LexVINOD KRISHAN KHANNA & ORS. versus AMRITSAR SWADESHI WOOLLEN MILLS PRIVATE LIMITED
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SUPREME COURT REPORTS
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[2021] 1 S.C.R. 708
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VINOD KRISHAN KHANNA & ORS.
v.
AMRITSAR SWADESHI WOOLLEN MILLS PRIVATE LIMITED
(Civil Appeal No. 5087 of 2019)
FEBRUARY 23, 2021
[R.F. NARIMAN AND B.R. GAVAI, JJ.]
Companies Act, 1956 – ss.397 and 398 – Company Petition
filed by Appellants in 2007 against Respondent-company and its’
eight directors before Company Law Board (CLB) – Appellants, who
had 14.62% of the paid-up share capital of Respondent-company,
agreed to sell their shares and go out of Respondent-company –
Independent valuer, appointed by CLB, determined fair price of the
shares to be Rs. 10.35 each – National Company Law Tribunal
(NCLT), in 2018, directed Respondents to hand over purchase
consideration to Appellants @ Rs.10.35 per share alongwith simple
interest @9% per annum – Appeal before National Company Law
Appellate Tribunal (NCLAT) by Respondent company, limited to grant
of interest at the rate of 9% per annum – NCLAT reduced interest to
6% per annum – Justification – Held: Not justified – NCLAT reduced
interest without giving any reasons – Argument of respondent-
company that if at all something is to be awarded to Appellants
above the consideration for shares, it should be a pro-rata
percentage of share-holding of Appellants in company’s share of
profits from 2007 till 2018, not tenable – The company’s earnings
have no direct relation with the valuation of shares which fluctuate
in the share market depending on several factors – Challenge of
respondent-company to the date from which interest was granted,
also not tenable – NCLT directed that interest was payable from
01.04.2007, i.e. shortly after the date when the Company Petition
was filed by the Appellants (14.03.2007) – This was for the reason
that, as of the date of the NCLT’s directions, more than a decade
had elapsed from the filing of the petition, during which time
Respondent-company had effectively utilized the funds of Appellants
in relation to its business – NCLT also noted that all parties had
agreed upon the date of filing the petition as the valuation date for
the shares in order to enable the Appellants to walk out of the
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company – Nothing perverse in this reasoning of NCLT – Given the
fact that this is a 2007 Company Petition, Respondent-company
and its directors to pay to Appellants the requisite consideration
for the shares, together with simple interest at 9% per annum from
01.04.2007 till the date of payment.
Disposing of the appeals, the Court
HELD: 1. The NCLT had awarded interest at the rate of
9% per annum. The NCLAT, however, reduced this figure to
6% per annum, without giving any reasons. [Para 8][714-B-C]
2. At this stage, it is important to point out yet another
argument of respondent-company that if at all something should
have been awarded to the Appellants above the consideration
for the shares, what should be awarded is a pro-rata percentage
of the share-holding of the Appellants in the company’s share of
profits from 2007 till 2018. This argument has no legs on which
to stand. What if the company ended up making losses instead of
profits, would it then be equitable to award nothing to the
appellants? Secondly, the company’s earnings have no direct
relation with the valuation of shares which fluctuate in the share
market depending on several factors. Thus, the order of the
NCLAT on reducing the award of interest from 9% to 6% is set
aside. [Para 9][714-C-E]
3. The challenge of respondent-company to the date from
which interest was granted is not acceptable. The NCLT directed
that interest was payable from 01.04.2007, i.e. shortly after the
date when the Company Petition was filed by the Appellants
(14.03.2007). This was for the reason that, as of the date of the
NCLT’s directions, more than a decade had elapsed from the
filing of the petition, during which time the Respondent company
had effectively utilized the funds of the Appellants in relation to
its business. Pertinently, the NCLT also noted that all parties
had agreed upon the date of filing the petition as the valuation
date for the shares in order to enable the Appellants to walk out
of the company. There is nothing perverse in this reasoning of
the NCLT. [Para 10][714-E-G]
VINOD KRISHAN KHANNA & ORS. v. AMRITSAR SWADESHI
WOOLLEN MILLS PVIVATE LIMITED
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SUPREME COURT REPORTS
[2021] 1 S.C.R.
4. Given the fact that this is a 2007 Company Petition, the
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