DR. MRS. RENUKA DATLA versus SOLVAY PHARMACEUTICAL B.V. AND ORS.

Citation: [2003] SUPP. 5 S.C.R. 20 · Decided: 30-10-2003 · Supreme Court of India · Bench: S. RAJENDRA BABU · Disposal: Disposed off

Judgment (excerpt)

A 
B 
c 
DR. MRS. RENUKA DATLA 
v. 
SOLVAY PHARMACEUTICAL B.V. AND ORS. 
OCTOBER 30, 2003 
[S. RAJENDRA BABU, P. VENKATARAMA REDDI AND 
ARUN KUMAR, JJ.] 
Companies Act, 1956 : 
Transfer of share holdings-Valuation of shares-Petitioners filed three 
suits in the trial court to resolve disputes on share holding-Interim injunction 
vacated in one suit but continued in others-High Court upheld vacation of 
interim injunction and further vacated interim injunctions in other suits-
Special Leave Petition filed, wherein parties entered into a settlement, 
D appointing a Valuer for valuation of the shares in question-Petitioners objected 
to valuation report as the control premium was not added in the value; values 
of Verlin and Colopsa brands were not included; and discounted cash flow 
method of valuation was not adopted-Held judicial intervention permissible 
if valuation is made on fundamentally erroneous basis or a patent mistake 
committed-Valuation not vitiated by any demonstrably wrong approach or 
E fundamental error going to the root of the valuation-What has not been 
specifically and clearly said in terms of the settlement cannot be super imposed 
while interpreting the same-Terms of the settlement is the last word on the 
subject-Addition of control premium to the value of shares was not 
contemplated in the settlement-Discount cash flow method adopted while 
p 
resorting to valuation based on future earnings, caused no prejudice-
Respondents to pay interest to the petitioners at the rate of 9% of the value 
of shares, f!Xed by the valuer for 12 months, to meet the er.ds of justice, since 
!he respondents retained the money for 12 months-:-Civil Procedure Code-
Order 43 Rule /. 
G 
The dispute was regarding transfer of share holdings of two 
H 
pharmaceutical companies, the respondents. The petitioners filed three 
suits in the trial court impleading the said companies and R-3. One of the 
petitioners also applied for an interim injunction restraining transfer/ 
exchange of share holdings. The trial court did not allow the same and 
20 
RENUKADATLA v. SOLVAY PHARMACEUTICAL 
21 
also vacated the ex-parte injunction granted earlier. However, the ad A 
interim injunction granted in the other two suits filed by other petitioners 
remained in force. The aggrieved parties approached the High Court 
under Order 43 Rule l CPC, which upheld the vacation of the injunction 
by the trial court and further vacated injunctions continuing in the other 
suits. The petitioners being aggrieved filed special leave petitions. B 
·Thereafter, the parties settled all the disputes and the terms were reduced 
to writing, signed by all the parties. The special leave petitions were kept 
pending. 
According to the terms of settlement, R-1 and R-3 agreed to purchase 
4.91 % shares held by the petitioners in the two companies namely Duphar C 
Pharma India Ltd. (DPIL) renamed as Solvay Pharma India Ltd. and 
Duphar Interfran Ltd. (DIL), the petitioners agreed to sell the said shares. 
A Chartered Accountant had to evaluate the intrinsic worth of both the 
Companies, DPIL and DIL, as going concerns and the value of the said 
4.91 % shares held by the petitioners in those two Companies "by applying 
the standard and generally accepted method of valuation". He had to give D 
opportunity to the respective parties to make their submissions and his 
valuation was to be regarded as final and binding on all the parties to the 
settlement. The relevant date for valuation was fixed as 31.3.2001. The 
payment for shares was to be made within two weeks ·of the submission 
of the valuation report and the statutory approvals thereof failing which E 
the respondents were to pay interest at the rate of 15% p.a. simultaneously 
with receipt of the total consideration for 4.91% shares, the petitioner was 
to effect the transfer of shares. R-3 was to withdraw all litigation likewise, 
the petitioners were to withdraw all related litigation as well as the 
application filed under Section 399(4) of the Companies Act before the 
Central Government. 
F 
The Chartered Accountant submitted his valuation report as per the 
settlement after assessing the intrinsic worth of the two companies as going 
concerns; the value of 4.9! % shares was arrived at Rs. 8.24 crores. 
Discounted cash flow method, which is the commonly used methodology 
for future earning based valuation, was eschewed from consideration as 
no independent (third party) projections were provided and 

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