National Company Law Appellate Tribunal: The appellants who are minority shareholders in Trinetra Cement Limited preferred an appeal against the order of NCLT, Division Bench, Chennai whereby the modification of scheme of amalgamation, as sought for by the appellants was rejected. A Scheme of Arrangement for Amalgamation of Trinetra Cement Limited and Trishul Concrete Products Limited (1st and 2nd Respondents) with ‘The India Cements Limited’ (‘3rd Respondent-Transferee Company) was filed before the Hon’ble High Court of Madras, which after first motion stood transferred to the Tribunal, Chennai Bench, at the stage of second motion.
The appellants who claimed to be minority shareholders to the extent of 2.37% of total shareholding in Trinetra Cement Limited filed objections under Rule 34 of the Companies (Court) Rules, 1959 challenging the valuation arrived at by the Valuer on the ground that it was unfair and nontransparent as it was carried out in a single day on 26th February, 2014. It was further submitted that Valuation Report and the Fairness Opinion were not carried out independently since the Valuer and Merchant Banker were working in tandem in complete defiance of the Circulars issued by the statutory body (SEBI).
Learned counsel for the appellants submitted that the Tribunal failed to appreciate that the Valuer cannot work in tandem with the Merchant Banker providing fairness report of valuation. Both the Valuer and Merchant Banker were required to work independently to ensure transparency. Per contra, according to the respondents, the objectors were not present; either in person or by proxy, during the shareholders’ meeting held on 25th March, 2015, when no objection to the Scheme was raised by the shareholders and the resolutions were passed unanimously.
NCLAT rejected the submission made on behalf of the appellants that the multiple steps for the ‘Scheme’ taken on a single day would render the reports invalid as it is usual practice by companies across India that the reports are provided to the Board for approval on the same day. NCLAT, upholding the Tribunal’s order, stated, that full compliance of SEBI Circulars was made out, thereby, rejecting the allegation made by the ‘minority shareholders’ (appellants) that the valuation report was erroneous.
NCLAT held that, “The appellants, having failed to show any such illegality in the valuation made by the Valuer, on mere allegation it cannot be interfered with. From the record, we find that ‘Surplus Assets’ of ‘Trinetra Cement Limited’ have not been valued separately because the Company has to be treated as ‘going concern’. It was in this premises, the valuation of both Trinetra Cement Limited’ and The India Cements Limited’- the ‘Net Asset Value method was not used.” [Arvind Aggarwal v. Trinetra Cements Ltd., 2017 SCC OnLine NCLAT 239, decided on 12.9.2017]