Miheer H Mafatlal v. Mafatlal Industries Limited (1996) 87 Com Cases 792 (Supreme Court)
Fair exchange ratio based on Manageable Profit Method, Net Worth or Breaks up Method and Market value accepted by the Court. In general parlance when the valuation has been worked out by a recognized firm of chartered accountants who are experts in their field of valuation, it is not for the court to substitute the exchange ratio.
Hindustan Lever Employees Union v. Hindustan Lever Ltd and Others Bombay High Court, 1994
The jurisdiction of the Court in sanctioning a claim of merger is not to ascertain mathematical accuracy if the determination satisfied the arithmetical test. A company court does not exercise an appellate jurisdiction. It exercises a jurisdiction founded on fairness. It is not required to interfere only because the figure arrived at by the valuer was not as good as it would have been if another method had been adopted. What is imperative is that such determination should not have been contrary to law and that it was not unfair for the shareholders of the company which was being merged.
The hon’ble Supreme Court held “ We do not think that the internal management, business activity or institutional operation of public bodies can be subjected to inspection by the court. To do so, is incompetent and improper and, therefore, out of bounds.”
In the instant case the court accepted the ratio of 2:2:1 as Income, Market and Asset Approach on which the valuation was based.
Delhi Towers Ltd. v. G.N.C.T. of Delhi MANU/DE/3152/2009
There are no judicial precedents that have held that the court is empowered to
consider the merits of the terms on which the scheme for amalgamation has been
proposed by the consenting parties. On the contrary statutory provisions mandate
and judicial precedents have held that even a modification suggested by the
court is required to have the approval of the shareholders and the creditors
before it can be incorporated in the scheme. No adjudication is involved. The
role of the court is merely supervisory within the contours of the broad
parameters noticed hereinabove without ruling on the merits of the schemes
placed before the court and its consideration is confined to the issue that the
scheme was not violative of the principles of law, public policy and, was not
opposed to public interest.
Advance Plastics (P) Ltd vs Dynamic Plastics (P) Ltd Bombay High Court
The shares are the properties of the shareholders and they are the ultimate and the best judge of the value they would put on their charges. There is no requirement in the Companies Act that in such a case (i.e. amalgamation) the ratio of exchange has to be determined on a valuation made by a chartered accountant and auditor. In the present case, no shareholder has challenged the amalgamation. In the circumstances, valuation report is not necessary.
Shreya’s India (P) Ltd. v. Samrat Industries (P) Ltd. Rajasthan High Court
The Regional Director raised an objection that no valuation report has been filed and that the exchange ratio for amalgamation has not been worked out by an independent valuer. The Hon’ble Court overruled this objection and sanctioned the scheme of amalgamation by holding that there was no legal or factual impediment to grant sanction to the scheme of amalgamation.
Li Taka Pharmaceuticals Ltd. v. State of Maharashtra and other Bombay High Court
Valuation on the instrument of the amalgamation scheme sanctioned by the court, after due verification, is to be determined by the stamp authority only on the basis of the price of the shares allotted to the transferor company or the consideration, if paid, but not separately valuing the assets and liabilities.
COMMISSIONER OF WEALTH TAX vs. MAHADEO JALAN & Others, Supreme Court, 1972
The real value of shares which a deceased person holds in a company at the date of his death will depend more on the profits which the company has been making and should be capable of making, having regard to the nature of its business than upon the amount which the shares would realise on liquidation.
Mrs Renuka Dalta, Companies Act, 2003 Supreme Court
The Valuer considered three methods of valuation. (1) Asset based (2) Earning based (3) Market based. While working out the earning based valuation, the value on the basis of capitalization of past earnings was adopted.
The discounted cash flow method which is the commonly used methodology for future earnings based valuation was eschewed from consideration. The reasons given by the valuer are;
(1) No independent (third party) projections have been provided; (2) Both parties have provided projections which differ substantially. Since the value of a company/business would be more influenced by its earnings value a higher weightage is given to the earnings value as compared to its asset value.
The valuer considered the following weightage for determine the intrinsic value
* Asset based value 1/3rd weightage.
* Earnings based value 2/3rd weightage.
The court well accepted the methodology of valuation done by the valuer.
Bharat Hari Singhania , wealth tax, 1994 (SC)
The Court has accepted the Net Asset Value less 15% in deciding the value of shares of unlisted company in accordance with the erstwhile CCI Guidelines
Tolley, re Elder's Trustee & Executor Co. Ltd. V. Commissioner of Succession Duties, 1932, S.A.S.R.
Buyers & sellers in the open market would be more directly influenced by the apparent earning power than by complex calculations on net assets, but those assets would be regarded generally for assurance that returns would be maintained.
Abraham V. Federal Commissioner of Taxation, 70 C.L.R. 23
The Judgment approved of estimated additional income from idle cash being included in future maintainable profits.
Murdoch's Perpetual Trustee Co. V. Federal Commissioner of Taxation (re Sir James Murdoch) 65 C.L.R. 573
It is evident that Parcel of shares sufficient to carry special resolution may have higher value than parcels which are insufficient for that purpose.