Company Law Board
B.A. Mendonca And Ors. vs Philips India Ltd. And Ors. on 24 January, 2000
Equivalent citations: [2001]106COMPCAS526(CLB)
ORDER
S. Balasubramanian, Vice-Chairman
1. Certain employee shareholders of M/s. Phillips India Limited (the company) have filed this petition under Sections 397/309/402/403 of the Companies Act, 1956 (the Act) alleging acts of oppression and mismanagement in the affairs of the company. These petitioners together with those who have given consent to file this petition collectively hold 0.02 per cent. shares in the company. The petitioners allege that there were false statements in the annual report for 1998-99, discrepancies/material variation in the copies of the annual reports sent to the Indian shareholders and those sent to the foreign shareholders, concealment of vital information from shareholders in the explanatory statement to the resolutions concerning special business at the 69th annual general meeting which had a bearing on the shareholders interest as a profit making unit was proposed to be sold and that there were irregularities in the conduct of the 69th annual general meeting and that the minutes of the annual general meeting did not reflect the correct proceedings of the annual general meeting.
2. The facts leading to this petition could be summarised as follows : The company had a non-ceramic passive components manufacturing unit at Pune (component unit). The company entered into an agreement with one M/s. B. C. Components India Private Ltd., a subsidiary of M/s. B. C. Components International, B. V., the Netherlands, for sale of this unit. It also appointed M/s. KPMG India Ltd. to value the unit. M/s. KPMG India Ltd. valued the business value of the unit in the range of Rs. 24.3 crores and Rs. 28.4 crores. In the annual general meeting of the company held on May 28, 1999, the approval of the general body was sought in terms of Section 293(1) of the Act to sell this unit for a sum of Rs. 32.5 crores to M/s. B. C. Components of India Pvt. Ltd. This item of business was to be a special business and in terms of Section 175(2), an explanatory statement was annexed to the notice for the meeting. In the annual general meeting held on May 28, 1999, the resolution to sell the components unit to M/s. B. C. Components India Pvt. Ltd. was passed by a majority of over 99 per cent.
3. Shri Bhatt, senior advocate, appearing for the petitioners, submitted that the action of the company in selling this unit is mala fide and against the interests of the company. He pointed out that the company had originally sought for the approval of the shareholders for sale of this unit in an extraordinary general meeting held on December 4, 1998. However, the company withdrew the resolution after the shareholders pointed out various infirmities in the explanatory statement annexed to the notice of that meeting. However, he submitted that, the company issued a notice on February 26, 1999 convening the 69th annual general meeting on May 28, 1999, in which as item No. 7 an ordinary resolution as a special business was proposed for sale of this component unit to B. C. Components India Pvt. Ltd. for an aggregate consideration of Rs. 32.5 crores. The explanatory note did not contain vital information relating to the method and manner of valuation of this unit and the company had also failed to place the valuation report before the general body for proper assessment. He also pointed out that the company omitted in the explanatory statement the fact that there was another valuation done by M/s S. B. Billimoria and Co. at the instance of Life Insurance Corporation of India. One of the shareholders of the company sought for a copy of the valuation report which the company failed to provide (annexures A-13 and 14). Thus, before deciding on the resolution, the shareholders did not have the opportunity of intelligently assessing the adequacy of the value for the components unit. He argued to state that non-supply of the valuation report is against the principles of natural justice. He further pointed out that the explanatory statement did not contain any details as to whether an open offer was called for before deciding on M/s. B. C. Components India Pvt. Ltd. If an open offer had been made for sale of this unit, there is every possibility that the company could have got a better offer. According to him, the entire exercise had been made in a clandestine style as is evident from the fact that even before the approval of the general body, certain consignments had been received in the name of M/s. B. C. Components India Pvt. Ltd. and has been admitted in the reply. He also pointed out that the directors of B. C. Components India Pvt. Ltd. are the employees of the company and the registered office of the company is the office of the valuer. Therefore, he expressed his apprehension that there could have been a nexus between the company, the valuer and M/s. B. C. Components India Pvt. Ltd. Going through the agreement, a copy of which was sent to the shareholders at annexure A-14, he pointed out that from this agreement it is very difficult to find out as to what are the assets of the components unit that were being sold to M/s. B. C. Components India Pvt. Ltd. According to him, the value of the land on which the unit is functioning would alone cost more than Rs. 100 crores. He also pointed out that from a reading of this agreement, one cannot ascertain as to whether the entire unit is being sold or only a part of it.
4. He further argued to state that if all these aspects are taken into account, then, it will be clear that the explanatory statement did not conform to the requirements of Section 173(2) of the Act. In other words, according to him, the approval of the general body had been sought without furnishing full and complete details of the proposed sale and as such the same is invalid. He pointed out that while the board of directors have the right to decide on sale of a unit, yet, the same should be done in a transparent manner and not in a clandestine way as it has happened in this case. Therefore, he urged that before any order is passed on the petition, the company should be directed to furnish a copy of the valuation report prepared both by M/s. KPMG and M/s. B. S. Billimoria so that the petitioners would be in a position to argue the matter further. In this connection, he pointed out that in an earlier case of sale of a unit at Salt Lake in Calcutta by the company, when the matter went before the High Court, the valuation report was placed before the High Court. As to the right of the shareholders to receive a copy of the valuation report, he relied on Subir Kumar Basu v. New Central Group Engineering P. Ltd. [1986] 59 Comp Cas 222 (Cal). Even otherwise, he submitted that even for the Company Law Board to decide about the adequacy or otherwise of the consideration, it should have the benefit of going through the valuation reports. He submitted that the sale has been proposed only with the sole objective of benefiting the majority shareholders of the company, M/s. Koninklijke Phillips Electonics NV, the Netherlands which holds 51 per cent. shares in the company and at its instance. He also pointed out that the component unit is one of the vital units of the company since many of the components manufactured by this unit are being used in the final products of the company. Once the sale is effected, then, the company will have to purchase its requirement at exorbitant prices which would not be in the interest of the company/shareholders and consumers. In fine he demanded that we should direct the company to furnish to the petitioners a copy of the valuation reports before passing a final order on the petition.
5. Shri Sarkar, senior advocate for the company and its directors, initiating his arguments submitted that in the absence of any arguments by counsel for the petitioner in relation to various other allegations in the petition, he was restricting his arguments only on the issue relating to the sale of the components unit. He refuted the allegations of the petitioners that the explanatory statement did not contain full particulars. He pointed out that the components unit is a division of the company. This unit was receiving technical support from the holding company, namely, KPENV, the Netherlands which was also in the business of manufacturing components. Since the holding company had decided to hive off the components business, the company would not be receiving any further technical support from the parent company especially when such support is necessary due to vast changing technology. Since the components business of the parent company had been transferred to B. C. Components International BV, it evinced interest in taking over the components division of the company through a subsidiary to be established in India. Accordingly, in the interests of the company, it was decided to sell this unit to M/s. B. C. Components India Pvt. Ltd., which is a subsidiary of the foreign company which had taken over the components business of the parent company. Originally, M/s. KPMG were appointed to value this unit and they valued the unit in the range of Rs. 24.3 crbres to Rs. 28.4 crores. Later, at the instance of the LIC, the value was reassessed by M/s. B. S. Billimoria and Co. which valued the components unit in the range of Rs. 28 crores to Rs. 30 crores. The second valuation was done after the notice for the annual general meeting was sent and as such the same was not indicated in the explanatory statement. However, the agreement was to sell this unit at a value of Rs. 32.5 crores which is much more than the valuation done by either of the valuers. He also pointed out that even though the petitioners claim that the value of the land would be more than Rs. 100 crores, they have not produced even an iota of evidence to substantiate their stand. In this connection, he referred to Mohta Brothers (P.) Ltd. v. Calcutta Landing and Shipping Co. Ltd. [1970] 40 Comp Cas 119 (Cal) and Dua (M. M.) v. Indian Dairy and Allied Services Pvt. Ltd. [1996] 86 Comp Cas 657 (CLB) wherein it was held that in respect of any allegation, full particulars should be given failing which the same cannot be enquired into. He explained that this unit was being sold as a going concern along with all the employees some of whom are shareholders, with their full consent.
6. In regard to the sufficiency or otherwise of the explanatory statement, Shri Sarkar submitted that the explanatory statement in regard to the sale of this unit is comprehensive and fully discloses all material facts to enable the shareholders to take a decision on the proposal. Even assuming, as alleged by the petitioners that the explanatory statement lacks certain particulars, then, the same cannot be a ground for moving a petition under Section 397/398 of the Act as held by the Calcutta High Court in Maharani Lalita Rajya Lahshmi (M. P.) v. Indian Motor Co. (Hazaribagh) Ltd. [1962] 32 Comp Cas 207 ; AIR 1962 Cal 127. He further submitted that any lacunae in the explanatory statement, in view of the proposal having been overwhelmingly voted in favour, should be presumed to have been condoned by the shareholders. (Bamford v. Bamford [1969] 39 Comp Cas 369 (Ch. D.)). He further pointed out that the general body had overwhelmingly approved the proposal with more than 99.5 per cent. voting in favour of the resolution. According to him, once the general body accords its approval in terms of Section 293(1)(a), then, their wisdom cannot be questioned. In this connection, he referred to Gopal Das Gujarati v. Tita-garh Paper Mills Co. Ltd. [1986] 60 Comp Cas 920 (Cal) wherein the court has held that entertaining the complaint of a person holding 0:006 per cent. shares would mean allowing a minimal minority to hold the overwhelming majority to ransom. For the same proposition he relied on Daniels v. Daniels [1978] Ch. D. 406. He therefore submitted that the petitioners holding a minimal 0.02 per cent. shares cannot question the wisdom of those who have voted in favour of the resolution by a majority of over 99 per cent. Therefore, he submitted that the general body approval cannot be impugned on the ground of insufficiency of material facts in the explanatory statement.
7. Regarding furnishing a copy of the valuation reports, he submitted that it is wrong on the part of counsel for the petitioners to have submitted that the valuation report in respect of the Salt Lake unit was placed before the Calcutta High Court. He pointed out that in respect of the Salt Lake unit, there was no valuation report arid it was only an agreement between the company and M/s. Videocon Ltd. for a consideration of Rs. 9 crores. In the absence of the valuation report, the question of furnishing a copy of the same does not arise. As far as the present case, is concerned, he submitted that the valuation reports contain certain sensitive information which would not be in the interest of the company to disclose. He further submitted that the shareholders have no right to have a copy of the same and it is for the board of directors as a part of indoor management to decide the issue. He submitted that the valuation of this unit was done by two reputed valuers and the company has in fact sold the unit during the pendency of the proceedings for a sum of Rs. 35.39 crores after getting the approval of the financial institutions which have a substantial stake in the company. In regard to the adequacy or otherwise of the consideration, he submitted that two independent reputed valuers have valued the unit and the company has obtained a consideration which was more than the valuation made by these valuers and as such the consideration received cannot be impugned to be inadequate. In this connection, he referred to Hindustan Lever Employees' Union v. Hindustan Lever Limited [1995] 83 Comp Cas 30 ; 1 SCC (Supp.) 449, wherein the Supreme Court has held that once valuation has been done by reputed valuers, the same cannot be challenged unless otherwise it is shown that the valuation is vitiated by fraud or mala fides. In the present case, Shri Sarkar pointed out that the petitioners have not alleged that there was fraud or collusion in the determination of the consideration for the unit. For the same proposition, he relied on Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp Cas 792 (SC) ; [1997] 1 SCC 579 wherein the apex court held that once the valuation of shares is determined by an expert, namely a reputed firm of chartered accountants and approved by a majority of the shareholders, the court cannot intervene and the matter should be left to the commercial decision of the shareholders.
8. He also pointed out that the turnover arising out of the business of the components unit is only about 5 per cent. of the turnover of the company. Since continuing with the unit without technical support would make the unit unviable and as such the sale of this unit will not in any way affect either the interests of the shareholders or of the company and as such cannot be questioned by the minority shareholders. In this connection, he relied on P. S. Offshore Inter Land Services Pvt. Ltd. v. Bombay Offshore Suppliers and Services Ltd. [1992] 75 Comp Cas 583 (Bom).
9. Summing up his arguments, Shri Sarkar, even questioned the maintainability of the petition on various grounds. According to him only one solitary allegation of sale of the components unit has been argued. To file a Section 397/398 petition, there should be continuous acts of oppression and mismanagement and a single solitary incident cannot give cause of action to file such a petition. Further, this allegation alone cannot justify winding up of the company on the just and equitable ground, which is a prerequisite in a Section 397/398 petition. This solitary allegation cannot be considered to be either oppressive or mismanagement. Thus, he submitted that not only is the petition not maintainable but even on the merits, the petitioners have not been able to establish that there is any oppression or mismanagement in the affairs of the company and as such prayed for dismissal of the petition.
10. Shri Lahiri, counsel for the 11th respondent submitted that his client is a bona fide purchaser for appropriate consideration. He submitted that his client is a subsidiary of M/s. B. C. Components International BV which had taken over the components business of KPENV all over the world. His client was incorporated as a private limited company to take over the components unit of Phillips India. The majority shares of the parent company are held by Compass Partners International and KPENV does not hold any shares in Compass Partners. Thus, there is no reason either for KPENV or the company to have bestowed any benefits on B. C. Components India Pvt. Ltd. by selling the components unit at a lower value. For the sake of incorporating this company, two employees of Phillips India Ltd. subscribed to the memorandum and the registered office of the company was indicated to be that of the valuer. Now that the parent company has already invested in the shares of the subsidiary, it would have its own directors and the registered office would be shifted. Shri Lahiri pointed out that the petitioners were fully aware of the proposal of the company to hive off the components unit for quite some time. As a matter of fact, the proposal was put before the general body in a meeting held on December 4, 1998. Referring to pages 113-115 of the rejoinder, he pointed out that even the dealers and others had already been advised about the forthcoming sale of this unit. Accordingly, he submitted that the sale of the unit was done in a transparent manner and for a value more than what was assessed by the two independent valuers and as such the petitioners cannot impugn the sale.
11. We have considered the pleadings and arguments of counsel. On August 24, 1999, when we heard counsel from both the sides on the interim prayer relating to restraining the respondents from acting on the resolution of the annual general meeting approving the sale of the unit, counsel for the petitioners submitted that the petitioners had no objection to the sale of this unit but were very much concerned about the adequacy of the consideration. In view of this submission, we passed an order on that day as follows : "Heard on the application. The consideration for Pune unit will be subject to our final order on the petition in case the sale goes through before the disposal of the petition." When the petition was taken up for hearing counsel for the petitioners argued only on the allegation relating to the sale of the components unit and not on the other allegations in the petition. Even though, after counsel for the respondents had completed their arguments in reply, and Shri Bhatt by way of rejoinder, the other counsel for the petitioners Ms, Aparna Bhat wanted to argue on the other allegations which was objected to by counsel for the respondents and as such no arguments on other allegations took place. Therefore, in this order, we are confining" ourselves only to the allegation relating to the sale of the components unit, on which arguments were advanced.
12. The complaints of the petitioners in relation to the sale of the components division could be summarised as non-disclosure of full and complete particulars in the explanatory statements, non-supply of the valuation reports to the petitioners, inadequate consideration, the sale of this unit is against the interest of the company/shareholders and consumers.
13. To examine the allegation that the explanatory statement did not contain full and complete particulars regarding the sale of the components unit, it is appropriate to reproduce the explanatory statement as well as the resolutions proposed in the 69th annual general meeting.
"Item No. 7 : The company has been carrying on the business, inter alia, of manufacturing and selling non-ceramic passive components since 1959 at its components undertaking located at Loni-Kalbhor-412 201 (near Pune Central Railway).
In respect of the components undertaking, the company was receiving technical support from various entities within the components division of Koninklijke Phillips Electronics N. V., of Eindhoven, the Netherlands (KPENV). KPENV has decided to focus, amongst others, on the business of high volume electronics particularly in the electronic data processing, telecommunication and digital electronics markets and, therefore, decided to divest globally the non-ceramic passive components (leaded and non-liner resistors, electrolytic and film capacitors, potentiometers, variable capacitors and trimmers) business group including the technical support centres of these products as a going concern. In the absence of continuing technical support from KPENV this business will not remain viable.
In view of the above, as a process of divestment, the company has approached KPMG India Ltd (KPMG) for the business valuation of the components undertaking. KPMG has provided the business valuation of the components undertaking under various methods. However, the discounted cash flow method is one of the most acceptable methods for valuing a business undertaking. For calculating the future cash flows, the opening net operating capital has been considered as at December 31, 1998. As per this method of valuation, the value of the components undertakings is in the range of Rs. 243 million to Rs. 284 million.
Based on the valuation, the board of directors have decided to accept the offer from B. C. Components India Pvt. Ltd. (BCIL) a proposed subsidiary of BC components International BV., the Netherlands, for the purchase of the components undertaking as a going concern for a value of Rs. 325 million subject to such variations as explained hereunder and subject to such approvals as may be necessary. Under the structure envisaged for this transaction, it is proposed to sell and transfer all the fixed assets, current assets and current liabilities of the components undertaking as to the closing date which will be finalised mutually after obtaining necessary approvals in relation to the transfer. BCIL will take over the services of the employees of the components undertaking on the closing date on the terms and conditions not less favourable than those enjoyed by them at present. Any change in the net operating capital of the components undertaking from December 31, 1998, to the closing date and any other adjustment as mutually agreed will be given effect to suitably in the agreed consideration of Rs. 325 million. Since B, C. Components International BV will be engaged in this business activity on a global basis and will have effective research and development facilities, BCCI will be the most suitable buyer.
The shareholders may recall that at the extraordinary general meeting (EGM) held on December 4, 1998, the resolution relating to the proposal to sell or otherwise dispose of the said components undertaking was withdrawn as, on the date of EGM, the final details of the sale/transfer were not finalised.
The proposed sale of the said components undertaking is also subject to the approval of the financial institutions, debenture trustees and such other approvals, sanctions and permissions as may be necessary. The company will take steps to obtain such approvals at the relevant time.
In the opinion of the directors the aforesaid offer is fair and reasonable and it would be in the interest of the company and its shareholders to accept the said offer.
The members are aware that under Section 293(1)(a) of the Companies Act, the consent of the company in general meeting is required to be obtained before the sale or disposal of the whole or substantially the whole of any undertaking of the company. The resolution set out in the accompanying notice seeks to obtain the consent of the members to the sale of the company's said components undertaking. The directors commend the resolution for acceptance.
None of the directors of the company are concerned or interested in the said resolution."
14. The resolution proposed before the general body reads as follows :
"Resolved that pursuant to the' provisions of Section 293(1)(a) and other applicable provisions, if any, of the Companies Act, 1956, and subject to the approval of the financial institutions, and subject to such other consents, sanctions, approvals or permissions as may be necessary, the consent of the company be and is hereby accorded to the board of directors of the company to sell or otherwise dispose of as a going concern the components undertaking of the company located at Loni-Kalbhor-412 201, (near Pune Central Railway) together with the use of all licences, permits, consents and approvals whatsoever and all the rights and benefits attached thereto and the related liabilities to B. C. Components India Private Limited, a proposed subsidiary of B. C. Components International BV, the Netherlands, through one or more contracts, on such terms and conditions, as may be deemed fit by the board of directors in the best interest of the company, and at an aggregate consideration of Rs. 325 million being the agreed value of the business of the components undertaking subject, however, to variations in the net operating capital of the undertaking to be determined on the proposed closing date and such other variations, as the board of directors may in the best interests of the company and its shareholder consider proper."
"Resolved further that the board of directors be and is hereby authorised to do and perform all such acts, deeds, matters and things as they may in their absolute discretion deem necessary, including determining the proposed closing date and to sign and execute all such applications, agreements, deeds, other documents and writings as they may consider necessary, fit and proper for the purpose of giving effect to this resolution."
15. Section 173(2) of the Act deals with explanatory statements. It reads :
"Where any items of business to be transacted at the meeting or deemed to be special as aforesaid, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each such item of business including in particular the nature of the concern or interest, if any, therein, of every director, and the manager, if any." From a reading of this section it is clear that what is needed to be disclosed in the explanatory statement are the "material facts", the idea being that the shareholders should be in a position to form an independent opinion on the basis of the facts placed before them to take an appropriate decision. It is difficult, if not impossible to lay down any standard/guideline as to what would constitute material facts as the same would vary from case to case depending on the proposal under consideration. From the very fact that the section uses the words "material facts", it is clear that facts which are not material need not be furnished. As long as the explanatory statement is fair and gives, as far as possible, all information reasonably necessary for the shareholders to understand and appraise the proposal, such a statement would satisfy the requirements of Section 173(2) of the Act, provided it does not conceal or suppress or withhold relevant information or facts and does not make any false suggestion. As long as the explanatory statement contains sufficient, true and correct information to enable the general body to intelligently appraise the proposal, the explanatory statement should be considered to be fulfilling the requirements of Section 173(2) of the Act. In the present case, the proposal was for the sale of a unit of the company. Therefore, in this case, the material facts could comprise the reasons for the sale, whether sale would affect the interest of the company, to whom the sale is being effected, the consideration for the sale, how and by whom the consideration was assessed, whether the directors have any interest in the sale, whether all statutory clearances have been obtained etc. These material facts, we feel, would enable the shareholders to decide on the issue.
16. Now we shall examine the contents of the explanatory statement in the light of what we have stated in the above paragraph. A reading of the above explanatory statement would show that it indicates the reason for the decision to sell the unit, the name of the buyer, the name of the valuer, the value determined, the value at which the unit is proposed to be sold, the fact that the proposal is subject to various approvals etc. that the proposal was for transfer of all fixed assets, current assets and current liabilities together with the services of all the employees of that unit to the buyer and the fact that none of the directors of the company was interested in the resolution. Thus we find that all material facts have been given in the explanatory statement to enable the shareholders to take a decision on the proposal. Counsel for the petitioners pointed out that this statement has not provided information relating to the manner and method of valuation. We find that, in para. 3 of the explanatory statement there is mention about the discounted cash flow method. He also complained that from the sale agreement it is not clear as to what was being sold. A perusal of the resolution would indicate that the proposal was to sell the unit as a going concern which would mean taking over the assets and liabilities along with the business and the employees. This has also been elaborated in the explanatory statement. In regard to non-furnishing of the information on the second valuation by M/s. B. S. Billimoria and Co., Shri Sarkar explained that it was done subsequent to the date of the notice and as such the omission of the same in the explanatory note cannot be considered to be a deliberate omission. Accordingly, we hold that there is no substance in the allegation of the petitioners that the explanatory statement does not contain all material facts. While coming to this conclusion, we also note that other than the petitioners, some of whom had reportedly raised certain issues relating to the explanatory statement before the general body, no other shareholder has complained about the insufficiency of information in the explanatory statement as is evident from the fact that more than 99 per cent. of the votes polled had been in favour of the resolution.
17. In regard to the adequacy of the consideration, other than alleging that the consideration is not adequate, the petitioners have not furnished any details to support this allegation. Even on their contention that the land on which the unit is located would be of about Rs. 100 crores, no details to substantiate the same have been furnished. Mere suspicion or surmise cannot substitute proper evidence. We find that the business value of the unit has been assessed not by one but two independent reputed valuers and the difference in valuation has been found to be of the order of just about Rs. 2 crores. While M/s. KPMG assessed the value between Rs. 22.3 crores and Rs. 28.4 crores, M/s. Billimoria assessed the value between Rs. 28 crores and Rs. 30 crores. During" the hearing it transpired that this unit had been sold for a sum of Rs. 35.39 crores. We find that the financial institutions having high stake in the company, have accepted the valuation as also the general body of the shareholders. Even though, counsel for the petitioners on the ground that the registered office of M/s. B. C. Components India Pvt. Ltd. has been located in the office of one of the valuers and thus passingly expressed an apprehension that there could be a nexus, in view of the fact that no such allegation is found in the pleadings and that the other valuer also has more or less assessed a similar value, we ignore this allegation as unfounded. As held by the Supreme Court in Hindustan Lever Employees' Union v. Hindustan Lever Limited [1995] 83 Comp Cas 30 and also in Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp Cas 792, unless and otherwise it is shown that the valuation is found to be vitiated by fraud or mala fides, valuation done by experts cannot be interfered with. Therefore, we do not find any substance in the contention of the petitioners that there has been no adequate consideration for the components unit.
18. Connected with the above is the demand of the petitioners for a copy of the valuation report. Counsel for the petitioners submitted that in the Calcutta High Court, the valuation report relating to the Salt Lake unit was submitted. We find, as rightly pointed out by Shri Sarkar, that the entire dispute in that case was that there was an agreement to sell the Salt Lake unit for a sum of Rs. 9 crores without any proper assessment and therefore, the question of the valuation report being submitted to the court did not arise. Counsel for the petitioners relied on Subir Kumar Basu v. New Central Group Engineering P. Ltd. [1986] 59 Comp Cas 222 (Cal) to advance his argument that the shareholders have a right to get a copy of the valuation report. In that case, the valuation was done for the purpose of purchasing the shares of the petitioner by the respondents. While determining the value, the chartered accountant did not disclose certain documents furnished to him by the respondents, to the petitioner. When the petitioner challenged the valuation on the ground of non-disclosure of documents having a bearing on the valuation, the court set aside the valuation. In that case, the petitioner was vitally affected as his shares were to be sold. Therefore, we find that the facts of that case are not applicable to the present case before us. The stand taken by the company before us is that the valuation reports contain certain sensitive information which would not be in the interest of the company to disclose. As per the provisions of the Companies Act, while the shareholders have a right to inspect certain statutory records of the company, yet such a right does not extend to inspection of all the documents that they desire. We find that the company was fair enough to furnish a copy of the sale agreement to a shareholder when he sought for the same. Once the company claims confidentiality, then, a judicial authority cannot force supply of a copy of the same. At best the judicial authority itself may seek production of the same for its own perusal /examination. In the present case, we decided not to do so inasmuch as the complaint of the petitioners is about the inadequacy of the consideration without any particulars to substantiate the same. By merely perusing the valuation reports we cannot form any opinion on the correctness of the value assessed especially when two expert valuers have carried out the exercise and furnished their reports with negligible difference in the value. In view of this, we do not consider it necessary that the company should furnish a copy of the valuation reports to the petitioners.
19. Counsel for the petitioners also questioned the wisdom of the management in selling this unit. One of the concerns expressed by him was that after the sale of this unit, the company would be forced to purchase various components from this unit at exorbitant prices which would be against the interest of the company, shareholders and consumers. We do not find much substance in this argument. It was indicated during the hearing as also confirmed by the notice issued by the company at page 113 of the rejoinder that the turnover arising out of this unit in the total turnover of the company is only about 5 per cent. Further, in many large companies, depending upon the business and technological exigencies, acquisition of new businesses and disposition of the existing businesses are the order of the day. Such decisions fall squarely within the realm of indoor management and within the full competence of the board subject to, where the statute provides for shareholders' approval, their approval. A judicial body cannot substitute its wisdom on commercial and business decisions of the board/shareholders as long as they are bona fide and lawful. In the present case, the components unit was proposed to be sold mainly on account of non-availability of future technological support from the parent company which itself had hived off the components business. In the opinion of the board of directors consisting of independent non-executive directors and financial institution nominee, this components unit would become unviable without such technical support and as such it decided to sell off this unit. The decision of the board has been overwhelmingly supported by the shareholders who have voted in favour of the sale of the unit. A commercial/business decision taken by the board and approved by the majority shareholders cannot be impugned by shareholders holding minimal shares in the company as held in Gopal Das Gujarati v. Titagarh Paper Mills Co. Ltd. [1986] 60 Comp Cas 920 (Cal) with which we fully agree.
20. In view of our findings that the explanatory statement did not suffer from any infirmities and that the petitioners have not established with full particulars that the consideration for the unit was inadequate and that the consideration received for the unit is more than the assessment made by two independent expert valuers and that non-supply of the valuation reports does not give a right to the petitioners to challenge the sale and that a commercial/business decision taken by the board consisting of independent directors and overwhelmingly approved by the shareholders cannot be challenged by shareholders holding minimal shares, we dismiss this petition. In view of the petition having been dismissed on the merits, we are not dealing with the other submission made by Sri Sarkar on the maintainability of the petition.
21. Petition is dismissed. No order as to costs.