Pannalal Bhansali vs. Bharti Telecom Limited

2026 INSC 213
Reportable


IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

Civil Appeal No. 7655 of 2025



Pannalal Bhansali
...Appellant

Versus

Bharti Telecom Limited & Ors.
...Respondents

with

Civil Appeal No. 9862 of 2025


Civil Appeal No. 9601 of 2025

Civil Appeal No. 9797 of 2025

Civil Appeal No. 7666 of 2025

Civil Appeal No. 9478 of 2025

Civil Appeal No. 9599 of 2025

Civil Appeal No. 9849 of 2025

Civil Appeal No. 13824 of 2025


J U D G M E N T

K. VINOD CHANDRAN, J.

1. The appellants, investors in a minority, cry foul on the
allegation of their being arbitrarily disgorged of their
Signature Not Verified
st
shareholdings and eased out of the 1 respondent company, (BTL
Digitally signed by
Deepak Guglani
Date: 2026.03.10
16:30:38 IST
Reason:
for brevity) in a grossly unfair manner, making a sham of an
Page 1 of 55
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evaluation fixing the share price at an unreasonably low value.
st
Shorn of the details, the 1 respondent, a closely held company
having 1.09% of its shareholding with individuals, decided to
reduce its share capital under Section 66 of the Companies Act
1
2013 by cancelling 28,457,840 equity shares held by the identified
minority shareholders by paying an amount of Rs.163.25/- per
equity share of Rs.10/- each. The resolution was passed by a
Special Resolution with a majority of more than 99.90%, the
sanction for which was sought before the National Company Law
Tribunal (the NCLT hereinafter). The NCLT found that the decision
to deduct the Dividend Distribution Tax from the price fixed for the
individual shares was arbitrary and directed the BTL to pay the
identified individual investors; without the tax deduction,
Rs.196.80/- per equity share. BTL acceded to the NCLT’s order but
thirty-five of the shareholders, those who voted in favour of the
reduction of share capital, filed appeals before the National
Company Law Appellate Tribunal (NCLAT hereinafter),
unsuccessfully, some of whom are before us; precisely eleven of

1
For brevity ‘the Act of 2013
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them. The intervention attempted by some others were disallowed
by us.
2. Sri. K. Parmeshwar, learned Senior Counsel led the
arguments on behalf of appellants and forcefully urged the
unfairness in the fixation of share value, which edged out the
individual investors with a raw deal for the shares held for long.
The Directors and the majority have a fiduciary relationship with
not only the Company but also with the minority, negated totally in
fixing the share prices. The challenge according to Sri.
Parmeshwar is on three counts which are subtly encapsulated as
the Manner, the Method and Matter, which he styles as the three
objectionable Ms. The manner being the procedure followed, the
method being the measure employed in valuation and the matter
being the very low price determined. Insofar as the manner is
concerned, it is pointed out that the Board resolution does not
speak of a request made by the shareholders to give them an
escape route, which is included in the notice of the General
Meeting; misleading since such a request was absent. The Board
peremptorily decided to reduce the shareholding and entrusted
the valuation to the company’s own internal auditor’s associate, a
related entity. Though a fairness report was obtained, it has the
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same date as the valuation report, indicating the hasty manner in
which valuation and fairness evaluation were proceeded with, a
clear sham.
3. Further, there were essential aspects of valuation as revealed
from documents, which were relevant insofar as the consideration
of the value fixed for reduction of shareholding, which was never
supplied to the independent shareholders, who were in a minority.
Those were merely kept in the registered office as indicated from
the notice of the General Meeting, which is insufficient as has been
declared by the decisions of this Court. Despite some of the
shareholders having asked for a copy of the valuation and fairness
reports, the same were not supplied. There are serious procedural
infractions and inadequate, misleading disclosures, in violation of
the mandate of Section 102 of the Act of 2013, which vitiates the
entire process of reduction of shareholding. On a summing up of
the procedural infractions, it is urged that the explanatory note of
the General Meeting is a ‘tricky notice’ for : (i) it does not have a
summary of or the valuation report itself, (ii) non-disclosure of the
methodology adopted in valuation; reference not being made to
the share value of Bharti Airtel Limited (BAL for brevity), a
subsidiary company the shareholding in which is the only business
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of the first respondent company and (iii) the valuation having been
made by an interested entity. The ‘tricky notice’ disabled an
informed decision by the individual shareholders, is the
contention, fortified with decisions. This encompasses the
challenge to the manner in which the procedure was carried out.
4. Insofar as the methodology is concerned, it is argued that the
BTL, earlier listed in the Stock Exchanges was delisted between
1999-2000 and BAL was incorporated as a subsidiary. On the BAL
launching an IPO in January 2002, it was listed on the Bombay Stock
Exchange and the majority shareholding of the first respondent in
BAL fell considerably, making BAL & BTL associate companies. It
was by a rights issue brought out in the year 2016 and the resultant
capital increase in BTL, BAL again became a subsidiary of BTL.
Since, the BTL’s only business was the investment made in BAL, the
share price fixed of BTL should have been fixed with reference to
the share value of BAL. The valuation report indicates the share
value of BAL at Rs.368.22/- as it’s listed price while the value of BTL
was calculated based on the market value of BAL and the Net Asset
Value of BTL. More importantly, arbitrarily and without legal
sanction, the method of Discount for Lack of Marketability (DLOM)
was applied to further reduce the value of share. The method of
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DLOM applied is against the accepted norms of valuation as has
been deprecated internationally too, as revealed from the
judgment of the Court of Appeal of Singapore in Kiri Industries
2
Ltd. v. Senda International Capital Ltd. The reliance on Professor
Aswath Damodaran’s opinion also is not relevant, since it applies to
valuation of private companies plagued with illiquidity. The
method applied hence is arbitrary and unfair is the contention.
5. Insofar as the material irregularity, the price fixation is
argued to be wholly deficient and arbitrarily low. It is argued that
in the year 2001, the first respondent had offered an exit price of
Rs.96/- per share and later in the year 2006 @ Rs.400/- per share.
There was a private offer by a commodity broker in the year 2007
@ Rs.2000/- per share. Reliance is also placed on the various
purchase offers, as produced at Annexure 2 series, in the
Convenience Compilation. It is based on the capital infusion of the
rights issue that the first respondent again rose to the position of a
holding company of BAL and in the year 2018 for the induction of a
foreign entity, an estimate of fare share value was made by a
qualified agency, which put the per share price @ Rs.310/- as is

2
[2022] SGCA (I) 5
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evident from Annexure A5. It is at this price SingTel purchased
49% of the shares in BTL. The reduction of the share capital then
made was intended at edging out the investors from amongst the
public, who were in a minority, in which circumstance there should
have been a higher standard of fairness and transparency applied.
6. The reference to market value is no basis since the investors
had remained in the company for long, admittedly even without
payment of dividends. A fair value for their exit from the company
cannot be equated with the fair market value. The several offers
made for buy-back and purchase at a higher value and the value
at which SingTel purchased shares in the BTL, almost simultaneous
to the reduction in share capital would definitely regulate valuation
under Section 66. Reference is also made to Section 68 and Section
230 of the Act of 2013, respectively of a voluntary exit and one
based on compromise which procedure ought to have been
applied to bring in the standard of fairness even under Section 66,
which is an involuntary purchase made by the majority in
oppression of the minority shareholders; a forced exit. The
material defect is the low value of the share fixed for the exit of the
minority shareholders. Sri. Parmeshwar while summing up
cautions that we would be laying down the law with respect to
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edging out of minority shareholders, which necessarily has to
satisfy the judicial conscience with a higher standard of fairness
than applicable in a voluntary or optional exit or an exit by
compromise, especially since it is the majority will running
roughshod over the minority rights.
7. Sri. Masoom K. Shah, learned counsel appearing in one of the
appeals, for the appellant while adopting the submissions of Sri.
Parmeshwar, points out a defect in the constitution of the NCLAT
insofar as it being comprised of two Technical Members and one
Judicial Member. Reliance is placed on Union of India v. Madras
3
Bar Association (2010-MBA) (paragraph 120 (xii)) to contend that
a Constitution Bench of this Court deprecated the practice of a
majority of Technical Members sitting in a Bench of the NCLT or
the NCLAT, which substitutes the High Court. In anticipation, to
preempt that contention, it is pointed out that there cannot be
raised a ground of acquiescence, insofar as the defect going to the
root of jurisdiction by reason of the illegal composition, as has
4
been held in State of M.P. v. B.R. Thakare . Sri Shah also points
out from the valuation report and the documents pertaining to

3
(2010) 11 SCC 1
4
(2002) 10 SCC 338
Page 8 of 55
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various associates of the agency which carried out the valuation
that it has an inextricable link and connection with the Internal
Auditor of BTL. The one who signed the valuation report itself is in
the Board of the internal auditor, thus, throwing a cloud of absence
of impartiality on the valuer, coupled with a bias in favour of the
majority shareholders revealing a collusion in arriving at a lower
value of shares for the exit of the individual members from the
public; which does not augur well on the facts of the case
especially on the minority shareholders being given a raw deal
and forced out of their shareholding.
8. Sri Sumit Kumar, learned counsel appearing for one of the
appellants refers to Annexure A7 in C.A. No.2864 of 2021, wherein
there was a status quo order, which is even now in force; and
reduction of share capital having been made in the interregnum,
falling flat, requiring immediate resumption of shares. The
valuation made by the Custodian also is pointed out to assail the
price fixed now.
9. Sri Ramji Srinivasan & Sri. Shyam Divan learned Senior
Counsel appearing for BTL commenced their arguments with
Section 423 of the Act, which jurisdiction the appellants have
invoked, wherein there should be a clear question of law raised,
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which is absent in the present case. Every legal requirement has
been complied with for the reduction of share capital under
Section 66 of the Act of 2013 and there is no violation complained
of but for a mere allegation of prejudice which the appellants have
failed to substantiate as real and compelling, enabling this Court
to interfere. Valuation is dependent on multiple factors and not
possible of mathematical certainty. It is urged that in the formation
of companies, the shareholders come together and enter into a
contract or charter as revealed from the Articles of Association to
which each of them are bound. The decisions are of the majority of
such shareholders, failing which there would be mayhem and no
corporate entity would be able to perform its functions and arrive
at its collective goal of realizing its objectives. In the present case,
it is pointed out that the appellants, eleven in number and those
before the NCLAT, thirty-five in number do not together satisfy the
definition of a minority as coming out from Section 244 of the Act of
2013. Neither do they have the number of shareholders, nor do
their total value of shareholding satisfy the minimum requirement
th
thereunder of a minimum 100 persons or 1/10 of the share value,
thus disabling even an application for oppression or
mismanagement on their combined efforts.
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10. It is pointed out that there is no valuation provided under
Section 66 as would be the requirement under various other
provisions of the Act of 2013 which demolishes the ground of an
interested valuation having been taken up by a related agency of
the internal auditor of the company. Even otherwise on that sole
ground prejudice cannot be found unless it is shown in reality.
Section 66 does not require a valuation and the safeguards as
provided therein of a special resolution being passed in the
General Meeting of the Company and more importantly
confirmation by the Tribunal have been scrupulously followed.
Though, a valuation is not mandated as per the Section, definitely
there should be some method by which a fair value is arrived at
insofar as providing an exit for the identified shareholders. A
Valuer was appointed who is an agency, with its associates, having
a global presence and a reputation in corporate matters including
financial aspects. When the company could have done the
valuation by itself, then thought it fit to appoint an independent
valuer only to ensure transparency and to avoid a contention of
bias being raised. The valuer had examined the books of accounts
and submitted the valuation report, which was scrutinized by
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another agency who had also affirmed the valuation as fair and
reasonable by its fairness report.
11. The fact that the valuer was a sister concern of BTL’s Internal
Auditor does not bring forth any conflict of interest or validate the
contention of lack of independence. The Internal Auditor as is
mandated by the guidelines issued by the Institute of Chartered
Accountants of India (ICAI) is an independent agency appointed
by the Company for the purpose of carrying out audit, as per the
mandate of the Act of 2013. The mere fact that the signatory of the
report valuing the shares of BTL was in the Board of Directors of
BTL’s Internal Auditor does not create any conflict or relation
insofar as the affairs of BTL. The Internal Auditor acts as an
independent agency and so did the valuer on accepted accounting
norms. It is reiterated that the same was affirmed by an
independent agency and it also was affirmed as a fair and true
valuation by two other agencies having no connection with BTL or
the Internal Auditor as was sought for by the Custodian who is a
party in Civil Appeal No. 2864 of 2021. The valuation and fairness
report being on the same date only denotes the day of issuance
and is no reflection of the time taken for evaluation.
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12. On facts it is pointed out that BTL having been delisted from
all stock exchanges made a buy-back offer of Rs.96/- per share in
the year 2001, which was the only buy-back offered by the
company itself. One of the promoters of BTL, Bharti Overseas
Trading Company had offered Rs.400/- per share in May 2006. But
for that there is nothing substantial brought out from the various
documents produced as to a clear value of the share of BTL, whose
only investment was in BAL. In 2016, there was a rights issue which
increased the share base exponentially causing significant
lowering of the monetary value of the shares. This was followed up
with a preferential allotment of shares at the rate of Rs.310/- per
share in favour of a Strategic Long-Term Promoter, SingTel, so as
to infuse funds into the company. The share value for the said
transaction was on the basis of the prevailing market price of BAL
and in accordance with the applicable FEMA regulations
mandating a certain floor price. In any event, there can be no
equation of the share price determined for preferential allotment
to the present reduction of shares. Therein the investors were
entering into a strategic partnership in the business which
definitely would have required a premium to be paid on the share
value. It is also pointed out that BAL share value fell sharply from
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January 2018 to May 2018 due to the tariffs imposed and the fierce
competition in the telecom market, which also impacted the share
value of BTL. There is no misrepresentation insofar as the
shareholders having requested for a buyback, which is evident
from the Minutes of the various AGMs, some of which were handed
over across the Bar. The shares having been delisted and there
being no payment of dividend for long coupled with a constant
clamor for buy-back the reduction of share capital was proposed,
by which measure the Company out of its own funds, would
purchase the shares of the identified shareholders which had no
marketability.

13. We were taken through the valuation report, figure by figure
and page by page pointing out the manner in which the valuation
was arrived at and the DLOM applied at the rate of 25%, at the
minimum, for reason of the existing illiquidity, approved by Indian
Accounting Standards as brought out in the ICAI Valuation
Standards. The valuation as earlier pointed out was approved in
the fairness report issued by a totally different agency. The same
was placed in the Board of Directors and a resolution was passed
subject to the approval of the shareholders for which notice was
issued as per Annexure A18. The notice specifically indicated the
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relevant documents having been kept in the Registered Corporate
Offices of BTL, available for inspection between 19.06.2018; the
date of notice and 26.07.2018; the last day of receipt of postal ballot
or e-voting. It is emphasized that there can be no case raised of the
relevant documents having not been supplied, especially since the
voting period extended over a month and in fact the Advocate of
one of the investors had inspected the documents and sought for
further details as is evident from the e-mail projected by the
appellants themselves. It is emphatically contended that 99.90% of
the equity shareholders of BTL passed and approved a special
resolution and 76.35% of the identified shareholders present and
voting also voted in favour of the special resolution approving the
share value of Rs.196.80/-. No Objection Certificates were also
received from all the creditors and hence, the petition under
Section 66 of the Act seeking confirmation of the scheme of capital
reduction before the NCLT.
14. The NCLT as is the mandate, called for a report from the
Regional Director of the Department who confirmed compliance of
the procedure prescribed under the Act for reduction of capital.
The NCLT having confirmed the capital reduction after looking at
the objections filed by public shareholders, the NCLAT has also
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approved the same. There is hence no scope for interference,
especially since no prejudice is shown. It is pointed out that the
capital reduction was proceeded with immediately after the rights
issue which put the identified shareholders in a position enhancing
their shareholding exponentially, especially since the rights issue
offered 115 shares at par for Rs.10/-, as against every single share
held by an investor. Hence, the capital reduction after the rights
issue put the investors in a very favorable position and the
appellant in Civil Appeal No. 7655 of 2025 who would have
obtained Rs.16 lakhs before the rights issue, on the very same
valuation went home with an astronomical amount of Rs.47.30
crores. The fair value cannot be fixed at the ipse dixit of the
investor, and it has to be with reference to the market value. There
cannot be a fair value fixed divorced from the market value,
especially in the case of BTL which had no other commercial
activity other than the investment in BAL. The shares of BAL were
listed in the stock market, and the value therein could not have
been adopted for BTL which was the holding company, having only
investment in the listed company; the shareholdings of which
holding company was not marketable by reason of the delisting. It
is pointed out that the identified investors are neither fly-by-night
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operators nor persons unfamiliar to investor domains but are
shrewd operators who have earned substantial payouts; though
not by way of periodic dividends which were practically absent, in
the reduction of share capital, despite their shares being locked in
for long. They have waited patiently and benefited with bountiful
yields and crave more on an impulsive caprice, with nothing more
and in total absence of any real prejudice having been shown to
have visited them.
15. Both sides have placed reliance on a host of decisions to
buttress their contentions which we shall refer to, as are
applicable, in the course of our adjudication. We also refer from
the documents in the Convenience Compilation and otherwise
from the specified volumes of the numbered appeals.



Jurisdictional defect on the composition of the NCLAT & the
status-quo order:



16. The contention first taken is of the constitution of the Bench of
3
the NCLAT running foul of the mandate declared in 2010-MBA .
3
The Constitution Bench in 2010-MBA considered the challenge
against the Companies (Second Amendment) Act, 2002,
constituting the NCLT & NCLAT; pointedly for our purpose, with
reference to Section 10-FL insofar as the constitution of Benches.
Page 17 of 55
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Paragraph 120(xii), one of the several corrections suggested,
required two members of the Tribunal to always have a Judicial
Member and any Larger or Special Benches constituted to have
more Judicial Members than Technical Members.
17. Section 10-FL by sub-section (1) provided for the Tribunal to
exercise the powers conferred by Benches constituted by the
President out of which one shall be a Judicial Member and another
a Technical Member. The first proviso empowered the President
of the Tribunal by general or special order to permit Members to
sit single and exercise the jurisdictional powers and authorities of
the Tribunal with respect to such class of cases or matters with
respect to a class of cases, as specified. The above provision is no
more applicable since the Companies Act, 1956 has been replaced
by the Companies Act, 2013. Sections 418A and 419 of the new
statute speak of Benches of the NCLAT and that of the NCLT. The
proviso to sub-section (1) of Section 418A requires a Bench of the
NCLAT to have at least one Judicial Member and one Technical
Member and the proviso to Section 419(3) mandates a similar
composition in constitution of Benches of two Members. Section
419 further provides that the Tribunal shall exercise the powers in
respect of such class of cases or such matters pertaining to a class
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of cases as the President by general or special order specifies, by
a Bench consisting of a Single Judicial Member.
18. The provisions leading to the constitution of the NCLT and
NCLAT were again challenged in Madras Bar Association v.
5
Union of India ( 2015-MBA ). Section 419, as we see from the law
reports, was not challenged before the Constitution Bench and
Section 418A came to be introduced by Act 29 of 2020, later to the
5
decision. Three issues arose in the 2015-MBA , which were with
respect to (i) the constitution of NCLT and NCLAT, held to be valid;
(ii) qualification of President and the Members of NCLT and
NCLAT, Section 409(3)(a) & (e) as also Section 411(3) held invalid
as making eligible a person other than a Secretary or Additional
Secretary to be a Technical Member and (iii) the constitution of the
Selection Committee for Members; held to be possible if
comprising of only four Members, two from the Judicial side being
the Chief Justice of India or his nominee and a Senior Judge of the
Supreme Court or the Chief Justice of a High Court and two
Secretaries, one from the Ministry of Finance and Company Affairs
and the other from the Ministry of Law and Justice, with the Chief

5
(2015) 8 SCC 583
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Justice of India or his nominee having a casting vote; following the
earlier judgment. Thus, ensuring that the Judiciary has the final
say, untrammeled by any governmental influence or interference
in the appointment of a Member of the Tribunal, be it a Judicial
Member or a Technical Member.
19. The provisions as of now do not require a majority of Judicial
Members in the Larger Benches of the NCLT or the NCLAT. We
3
cannot but notice the extract made in 2010-MBA from State of
6
West Bengal v. Anwar Ali Sarkar in the context of Article 14,
applies equally to the issue raised before us, attempting a
distinction drawn between judicial members and technical
members. The extract was made consequent to the finding in
paragraph 102 that “ The fundamental right to equality before law
and equal protection of laws guaranteed by Article 14 of the
Constitution, clearly includes a right to have the persons rights
adjudicated by a forum which exercises judicial power in an
impartial and independent manner, consistent with the recognized
6
principles of adjudication” (sic). Anwar Ali Sarkar held that even a
criminal is entitled to set up a defense, and a special trial, as was

6
AIR 1952 SC 75
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contemplated in the legislation under challenge though is in public
interest, would interfere with his fundamental rights.
20. Examining the special law contrasted with the ordinary law
6
of the land, Vivian Bose J. in paragraph 87; Anwar Ali Sarkar
opined that the test is not merely academic, for equality should be
tested on the collective conscience of a sovereign democratic
republic as to whether substantially equal treatment would be
found by ‘men of resolute minds and unbiased views’. Whether
these men would find it right or proper in a democracy of the kind
we have proclaimed ourselves, is the true test. We respectfully
adopt the definition as applicable to adjudications in every sphere
and branch involving interpretation and resolution of disputes,
complex and simple, both. All adjudicators first and foremost are
or should be reasonable persons having resolute minds and
unbiased views . Though judicial experience is valuable,
administrative officers and technocrats; to whom judicious
consideration is not alien in their long tenures of service dealing
also with quasi-judicial matters, statutory appeals and the like,
when permitted by the legislature to be included as Tribunal
Members to aid, assist and promote a holistic adjudication of
disputes and interpretation of laws, having administrative and
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technical ramifications, we cannot after permitting them to sit side-
by-side treat them or their capabilities, with disdain or label them
lower in status or in quality.
21. In the present case, we also have to notice that the Bench was
headed by a Judicial Member and had two Technical Members,
and the opinion was unanimous at the NCLAT. We also find no
4
parallel infirmity as arising from B.R. Thakare , wherein a single
Member of the Tribunal, an Administrative Member, was tasked
with the adjudication of a dispute relating to cadre determination
involving interpretation of the respective rules. It was held as a
measure of proper administration of justice that ‘… while allotting
work to a Single Member, whether judicial or administrative, the
Chairman should keep in mind the nature of the litigation and where
questions of law and its interpretation are involved, they should be
assigned to a Division Bench of which one of them is a Judicial
Member’ (sic) . No distinction was drawn with reference to the
source from which the Members come and there is no application
to the facts of the present case. As of now, the Companies Act
permits a Single Bench to sit only in the NCLT and that too a Bench
of a Judicial Member. The NCLAT as provided in Section 418A
always comprises of two Members, one of whom is a Judicial
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Member or such larger composition where the prescription is only
of the presence of a Member from the Judicial side and not in the
majority.
22. We find absolutely no reason to interfere with the order on
the question raised of the composition of the Bench of the Appellate
Tribunal. We also notice the further contention taken based on the
order of status quo , wherein the first respondent company was not
a party, to only reject it immediately. Obviously, the matter arose
from a scam in which a Custodian was appointed for the sale of
assets of the person involved in the scam, the assets being
represented by the legal representatives. The Custodian had
proceeded to sell the properties belonging to the legal
representatives in which circumstance this Court had issued a
status quo order which binds the Custodian and not the first
respondent company, who was not a party to that proceeding. The
status quo order is only insofar as the preservation of the assets,
which in the circumstance of a reduction of shareholding, as is the
subject matter of the present case, would only have the
consequence of the shareholding being converted to money which
would be held by the Custodian, the disbursement and adjustment
of which would depend on further orders passed by this Court in
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the pending appeal. Reference is also made to Annexure-22 in
Civil Appeal No. 2864 of 2021 to contend that the undertaking
before the Custodian to disclose the Special Courts order before
the NCLT was not complied with. The Special Courts order or even
this Court’s as we perceive it has no bearing on the share capital
reduction of BTL. What assumes relevance is the custody of certain
shares being with the Custodian, in which circumstance the
proceeds with respect to that, on reduction of share capital, will
have to be submitted to the Custodian. It does not have any
significance to the reduction of share capital or the proceedings
before the NCLT.

The Manner; The procedural infraction:

23. Under this head is raised issues of; (i) a request from the
shareholders, though disclosed in the notice having not been
indicated in the Board Resolution; (ii) the ‘tricky notice’ issued
insofar as the elements constituting valuation having not been
disclosed, especially the valuation and fairness reports; (iii) the
valuation having been effected by a related agency; (iv) the
fairness report having been issued on the very same date of the
valuation report and (v) the valuation and fairness reports having
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not been sent along with the notice and kept out of reach of the
investors by making it open for verification only at the Registered
Office of the Company. As was pointed out by the respondent
company, the shares of the company remained locked in for long
after the initial buyback offer, pursuant to delisting. There were
also no dividends paid, in which circumstance the individual
investors had sought for an exit option at the Annual General
Meetings (AGM), the minutes of which were handed over to us,
across the Bar. That the investors herein did not opt for the
buyback offer and had been holding the shares despite no
payment of dividend for long is crystal clear from the minutes of
the AGM. Also, it is revealed that there were requests made for
buyback or another opportunity by which an exit is provided to the
shareholders. That the company resorted to reduction in share
capital, which in turn provided an exit option, as sanctioned under
the Act of 2013 cannot also be disputed.
24. Even when the request made by the individual shareholders
from the minutes of the AGM was pointed out, there was stiff
opposition by the appellants on the ground that they never asked
for a forced exit from the company. Be that as it may, when it cannot
be denied that the reduction of capital is a valid means, legally
Page 25 of 55
Civil Appeal No. 7655 of 2025 etc.


permissible under the Act of 2013 which is also hedged in by
safeguards insofar as a sanction being required by a special
resolution in an extraordinary general meeting with a further
sanction by the Tribunal, wherein the Central Government and the
Registrar of Companies is entitled to offer their opinions; there is
little room to find a request for exit from the investors being
necessary. The Board having decided to go in for a reduction in
capital, which definitely is not a buyback option but would all the
same be an exit measure, there is no infirmity in the notice having
indicated the request made by the investors. Especially since the
shares of the company were locked in and it was decided that the
capital reduction process is the best possible route to provide an
exit opportunity in a fair and transparent manner. The observations
in the notice though not a part of the resolution would have
weighed with the Board of Directors in arriving at a decision for
reduction of capital by purchase of the shares held by the
identified investors, members of the public.
25. The further contention is with respect to a ‘tricky notice’
which is argued on the basis of reliance placed on various
decisions of the High Courts and this Court relying on Baillie v.
Page 26 of 55
Civil Appeal No. 7655 of 2025 etc.


7
Oriental Telephone and Electric Co. Ltd. We would in that
circumstance, look at the decision from the source, which coined
the term ‘tricky notice’ and in that context a bit of the history of
8
corporate law would be apposite. Foss v. Harbottle is a leading
precedent in corporate law which brought in the principle of
‘proper plaintiff rule’ wherein the alleged wrongs against a
company had to be agitated by the company itself. There were
exceptions, subsequently carved out, by judicial precedents,
sanctioning an individual action in the event of (i) ultra vires
actions, (ii) a fraud on the minority, (iii) an illegal action by the
majority and (iv) a ‘tricky notice’ without relevant material or
without sufficient disclosure, the last of which is the contention
herein.
26. The term itself was coined in Kaye v. Croydon Tramways &
9
Co. Ltd. which was concerned with an agreement between two
companies for sale of one to the other. The company which was to
be sold called a meeting of its shareholders by a notice issued for
approval of the agreement. The purpose for convening the
meeting as disclosed in the notice was to confirm the agreement of

7
[1915] 1 Ch 503
8
67 E.R. 189
9
[1898] 1 Ch. 358
Page 27 of 55
Civil Appeal No. 7655 of 2025 etc.


sale with the purchase price specified and the compensation to be
paid for loss of office of the Directors and the Secretary. The
compensation was based on an arrangement; in deviation of the
original proposal to take over the Directors and the Secretary, to
relieve them of their duties. It was found that the notice was artfully
framed to mislead the shareholders that the entire purchase price
would come to the selling company, making it a ‘tricky notice’,
playing with words to mislead the shareholders to consider a
contract of sale, concealing from them that a large portion of the
purchase money would go into the pockets of the Directors and
Secretary.
7

27. Baillie was again a case in which the decision of the
company was annulled on the ground of a ‘tricky notice’ without
proper disclosure. Therein two special resolutions were under
challenge with respect to enhancement of remuneration of the
Directors in a subsidiary company, completely controlled by the
holding company. The increased remuneration of the Directors of
the subsidiary included 20% of the net profits of that company. On
an auditor’s report pointing out that the remuneration fixed in the
subsidiary company required authorization by the holding
company, a meeting was convened with three resolutions, one of
Page 28 of 55
Civil Appeal No. 7655 of 2025 etc.


which required ratification of all actions taken with respect to the
subsidiary, including ratification of the remuneration already paid
to the Directors and the other, authorising the articles to be
altered, bringing in sweeping changes with respect to the
remuneration of the Directors in the subsidiary company. On a
challenge made by the individual shareholder it was found that
there was no disclosure of the actual amount received by the
Directors which was alleged to be enormous and sedulously
concealed. The notice was found to be not frank, not open, not clear
and not in any way satisfactory, making it a ‘tricky notice’.
10
28. LIC v. Escorts Ltd and Others is an authority for the
proposition that a shareholder calling an extraordinary general
meeting of the company is not bound to disclose its reasons as is
incumbent on the management so to do under Section 173(2) of the
Companies Act, 1956. Claude-Lila Parulekar (SMT.) v. Sakal
11
Papers (P) Ltd. and Others dealt with transfer of shares denying
the right of pre-emption to the existing shareholders, the appellant
therein. The decision to raise the issued capital of the company and
to allot the shares at par, to any person whether a member of the

10
(1986) 1 SCC 264
11
(2005) 11 SCC 73
Page 29 of 55
Civil Appeal No. 7655 of 2025 etc.


company or not was to be ratified by a General Body Meeting. The
notice issued subsequently for an Annual General Meeting
contained the details of ordinary and special business but no
indication whatsoever of the increase in the share capital and
allotment of shares. It was argued by the respondents that after the
notice of AGM, the Ministry of Finance had given notice extending
the validity of a sanction for a foreign exchange loan, clarifying that
no further extension would be granted, based on which the foreign
financier advised the company to increase its share capital in view
of its expansion programme. This Court held that since the
increase in share capital did not fall within the exceptions carved
out in Article 94, which reflected the substance of Section 173 of
the Act of 1956, it was incumbent for notice to be given not only
indicating the issuance of share capital as a special item of
business but also setting out all material facts relating thereto.
29. We do not think that the notice in the present case is vitiated
by non-disclosure or mis-disclosure merely for reason of the
valuation and fairness report not being placed before the
shareholders. As we found, the measure adopted was a reduction
in capital as permitted by Section 66, hedged in by various
protections but does not require a valuation report as would be
Page 30 of 55
Civil Appeal No. 7655 of 2025 etc.


required in other circumstances. A valuation in the process of
reduction of capital was resorted to by the company only to arrive
at a fair value and the fair value arrived, after the deduction of tax
was disclosed in the notice and the method adopted itself was kept
open for verification by the identified shareholders at the
registered office. It was disclosed fully in the proceedings before
the NCLT where the investors objected, despite the special
resolution having been passed with a thumping majority. The
NCLT did not reject their contentions in limine on the ground that
they had participated in the extraordinary meeting convened and
voted in favour of the capital reduction with a majority of 99.90%
of the total shareholders and 76.35 % of the identified shareholders
present and voting in favour of the resolution, but dealt with the
contention of an unfair value having been fixed and rejected the
same on an examination of the attendant facts and figures. We are
quite conscious of our confined jurisdiction under Section 423 of
the Act of 2013, which is to consider a question of law. As held in
12
Devas Multimedia (P) Ltd. v. Antrix Corpn. Ltd. when NCLT &
NCLAT have recorded concurrent findings it is not for this Court to

12
(2023) 1 SCC 216
Page 31 of 55
Civil Appeal No. 7655 of 2025 etc.


reappreciate evidence in the usual course. However, we are
obliged to look into the question of whether there is any perversity
in the findings, which it is trite is one of law.
30. A comparison was attempted to be drawn from other
provisions, which also are exit options available to the
shareholders. Section 62 dealing with further issuance of share
capital by sub-section (1)(c) requires a valuation report from a
registered valuer, which in that circumstance would have to be
enclosed with the notice to the existing shareholders. Likewise,
Section 230 of the Act of 2013 under Chapter XV deals with
compromise, arrangement and amalgamation with creditors and
members. When a compromise or arrangement is made with the
creditors or the members, the provision speaks of two motions
before the Tribunal, one to convene a meeting of the creditors or
a class of creditors or members or a class of members to be held
and conducted in such manner as the Tribunal directs. In the first
motion made before the Tribunal, as is evident from sub-section
(2)(v), a valuation report in respect of the shares and the property
and all assets, tangible and intangible, movable and immovable of
the company by a registered valuer is required to be annexed. If
th
the meeting sanctions the resolution by 3/4 majority, then again
Page 32 of 55
Civil Appeal No. 7655 of 2025 etc.


the compromise or arrangement has to be sanctioned by the
Tribunal by an order, for which a second motion is stipulated by
sub-section (6).
31. An amalgamation or merger as contemplated in Section 232
also stipulates a report of the expert with regard to valuation by
sub-section (2)(d). So does Section 236(2) in the context of a
buyback or purchase of minority shares, which is conspicuously
absent in a reduction of share capital, which also results in an exit
of certain shareholders. Similarly, a buyback under Section 68 is
optional and it is for the shareholder to decide whether the
buyback is accepted or not, looking at the value at which the
buyback is offered, which provision also does not stipulate a
valuation report. Hence, whenever a valuation report was found
expedient, it was statutorily required, but not under Section 66.
32. Reduction of share capital can be achieved by a special
resolution and confirmation by the Tribunal, without a report of
valuation from an approved/registered valuer and hence, it does
not fall within the ambit of a relevant material; without the full and
complete disclosure of which the reduction of capital cannot be
acted upon. However, it is pertinent to notice that the company
despite any legal requirement had adopted a valuation exercise,
Page 33 of 55
Civil Appeal No. 7655 of 2025 etc.


which was further affirmed in a fairness evaluation by a different
agency, both of which reports were retained in the Registered
Office of the Company, kept open for verification by the investors.
As has been factually found one of the investors, through his
advocate had verified the reports and made a subsequent request
only for the details of the shareholders and raised no dispute
against the value adopted. We have to pertinently also notice that
as argued by the learned Senior Counsel for the respondent, the
individual investors are not fly-by-night operators, but are shrewd
investors who are aware of the changing trends in businesses
especially when the respondent company is only having the
business of holding shares in a telecom company. We do not find
any procedural infraction or misleading disclosure to style the
notice as a ‘tricky notice’. The notice contains the full disclosure as
required in a measure employed for reduction of share capital
under Section 66, which is the price offered by the company which
translates as an exit option for the identified shareholder.
33. On the finding that there was no statutory mandate for a
valuation report for the reduction of a share capital, we could reject
the arguments raised of a related agency having been employed
for valuation, but we proceed to consider the ground of a
Page 34 of 55
Civil Appeal No. 7655 of 2025 etc.


perceivable bias raised. The specific argument is that the valuer
was an associate/affiliate of the internal auditor of the company. It
was buttressed by reference to documents, including the valuation
report displaying the same logo, having common
partners/directors and the internal auditor having a controlling
interest in the valuer. There was a contention by the respondent
that no allegation of mala fide or bias can be raised without making
the entity against whom such an allegation is raised, a party to the
lis . We are not persuaded to reject the contention only on that
ground since here the lis was initiated by the company for the
purpose of obtaining a confirmation of the special resolution,
which is strictly not adversarial in nature, but in which the
stakeholders are entitled to raise their objections and argue
against such confirmation. Hence, when an objection is raised as
to the independence or lack of it, of a valuer, it is for the Tribunal
to look into it and if satisfied implead that entity or otherwise reject
it in limine ; which later procedure was adopted in the present case.
34. Before us, the learned Senior Counsel appearing for the
respondent company had produced the Basic Principles
Governing Internal Audit which mandates that the internal auditor
shall be free from undue influence and shall resist any undue
Page 35 of 55
Civil Appeal No. 7655 of 2025 etc.


pressure or interference in establishing the scope of the
assignments or the manner in which the audit is conducted and
reported. The internal auditor in the nature of an in-house
vigilance machinery, is mandated by the Act of 2013, under
Section 138 read with The Companies (Accounts) Rules, 2014. Rule
13 of the said Rules by its Explanation also permits an employee to
be appointed as an internal auditor, which in the present case has
not been resorted to. Though, distinguished from statutory audits
under Chapter X, the internal auditor, here an outside agency,
merely by their appointment by the company cannot be said to be
related in any manner to the company. Appointment as an internal
auditor, does not bring in a bias with respect to the activities of the
company which would essentially go against the scope and spirit
of an audit carried out of the accounts of the company as an in-
house verification, which is also a statutory requirement, available
for scrutiny before a statutory auditor. It has been held in N.K.
13
Bajpai v. Union of India that bias should be demonstrably real
and present to vitiate an action. Where it is shown that there exists
a real danger of bias the action would attract judicial chastisement

13
(2012) 4 SCC 653
Page 36 of 55
Civil Appeal No. 7655 of 2025 etc.


while, if it is only a mere probability or even a preponderance of
probability it cannot affect the action adversely, was the law
declared. We do not find even a probability that the internal
auditor would act in a biased manner, leave alone the valuation
agency which is an affiliate of the former.
35. We have to further notice that the fairness report has been
obtained from a different agency which has no connection with the
internal auditor and in any event, the valuation report is accepted
as valid and proper by the ICICI Securities Limited and SBI Caps
Securities Limited, totally unrelated to the respondent company as
is revealed from Annexures A-30 & A-31 produced in Civil Appeal
No. 2864 of 2021 as obtained by ‘The Custodian, Appointed under
Special Court (Trial of Offences relating to Transactions in
nd
Securities) Act, 1992’ the 2 respondent in that appeal. All the
more as per the proviso to Section 66(3) the Tribunal considering
the reduction of capital measure has to obtain a certificate from the
Company’s auditor that the accounting standards adopted is in
conformity with that specified in Section 133, which is produced as
Annexure A13 in the application under Section 66 before the NCLT
produced as Annexure-A/14 in the Convenience Compilation.
Page 37 of 55
Civil Appeal No. 7655 of 2025 etc.


36. The fairness report signed on the same day as the valuation
report does not raise any apprehension of levity since the fairness
is of the approach in valuation, which does not require a
threadbare analysis or a reverification of the books of accounts.
The figures are more than explicit and so is the method adopted as
discernible by financial experts. We also reckon the contention
raised by the respondent company that the date of the report
indicates the day of issuance and not necessarily the time taken or
the diligence exercised in arriving at the valuation or even
affirming the fairness.
37. One other contention is of the reports being kept in the
Registered Office not being sufficient based on Firestone Tyre &
14
Rubber Co. vs. Synthetics and Chemicals Ltd. highlighting the
difficulty and disinclination of shareholders to travel to the
Registered Office. We cannot subscribe to the said view at least in
today’s scenario of ease of travel, especially since most of the 35
appellants before the NCLAT lived in Delhi, when the Registered
Office was in Gurgaon, Haryana. Some had their residence at
Mumbai & Pune and only three were abroad, as revealed from the

14
(1971) Comp. Cases 377 (Bom.)
Page 38 of 55
Civil Appeal No. 7655 of 2025 etc.


cause title of the order of the NCLAT. None except one thought it
fit to verify the reports. We hence find absolutely no reason to
sustain the procedural infraction on the grounds of non-disclosure
or bias, as alleged by the appellants.





The Method and The Matter; DLOM and the share price:


38. The above aspects are considered together since they are
inextricably linked. The share value determined for reduction of
share capital is termed unfair solely because of the application of
DLOM, which is said to be inapplicable in a situation of this kind
where there is a forced exit of the shareholders. Both sides relied
2
on Kiri Industries Ltd. . On a reading of the same, we do not find
any international denouncement of the application of DLOM in all
situations, as argued by the appellants. True, in the aforesaid case
wherein there was a forced buyout as per the order of the
Singapore International Commercial Court, wherein the minority
shareholders were asked to be bought out by the majority
shareholders, DLOM was declined. Insofar as the DLOM principle
is concerned, the decision in Thio Syn Kym Wendy and Others v.
Page 39 of 55
Civil Appeal No. 7655 of 2025 etc.


15
Thio Syn Pyn and Others and the decision in Liew Kit Fah and
16
Others v. Koh Keng Chew and Others were referred to. Liew
16
Kit Fah held that liquidity, after all is a valuable attribute of an
investment and the lack of it is a depreciatory factor, giving rise to
application of DLOM in the valuation of unquoted shares. However
this was observed to be laid down in a consent order where there
was no Court order on account of a finding of oppression. The
15
principle laid down in Thio Syn Kym Wendy that DLOM will
apply to illiquid privately held shares, save in exceptional
circumstances proven by the party alleging it, was held to be an
incidental observation which cannot be elevated into a principle of
law. In the context of a Court ordered buyout in an action alleging
oppression, DLOM was found to be inapplicable, not as a universal
principle but more on the facts of that case.
39. Interestingly the Court referred to an article of Professor
Douglas Moll titled “Shareholder Oppression and ‘Fair Value’: of
Discounts, Dates and Dastardly Deeds in Close Corporation” (2004)
54 (2) Duke LJ 293, wherein the distinction between fair value and
fair market value was brought out which we have read, as available

15
[2018] SGHC 54
16
[2020] 1 SLR 275
Page 40 of 55
Civil Appeal No. 7655 of 2025 etc.


on the internet. ‘Fair value’, as distinguished from ‘fair market
value’, is the enterprise value; the pro-rata portion of the
company’s overall value as an operating business. ‘Fair market
value’ on the other hand involves the Court valuing the minority’s
share by considering what a hypothetical purchaser would pay for
them. Professor Moll was of the opinion that in a ‘fair market value’
situation, a marketability discount is applied since a hypothetical
purchaser is likely to pay less for shares which lack a ready
market. Professor Moll was also of the opinion that valuation is
inherently contextual and buyout proceedings in the context of an
oppression setting, would make the marketability discounts
inappropriate. The report is an interesting read and affords
insights in the context of an oppressive setting with respect to
Close Corporations, in the United States of America. The
illustrative reference to minority with a 33% shareholding in an
oppressive setting also is distinguishable from the instant case,
which deals with a far lesser minority and in the Indian setting. The
statutory language was also pertinently pointed out as standing
against a marketability discount being applied, when the specific
term used was ‘fair value’ as distinguished from ‘fair market value’,
employed in comparable statutes.
Page 41 of 55
Civil Appeal No. 7655 of 2025 etc.


40. It is recognised even by Prof. Moll that investors generally
pay a premium for liquidity and conversely extract discounts for
illiquidity. In the present case, there is no oppression complained
of by the minority shareholders and in any event, 11 appellants do
not, by their sheer number or with their combined holdings,
constitute a collective which could validly raise an allegation of
oppression under Section 244 of the Act of 2013. We have to
immediately also notice that the shareholders identified for the
purpose of capital reduction, together far exceeded the minimum
number; one hundred under Section 244. There was no complaint
of any oppressive action existing. All the same in the setting of the
present proceedings, even the objection raised by an individual
shareholder as to the reasonableness of the price fixed has to be
looked into, which pertinently is not in a setting of oppression.
7 8
41. In Baillie , the decision in Foss v. Harbottle was noticed and
the exception carved out to the ‘proper plaintiff’ rule even while
rejecting the challenge against the action of its Directors enabling
purchase of the personal properties of the Directors for prices far
exceeding its actual value that too by mortgaging and
encumbering other properties of the company and applying these
proceeds to make the purchases. However, it was observed that it
Page 42 of 55
Civil Appeal No. 7655 of 2025 etc.


would not be proper to hold that a society of private persons
associated together in an undertaking, are deprived of their civil
rights inter se , because the Crown or the Legislature has conferred
on them a corporate character to make more attainable, the
common objects. The ‘claims of justice’ then would be found
superior to any difficulties arising out of technical rules regarding
the mode in which the corporations are required to sue. Even in
8
Foss v. Harbottle it was held that if a case arises as to an injury to
a corporation or to some of its members, for which no adequate
remedy remains except that of a suit by an individual corporator
in their private character, requiring protection of those rights
entitled in their corporate character, then the ‘claims of justice’
would override procedural technicalities. It is the said principle
that is enshrined in the Act of 2013 where even when a special
resolution is passed the Tribunal is required to scrutinise a
reduction in capital under Section 66, after hearing all the stake
holders, ex debito justitiae.
42. Coming back to the present case, here the measure
employed was of a reduction in capital as permitted by the statute.
Page 43 of 55
Civil Appeal No. 7655 of 2025 etc.


17
In Re: Reckitt Benckiser (India) Ltd. encapsulated the principles
regulating a reduction of share capital after referring to British and
18
American Trustee and Finance Corporation v. Couper . The
broad principles distilled were that (i) reduction of share capital is
a strictly domestic concern depending on the decision of the
majority, (ii) if reduction of share capital is approved by a special
resolution, the majority also has the right to decide how it should
be carried out, (iii) reduction of share capital can be brought about
by extinguishing some of the shares while retaining others even in
the same class or making a proportionate reduction for all or even
for some, while for others it is totally extinguished. The reduction
thus can be in any manner and even if it is selective it is
permissible.
43. The reduction of capital was sanctioned by the Board and it
was put up as a special resolution before the general meeting
convened. The special resolution was passed by not only the
th
majority shareholders but also by 3/4 of the majority individual
shareholders, present and voting, identified for the purpose of
reduction of share capital, which makes it consensual. Even the

17
2005 SCC Online Del 674
18
(1894) SC 399
Page 44 of 55
Civil Appeal No. 7655 of 2025 etc.


appellant in C.A. No.7655 of 2025, who holds the majority of the
minority shareholding voted in favour of the special resolution. An
argument was raised that only 733 out of the 4942 identified
th
shareholders voted and the 3/4 majority from those present and
voting is a mirage. We cannot accept the said contention, first for
reason of the statute not prescribing any majority from the
identified shareholders. Then, the others thought it fit to abstain
and in a democratic set up where the will of the majority reigns
supreme, the abstainers are deemed to have left the choice to
those who vote and they acquiesce to the majority will of those
present and voting in the extraordinary general meeting. It is only
later, finding the application of DLOM that an objection was taken.
Thus there is no oppression setting in the present case and there
can be no distinction drawn from the statutory words employed of
a ‘fair value’ and a ‘fair market value’.
44. The statutory scheme also does not restrict the use of DLOM.
Examining the statutory scheme under Section 66, in addition to
the special resolution and notice to the Central Government and
the Registrar of Companies, sanction is accorded by the Tribunal
for capital reduction only if it is satisfied that the accounting
treatment proposed by the company for such reduction is in
Page 45 of 55
Civil Appeal No. 7655 of 2025 etc.


conformity with the accounting standards specified in Section 133
or any other provision of the Act and a certificate to that effect by
the company’s auditor has been filed with the Tribunal, as per the
proviso to Section 66(3); which we have found was furnished.
Section 133 enables the Central Government to prescribe
accounting standards as recommended by the Institute of
Chartered Accountants of India constituted under Section 3 of the
Chartered Accountants Act, 1949 in consultation with and after
examination of the recommendations made by the National
Financial Reporting Authority, constituted under Section 132 of the
Act of 2013. The Indian Accounting Standards (Ind AS) 113
provides for fair value determination as a market based
measurement and not an entity specific measurement, quite
contrary to the statutory scheme found in the United States as
described by Professor Moll.
45. The definition of fair value as per the Ind AS 113 is ‘the price
that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the
measurement date’(sic) . It is required that when measuring fair
value, an entity shall take into account the characteristics of the
asset or liability, if market participants would take those
Page 46 of 55
Civil Appeal No. 7655 of 2025 etc.


characteristics into account when pricing the asset or liability at
the measurement date. These characteristics include, not
exhaustively, but as stated in the Ind AS 113, as an example, the
condition and location of the asset and restrictions if any on the sale
or use of the asset. Hence, the approved accounting standards, as
statutorily brought out, treats the fair price as one linked with the
market especially in the context of Section 66, reduction of share
capital. The Valuation Standards Board ICAI and the ICAI
Registered Valuers Organisation of the Institute of Chartered
Accountants of India has brought out ‘ICAI Valuation Standard 103-
Valuation Approaches and Methods’. The Discount for Lack of
Marketability (DLOM) is one of the subheadings under the heading
“Adjustment and Valuation”. It is stated therein that ‘ DLOM is based
on the premise that an asset which is readily marketable commands
a higher value than an asset which requires longer period/ more
efforts to be sold or an asset having restriction on its ability to sell.’
‘Determining an appropriate level of DLOM can be a complex and
subjective process. Accordingly, the specific nature and
characteristics of the asset and the acts and circumstances
surrounding the valuation should be considered.’
Page 47 of 55
Civil Appeal No. 7655 of 2025 etc.


46. Looking at the valuation report it definitely reckoned the
share value of BAL for a reasonable period since that would have a
nexus in deciding the value of shares of BTL whose only business
is investment in the listed BAL. BTL admittedly was not listed
having been delisted in the year 1999-2000 and continued without
any payment of dividend to the shareholders. The only buyout,
which was statutorily prescribed, was offered at the rate of Rs.96/-
per share, long back in the year 2001. In 2006, one of the promotor
firms of BTL had offered to purchase the shares of public
shareholders at Rs.400/- per share. More importantly, BTL
conducted a rights issue in 2016 whereby the existing
shareholders were offered and issued 115 shares for every one
share held by them which resulted in diminishing the monetary
value of BTL shares. The various offers relied on in the
Convenience Compilation, at Annexure 2, even though not
authenticated, reveals only a price of Rs.35-Rs.55 that too before
the rights issue of the shares. A commodity broker is said to have
offered an amount of Rs.2000/- in the year 2007 that too, far prior
to the rights issue. The further issue of share capital for the purpose
of bringing in an investor as a strategic long-term promoter made
a valuation at Rs.310/- per equity share which is not parallel with
Page 48 of 55
Civil Appeal No. 7655 of 2025 etc.


the reduction of capital now attempted by the respondent
company. The marketability of the shares is absent, and it has to
be reiterated that the company had not been paying any
dividends. There were also requests made by the shareholders for
an exit option as is revealed from the minutes of the AGMs. In the
totality of the circumstances, the applicability of DLOM cannot be
held invalid and in any event, what has to be looked at by the
Tribunal in scrutinising the scheme of reduction of capital is only
as to whether there was a fair measure employed which cannot be
termed unreasonable or prejudicial to the individual
shareholders.
17

47. In Re: Reckitt Benckiser (India) Ltd. held that when the
matter comes to Court, the satisfaction of the Court is as to whether
(i) there is an unfair or inequitable transaction and (ii) whether the
creditors entitled to object to the reduction have either consented
19
or are paid or are secured. In Re: Cadbury India Limited
examined Section 100 of the Act of 1956; analogous to the purpose
of Section 66, to find three requirements; (i) the Articles of
Association should permit a reduction of share capital; (ii) the

19
2014 SCC Online Bom 4934
Page 49 of 55
Civil Appeal No. 7655 of 2025 etc.


scheme for reduction should be approved by a special resolution
and (iii) the Court’s sanction (sic- now the ‘Tribunal’) must be
obtained if the special resolution is passed. The consideration of
sanction of the scheme of reduction is regulated insofar as being
(i) not against public interest; (ii) fair and just and not unreasonable
and (iii) not unfairly discriminatory or prejudicial against a class of
shareholders. As for prejudice it was held to be something more
than just receiving less than what a particular shareholder may
desire. To find prejudice there should be an attempt to force a class
of shareholders to divest themselves of their holding at a rate far
below what is reasonable, fair and just; a strategy by which an
entire class is forced to accept something that is inherently unjust.
It was also held that reasonableness can be tested on the basis of
past open offers, extinguishments or buy-backs and the rates at
which they were effected. If the rates offered in the scheme of
reduction is more than the past offers then, the burden on the
objector is exponentially high when raising the plea that the offer
is unfair or unreasonable, to establish real prejudice, palpable
bias and demonstrable arbitrariness. Allegation of violation of
principles of fairness, when raised should be substantiated by
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obvious and blatant unfairness as revealed from the consequent
action; which is absent here.
48. Unless the valuation is especially unreasonable it would be a
wrong approach to reject a plausible rationale provided by the
valuer on the mere ground that the objector has a different point of
view. The test insofar as considering a sanction as held in In Re:
19
Cadbury India Limited is as to whether (i) a fair and reasonable
value was offered to the minority shareholders? (ii) The majority of
the non-promoter shareholders have voted in favour of the
resolution? (iii) the resolution read by any fair-minded and
reasonable person, without microscopic scrutiny, finds it to be
egregiously wrong offending the judicial conscience? (iii) the
valuer has gone so off-track that the result of valuation return can
only be wrong? We cannot but notice that all the above tests are
satisfied in the above case. We have already found that a fair and
reasonable value was offered to the minority shareholders and the
majority of the identified shareholders present and voting, voted
in favour of the resolution. Even on a microscopic scrutiny the
valuation cannot be found to be egregiously wrong especially
looking at the previous offers and also the rights issue offered at
par, prior to the reduction of share capital, exponentially
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increasing the take aways of the individual shareholders and the
valuation cannot at all be said to have gone off-track, so as to make
it egregiously wrong.
49. In this context, we cannot but notice that the share value now
fixed by the Board and approved by the majority of the
shareholders of the company which on modification by the
Tribunal stands at Rs.196.80/- for each equity share. Even taking
the highest offer at Rs.2000/- by a commodity broker as claimed
by the appellants, prior to the rights issue, as of now on a further
purchase of 115 shares at par, expending Rs.1150/- in the rights
issue, the single share available with the identified shareholders
becomes 116 at the rate of Rs.196.80/-, which by no stretch of
imagination or any standard of scrutiny adopted, can be said to be
unreasonable. Arguments raised on the valuation initiated at the
behest of the Custodian, is available at Annexure A-9 & A-11, both
in the year 2012, based on the purchase offers received. The
purchase offers ranged between Rs.550/- to Rs.3,650/-. The
valuation too by SBI Caps Securities and ICICI Securities ranged
between Rs.12,707/- to Rs.20,215/- after applying discounts
ranging from 20% to 30%. The above valuation was in the year
2012, while consequent to the reduction of share capital, the
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Custodian had sought for a verification of the valuation conducted
by the very same agencies. ICICI Securities by Annexure A-30
while affirming the valuation as fair specifically noticed that the
adverse effect by reason of the huge liability created on BAL, by a
ruling of the Supreme Court was not captured in the earlier
valuation. They also emphatically notice that the Valuation was by
a reputed international firm and the Fairness Report by a SEBI
registered category-I merchant banker. SBI Caps Securities also
confirmed the valuation by A-31.
50. We cannot but reiterate that the appellants herein are not
wary investors, cautious retirees or mere speculators, but
seasoned retail investors who blend in equal measure prudence
with quite calculation. The share value of BAL was in the public
domain, being a listed company. The appellants were aware of the
fact that BTL had only investment in BAL, which confined its
operations. The appellants were aware and many had participated
in the rights issue brought about and if not participated, at their
peril. The shareholders were also aware of the price at which
SingTel was brought in, as a strategic long-term promoter,
pursuant to which the reduction of share capital was attempted
which gave them enough material for making an informed and
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calculated decision as to whether they should opt for it. Far from
the bullish and bearish trends that regulate the flexible share value
of listed companies in a volatile market, the appellants held on to
the shares of BTL; with zero listing, zero marketability, zero
dividend payment, zero exit options also declining purchase
offers, with the stoic resolve of a feline waiting patiently for its
prey. The move was made when the AGM was constituted quite
realising the price offered for each equity share, which was even
minus the taxes payable by the company. The decision taken at
the EAGM passing the special resolution clinches the issue. Only
on finding the DLOM having been applied, the objections were
raised despite the fact that at the time of EAGM the appellants were
satisfied with the price offered. The objection is only in applying
DLOM with nothing in substantiation as to how the price fixed is
unreasonable. The identified shareholders voted in majority or
abstained, finding the price offered to be reasonable and not
prejudicial, which though pounced upon was resiled from later.
The nature’s wild offers no second pounce at the prey nor do the
hinterlands of financial wilderness and in any event, valuation is an
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exercise which is best left to the experts as has been held in Mihir
20
H. Mafatlal v. Mafatlal Industries Ltd.
51. On the above reasoning, we reject the appeals.
52. Pending applications, if any, shall stand disposed of.




……...…….……………………. J.
(SANJAY KUMAR)


...………….……………………. J.
(K. VINOD CHANDRAN)
NEW DELHI;
MARCH 10, 2026.

20
(1997) 1 SCC 579
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