Summary
The Supreme Court restored nine per cent simple interest from 1 April 2007 on the consideration payable to minority shareholders leaving a company under a consensual valuation arrangement. The company had retained and used the funds for more than a decade, while the parties had agreed to value the shares at the petition date. The NCLAT had reduced interest without reasons and removed the company from the purchasing obligation on an unraised point without hearing affected shareholders. Those changes were reversed and payment ordered within four months.
Issues
- Whether the NCLAT was justified in reducing interest on the share-purchase consideration and removing the company from the purchasing obligation.
Held
- Interest at nine per cent was justified in equity on these facts because the respondents retained and used the money otherwise payable to the exiting shareholders. The NCLAT supplied no reason for reducing the rate to six per cent. (¶ 8-9)
- The agreed valuation date and the long retention of funds justified interest from 1 April 2007. The proposed substitution of a proportionate share of company profits was rejected; profit or loss did not supply the proper measure here. (¶ 9-10)
- The NCLAT should not have raised and decided the company’s exclusion from the purchasing obligation on its own without hearing the shareholders affected by that direction. (¶¶ 4, 7, 11)
- Respondents 1–9 before the NCLT were directed to pay the requisite share consideration with nine per cent simple annual interest from 1 April 2007 until payment within four months. (¶ 13)
Result
Shareholders’ appeals allowed to the stated extent; company’s appeal dismissed. Share consideration with nine per cent simple interest directed to be paid within four months.