G.L. SULTANIA AND ANR. versus THE SECURITIES AND EXCHANGE BOARD OF INDIA AND ORS.

Citation: [2007] 6 S.C.R. 1152 · Decided: 16-05-2007 · Supreme Court of India · Bench: B.P. SINGH · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
G.L. SUL TANIA AND ANR. 
v. 
THE SECURITIES AND EXCHANGE BOARD OF INDIA AND ORS. 
MAY 16, 2007 
[B.P. SINGH AND AL TAMAS KABIR, JJ.] 
Securities and Exchange Board of India Act, 1992-Section 157-
Securities and Exchange Board of India (Sz;bstantial Acquisition of Shares 
C and Takeovers) Regulations, 1997-Regulation 20(5)-Public offer made by 
acquirer to purchase shares of minority shareholders at a price under the 
Regulations-Objections by shareholders before Board contending that the 
offer price was not fixed in accordance with the parameters laid down in the 
Regulations-Board appointing an independent valuer and approving draft 
offer letter by adopting valuation done by the independent valuer-Appeals 
D by shareholders before Appellate Tribunal dismissed-Correctness of-Held, 
Court b·enerally should not interfere with an expert valuer's report unless it 
is shown that some well accepted principle of valuation has been departed 
from without any reason or that the approach adopted is patently erroneous 
or that the parameters laid down in the Regulations have not been considered 
E by the vaiuer-On facts, the valuer had considered all the factors relevant 
under the Regulations and have adopted a reasonable approach which 
warrants no interference and the Board has'acted in a reasonable manner 
to secure a reasonable price for the shares of the shareholders. 
The shares of respondent no. 4 - target company- were originally held 
F by a family of four brothers equally. About 40% of the share capital was 
transferred in favour of one of the brothers-respondent no. 3 - pursuant to a 
family settlement arrived at between tlie brothers. Thereafter, a Memorandum 
ofUnderstandin~ was entered into between one of the brothers and respondent 
no. 3 to sell certain percentage of shares to the latter at the rate of Rs. 40 
per share. This agreement attracted the provisions of Securities and Exchange 
G Board oflndia (Substantial Acquisition of Shares and Takeovers) Regulations, 
1997 (fakeover Code) under which a public offer was made by the respondents 
to acquire the balance share capital of the target company at Rs. 40 per share. 
Having regard to the objections raised by the appellants that the offer price 
r 
was very low and that it had not been determined in accordance with the 
H 
1152 
...
G L SUL TANIA 1·. SECURITIES AND EXCHANGEBOARDOF INDIA 
1153 
parameters laid down in Regulation 20(5) of the Takeover Code, the Board A 
appointed an Independent valuer which valued the shares at the rate of Rs. 
63.50 by one method and at Rs.64.17 by another method. On the objections by 
the respondents about the higher valuation, the shares came to valued by 
another valuer which valued the shares at Rs. 60.04. The appellants filed 
objections on the low valuations and filed two valuation reports of their valuers B 
before the Board showing the higher valuation at Rs.408/- and Rs. 590-/- per 
share to support their case. The Board rejected the objections of tt1e appellants 
and accepted the valuation report given by the independent valuer and approved 
the draft letter of offer. Appeals preferred by the appellants against the order 
of the Board before Securities Appellate Tribunal were dismissed. 
c 
In appeal to this Court, the appellants contended that the price approved 
by the Board was not a fair price and that the valuer had failed to take into 
account all the relevant factors enumerated in Regulation 20(5) of the 
Takeover Code; that the Board failed in performance of its !luty as required 
under the Act and the Regulations and consequently failed to pass appropriate D 
directions to revise the offer price in terms of the mandate under the Takeover 
Code; and that the valuer erred in relying on the principles approved by this 
Court in Hindustan Lever Employees' Union v. Hindustan Lever Ltd. & Ors., 
[ 1995) Supp. 1 SCC 499 as it was applicable in the present case. 
The contesting respondents 2 and 3 contended that the valuation of E 
shares was done having regard to the parameters laid down under Regulation 
20(5) of the Takeover Code and that the Board had taken all necessary 
precautions to safeguard the interest of the shareholders so as to ensure 
payment of best price for the shares to be sold by them; that, under the 
Regulation, the Board cannot play the role of a valuer itself and that it should F 
only be satisfied that the valuation of shares is not arbitrary, perverse or 
capricious and that the ex

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