Full Judgment Text
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5087 OF 2019
VINOD KRISHAN KHANNA & ORS. …Appellants
VERSUS
AMRITSAR SWADESHI WOOLLEN MILLS
PRIVATE LIMITED …Respondent
WITH
CIVIL APPEAL NO. 9617 OF 2019
CIVIL APPEAL NO. 8907 OF 2019
CIVIL APPEAL NO. 8912 OF 2019
J U D G M E N T
R.F. Nariman, J.
1. The point that has been raised in these appeals lies in a very narrow
compass. The Appellants in Civil Appeal No.5087 of 2019 filed a
Company Petition No. 25 of 2007 against the Respondent company
and eight directors of the company (arrayed as Respondents 2-9 in
the petition) before the Company Law Board (“ CLB ”), in which
prayers were made on grounds taken under sections 397 and 398 of
the Companies Act, 1956. Various orders were passed in this petition
Signature Not Verified
Digitally signed by
Jayant Kumar Arora
Date: 2021.02.24
16:15:24 IST
Reason:
by the CLB, Principal Bench at New Delhi. By an order of the CLB
dated 01.04.2011, it was finally accepted that the Appellants, who
2
have 14.62% of the paid-up share capital of the Respondent
company, would agree to sell their shares and go out of the
Respondent company. Consequently, a valuer was appointed on
01.04.2011 (who was the substituted with a different valuer on
11.08.2011) to determine as to what would be the fair price of the
shares as on 14.03.2007, i.e. the date of filing of the Company
Petition.
2. The proceedings culminated in an order dated 08.06.2018 by the
National Company Law Tribunal (“ NCLT ”), in which it took on record
the Valuation Report dated 20.07.2012 (which was filed before the
NCLT on 23.07.2012), which valued the share price at INR 10.35
each. After finding that this valuation was in order, the NCLT finally
directed as follows:
“(I) The Petitioners are directed to sell their
entire share-holding held by them in
Respondent No. 1 Company as on share the
date of filing the Petition to the Respondents
either jointly or severally at the fair price of Rs.
10.35 per share as arrived at by the
Independent valuer upon consent appointed by
CLB.
(II) The Petitioners shall hand over their
share certificate(s) along with duly executed
share transfer forms to the Respondents and
the Respondents shall simultaneously hand
3
over crossed demand draft/pay order favouring
the petitioners for the amounts payable as
purchase consideration as computed in
accordance with the fair value of share of
Rs.10.35 per share along with interest
calculated @9% per annum (simple interest)
from 1.4.2007 till the actual date of payment
within a period of 2 months from the date of
this order.
(III) The compliances, as above, shall be
made before the Bench Officer of this
Tribunal.”
An appeal was filed before the National Company Law Appellate
3.
Tribunal (“ NCLAT ”) against this order by the Respondent company
alone, limited to the grant of interest at the rate of 9% per annum, and
the date from which the said interest was granted. It is important to
note that Respondent Nos. 2 to 9 to the Company Petition, who were
also governed by the NCLT order, did not file any appeal against the
aforesaid order.
4. By the impugned judgment dated 01.04.2019, the NCLAT held that
the order of the CLB dated 01.04.2011 was not an order in the sense
of being an executable order, but merely an order appointing a valuer
of the Appellant’s shares. However, despite the fact that no challenge
had been made on the ground that the Respondent company cannot
be made to buy-back its shares, the NCLAT suo moto decided to
4
raise such a ground and answer it, stating that the Respondent
company could not be made to buy-back its own shares, as a result
of which, the purchase would now only be made by Respondent Nos.
2 to 9 (i.e. the directors of the company) and not by the company
itself. Also, the interest that was awarded to the Appellants at the rate
of 9% per annum simple was reduced to 6%.
5. We have before us four appeals. Shri Nidhesh Gupta, learned senior
counsel appearing for the Appellants in Civil Appeal No. 5087/2019
[Item No.5], has put one simple point before us, namely, that as
Respondent Nos. 2 to 9 had not appealed against the order of the
NCLT to the NCLAT, the NCLAT could not reduce interest from 9% to
6%, which would benefit parties who did not appeal against the NCLT
order, but had instead accepted it.
6. Shri Jayant Mehta, learned counsel appearing on behalf of the
company in Civil Appeal No. 9617/2019 [Item No. 5.1], has argued
that interest in this matter could only be claimed in equity, and cited
several judgments to buttress his arguments. He went on to add that
no grounds have been made out for interest in equity by the clients of
Sh. Nidhesh Gupta, learned senior counsel, as a result of which they
should not have been awarded interest at all. In any case, the
reduction from 9% to 6% would clearly be in order on the facts of the
case as otherwise, Shri Gupta’s clients shall be unjustly enriched, on
5
which proposition also, he has cited several judgments.
7. Both counsel then went into each other’s conduct in taking
adjournments before the CLB. Shri Ritin Rai, learned senior counsel,
who appeared in Civil Appeal No. 8907/2019 [Item No. 5.2], raised
only a limited point, i.e. that the share-holders whom he represents
are a third group who are not Respondent Nos. 2 to 9, but who have
been affected by the NCLAT’s direction to remove the Respondent
company suo moto from being a person who was to buy-back its own
shares.
8. Having heard all the learned counsel appearing for the parties, the
limited point before us is whether the interest at the rate of 9% could
have been granted by the NCLT. The NCLT awarded interest at the
rate of 9% per annum on the following basis:
“……… However, it is to be seen that both
parties have agreed to a valuer to be
appointed and have also consciously agreed to
a valuation date in order to enable the
Petitioners to walk out of the Company. Thus,
Company has effectively utilized the funds of
the Petitioners in relation to its business fully
knowing that the funds are required to be
refunded back. In the circumstances, being a
Court of Equity in relation to matters touching
upon oppression and mismanagement Petition
and exercising equitable jurisdiction, this is
6
unable to accept the stand of the Respondents
that they are not inclined to pay any interest.
In this connection, this Tribunal would once
again wish to refer to the decision of Hon’ble
Supreme Court passed in the matter of Dr.
Renuka Datla Vs. Solvay Pharmaceuticals B.V.
cited earlier and be guided by it particularly
paragraph 19 which is extracted hereunder:
19. In the result, IA Nos. 2 to 4
of 2002 are liable to be rejected.
However, there is one direction
concerning interest which we
consider appropriate to give in the
given facts and circumstances of
the case. Though the grant of
interest, as prayed for by the
petitioners, from 31.5.2002 – the
stipulated date of submission of
valuation report - is not called for,
we feel that that the ends of
justice would be adequately met if
the respondents concerned are
directed to pay the interest at the
rate of 9 per cent an Rs. 8.24
crores, which is the value of
shares fixed by the valuer, for a
period of twelve months. True, the
petitioners contested the valuation
and thereby delayed the
7
implementation of settlement.
However, having regard to the
bona fide nature of the dispute
and the fact that the respondents
have retained the money
otherwise payable to the
petitioners during this period of
twelve months and could have
profitably utilized the same, we
have given this direction taking an
overall view.
19.Going by the above decision of Hon’ble
Supreme Court since the monies which were
otherwise payable to the Petitioners having
been retained all along by the Respondents and
having utilized the same, we feel that the ends
of justice could be adequately met if the
Respondents in the main C.P. are directed to
pay interest @9% per annum on simple Interest
basis.”
The NCLAT, however, reduced this figure to 6% per annum,
without giving any reasons.
9. At this stage, it is important to point out yet another argument of Sh.
Jayant Mehta, that if at all something should have been awarded to
the Appellants above the consideration for the shares, what should be
awarded is a pro-rata percentage of the share-holding of the
Appellants in the company’s share of profits from 2007 till 2018,
8
which according to him would amount to a figure of approximately
INR 48.98 lakhs. This argument has no legs on which to stand. What
if the company ended up making losses instead of profits, would it
then be equitable to award nothing to the appellants? Secondly, the
company’s earnings have no direct relation with the valuation of
shares which fluctuate in the share market depending on several
factors. Thus, we set aside the order of the NCLAT on reducing the
award of interest from 9% to 6%.
10. We have also heard Shri Jayant Mehta’s challenge to the date from
which interest was granted. We are not inclined to accept the same.
The NCLT directed that interest was payable from 01.04.2007, i.e.
shortly after the date when the Company Petition was filed by the
Appellants (14.03.2007). This was for the reason that, as of the date
of the NCLT’s directions, more than a decade had elapsed from the
filing of the petition, during which time the Respondent company had
effectively utilized the funds of the Appellants in relation to its
business. Pertinently, the NCLT also noted that all parties had agreed
upon the date of filing the petition as the valuation date for the shares
in order to enable the Appellants to walk out of the company. We do
not find anything perverse in this reasoning of the NCLT.
11. We also allow Civil Appeal No. 8907/2019 [Item No. 5.2] and Civil
Appeal No. 8912/2019 [Item No. 5.3], as the NCLAT should not have
9
suo moto raised a point by itself and answered it without hearing Shri
Ritin Rai’s clients.
12. In the result, Civil Appeal No. 5087/2019 [Item No. 5], Civil Appeal
No. 8907/2019 [Item No. 5.2] and Civil Appeal No. 8912/2019 [Item
No. 5.3] are allowed to the extent indicated by this judgment. The
company’s appeal i.e. Civil Appeal No. 9617/2019 [Item No. 5.1] is
dismissed.
13. It is also made clear that given the fact that this is a 2007 Company
Petition, the Respondent Nos.1-9 before the NCLT will be made to
pay to the Appellants the requisite consideration for the shares,
together with simple interest at 9% per annum from 01.04.2007 till the
date of payment, within a period of four months from today.
………........................J.
(R.F. Nariman)
..................................J.
(B.R. Gavai)
New Delhi;
February 23, 2021.
10
ITEM NO.5 Court 3 (Video Conferencing) SECTION XVII
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 5087/2019
VINOD KRISHAN KHANNA & ORS. Appellant(s)
VERSUS
AMRITSAR SWADESHI WOOLLEN MILLS PRIVATE LIMITED Respondent(s)
WITH
C.A. No. 9617/2019 (XVII)
(FOR ADMISSION and I.R. and IA No.184233/2019-STAY APPLICATION and
IA No.184236/2019-PERMISSION TO FILE ADDITIONAL
DOCUMENTS/FACTS/ANNEXURES)
C.A. No. 8907/2019 (XVII)
(IA No.158069/2019-EXEMPTION FROM FILING C/C OF THE IMPUGNED
JUDGMENT and IA No.158068/2019-STAY APPLICATION and IA
No.158059/2019-PERMISSION TO FILE APPEAL and CURING THE DEFECTS and
IA No.158065/2019-PERMISSION TO FILE ADDITIONAL
DOCUMENTS/FACTS/ANNEXURES)
C.A. No. 8912/2019 (XVII)
(IA No.159656/2019-EXEMPTION FROM FILING C/C OF THE IMPUGNED
JUDGMENT and IA No.159828/2019-STAY APPLICATION and IA
No.159651/2019-PERMISSION TO FILE PETITION (SLP/TP/WP/..) and IA
No.159652/2019-CONDONATION OF DELAY IN REFILING / CURING THE
DEFECTS and IA No.159654/2019-PERMISSION TO FILE ADDITIONAL
DOCUMENTS/FACTS/ANNEXURES)
Date : 23-02-2021 These appeals were called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN
HON'BLE MR. JUSTICE B.R. GAVAI
Counsel for the
parties Mr. Nidhesh Gupta, Sr. Adv.
Mr. Venkita Subramoniam T.r, AOR
Mr. Rahat Bansal, Adv.
Mr. Likhi Chand Bonsale, Adv.
Mr. Jayant K. Mehta, Adv.
Mr. Sharath Sampath, Adv.
Mr. Pratyaksh Sharma, Adv.
Mr. Adity Krishna, Adv.
Ms. Anu Shrivastava, Adv.
Ms. Nidhi Mohan Parashar, Adv.
11
Mr. Ritin Rai, Sr. Adv.
Ms. Charu Ambwani, AOR
Mr. Tushar Singh, AOR
UPON hearing the counsel the Court made the following
O R D E R
Civil Appeal No. 5087/2019 [Item No. 5], Civil Appeal No.
8907/2019 [Item No. 5.2] and Civil Appeal No. 8912/2019 [Item No.
5.3] are allowed and Civil Appeal No. 9617/2019 [Item No. 5.1] is
dismissed in terms of the signed reportable Judgment.
The operative portion of the Judgment is reproduced as
under :-
“10. We have also heard Shri Jayant Mehta’s
challenge to the date from which interest was
granted. We are not inclined to accept the same.
The NCLT directed that interest was payable from
01.04.2007, i.e. shortly after the date when the
Company Petition was filed by the Appellants
(14.03.2007). This was for the reason that, as
of the date of the NCLT’s directions, more than
a decade had elapsed from the filing of the
petition, during which time the Respondent
company had effectively utilized the funds of
the Appellants in relation to its business.
Pertinently, the NCLT also noted that all
parties had agreed upon the date of filing the
petition as the valuation date for the shares in
order to enable the Appellants to walk out of
the company. We do not find anything perverse in
this reasoning of the NCLT.
11. We also allow Civil Appeal No. 8907/2019
[Item No. 5.2] and Civil Appeal No. 8912/2019
[Item No. 5.3], as the NCLAT should not have suo
12
moto raised a point by itself and answered it
without hearing Shri Ritin Rai’s clients.
12. In the result, Civil Appeal No. 5087/2019
[Item No. 5], Civil Appeal No. 8907/2019 [Item
No. 5.2] and Civil Appeal No. 8912/2019 [Item
No. 5.3] are allowed to the extent indicated by
this judgment. The company’s appeal i.e. Civil
Appeal No. 9617/2019 [Item No. 5.1] is
dismissed.
13. It is also made clear that given the fact
that this is a 2007 Company Petition, the
Respondent Nos.1-9 before the NCLT will be made
to pay to the Appellants the requisite
consideration for the shares, together with
simple interest at 9% per annum from 01.04.2007
till the date of payment, within a period of
four months from today.”
(JAYANT KUMAR ARORA) (ANITA RANI AHUJA)
COURT MASTER ASSISTANT REGISTRAR
(Signed reportable Judgment is placed on the file)