NCLT Directs Co. To Buy Minority Shares U/s 242(2)(B) as Majority Shareholders Declined Purchase at Market Value Request

Case Details: Jackie Shroff v. Atlas Equifin (P.) Ltd. - [2024] 167 taxmann.com 722 (NCLT - Mum.)

Judiciary and Counsel Details

• Shyam Babu Gautam, Technical Member & P.N. Deshmukh, Judicial Member
• Rahul Chitnis, Mangesh Bhende, Digajmaan Mishra, Yashmaan Mishra, Khushboo Dilloud, Sunita Vishwakarma, Sarswati Shivhare & Shwetal Shepal, Advs. Applicant.
• Ashish Kamat, Mohit Khanna & Aditi Tiwari, Advs. for the Respondent.

Facts of the Case

In the instant case, the Respondents/majority shareholders of company ‘A’ entered into a joint venture with the petitioner/minority shareholder in ‘A’, and they started a holding company – ‘A’ to hold stakes in joint venture company ‘S’.

The petitioner and the respondents entered into a shareholder agreement (JVA). The equity shares of the company and issued to the parties to the said JVA in proportion to their respective holding in the ‘A’. The shareholding were changed and the non-resident persons transferred a major portion of their shareholding to the company abroad.

The Board of Directors of ‘A’ decided to infuse further capital in the company. The petitioner offered his shares to respondents at the market value of shares computed based on the net worth of the company, with an increase of 10% per annum over the value of shares.

However, neither of the majority shareholders accepted the offer. Thereafter, the petitioner filed an instant petition alleging various acts of mismanagement and oppression and prayed that the respondents be ordered and directed to purchase shares of the petitioner at a market value with an increase of 10% per annum over the value of shares.

NCLT Held

The NCLT held that company ‘A’ was to be directed to purchase shares of the petitioner under section 242 (2) (b) of the Companies Act, 2013, and a chartered accountant was to be appointed as a valuer to determine the value of shares upon which shares would be purchased by Company.

List of Cases Referred to

• Petition is plainly silent. In this regard, reference is drawn to- Sangramsinh P. Gaekwad & Ors. v. Shantadevi P Gaekwad & Ors [(2005) 11 SCC 314 (para 18),
• Needle Industries (India) Pvt. Lid & Ors. v. Needle Industries Newey (India) Holding Lid & Ors. [(1981) 3 SCC 3331 (para 18)
• M.S.D.C. Radharamanan v. M.S.D. Chandrasekara Raja & Anr. (2008) 6 SCC 750 (para 22).