Company Petition No. 1072 of 2009, Company Application Nos. 1332 of 2009, 71 and 120 of 2010. Case: In Re: Cadbury India Limited Vs. High Court of Bombay (India)
| Case Number | Company Petition No. 1072 of 2009, Company Application Nos. 1332 of 2009, 71 and 120 of 2010 |
| Counsel | For Appellant: Janak Dwarkadas, Senior Advocate, Ankita Singhania and Rajesh Shah i/b Rajesh Shah & Co. |
| Judges | G.S. Patel, J. |
| Issue | Companies Act, 1956 - Sections 1, 100, 101, 102, 103, 104, 2, 3, 391, 391(1)(a), 393, 4, 5, 6, 7, 8 |
| Citation | 2015 (125) CLA 77 (Bom) |
| Judgement Date | Friday May 09, 2014 |
| Court | High Court of Bombay (India) |
Judgment:
G.S. Patel, J.
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The Petitioner, Cadbury India Limited ("Cadbury India") filed this petition in 2009 under Sections 100 to 104 of the Companies Act, 1956. It is in quite extraordinary circumstances that this petition has been pending for five years. The petition seeks approval of this Court to a special resolution passed by a majority of Cadbury India's shareholders at an extraordinary general meeting, for reduction of Cadbury India's share capital.
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Before I turn to the justifications pleaded by Cadbury India in support of its petition, and, later, to the objections taken by various groups of shareholders, a word about the structure of this judgment.
(a) In Section 1, for convenience, I summarize very broadly the controversy and my conclusions.
(b) The relevant facts are set out in Section 2.
(c) Section 3 contains a summary of the objections, principally those of one set of objectors, Ms Malati Samant (the "Samant Group") and Mr. Alok Churiwala (the "Churiwala Group"), who presented their objections together.
(d) In Section 4, I have considered the statutory provisions and various authorities cited.
(e) In Section 5, I consider the objectors' submissions in somewhat greater detail. References to the Samant Group should be read to include the Churiwala Group as well. In this section, I have also dealt with the objections of the third group, the Deepak Gidwani Group (the "Gidwani Group"), separately represented.
(f) Section 6 contains a brief analysis of the two court-ordered valuation reports and about the two rival valuation methods in question.
(g) In Section 7, having considered the rival submissions and the case law cited, I have attempted to cull out guiding and defining principles in matters such as these.
(h) Finally, Section 8 sets out my conclusions.
Throughout, paragraph numbering follows the section numbers. For convenience, the 'table of contents' below provides the page numbers of each section.
1 SECTION 1: SUMMARY
1.1. Cadbury India seeks this Court's sanction to a special resolution passed by a majority at an extraordinary general meeting approving a scheme for reduction of its share capital. The reason for this share capital reduction is that it is the policy of Cadbury India's parent companies to operate, where permitted, only through branches or wholly-owned subsidiaries. Before filing this petition, Cadbury India made a series of buy-backs and open offers. It then called an extraordinary general meeting to approve, with or without modification, a special resolution for reduction of its share capital. The meeting was duly convened, held and conducted. There is no complaint about that. An overwhelming majority, including, as we shall presently see, a bulk of the non-promoter minority voted in favour. A minority voted against. Some of those who voted against came to court. There were other opponents to the petition, too. Altogether, about 17 different parties filed opposition affidavits, some by post. Today, all that remain are the Samant and Churiwala Groups. I exclude the Gidwani Group from this because their submission is on a very limited aspect of the matter, having accepted a revised share valuation.
1.2. The petition, as originally brought, was based on two valuation reports. This Court, exercising its discretion, commissioned an independent valuation from a renowned firm, Ernst & Young ("E & Y"). This was later ordered to be revised. The Samant and Churiwala groups object even to these two Court-compelled E & Y valuations. They say that both are unfair, unreasonable, result in inequity and injustice and ought not to be accepted. They demand acceptance of their own valuation, one that is significantly higher. They have attempted to point to several 'deficiencies', 'defects' and 'errors' in the two E & Y valuations. The interests of the 'oppressed minority' must prevail, they say.
1.3. After a hearing spread over several days and many hours, on 25th February 2014, I invited both sides to file brief written submissions, no more than 20 pages. I expected these to be a reflection of what was argued before me in Court.
1.4. The Samant Group took undue advantage, and perhaps even abused, this liberty. A first set of written submissions was sought to be tendered. Counsel for Cadbury India mentioned the matter on 10th March 2014, objecting and saying that this set of written submissions from the Samant group contained new and additional material never argued before the Court. I orally directed the Samant group to reconsider its written submissions. On 13th March 2014, an entirely new set of written arguments was presented. The second set retained all the new material in the first, and added to it. A very large volume of authorities was also submitted, although during the oral arguments only one authority was actually cited before me.
1.5. What came in from the Samant Group was a lengthy, rambling, 52-page disquisition. The length itself is of no moment. What is distressing, however, is that this treatise contains material not once urged in court; material that, had it been placed during a hearing, I might have had an opportunity to test, and on which to hear the other side. This new material is not limited to a citation of precedents and authorities either. It contains entirely new submissions on facts. Whatever may be the interest of a litigant, counsel at the Bar are expected, and not unreasonably so, to conduct themselves in a manner that is not unfair to the opponent and certainly not to the Court itself. This new material put me as a serious disadvantage. I had now to consider material that was never argued; material that I had no opportunity during arguments to consider, on which to raise any query, put any question, clarify any doubt; most of all, material on which I did not have the benefit of hearing the other side. This came after several days of hearing spread over several hours in a matter that has been pending since 2009 before different benches. I granted all parties the same liberty. I made it clear that the written submissions should be brief and concise. This was obviously meant to be an apercu of arguments. It was never intended to offer any party the liberty of a further, virtually unlimited, expansion of the contours of the controversy before me.
1.6. I must also note that this conduct runs to a pattern, one that is discernible on a close reading of the material. To put it plainly: the Samant Group has persistently objected to every single proposal, offer and valuation. It has levelled allegations against valuers, including the Court-appointed valuers, E & Y. It is one thing for an objector to say that it has been hard done by a petitioner-company. It is quite another to accuse a firm of independent professionals appointed by the Court of bias and worse.
1.7. It does not end there. Even more disquieting is the tone adopted in these written submissions: inflammatory, accusatory, intemperate and decidedly uncivil. Allegations of misconduct and deceit are made against Cadbury India. Motives are imputed to E & Y and its representative, apart from the two firms who first prepared a valuation before the petition was filed, both firms of repute (M/s. Bansi S. Mehta & Co. and M/s. SSPA & Co). Worst of all are the allegations, only thinly veiled, against the court itself. It is impossible not to see these as a direct and frontal attack on the court. The Samant Group's written submissions purport to set down in the hard, cold immutability of print things alleged to have transpired in court; matters, incidents and statements that form no part of this Court's record. This is beyond egregious. It is wholly unacceptable. It is to be deprecated. No words are sufficient for the excoriation such conduct merits. Let there be no mistake: the linguistic restraints we impose on ourselves in our decisions is no weakness, nor an indication of unwonted indulgence, benevolence or indulgence in such situations. It is merely a refusal by a court to let itself be pulled into the same mire.
1.8. But no party should have to suffer, or have his cause left unheard, because of the ill-advised and immoderate conduct of its chosen advocate. I have, therefore, given the objectors latitude that I do not believe they have earned or that they deserve. As the reasons that follow will make it clear, even this additional and extra material does not in any way assist the objectors in the Samant group.
1.9. I attempted to cut through the bramble of invective and accusation to discern, if I might, a legal basis for the opposition. I found none. At its heart, the submission of the Samant Group, from the first the most vociferous and now, effectively, the only remaining opponent of Cadbury India's scheme, was merely this: that a Court must, as a matter of law, take on itself the burden of a microscopic examination of an accounting valuation exercise. It must test every assumption behind that valuation. It must weigh every single finding. And even where a valuer has taken a plausible view, the Court must step in and interfere, must jettison that assumption, discard a chosen methodology and defenestrate the valuation, substituting it with one furnished by the opponents only because the opponents find the valuation unsuitable and not to palate. It is not, the submissions seem to suggest, any part of the forensic burden of an opponent to such a scheme to show unequivocally, clearly and unambiguously why the scheme is unfair or unjust. Those results, and damage to the public interest, must be presumed if an opponent can only show that another method or a different assumption might have yielded a different result. Further, a rival or competing valuation by the opponents does not need to be subjected to the same exacting and fine-grained analysis; it is sufficient to show that some other valuation is possible.
1.10. I have found these submissions singularly unappealing and unpersuasive. Another...
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