High Court further directed the statutory auditor to commence the valuation as per the order of this Board dated December 8, 2000. By another order dated March 3, 2005, the Bombay High Court also set aside the arbitration award. By his valuation report dated August 2, 2005, the valuer had determined the fair value of the share as on March 31, 1999, at Rs. 8 per share. The company had remitted a sum of Rs. 2 lakhs to the petitioner towards 25,000 shares held by it at Rs. 8 per share and it has also cancelled these 25,000 shares. The petitioner has not accepted the amount of Rs. 2 lakhs and has challenged the valuation in the present application.
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The main ground of challenge on the valuation is that instead of determining the value of the shares as on March 31, 1999, the valuer has taken the subsequent events into account while determining the value. As on March 31, 1999, the company had an award for Rs. 2.97 crores which should have been taken into consideration in the valuation. However, on the ground that the said award had been set aside by the High Court, on certain presumptions and assumptions, the valuer had taken the arbitral award as 50 per cent, of the amount expended on the cable car project opining that the quantum of arbitrary award, if at all made, would be mainly related to the amounts expended on the awarded project. On the basis of the said rationale, he had computed Rs. 44.45 lakhs as the arbitral award and has determined the fair value of the share at Rs. 8 per share. Therefore, the said valuation should be set aside and the shares of the petitioners which stand cancelled suo motu by the respondents should be restored in the name of the petitioner especially when the petitioner has not surrendered the share certificates nor has executed any instrument...
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