Case: Bajaj Auto Limited Vs. Western Maharashtra Development Corporation Limited

B.P. Colabawalla, J.1. By this Appeal, exception is taken to the order of the learned Single Judge dated 15th February 2010, under which, the learned Single Judge was pleased to set aside the arbitral award dated 14th January, 2006 passed by the Sole Arbitrator (Mr. Justice A. V. Savant).2. The arbitral award passed by the Arbitrator was in favour of the Appellant. In a nutshell, the Arbitrator held that the 27% shareholding of the Respondent (30,85,712 equity shares) in a company called Maharashtra Scooters Ltd. (MSL), are to be valued, for the purposes of sale to the Appellant, at the rate of Rs.151.63 per share as on 3rd May, 2003. MSL is jointly promoted by the Appellant and the Respondent and is a public company whose shares are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).3. Being dissatisfied with the arbitral award, the Respondent before us (original Petitioners) challenged the same before the learned Single Judge under the provisions of section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) on various grounds as set out in the Arbitration Petition. After hearing the parties, the learned Single Judge, by an elaborate and reasoned order, negated all the contentions of the Respondent, save and except one, on the basis of which the award was set aside. In a nutshell, the ground on which the award was set aside by the learned Judge was that Clause 7 of the Protocol Agreement entered into between the parties and which gave the right of first refusal to the Appellant to purchase the shareholding of the Respondent, was contrary to section 111-A of the Companies Act, 1956 (the Companies Act). The learned Judge held that the effect of Clause 7 of the said Agreement was to create a right of pre-emption between the Appellant and the Respondent for the purchase of each others shares in MSL. The learned Judge held that MSL being a public company, the Appellant and the Respondent (being shareholders), could not have a pre-emption clause inter-se between themselves as the same was violative of section 111-A(2) of the Companies Act. On that count alone the learned Judge set aside the arbitral award. Being aggrieved by this portion of the impugned order, the Appellant is in Appeal before us.4. The Cross Objections have been filed by the Respondent herein (original Petitioners) being aggrieved by the impugned order insofar as the learned Judge negated the other contentions raised by the Respondent to challenge the arbitral award. As the arguments in the Appeal as well as the Cross Objections have been heard by us at length, we will deal with the Appeal as well as the Cross Objections in this judgment. We shall first take up the contentions raised in Appeal No.153 of 2010.APPEAL NO.153 OF 20105. The brief facts that give rise to the controversy are that the Respondent (original Petitioner before the learned Single Judge) is a State Government Corporation and a wholly owned undertaking of the State of Maharashtra. As stated earlier, MSL is a listed public company incorporated and registered under the provisions of Companies Act, 1956. The equity shares of MSL are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).6. MSL was incorporated pursuant to the Protocol Agreement dated 2nd October, 1974 entered into between the Appellant and the Respondent which inter-alia provided that the Appellant would grant benefit of know-how and offer its assistance in the manufacture of two wheeler scooters to MSL and would also participate in the equity share capital of MSL on the terms and conditions as set out therein. In accordance with the terms and conditions of the said Agreement, the Respondent as of today continues to hold 27% of the equity shareholding of MSL and the Appellant continues to hold 24% thereof. The balance 49% of the equity shareholding of MSL is held by the public. The controversy in this Appeal No.153 of 2010 revolves around Clause 7 of the Protocol Agreement which inter alia provides that if either party desires to part with or transfer its shareholding or any part thereof, in the equity share capital of MSL, such party shall give first option to the other party for the purchase of such shares at such rate as may be agreed to between the parties or decided upon by arbitration. The procedure to be followed in such a situation is also set out in the said clause.7. It is the case of the Respondent that the Appellant had for the last 20 odd years repeatedly been requesting the Respondent to divest/transfer its 27% shareholding to the Appellant. On 30th June 2002, Mr. Raghuram of CRISIL carried out a valuation of the shareholding of the Respondent in MSL. It is the case of the Respondent that this valuation was done on the joint request of the Appellant and the Respondent. This of course has been disputed by the Appellant. Be that as it may, ultimately, some time in April 2003, the Respondent considered selling and transferring its 27% shareholding to the Appellant and in furtherance thereof, addressed a letter dated 9th April, 2003 offering to sell its 27% shareholding in MSL (30,85,712 shares) to the Appellant at a price of Rs.232.20 per share.8. In reply thereto, by their letter dated 3rd May, 2003, the Appellant, under clause 7 of the Protocol Agreement, confirmed their interest in buying the shareholding of the Respondent. It was however stated that the price at which the shares were offered was not acceptable to the Appellant and therefore, requested that a meeting be called for by a High Level Committee to carry out official negotiations to reach a fair and marketable settlement.9. In response thereto, the Respondent addressed a letter dated 7th May, 2003 calling upon the Appellant to confirm whether their letter dated 3rd May, 2003 was in response to the buy back by the Appellant. By their letter dated 10th May, 2003, the Appellant confirmed that their letter dated 3rd May, 2003 was a response to the offer made by the Respondent under clause 7 of the Protocol Agreement. It was stated that in the letter dated 3rd May, 2003 they had confirmed their intention to purchase the shares but the price offered was not acceptable to the Appellant and therefore, requested that a meeting be called for by the High Level Committee to negotiate the price. Thereafter, by their letter dated 6th June 2003, the Appellant reiterated that they were not agreeable to the price of Rs.232.20 per share as demanded by the Respondent and offered to purchase the 27% shareholding of the Respondent at the rate of Rs.75/- per equity share. Again, by their letter dated 31st July, 2003 the Appellant informed the Respondent that if their offer of Rs.75/- per share was not acceptable to the Respondent then arbitration be initiated in terms of clause 7 of the Protocol Agreement. It is the case of the Respondent that this correspondence clearly indicates that there was no concluded contract arrived at between the parties in respect of sale of the said shares. We will deal with this argument later in this judgment, when we deal with the Cross Objections.10. Be that as it may, as there was no agreement on the rate at which the shareholding of the Respondent would be sold to the Appellant, in terms of clause 7 of the Protocol Agreement, the Respondent addressed a letter dated 27th October, 2003 to the Arbitrator requesting him to accept his appointment as a Sole Arbitrator for the assignment to determine the value of the shares. Paragraphs 2 & 4 of the said letter read as under:-As per the Protocol Agreement, the Corporation has to make the first offer to Bajaj Auto Ltd. And in turn Bajaj Auto Ltd. has to accept or reject that offer. This process has been completed and since no agreement has been reached on the value of the share, as per the Agreement, the parties involved have to proceed to appoint a Sole Arbitrator for the purpose.............You are, therefore, requested to be kind enough to kindly forward your acceptance to be appointed as the Sole Arbitrator for this assignment and also communicate the retainer-ship charges and venue suitable to you for the purpose of Arbitration. The detail Terms of Reference would be communicated to you later.(emphasis supplied)11. Pursuant thereto, on 29th December, 2003 a joint reference was made to the Arbitrator to decide the rate at which the shares of the Respondent would be sold to the Appellant. This joint reference has been signed by the Appellant as well as the Respondent. The said letter reads as under:-Dear Sir,We thank you for consenting to be appointed as the Sole Arbitrator in the MSL arbitration assignment. We are outlining below the terms of reference, in this matter.1. The appointment of Sole Arbitrator is made jointly by BAL and WMDC, in terms of the Clause No.7 of the Protocol Agreement dated 2 October 1974, between WMDC and BAL, the co-promoters of MSL.2. BAL had expressed its willingness to buy the stake held by WMDC in MSL. WMDC had indicated its desire to sell its shareholding in MSL. However, price per share remained in dispute and hence in accordance with clause no.7 of the protocol agreement, the question of rate for the purchase by BAL of equity shares in MSL held by WMDC is hereby referred to the Sole Arbitrator.3. The Arbitrator shall take into account the Protocol Agreement covenants and all other concerned factors which may have impact on the share price of MSL shares, while giving his arbitral award.4. The arbitral award will be final and binding on both parties.5. The Arbitrator is requested to give his award within a period of 3 months from the date of this terms of reference.6. Arbitration proceedings will be held in Mumbai.7. Cost of Arbitration shall be fixed by the Arbitration Tribunal in accordance with Sec. 31(8) of the Arbitration and Conciliation Act 1996. These costs will be shared equally by BAL and WMDC.8. BAL and WMDC will be happy to provide any information as may be required by the Arbitrator.(emphasis supplied)12. Pursuant to the aforesaid joint reference, parties appeared before the Arbitrator and led the necessary evidence. The Respondent had also challenged the jurisdiction of the Arbitrator. The Arbitrator, after considering the challenges and the evidence, by a detailed award, held in favour of the Appellant and declared that the 30,85,712 equity shares of MSL held by the Respondent (its 27% shareholding) and valued as on 3rd May 2003, are to be sold to the Appellant at a price of Rs.151.63 per share.13. Being aggrieved by the aforesaid award, the Respondent challenged the same before this Court under the provisions of section 34 of the Arbitration and Conciliation Act, 1996. As stated earlier, the learned Single Judge negated all the contentions of the Respondent herein save and except one, on the basis of which the award was set aside. Before the learned Single Judge, there was a challenge to the legality of clause 7 of the Protocol Agreement. The submission of the Respondent before the learned Single Judge was that clause 7 created a right of pre-emption, and MSL being a listed public company, section 111-A of the Companies Act 1956 was thereby violated. It was the submission of the Respondent that section 111-A provides that the shares or debentures of a public company and any interest therein shall be freely transferable. It was the further submission of the Respondent that section 9 of the Companies Act further provides that the provisions of the Companies Act shall have effect notwithstanding anything to the contrary contained in the Memorandum and Articles of Association of the company. It was therefore submitted that a pre-emption right recognised by clause 7 of the Protocol Agreement, and which was then incorporated in the Articles of Association of MSL, must yield to the provisions of section 111-A of the Companies Act. In other words, it was submitted that clause 7 of the Protocol Agreement being contrary to the provisions of the Companies Act, was unenforceable. The learned Single Judge, after hearing the parties, upheld this contention of the Respondent and set aside the arbitral award on this sole ground. Being aggrieved by this part of the impugned order, the Appellant has filed the present Appeal (Appeal No.153 of 2010) before us.14. In this Appeal, the real controversy revolves around clause 7 of the Protocol Agreement and whether it impinges on the free transferability of shares of a public company as contemplated under section 111-A of the Companies Act. Mr Chinoy, learned Senior Counsel appearing on behalf of the Appellant, submitted that clause 7 of the Protocol Agreement did not in any way impinge on the free transferability of shares as contemplated under section 111-A of the Companies Act. According to Mr Chinoy, the provisions of section 111-A were not directed against and did not restrict or affect a shareholders right to deal with his own shares and enter into consensual arrangements in relation thereto by way of sale, pledge or pre-emption. The provisions of section 111-A were really speaking, to ensure that the Board of Directors of a public company cannot refuse transfer of shares except as specified in the section. He submitted that an agreement voluntarily entered into by a shareholder of a public company regarding its own shares, was not within the purview of nor affected by section 111-A(2) of the Companies Act or its predecessor viz. section 22-A(2) [as it then stood before its deletion] of the Securities Contracts (Regulation) Act 1956. In support of the aforesaid submissions, Mr Chinoy placed heavy reliance on a Division Bench judgment of this Court in the case of Messer Holdings Ltd. v/s S.M. Ruia and others.(2010 (59) Company Cases 29 (Bom).)He submitted that in the aforesaid judgment, the order impugned in this Appeal, has been specifically considered and the Division Bench has expressly disagreed with/overruled the view expressed by the learned Single Judge in the order impugned before us. He therefore submitted that the impugned order was clearly erroneous and requires interference in appeal in so far as it sets aside the award on the ground that clause 7 of the Protocol Agreement impinges upon the principles of free transferability of shares as contemplated under section 111-A of the Companies Act.15. On the other hand, Mr Khambatta, learned Senior Counsel appearing on behalf of the Respondent, submitted that clause 7 of the Protocol Agreement and which was thereafter incorporated in the Articles of Association of MSL, was a highly restrictive pre-emptive clause that caused great fetters on the right of free transferability found in any ordinary pre-emption clause. He submitted that (i) clause 7 fetters the right of the Respondent to sell its shares to any other person including any other existing member of MSL, without offering the same to the Appellant; (ii) allows the Appellant to purchase the shares of the Respondent without accepting the price at which the shares were offered but at a price to be determined or fixed by arbitration. Such a provision, according to Mr. Khambatta, was therefore undoubtedly a fetter on the right of the Respondent to freely transfer its shares to a person of its choice and at a price of its choice and therefore clearly impinged upon the provisions of section 111-A(2) of the Companies Act, which contemplated free transferability of shares.16. Mr. Khambatta further submitted that since the Protocol Agreement was incorporated in the Articles of Association of MSL, upon incorporation of MSL and registration of its Articles of Association, the Protocol Agreement stood subsumed in its Articles. Hence, on 29th December 2003, which is the date of reference to arbitration, clause 7 of the Protocol Agreement was nothing but a part and parcel of Articles of Association of MSL. He submitted that Indian law has always prohibited restrictions on free transferability of shares of a public company. In support of this argument, Mr Khambatta placed reliance on sections 3(1)(iii), 3(1) (iv) and section 43A of the Companies Act. He also placed reliance on the following judgments:-1. Needle Industries (India) Ltd. and others v/s Needle Industries Newey (India) Holding Ltd. and others;(1981) 3 SCC 333 )2. Darius Rutton Kavasmaneck v/s Gharda Chemicals Ltd. and others;(Judgment of the Supreme Court dated 28.10.2014 in Civil Appeal No.2481 of 2014)3. V.B. Rangaraj v/s V.B. Gopalkrishnan and others;(1992) 1 SCC 160 ) and4. Pushpa Katoch v/s Manu Maharani Hotels Ltd. and others.(2005 (83) DRJ 246 (Delhi High Court).17. Mr Khambatta submitted that the above provisions of the Companies Act, as interpreted by the Supreme Court, would reveal that:-(i) the Articles of a private company must contain a restriction on free transferability of its shares, a section 43A company may contain such a restriction in its Articles, whereas the Articles of a public company cannot contain any restriction on free transferability;(ii) unless restrictions on transferability are incorporated into the Articles, shares by their very nature remain freely transferable;(iii) no extraneous restrictions such as restrictions in a separate / private agreement is valid or enforceable even in a private company, let alone a public company;(iv) a public company is prohibited from incorporating any restriction on transferability of its shares in its Articles, and the said shares must necessarily remain freely transferable and cannot be subjected to any restriction.18. Mr Khambatta additionally submitted that a pre-emption clause or what is some time known as a right of first refusal (ROFR clauses), is a classic restriction on transferability. He submitted that a pre-emption clause is one of the most common restrictions found in the Articles of a private company and since such a clause qualifies as a restriction on transferability for the purpose of validly incorporating a private company, it must necessarily amount to a restriction in the context of a public company. If this be the case, once a pre-emption clause is held to be a restriction on transferability, it would clearly impinge on the provisions of section 111A(2), was the submission of Mr Khambatta. In light of the above, Mr Khambatta submitted that clause 7 of the Protocol Agreement and which was subsequently incorporated in the Articles of MSL, restricts the shareholders of MSL to sell its shares to buyers of its choice, and at a price of its choice, and thereby would undoubtedly be a restriction on its transferability. This being the case, he submitted that the said clause was invalid and unenforceable.19. In the alternative, Mr Khambatta submitted that even assuming that the Protocol Agreement survived as an independent contract after it was incorporated in the Articles of MSL, it would make no difference to his submissions. He submitted that if something cannot be done directly, it also cannot be done indirectly. Once a restriction on transferability of shares in the Articles of a public company is invalid and unenforceable, the identical restriction cannot be permitted to re-emerge in a different avatar. Whether clause 7 is held as a part of the Articles of MSL, or a part of a free standing agreement, it remains equally restrictive and hence invalid and unenforceable. For all the aforesaid reasons, Mr Khambatta submitted that the order of the learned Single Judge cannot be faulted and the same requires no interference by us in Appeal.20. As stated earlier, the real controversy in this Appeal revolves around clause 7 of the Protocol Agreement and whether it impinges on free transferability under section 111-A of the Companies Act. Clause 7 of the Protocol Agreement reads as under :-7. If either party desires to part with or transfer its shareholding or any part thereof in the equity share capital of Maharashtra Scooters Ltd., such party shall give first option to the other party for the purchase of such shares at such rates as may be agreed to between the parties or decided upon by arbitration. The party desiring to part with or transfer its shares or any part thereof shall give to the other party a written notice of such intention specifying the number of shares and the rate at which it is willing to sell the same and if the other party within 30 days of the receipt of such notice, agrees, to such proposal for purchase of such shares, the party giving the notice shall be bound to sell and transfer such shares to the other party at the rate specified in such notice. If the other party is willing to purchase the shares but considers the rate proposed to be too high or unacceptable, it shall within 30 days from the receipt of the notice, give written intimation to the party giving notice of its intention to purchase the shares and the question of rate shall be referred to arbitration of a sole arbitrator if agreed to by both the parties or two arbitrators one to be appointed by each party in accordance with the provisions of the Indian Arbitration Act. If the party receiving a notice within 30 days of its receipt, fails to accept the proposal for purchase of the shares, the party giving the notice will be free to sell the shares to any other party but only at a rate not less than the rate specified in such notice.(emphasis supplied)21. Clause 7 of the Protocol Agreement inter alia provides that if either party desires to part with or transfer its shareholding or any part thereof in the equity share capital of MSL, such party shall give first option to the other party for the purchase of such shares at the agreed price, or in the absence of such agreement, decided upon by arbitration. The party desiring to part with or transfer its shareholding or any part thereof, is required to give written notice to the other party specifying its intention to do so and the rates at which it is willing to transfer / part with the same. Once this is done, clause 7 envisages 3 scenarios. (1) If the other party within 30 days of receipt of such notice agrees to such proposal, the party giving the notice is bound to sell such shares at the rate specified in the notice. (2) If the other party is willing to purchase the shares but considers the rate proposed in the notice as too high or unacceptable, it would communicate its intention to purchase the shares within 30 days from receipt of the notice and the question of rate is to be referred to arbitration. (3) If the other party, on receiving the notice to purchase the shares, fails to accept the said proposal within 30 days of its receipt, the party giving the notice is free to sell the shares to any other person, but only at a rate not less than the rate specified in such notice.22. Having said this, we shall now turn our attention to certain statutory provisions. Before we deal with the provisions of section 111-A, we must make a note of the provisions of section 22-A of the Securities Contracts (Regulation) Act, 1956 which was inserted in the said Act by the Securities Contracts (Regulation) (Amendment) Bill, 1985 and was a predecessor to section 111-A of the Companies Act. Section 22-A as introduced by the said Amendment Bill read as under:-22-A. Free transferability and registration of transfers of listed securities of companies.-(1) In this section, unless the context otherwise requires,-(a) company means a company whose securities are listed on a recognised stock exchange;(b) security means security of a company, being a security listed on a recognised stock exchange but not being a security which is not fully paid up or on which the company has a lien;(c) all other words and expressions used in this section and not defined in this Act but defined in the Companies Act, 1956 (1 of 1956) shall have the same meanings as are assigned to them in that Act.(2) Subject to the provisions of this section, securities of companies shall be freely transferable.(3) Notwithstanding anything contained in its articles or in Section 82 or Section 111 of the Companies Act, 1956 (1 of 1956), but subject to the other provisions of this section, a company may refuse to register the transfer of any of its securities in the name of the transferee on any one or more of the following grounds and on no other ground, namely:-(a) that the instrument of transfer is not proper or has not been duly stamped and executed or that the certificate relating to the security has not been delivered to the company or that any other requirement under the law relating to registration of such transfer has not been complied with;(b) that the transfer of the security is in contravention of any law;(c) that the transfer of the security is likely to result in such change in the composition of the Board of Directors as would be prejudicial to the interests of the company or to the public interest;(d) that the transfer of the security is prohibited by any order of any court, tribunal or other authority under any law for the time being in force.(4) A company shall, before the expiry of two months from the date on which the instrument of transfer of any of its securities is lodged with it for the purposes of registration of such transfer, not only form, in good faith, its opinion as to whether such registration ought not or ought to be refused on any of the grounds mentioned in sub-section (3) but also-(a) if it has formed the opinion that such registration ought not to be so refused, effect such registration;(b) if it has formed the opinion that such registration ought to be refused on the ground mentioned in clause (a) of sub-section (3), intimate the transferor and the transferee by notice in the prescribed form about the requirements under the law which has or which have to be complied with for securing such registration; and(c) in any other case, make a reference to the Company Law Board and forward copies of such reference to the transferor and the transferee.(5) Every reference under clause (c) of sub-section (4), shall be in the prescribed form and contain the prescribed particulars and shall be accompanied by the instrument of transfer of the securities to which it relates, the documentary evidence, if any, furnished to the company along with the instrument of transfer, and evidence of such other nature and such fees as may be prescribed.(6) On receipt of a reference under sub-section (4), the Company Law Board shall, after causing reasonable notice to be given to the company and also to the transferor and the transferee concerned and giving them a reasonable opportunity to make their representations, if any, in writing by order direct either that the transfer shall be registered by the company or that it need not be registered by it.(7) Where on a reference under sub-section (4) the Company Law Board directs that the transfer of the securities to which it relates-(a) shall be registered by the company, the company shall give effect to the direction within ten days of the receipt of the order as if it were an order made on appeal by the Company Law Board in exercise of the powers under Section 111 of the Companies Act, 1956 (1 of 1956);(b) need not be registered by the company, the company shall, within ten days from the date of such direction, intimate the transferor and the transferee accordingly.(8) If default is made in complying with the provisions of this section, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees.(9) If in any reference made under clause (c) of sub-section (4) of this section, any person makes any statement-(a) which is false in any material particular, knowing it to be false; or(b) which omits any material fact knowing it to be material,he shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.(10) For the removal of doubts, it is hereby provided that nothing in this section shall apply in relation to any securities the instrument of transfer in respect whereof has been lodged with the company before the commencement of the Securities Contracts (Regulation) Amendment Act, 1985.(emphasis supplied)23. The statement of objects and reasons indicate that the purpose for incorporating section 22-A in the Securities Contracts (Regulation) Act, 1956 was that at the said time, sections 82 and 111 of the Companies Act, 1956 permitted the Board of Directors of companies to assume powers under the Articles of Association to refuse registration of transfer of securities without assigning any reason. Though there was a provision for an appeal to the Company Law Board against such refusal, it placed an undue burden on an aggrieved person who often happened to be a small investor. The Legislature also felt that the position at that time was not conducive to free marketability of listed securities and healthy growth of the capital markets. In view thereof, the Legislature felt that unrestricted transferability was particularly necessary for securities of public companies which are listed on the Stock Exchanges. It was in this context that the Legislature proposed the amendment to the Securities Contracts (Regulation) Act, 1956 by insertion of section 22-A, to ensure free transferability of securities of public companies whose securities were listed on the Stock Exchanges.24. On a reading of section 22-A as it stood then, it is clear that the provisions therein applied only to public companies whose shares were listed on the recognised Stock Exchanges. The provision in section 22-A(2) that securities of public companies shall be freely transferable, was made only as the basis for the consequential provisions in sections 22-A(3) to (9) to provide for free transferability by restricting the entitlement of public companies (through their Board of Directors) to refuse registration of transfers only in four stipulated circumstances [section 22-A sub-section (3)]. This is also borne out by the statement of objects and reasons discussed above. In other words, section 22-A(2) provided for free transferability and the actual steps taken to provide for the same were set out in sections 22-A(3) to (9).25. The wordings of section 22-A as well as the objects and reasons discussed above make it clear that section 22-A was introduced to ensure that the Board of Directors of public companies exercising powers under its Articles of Association, do not place an undue burden on small investors by refusing to transfer shares without assigning any reason. In light of the language of section 22-A as well as the statement of objects and reasons, we do not read section 22-A(2) to mean that it would affect the right of individual shareholders to deal with their own shares on such terms and conditions as they deem fit or to enter into any consensual arrangement / agreement regarding their own shares by way of sale, pledge, pre-emption or otherwise.26. Once the context in which section 22-A had been inserted is understood, it cannot be said that two individual shareholders entering into a consensual agreement to deal with their shares in a particular manner, either in presenti or at a future date, would impinge or violate the concept of free transferability as contemplated under section 22-A(2). The purpose of the said provision, as we understand it, was to ensure that the Board of Directors of the company cannot refuse transfer of shares except on the grounds specified in the said section. This does not mean that if an individual shareholder enters into a separate agreement with another shareholder to deal with his specified shares in a particular manner, the same would violate the concept of free transferability as envisaged under section 22-A.27. We have come to this conclusion because we find that shares of a company are movable property and the right of the shareholder to deal with his shares and / or to enter into contracts in relation thereto (either by way of sale, pledge, pre-emption etc.), is nothing but a shareholder exercising his property rights. Such contracts voluntarily entered into by a shareholder for his own shares giving rights of pre-emption to a third party/another shareholder, cannot constitute a restriction on free transferability as contemplated under section 22-A. In fact, such contracts (either by way of sale, pledge or pre-emption ) are entered into by a shareholder in exercise of his right to freely deal with and / or transfer his own shares.28. Having said this, we now turn our attention to section 111-A of the Companies Act. By the Depositories Act, 1996 the entire scheme/provisions of section 22-A of the Securities Contracts (Regulation) Act, 1956 were deleted and simultaneously section 111-A was inserted in the Companies Act. For ready reference, section 111-A as it stood prior to its amendment in 2003, reads thus:-111-A. Rectification of register on transfer.-(1) In this section, unless the context otherwise requires, company means a company other than a company referred to in sub-section (14) of Section 111 of this Act.(2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable:Provided that if a company without sufficient cause refuses to register transfer of shares within two months from the date on which the instrument of transfer or the intimation of transfer, as the case may be, is delivered to the company, the transferee may appeal to the Company Law Board and it shall direct such company to register the transfer of shares.(3) The Company Law Board may, on an application made by a depository, company, participant or investor or the Securities Exchange Board of India, if the transfer of shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulations made there-under, or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), or any other law for the time being in force, within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of the transmission was delivered to the company, as the case may be, after such inquiry as it thinks fit, direct any depository or company to rectify its register or records.(4) The Company Law Board while acting under sub-section (3), may at its discretion make such interim order as to suspend the voting rights before making or completing such enquiry.(5) The provisions of this section shall not restrict the right of a holder of shares or debentures, to transfer such shares or debentures and any person acquiring such shares or debentures shall be entitled to voting rights unless the voting rights have been suspended by an order of the Company Law Board.(6) Notwithstanding anything contained in this section, any further transfer, during the pendency of the application with the Company Law Board, of shares or debentures shall entitle the transferee to voting rights unless the voting rights in respect of such transferee have also been suspended.(7) The provisions of sub-sections (5), (7), (9), (10) and (12) of Section 111 shall, so far as may be, apply to the proceedings before the Company Law Board under this section as they apply to the proceedings under that section.(emphasis supplied)By the amendment in 2003, the words Company Law Board appearing in section 111-A were substituted with the word Tribunal. However, this amendment is not germane for the purposes of the present Appeal.29. On reading section 111-A four things become clear. Firstly, unless the context otherwise requires, it applies only to public companies [sub-section (1) read with section 111(14). Secondly, subject to the other provisions of section 111-A, the shares or debentures and any interest therein of a company shall be freely transferable [sub-section (2). Thirdly, if a company, without sufficient cause, refuses to register transfer of shares within two months from the date on which the instrument of transfer or the intimation of transfer, as the case may be, is delivered to the company, the transferee may appeal to the Company Law Board and the Company Law Board shall thereafter direct such company to register the transfer of shares (proviso to sub-section (2)). In other words, the company cannot refuse transfer of shares without sufficient cause. Fourthly, if the transfer of shares or debentures is in contravention of any of the provisions of SEBI Act, 1992 or SICA, 1985 or any other law for the time being in force, then the company Law Board may, after such inquiry as it thinks fit, on an application made by the depository or company or participant or investor or the Security Exchange Board of India, direct any depository or company to rectify its register of records (sub-section (3)). Sub-sections (4), (5), (6) and (7) are not really germane to the issue involved in this Appeal.30. As stated earlier, section 22-A was inserted in the Securities Contract (Regulation) Act, 1956 which inter alia provided that subject to the provisions of that section, the securities of public companies would be freely transferable and the company could refuse the transfer only on four specific grounds as set out in subsection (3) thereof. It thus follows that the provisions of section 22-A were intended to regulate the right of the Board of Directors of public companies whose securities were listed on the stock exchange to refuse transfer of shares. The provisions of the said section was not to restrict the rights of the shareholders to deal with their shares or to enter into consensual agreements/arrangements regarding their shares either by way of pledge, sale, pre-emption or otherwise. We find that even the sweep of section 111-A of the Companies Act is the same as section 22-A of the Securities Contracts (Regulation) Act, 1956. Sub-section (2) opens with the expression subject to the provisions of this section. In other words, it is a provision re-stating that the shares or debentures and any interest therein of a company shall be freely transferable subject, however, to the other provisions of section 111-A. The proviso to sub-section (2) reinforces that section 111-A is to regulate the powers of the Board of Directors of the company regarding transfer of shares or debentures or any interest therein of a company. As set out in the proviso to subsection (2), the Board of Directors can refuse to register transfer of shares only if sufficient cause to do so is made out. Section 111-A and more particularly sub-section (2) thereof, is not a provision to curtail the rights of the shareholders to enter into a consensual agreement/arrangement with a purchaser in relation to their specific shares. The right to enter into a consensual agreement/arrangement must prevail so long as it is in conformity with the Articles of Association, the provisions of the Companies Act and Rules, and other governing laws. Therefore, the expression freely transferable appearing in sub-section (2) of section 111-A cannot be construed to mean that it also intends to take away the right of shareholders to enter into consensual agreements/arrangements with the purchaser in relation to their specific shares.31. We are of the view that if the legislature intended to take away that right, it would have made an express provision in that regard. It is now quite well settled by the Supreme Court that the Legislature does not interfere with the freedom of contract generally except when warranted by public policy and the Legislative intent in that regard is expressly made manifest. [See Byram Pestonji Gariwala Vs. Union Bank of India (1992) 1 SCC 31 ]. The Supreme Court has also further expounded that while enacting a statute, Parliament cannot be presumed to have taken away the right in property and deprivation of a legal right existing in favour of a person. [See ICICI Bank Ltd. Vs. SIDCO Leathers Ltd (2006) 10 SCC 452 ].32. The concept of free transferability would mean that a shareholder has the freedom to transfer his shares on terms defined by him, provided the terms are consistent with the Articles of Association as well as the Companies Act and Rules and other governing laws. The fact that the shares of a public company can be subscribed to by the public, unlike in the case of a private company, does not in any way whittle down the right of a shareholder of a public company to arrive at a consensual agreement/arrangement (either by way of sale, pledge, pre-emption etc.) with a third party or another shareholder, which is otherwise in conformity with the Articles of Association, the Companies Act and Rules, and any other governing laws.33. Whilst taking this view, we are supported by a judgment of the Division Bench of this Court in the case of Messer Holdings Ltd.(Supra) In the facts of that case also there was a similar clause (clause 6.1) as the one in the present case (clause 7) and the shares under dispute were of a public company. Clause 6.1 in the facts of that case also provided that neither party shall sell any shares in the company held or acquired by it without first offering the shares to the other party. The offer was to be in writing and was to set out the price and other terms and conditions. In the event the offeree did not agree to purchase the shares so offered, the offerer was free to sell the shares to any person (other than a competitor of the offeree), but at the same price and on the same terms and conditions as offered to the offeree. The identical argument that was made before us was also made before the Division Bench in Messer Holdings Ltd.(Supra) It was contended before the Division Bench that by virtue of section 111-A of the Companies Act, clause 6.1 itself was illegal and void, as it infracted the principle of free transferability of shares as set out in section 111-A(2). After considering the provisions of section 22-A of the Securities Contracts (Regulation) Act, 1956 (as it stood prior to its deletion), as well as the provisions of section 111-A of the Companies Act, the Division Bench of this Court negated the aforesaid contention. In paragraph 51 of the judgment, after reproducing section 111-A, the Division Bench held as under:-Even the sweep of Section 111-A is the same as Section 22 A of the Securities Contracts Act. In that, it is a provision regarding rectification of register on transfer. Sub-Section (2) opens with the expression subject to the provisions of this section In other words, it is a provision restating that the shares or debentures and any interest therein of a company shall be freely transferable subject, however, to the stipulation provided in the other part of Section 111-A of the Act. The proviso to subsection (2) reinforces the position that Section 111-A is to regulate the powers of the Board of Directors of the company regarding transfer of shares or debentures and any interest therein of a company. The Board of Directors cannot refuse to register transfer of shares unless there is sufficient cause to do so. In other words, the setting in which Section 111-A is placed in part IV of the Act under heading transfer of shares and debentures it is not a provision to curtail the rights of the shareholders to enter into consensual arrangement with the purchaser of their specific shares. The right to enter into consensual arrangement must prevail so long as it is in conformity with the terms of Articles of Association and other provisions of the Act and the Rules. Whereas, Section 111-A is a provision mandating the Board of Directors of the company to transfer shares in the name of the transferee, subject to the stipulations in Section 111-A of the Act. The expression freely transferable therein is in the context of the mandate against the Board of Directors to register the transfer of specified shares of the members in the name of the transferee, unless there is sufficient cause for not doing so. The said provision cannot be construed to mean that it also intends to take away the right of the shareholder to enter into consensual arrangement/agreement with the purchaser of their specific shares. If the legislature intended to take away that right of the shareholder, it would have made an express provision in that regard. Reliance has been rightly placed on the decision of the Apex Court in the case of Byram Pestonji Gariwala (supra) which takes the view that the freedom of contract generally, the legislature does not interfere except when warranted by public policy, and the legislative intent is expressly made manifest Even in the case of ICICI Bank Ltd. (supra), the Apex Court has in unmistakable terms expounded that while enacting a Statute, Parliament cannot be presumed to have taken away a right in property and deprivation of legal right existing in favour of a person. That cannot be presumed in construing the Statute. In fact, it is the other way round and a contrary presumption must be raised. The concept of free transferability of shares of a public company is not affected in any manner if the shareholder expresses his willingness to sell the shares held by him to another party with right of first purchase (preemption) at the prevailing market price at the relevant time. So long as the member agrees to pay such prevailing market price and abides by other stipulations in the Act, Rules and Articles of Association there can be no violation. For the sake of free transferability both the seller and purchaser must agree to the terms of sale. Freedom to purchase cannot mean obligation on the shareholder to sell his shares. The shareholder has freedom to transfer his shares on terms defined by him, such as right of first refusal, provided the terms are consistent with other regulations including to repurchase the shares at the prevailing market price when such offer is made. The fact that shares of public company can be subscribed and there is no prohibition for invitation to the public to subscribe to shares, unlike in the case of private company, does not whittle down the right of the shareholder of a public company to arrive at consensual agreement which is otherwise in conformity with the extant regulations and the governing laws.(emphasis supplied)We are in full agreement with the aforesaid reasoning of the Division Bench.34. It is important to note that the judgment and order impugned before us was also relied upon by one of the parties before the Division Bench in Messer Holdings Ltd.(Supra) After dealing with the same in great detail, the Division Bench at paragraph 57 expressly disagreed with the reasoning given in the judgment and order impugned before us. The relevant portion reads thus:-57. The Learned Single Judge has then distinguished the exposition in Madhusoodhanans case on the basis that the Karar referred to therein was an agreement between particular shareholders relating to the transfer of the specified shares. It is noted that in that case the company was a private company and restriction on the right of the shareholders to transfer shares and prohibit invitation to the public to subscribe for shares and debentures of the company is materially different. The main thrust is that in case of public company there can be no restriction whatsoever and if any other argument was to be accepted, it would mean that Section 111-A is being read as being subject to a contract to the contrary. The notification dated June 27, 1961 has been discarded on the opinion that, that cannot have any bearing in relation to Section 111-A of the Companies Act as it is issued in exercise of powers under Depositories Act, 1996. With utmost humility at our command, we do not agree with this reasoning of the Learned Single Judge in the case of WMD Corporation Ltd. (supra) for the reasons recorded hitherto.(emphasis supplied)35. Faced with the judgment in Messer Holdings Ltd., Mr. Khambatta, the learned senior counsel appearing on behalf of the Respondent, submitted that whether a particular clause was a restriction on transferability of shares had to be necessarily decided on a case to case basis. He submitted that the facts in the case of Messer Holdings Ltd.(Supra) were materially different than the ones before us. The first distinguishing feature he pointed out was that, under Clause 6.1 in Messer Holdings Ltd., there was no restriction on price whereas Clause 7 of the Protocol Agreement before us compelled the Respondent to sell the shares at a price not determined by the Respondent but determined through the process of arbitration. According to Mr Khambatta, this was a very significant distinguishing feature. We cannot agree. We do not think that this distinguishing feature can make any difference to the ratio laid down in Messer Holdings Ltd. Once it is held that consensual agreements/arrangements entered into by the shareholders of a public company with a third party regarding his own specified shares (either by way of sale, pre-emption or otherwise), do not impinge on free transferability of shares as contemplated under section 111-A, this so called distinction pails into insignificance. If the parties are free to enter into a consensual arrangement which does not infract free transferability as contemplated under section 111-A, we see no reason to hold that merely because the price of the shares is to be determined by the process of arbitration, the same would to be in violation of section 111-A. The fact that the price of the shares is to be determined by the process of arbitration is also a term of the very same consensual arrangement which is not violative of the provisions of section 111-A(2). We, therefore, find no substance in this argument.36. The second distinguishing feature that Mr. Khambatta sought to highlight is that in the facts of our case, this consensual arrangement as set out in clause 7 of the Protocol Agreement was also incorporated in Articles of Association of MSL whereas that was not the case before the Division Bench in the case of Messer Holdings Ltd. In furtherance of this argument, Mr. Khambatta submitted that the Protocol Agreement and more particularly Clause 7 thereof, was incorporated into the Articles of MSL and was therefore subsumed therein and did not independently survive. Once it was subsumed in the Articles and the same could not be incorporated the Articles of a public company, the same could not re-emerge in a different avatar, was the submission. We cannot agree with this argument. Merely because the Protocol Agreement was incorporated into the Articles of MSL, does not mean that the Protocol Agreement by itself (or clause 7 thereof) ceased to exist. The Protocol Agreement governs the rights and liabilities of the parties thereto and would continue notwithstanding the fact that they were incorporated in the Articles of MSL. Therefore, even if we are to assume that such a clause was not permissible in the Articles of a public company, that would not in any way destroy the rights created under the said Agreement inter-se between the parties. The rights and liabilities created under the said Protocol Agreement would continue to bind the parties thereto. Even if we are to hold that the company (namely MSL) was not bound by the terms of the Protocol Agreement, it would only mean that if the Respondent sought to sell their shareholding in breach of Clause 7 of the Protocol Agreement, the company (MSL) would not be in a position to refuse such transfer, in the absence of any Court or other judicial authority granting an injunction restraining it from doing so. This does not mean that the parties to the Protocol Agreement cannot, in appropriate proceedings, seek to enforce its terms. It is one thing to say that the said clause will not bind the company and it is wholly another to contend that the said clause would not bind the parties thereto. We are, therefore, of the view that notwithstanding the fact that the Protocol Agreement was incorporated in the Articles of Association of MSL, the same would not change the nature of that agreement namely being a consensual agreement/arrangement entered into between the parties determining the manner in which each party is allowed to dispose of its particular shareholding. At the highest and assuming everything in favour of the Respondent, it could be only be held that such a clause would not bind the company. However, it would certainly bind the parties to the Protocol Agreement. We, therefore, find no substance in this argument.37. Even otherwise, we find force in the argument of Mr. Chinoy that such a clause (clause 7), even if incorporated in the Articles of Association of a public company, would not in any way violate the principles of free transferability of shares as contemplated under section 111-A of the Companies Act. Clause 7 of the Protocol Agreement and which finds place in the Articles of MSL by virtue of incorporation of the Protocol Agreement in its Articles, only sets out how the Respondent and the Appellant are to deal with their respective shareholdings. It is not a blanket pre-emption clause which binds all the shareholders of MSL to sell their shares only to other members of MSL, which clauses are incorporated in the Articles of Association of a private company. Pre-emption clauses in the Articles of a private company are in the nature of a blanket restriction on all its members, and such clauses if incorporated in the Articles of a public company would certainly amount to a restriction on free transferability of shares as envisaged under section 111-A. However, that is not the case before us. Clause 7 of the Protocol Agreement and which has been incorporated in the Articles of Association of MSL, only relates to the shareholding of the Appellant and the Respondent and their rights and liabilities in relation thereto. It does not in any way affect the rights and/or liabilities of the other members of MSL. In this view of the matter, we are of the view that merely because Clause 7 of the Protocol Agreement was incorporated in the Articles of MSL, would not invalidate the same. We are also persuaded to take this view because we find that in todays global reality, joint ventures are extremely common and clauses similar to Clause 7 of the Protocol Agreement may become necessary to ensure that a joint promotor of a company does not sell his shareholding to a competitor who then possibly could get control of his rival. In this view of the matter and looking to the totality of the facts and circumstances of the case, we are clearly of the view that Clause 7 of the Protocol Agreement does not in any way impinge upon the principle of free transferability of shares as contemplated under section 111-A of the Companies Act, 1956.38. We must also mention here that agreements like the one contained in clause 7 of the Protocol Agreement before us, have now been expressly made a part of section 58 of the Companies Act, 2013. Section 58 of the Companies Act, 2013 reads as under:-58. Refusal of registration and appeal against refusal.-(1) If a private company limited by shares refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any securities or interest of a member in the company, it shall within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.(2) Without prejudice to sub-section (1), the securities or other interest of any member in a public company shall be freely transferable:Provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract.(3) The transferee may appeal to the Tribunal against the refusal within a period of thirty days from the date of receipt of the notice or in case no notice has been sent by the company, within a period of sixty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was delivered to the company.(4) If a public company without sufficient cause refuses to register the transfer of securities within a period of thirty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, is delivered to the company, the transferee may, within a period of sixty days of such refusal or where no intimation has been received from the company, within ninety days of the delivery of the instrument of transfer or intimation of transmission, appeal to the Tribunal.(5) The Tribunal, while dealing with an appeal made under subsection (3) or sub-section (4), may, after hearing the parties, either dismiss the appeal, or by order-(a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within a period of ten days of the receipt of the order; or(b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved.(6) If a person contravenes the order of the Tribunal under this section, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.(emphasis supplied)39. Sub-section (2) of section 58 specifically provides that without prejudice to sub-section (1), the securities or other interest of any member in a public company shall be freely transferable. However, the proviso to the said section stipulates that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract. Before the Companies Act, 2013 came into force, the 57th Report of the Parliamentary Standing Committee on the Companies Bill 2011, at pg. 86 thereof, noted that the proviso to section 58 simply seeks to codify the pronouncements made by various Courts holding that contracts relating to transferability of shares of a company entered into by one or more shareholders of a company (which may include promoter or promoter group as a shareholder) shall be enforceable under law. Keeping in line with the proviso to section 58(2) of the Companies Act 2013, the Securities And Exchange Board of India has also issued a notification dated 3 October 2013 being Notification No.LAD-NRO/GN/2013-14/26/6667 which declares that no person in the territory to which the Securities Contracts (Regulation) Act, 1956 extends, shall save with the permission of the Board, enter into any contract for sale or purchase of securities other than a contract falling under any one or more of the following namely:(a) Spot delivery contract;(b) contracts for sale or purchase of securities or contracts in derivatives, as are permissible under the said Act or the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the rules and regulations made under such Acts and rules, regulations and bye-laws of a recognized stock exchange;(c) contracts for pre-emption including right of first refusal, or tag-along or drag-along rights contained in shareholders agreements or articles of association of companies or other body corporate;(d) ............................40. On reading section 58 and the above Notification issued by the Securities and Exchange Board of India, we are of the view that section 58 merely clarifies and codifies the existing legal position regarding such pre-emption agreements. In other words, what was implicit in the provisions of section 111A of the Companies Act, 1956 has now been made explicit in section 58 of the Companies Act, 2013.41. For all the reasons set out earlier in this judgment, and coupled with the fact that the reasoning given in the impugned order before us has been specifically disagreed with by another Division Bench of this Court in the case of Messer Holdings Ltd.,(Supra) we are unable to uphold the order of the learned Single Judge insofar as it set aside the impugned award on the ground that Clause 7 of the Protocol Agreement imposed a restriction on free transferability of shares as contemplated under section 111A of the Companies Act, 1956.42. Having held so, we shall now deal with the judgments relied upon by Mr. Khambatta. The first two judgments of the Supreme Court relied upon by Mr. Khambatta are in the case of Needle Industries Ltd (Supra) and Darius Kavasmaneck (Supra). On going through the aforesaid judgments, we do not find anything therein that supports the contentions of the Respondent as raised herein. Neither of these judgments decide the issue that an agreement voluntarily entered into by an individual shareholder giving a right of pre-emption to a third person regarding his own shares, constitutes a restriction imposed on the right of a shareholder to transfer his shares and is therefore accordingly impermissible by virtue of section 111-A of the Companies Act. The said two judgments hold that a private company, by virtue of section 3(1)(iii), must contain provisions in its Articles of Association placing a restriction on the right of shareholders to transfer their shares, whilst a public company cannot have such a general restriction on transfer of shares by its members. We do not see how these judgments can be of any assistance in deciding the issue raised before us.43. The next judgment relied upon by Mr. Khambatta was of the Supreme Court in the case of V. B. Rangaraj.(Supra) On perusing the said judgment, we find that the facts in that case were totally different than the facts before us. In fact Ranagrajs judgment has been considered by the Division Bench of this Court in Messer Holdings Ltd.(Supra) We must mention here that Rangarajs judgement also came up for consideration before another bench of the Supreme Court in the case of M. S. Madhusoodhanan v/s Kerala Kaumudi (P) Ltd. (2004) 9 SCC 909 : AIR 2004 SC 909 In Madhusoodhanans case, the Supreme Court considered a case where specific performance was sought of an Agreement / Karar dated 16th January, 1986 which provided for the division of shares of the late parents (Sukumaran and Madhavi) in the percentage of 50:25:25 between the sons Madhusoodhanan, Ravi and Srinivasan. This division of shares was to take place on Madhavis death. Madhavi died on 2nd December, 1987 and Madhusoodhanan filed a suit in October 1988 for specific performance of the terms in the Karar. Thus, the Karar dated 16th January, 1986 was an agreement to transfer the parents shares in the percentages set out above, at a subsequent date (i.e. after Madhavis death). When specific performance of this agreement was sought by Madhusoodhanan, enforcement thereof was resisted by relying upon the judgment of the Supreme Court in the case of V. B. Ranagraj.(Supra) Distinguishing the judgment in Ranagrajs case, the Supreme Court pointed out that an agreement between particular shareholders relating to transfer of specified shares did not impose a restriction on the transferability of shares. The Supreme Court in Madhusoodhanans case held as under:-139. The respondents cited Article 29 of the Articles of the Company in support of their argument that Exhibits R-59 and R- 60 overrode the Karar insofar as it required that 50% of the shares of the late K. Sukumaran and Madhavi had to be transferred to Madhusoodhanan on Madhavis death. Article 29 says that the executors or administrators of the deceased sole holder of a share shall be the only persons recognised by the Company as having any title to the share. It was the contention of the respondents that insofar as the Karar provided for the transfer of the shares of the late Sukumaran and Madhavi to Madhusoodhanan, it was contrary to Article 29 of the Articles of Association of the Company and could not be enforced. This submission is made on the basis of the decision of this Court in V.B. Rangaraj v. V.B. Gopalkrishnan [(1992) 1 SCC 160 : AIR 1992 SC 453 ]140. That decision must be understood and read after enunciating certain basic principles relating to the transfer of shares and in the background of earlier decisions on the subject. It is settled law that shares are movable properties and are transferable. As far as private companies like Kerala Kaumudi are concerned, the Articles of Association restrict the shareholders right to transfer shares and prohibit any invitations to the public to subscribe for any shares in, or debentures of, the Company. This is how a private company is now defined in Section 3(1)(iii) of the Companies Act, 1956 and how it was defined in Section 2(13) of the 1913 Act.141. Subject to this restriction, a holder of shares in a private company may agree to sell his shares to a person of his choice. Such agreements are specifically enforceable under Section 10 of the Specific Relief Act, 1963, which corresponds to Section 12 of the Specific Relief Act, 1877. The section provides that specific performance of such contracts may be enforced when there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done, or when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief. In the case of a contract to transfer movable property, normally specific performance is not granted except in circumstances specified in the explanation to Section 10. One of the exceptions is where the property is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market. It has been held by a long line of authority that shares in a private limited company would come within the phrase not easily obtainable in the market (see Jainarain Ram Lundia v. Surajmull Sagarmull[AIR 1949 FC 211 : 1949 FCR 379] , AIR at p. 218). The Privy Council in Bank of India Ltd. v. Jamsetji A.H. Chinoy [AIR 1950 PC 90 : 77 IA 76] (AIR p. 96, para 21) said:It is also the opinion of the Board that, having regard to the nature of the Company and the limited market for its shares, damages would not be an adequate remedy.The specific performance of a contract for transfers of shares in a private limited company could be granted.145. In Rangaraj case [(1992) 1 SCC 160 : AIR 1992 SC 453 ] relied upon by the respondents, an agreement was entered into between the members of the family who were the only shareholders of a private company. The agreement was that for all times to come each of the branches of the family would always continue to hold equal number of shares and that if any member in either of the branches wished to sell his share/shares, he would give the first option of purchase to the members of that branch and only if the offer so made was not accepted, the shares would be sold to others. This was a blanket restriction on all the shareholders, present and future. Contrary to the agreement, one of the shareholders of one branch sold his shares to members of the second branch. Such sale was challenged in a suit as being void and not binding on the other shareholders. This Court rejected the challenge holding that the agreement imposed a restriction on shareholders rights to transfer shares which was contrary to the Articles of Association of the Company. It was, therefore, held that such a restriction was not binding on the Company or its shareholders. The decision is entirely distinguishable on facts. There is no such restriction on the transferability of shares in the Karar. It was an agreement between particular shareholders relating to the transfer of specified shares, namely, those inherited from the late Sukumaran and Madhavi, inter se. It was unnecessary for the Company or the other shareholders to be a party to the agreement. As provided in clause 10 of the Karar , Exhibits R-59 and R-60 did not obviate compliance with the Karar. Both Exts. R-59 and R-60 were executed on 15-7-1985, several months prior to the Karar. The parties who had consciously entered into the agreement regarding the transfer of their parents shares are, therefore, obliged to act in terms of the Karar. The defence of Ravi and Srinivasan based on Exts. R-59 and R-60 should not, in the circumstances, have been accepted by the Division Bench. Having regard to the nature of the shareholding, on the basis of the law as enunciated by the Federal Court and the Privy Council in the decisions noted above, it must be held that the Karar was specifically performable.(emphasis supplied)44. We must mention here that the Division Bench of this Court in Messer Holdings Ltd.(Supra) has relied upon the judgment of the Supreme Court in Madhusoodhanans case to come to the conclusions that it did.45. We must also make note of the fact that the view expressed in Rangarajs case has not been subscribed to by a three Judge Bench of the Supreme Court in the case of Vodafone International Holdings BV vs. Union of India and Another(2012) 6 SCC 613 ). Though the issue before us did not directly arise before the Supreme Court in Vodafones case, at paragraphs 261 and 262 of the said judgment, the Supreme Court opined as under:-Shareholders agreement261. Shareholders Agreement (for short SHA) is essentially a contract between some or all other shareholders in a company, the purpose of which is to confer rights and impose obligations over and above those provided by the company law. SHA is a private contract between the shareholders compared to the articles of association of the company, which is a public document. Being a private document it binds parties thereof and not the other remaining shareholders in the company . Advantage of SHA is that it gives greater flexibility, unlike the articles of association. It also makes provisions for resolution of any dispute between the shareholders and also how the future capital contributions have to be made. Provisions of the SHA may also go contrary to the provisions of the articles of association, in that event, naturally provisions of the articles of association would govern and not the provisions made in SHA.262. The nature of SHA was considered by a two-Judge Bench of this Court in V.B. Rangaraj v . V.B. Gopalakrishnan [(1992) 1 SCC 160] . In that case, an agreement was entered into between shareholders of a private company wherein a restriction was imposed on a living member of the company to transfer his shares only to a member of his own branch of the family, such restrictions were, however, not envisaged or provided for within the articles of association. This Court has taken the view that provisions of the shareholders agreement imposing restrictions even when consistent with company legislation, are to be authorised only when they are incorporated in the articles of association, a view we do not subscribe to.(emphasis supplied)In view of the above discussion, we find that the reliance placed by the Respondent on the judgment of the Supreme Court in Rangarajs case is wholly misplaced.

Decision:
1[ds]d with the judgment in Messer Holdings Ltd., Mr. Khambatta, the learned senior counsel appearing on behalf of the Respondent, submitted that whether a particular clause was a restriction on transferability of shares had to be necessarily decided on a case to case basis. He submitted that the facts in the case of Messer Holdings Ltd.(Supra) were materially different than the ones before us. The first distinguishing feature he pointed out was that, under Clause 6.1 in Messer Holdings Ltd., there was no restriction on price whereas Clause 7 of the Protocol Agreement before us compelled the Respondent to sell the shares at a price not determined by the Respondent but determined through the process of arbitration. According to Mr Khambatta, this was a very significant distinguishing feature.We cannot agree. We do not think that this distinguishing feature can make any difference to the ratio laid down in Messer Holdings Ltd. Once it is held that consensual agreements/arrangements entered into by the shareholders of a public company with a third party regarding his own specified shares (either by way of sale,or otherwise), do not impinge on free transferability of shares as contemplated under sectionthis so called distinction pails into insignificance. If the parties are free to enter into a consensual arrangement which does not infract free transferability as contemplated under sectionwe see no reason to hold that merely because the price of the shares is to be determined by the process of arbitration, the same would to be in violation of sectionThe fact that the price of the shares is to be determined by the process of arbitration is also a term of the very same consensual arrangement which is not violative of the provisions of sectionWe, therefore, find no substance in this argument.36.The second distinguishing feature that Mr. Khambatta sought to highlight is that in the facts of our case, this consensual arrangement as set out in clause 7 of the Protocol Agreement was also incorporated in Articles of Association of MSL whereas that was not the case before the Division Bench in the case of Messer Holdings Ltd. In furtherance of this argument, Mr. Khambatta submitted that the Protocol Agreement and more particularly Clause 7 thereof, was incorporated into the Articles of MSL and was therefore subsumed therein and did not independently survive. Once it was subsumed in the Articles and the same could not be incorporated the Articles of a public company, the same could notin a different avatar, was the submission.We cannot agree with this argument. Merely because the Protocol Agreement was incorporated into the Articles of MSL, does not mean that the Protocol Agreement by itself (or clause 7 thereof) ceased to exist. The Protocol Agreement governs the rights and liabilities of the parties thereto and would continue notwithstanding the fact that they were incorporated in the Articles of MSL. Therefore, even if we are to assume that such a clause was not permissible in the Articles of a public company, that would not in any way destroy the rights created under the said Agreementbetween the parties. The rights and liabilities created under the said Protocol Agreement would continue to bind the parties thereto. Even if we are to hold that the company (namely MSL) was not bound by the terms of the Protocol Agreement, it would only mean that if the Respondent sought to sell their shareholding in breach of Clause 7 of the Protocol Agreement, the company (MSL) would not be in a position to refuse such transfer, in the absence of any Court or other judicial authority granting an injunction restraining it from doing so. This does not mean that the parties to the Protocol Agreement cannot, in appropriate proceedings, seek to enforce its terms. It is one thing to say that the said clause will not bind the company and it is wholly another to contend that the said clause would not bind the parties thereto. We are, therefore, of the view that notwithstanding the fact that the Protocol Agreement was incorporated in the Articles of Association of MSL, the same would not change the nature of that agreement namely being a consensual agreement/arrangement entered into between the parties determining the manner in which each party is allowed to dispose of its particular shareholding. At the highest and assuming everything in favour of the Respondent, it could be only be held that such a clause would not bind the company. However, it would certainly bind the parties to the Protocol Agreement. We, therefore, find no substance in this argument.37. Even otherwise, we find force in the argument of Mr. Chinoy that such a clause (clause 7), even if incorporated in the Articles of Association of a public company, would not in any way violate the principles of free transferability of shares as contemplated under section111A of the CompaniesAct. Clause 7 of the Protocol Agreement and which finds place in the Articles of MSL by virtue of incorporation of the Protocol Agreement in its Articles, only sets out how the Respondent and the Appellant are to deal with their respective shareholdings. It is not a blanketclause which binds all the shareholders of MSL to sell their shares only to other members of MSL, which clauses are incorporated in the Articles of Association of a private company.clauses in the Articles of a private company are in the nature of a blanket restriction on all its members, and such clauses if incorporated in the Articles of a public company would certainly amount to a restriction on free transferability of shares as envisaged under sectionHowever, that is not the case before us. Clause 7 of the Protocol Agreement and which has been incorporated in the Articles of Association of MSL, only relates to the shareholding of the Appellant and the Respondent and their rights and liabilities in relation thereto. It does not in any way affect the rights and/or liabilities of the other members of MSL. In this view of the matter, we are of the view that merely because Clause 7 of the Protocol Agreement was incorporated in the Articles of MSL, would not invalidate the same. We are also persuaded to take this view because we find that in todays global reality, joint ventures are extremely common and clauses similar to Clause 7 of the Protocol Agreement may become necessary to ensure that a joint promotor of a company does not sell his shareholding to a competitor who then possibly could get control of his rival. In this view of the matter and looking to the totality of the facts and circumstances of the case, we are clearly of the view that Clause 7 of the Protocol Agreement does not in any way impinge upon the principle of free transferability of shares as contemplated under section111A of the Companiese are unable to uphold the order of the learned Single Judge insofar as it set aside the impugned award on the ground that Clause 7 of the Protocol Agreement imposed a restriction on free transferability of shares as contemplated under section111A of the CompaniesAct, 1956.42. Having held so, we shall now deal with the judgments relied upon by Mr. Khambatta. Thefirst two judgments of the Supreme Court relied upon by Mr. Khambatta are in the case of Needle Industries Ltd (Supra) and Darius Kavasmaneck (Supra).On going through the aforesaid judgments, we do not find anything therein that supports the contentions of the Respondent as raised herein. Neither of these judgments decide the issue that an agreement voluntarily entered into by an individual shareholder giving a right ofto a third person regarding his own shares, constitutes a restriction imposed on the right of a shareholder to transfer his shares and is therefore accordingly impermissible by virtue of section111A of the CompaniesAct. The said two judgments hold that a private company, by virtue of section 3(1)(iii), must contain provisions in its Articles of Association placing a restriction on the right of shareholders to transfer their shares, whilst a public company cannot have such a general restriction on transfer of shares by its members. We do not see how these judgments can be of any assistance in deciding the issue raised before us.Following the letter of 27th October 2003, a joint reference to arbitration was made on 29th December, 2003. The terms of reference contained an express statement of fact that the Appellant had expressed its willingness to buy the stake held by the Respondent in MSL and that the Respondent indicated its desire to sell its stake in MSL. However, what remained in dispute was the price per share to be determined, and hence, in accordance with Clause 7 of the Protocol Agreement, the question of rate at which the Appellant was to purchase the equity shares held by the Respondent in MSL, was being referred. All this material would clearly indicate that there was a concluded contract between the parties as on 3rd May, 2003 and looking at the letter dated 27th October, 2003 as well as the joint reference dated 29th December 2003, clearly establishes that even the parties understood it to be so. If according to the Respondent there was no concluded contract, then there would have been no occasion to either address the letter dated 27th October, 2003 to the Arbitrator or make a joint reference to him under clause 7 of the Protocol Agreement for determining the rate at which the shareholding of the Respondent would be sold to the Appellant. It is only for the first time in the application filed by the Respondent before the Arbitrator on 6th April 2004, that the Respondent sought to question as to whether a concluded contract had been arrived at. This to our mind was obviously anand was a clear deviation from the manner in which the Respondent had understood the course of dealings between the parties. We therefore have no hesitation in holding that on the basis of the correspondence exchanged between the parties and the Arbitrator, there was a concluded contract for sale of the Respondents 27% shareholding in MSL to the Appellant. The only question that the Arbitrator had to decide was the rate at which the said shares were to be sold as contemplated under Clause 7 of the Protocol Agreement and it was on this basis that a joint reference was made to the Arbitrator. We, therefore, are unable to agree with the submission of Mr Samdani that on reading the correspondence between the parties viz. the letters dated 9th April 2003, 3rd May 2003, 10th May, 2003 and 6th June, 2003 it was established that there was no concluded contract as on 3rd May, 2003.59. We are also unable to agree with the submission of Mr Samdani that because the parties were notwith respect to the date on which the valuation was required to be done, there was no concluded contract or that determining the same was outside the scope of the joint reference made to the Arbitrator. It may be noted that the joint reference was made to the Arbitrator on the basis that there was a concluded contract between the parties with reference to the sale of the Respondents 27% shareholding in MSL to the Appellant. The only question that the Arbitrator was required to decide was the rate at which the said shareholding ought to be sold. In deciding this question, necessarily as a matter of fact, the Arbitrator had to ascertain the date on which the shares of the Respondent were to be valued. A decision on the date was an integral part of deciding the rate at which the Respondents 27% shareholding was to be sold to the Appellant.60. To our mind, this is also contemplated in the joint reference dated 29th December, 2003 which specifically states that the Arbitrator shall take into account the Protocol Agreement covenants and all other concerned factors which may have an impact on the share price of MSL shares while giving the arbitral award. It cannot seriously be disputed that the date of valuation would certainly be one of the factors which would have an impact on the share price of MSL shares.61. The Arbitrator held that the relevant date of valuation would be 3rd May 2003, which was the date on which the concluded contract was arrived at between the parties. In our view, in holding so, the Arbitrator had not transgressed and / or exceeded his jurisdiction, and the determination of the date on which the valuation was to be done, was very much within the scope of the joint reference dated 29th December, 2003. We find that the Arbitrator has correctly taken the date as 3rd May, 2003 being the date when a concluded contract was arrived at between the parties for the sale of the Respondents 27% shareholding in MSL to the Appellant. We find that the Arbitrator has dealt with this issue in detail from paragraphs 30 to 36 of the award. We do not find any perversity in the same. Similarly, we find that the learned Single Judge has dealt with this issue in paragraphs 16 to 19 of the impugned order and we are in full agreement with the reasoning contained therein. This contention, therefore, of Mr Samdani will also have to beMSL is a listed Company whose shares are quoted on the Stock Exchange. Despite this, both the valuers viz. Mr Raghuram as well as Mr Bansi Mehta did not adopt this method of valuation because the average quoted price of MSL shares in 2003 was approx Rs.65/per share which did not reflect its true value. It is for this reason that both the valuers adopted the NAV method with one distinction viz. Mr Raghuram valued it on a going concern basis without giving any discounts whereas Mr Bansi Mehta valued it on a liquidation basis and for the purposes of valuation, took into account certain discounts.In the facts of the present case, as stated earlier, Mr Raghuram as well as Mr Bansi Mehta both preferred to adopt the NAV method (which is really speaking thevalue method, or valuation with reference to the assets of the company) subject to one distinction, viz. that Mr Raghuram adopted the NAV method on a going concern basis without taking into account any discounts, whereas Mr Bansi Mehta adopted the NAV method on a liquidation basis and took into account certain discounts for the purposes of valuation. This was done by Mr. Bansi Mehta in view of the peculiar circumstances of MSLs functioning and the fact that its operating segment was not only making repeated losses over the years but that admittedly it was incapable of making any profits. Both the aforesaid reports were considered in detail by thetaking into consideration the totality of the facts of the case and he peculiar circumstances of MSLs functioning and the fact that its operating segment (core business) was not only making repeated losses over the years, but admittedly it was incapable of making any profits, the Arbitrator accepted the valuation of Mr. Bansi Mehta, which valued the shares of MSL on the NAV method on liquidation basis. It has come on record that the net profit of a company of this magnitude for the financial year 2003, was merely Rs. 34 lacs after adjusting the operating loss of Rs.5 Crores against the income received from the investments. As stated earlier, the core business of MSL (assembling scooters) was not only suffering repeated losses over the years but was not even in a position tolet alone make any profits. We, therefore, find that the learned Arbitrator committed no error in accepting Mr. Bansi Mehtas valuation report which values the shares of MSL on the NAV method on a liquidation basis. The Arbitrator has accepted said report of Mr. Bansi Mehta after carefully taking into consideration the evidence of Mr. Bansi Mehta as well as his cross examination. Looking to the reasoning and the analysis of the evidence done by the Arbitrator, we do not think that the arbitral award suffers from any patent illegality or perversity either entitling the learned single judge (under section 34) or us (under section 37) to interfere with the same. We therefore find that the learned Single Judge rightly declined to interfere with the arbitral award on this issue. We must also mention here that the only distinction that was sought to be made by Mr Samdani between the going concern valuation and the liquidation basis valuation was that when the valuation was done on the NAV method on a going concern basis, there was no question of taking into account any discounts, whilst arriving at the valuation. However, Mr Samdani was unable to make good this submission. We fail to see on what basis this submission is made. To our mind discounts are to be applied on the market value of the assets because what has to be worked out is what a shareholder can expect to get after all the assets of the Company are notionally sold and in abstract theory the entire sale proceeds are distributed to the shareholders. Whatever dues the Company would have to pay (statutory or otherwise) whilst selling its assets would have to be taken into account whilst arriving at the market value of the assets being sold. This to our mind, would be the position whether you value the Company on the NAV method on a going concern basis or on the NAV method on a liquidation basis. We therefore fail to see on what basis it is submitted that when a Company is valued on the NAV method on a going concern basis, there is no question of any discounts.In the facts of the present case, we have already found that Mr Bansi Mehta adopted a recognised method of valuation which was accepted by the Arbitrator and did not proceed on a fundamentally erroneous basis so that the said valuation could be assailed. As stated earlier, Mr Bansi Mehta chose to value the shares of MSL by adopting the NAV method on a liquidation basis looking to the peculiar functioning of MSL and the facts and circumstances of the case. Furthermore, it is not as if Mr Bansi Mehtas valuation report was treated as gospel truth and accepted by the Arbitrator. The Arbitrator took into account the first and the second valuation reports of Mr Raghuram as well as the valuation report of Mr Bansi Mehta and after analyzing the detailed evidence led by the parties in relation to the said reports, sought to accept Mr Bansi Mehtas report subject to two changes as indicated earlier. Valuation being a question of fact as laid down by the Supreme Court in G.L. Sultanias case, coupled with the fact that the scope of interference with an arbitral award under section 34 of the Act is in any case only on certain limited parameters, we would be entitled to interfere with the award only if it is demonstrated that by accepting the discounts taken into consideration by Mr. Bansi Mehta in his valuation report, the Arbitrator committed any patent illegality or the award suffered from the vice of perversity.77. Having said this, we shall now deal with each of the discounts independently. The first discount taken into account was an amount of Rs.30 crores towards VRS (Voluntary Retirement Scheme). Before we deal with this discount on merits, we must mention here that as rightly submitted by Mr Chinoy, no such ground is taken in section 34 petition and neither was the said contention urged before the learned Single Judge. In fact the contentions raised before the learned Single Judge have been listed at paragraph 13 of the impugned order and there is no mention of this contention. This is probably why we find no discussion on this issue in the impugned judgment. We would therefore be justified in not allowing Mr Samdani to urge this contention for the first time before us.In addition to the aforesaid, we may also note that Mr Raghuram himself in his first report (as on 30th June 2002), considering the value of MSL shares on the NAV method on a liquidation basis, had also provided for an adjustment of Rs.222.44 million towards VRS costs. This in fact has been taken note of even by the Arbitrator in paragraph 60 of the arbitral award. We therefore do not find any illegality or perversity in the arbitral award when this adjustment towards VRS was taken into account for the purpose of arriving at the valuation of MSL shares. This argument of Mr Samdani will therefore have to bemust note what Mr. Bansi Mehta has stated in his valuation report as well as his evidence before the Arbitrator. Mr Bansi Mehta has pointed out that in valuing the shares of MSL on the basis of thevalue of its assets on a notional liquidation, what has to be worked out is what a shareholder can expect to get if the investee company (in this case, MSL) were to realize its investment, and in abstract theory distribute the entire proceeds of such asset sale to its shareholders.The Arbitrator, after taking note of all the material on record, held that if MSL was to sell the BAL shares held by it, MSL would have to pay 10.5% towards capital gains tax, would have to transfer 10% of the receipt to Reserves and would have to pay 12.5% plus surcharge as the dividend tax. It is on this basis, and after carefully considering the evidence of Mr. Bansi Mehta, that the Arbitrator has discounted sale value of BAL shares by 30%. We also find that if the shares of MSL were required to be valued on the basis of the NAV method on a notional sale / liquidation basis, the value amount realized by a notional sale of its assets, would necessarily have to be discounted/reduced by the costs which would have to be statutorily incurred on such notional sale.Looking to the valuation report and the evidence of Mr. Bansi Mehta, as well as the detailed reasoning of the Arbitrator on this aspect, we are unable to agree with Mr. Samdani that the Arbitrator committed any fundamental error whilst accepting the discount of 30% on the sale value of BAL shares. We do not find any perversity or patent illegality or any error apparent on the face of the award that makes it vulnerable to challenge on this aspect. This argument of Mr. Samdani would therefore also have to be rejected.However, in the facts of the present case, we find the reliance placed on the aforesaid provisions as wholly misplaced. As noted earlier, Mr. Bansi Mehta in his evidence clearly stipulated in paragraph 5.4 of his report that the fair market value of BAL shares must allow for a discount of about 30% and that the BAL shares held by MSL valued at the six monthly average rate set out in Appendix5 of his valuation report should be further discounted by no less than the 30%. It is on the basis of this evidence that the Arbitrator had applied the discount of 30% to the value of BAL shares. This figure of 30% is directly traceable to the evidence of Mr. Bansi Mehta, who has in categorical terms stated that the discount should be no less than the 30%. The observations of the Arbitrator in paragraph 100 of the arbitral award fixing the 30% discount on the ground that it should be just, fair and reasonable and would meet the ends of justice, cannot be read in isolation or be utilized to suggest that the Arbitrator was applying his own notion of what was fair, equitable and just. We, therefore, do not find any substance in this argument.91. However, whilst we are dealing with paragraph 100 of the arbitral award, it would be important to mention that in one area, there is an error of fact on the part of the Arbitrator where he refers to the first report of Raghuram as having indicated a discount of 30% to 40%. Admittedly, the discount that was referred to in the first report of Raghuram dealt with the discount on MSLs shares and not BAL shares. On this aspect, the Arbitrator has clearly made a mistake. However, we do not think that the mistake is such that would vitiate the entire arbitral award. As discussed earlier, there was a wealth of evidence before the Arbitrator and which was accepted by him, to demonstrate that a discount of 30% on the sale value of BAL shares was sustainable, both on a conceptual as well as an empirical basis.Mr. Bansi Mehta, therefore, has stated his reasons for taking the book value of theshares/investments as opposed to their market value. He has further stated that he has adopted this approach since he believed that there may not be any material difference between the market value and the book value of these pure financial assets. He has further stated that prima facie almost the entire appreciation may have arisen on account of MSLs share holding in BAL which were considered separately in the valuation report and have been valued on their market value. In answer to Question No.164 also, Mr. Bansi Mehta has stated that theinvestments can beeasily and his own data indicated that there was not much appreciation in these investments. As there was no material appreciation on these investments, Mr. Bansi Mehta thought that it was a fit case to value theinvestments on their book value as opposed to their market value. Mr. Bansi Mehta, in answer to Question No.173, has explained that if he had valued these investments on the market value basis, he would have had to apply a discount to that value as was done in the case of BAL shares and in such an eventuality the market value of these investments would have been lower than their book value. This is the justification given by Mr. Bansi Mehta for valuing theshares/investments on their book value as opposed to their market value.95. On going through the evidence of Mr. Bansi Mehta as well as the reasoning of the Arbitrator, we do not find any fundamental error in the approach of Mr. Bansi Mehta in valuing theshares/investments on a book value basis as opposed to their market value. There is cogent justification with evidence for valuing theshares/investments on their book value as opposed to their market value. We also find that the learned Single Judge has followed the same reasoning in paragraph 31 of the impugned order and we fully agree with the reasoning contained therein. We, therefore, are unable to agree with the submissions of Mr. Samdani that because theshares/investments were valued at their book value, the same was a fundamental error in the approach of valuation that opened up the arbitral award to challenge. This argument of Mr. Samdani would also therefore have to be rejected.On the aspect of control premium, we note that this issue has been discussed in great detail by the Arbitrator in paragraphs 59, 65, 74 and 75 of the arbitral award. The Arbitrator, in paragraph 59 of the arbitral award has referred to the first valuation report of Mr Raghuram (as on 30th June, 2002) where he himself concluded that though the sale of the Respondents 27% shareholding to the Appellant would give the Appellant 51% shareholding in MSL, the nature of the shareholders agreement between the Appellant and the Respondent had already bestowed effective management control to the Appellant without boardroom control. Mr Raghuram therefore himself concluded that the peculiar nature of the shareholders agreement between the Appellant and the Respondent would imply that the rationale for control premium might not exist. The conclusion of Mr Raghuram in the said first valuation report was that taking into consideration the peculiar nature of the shareholders agreement between the Appellant and the Respondent would result in a market discount being offered to an alternative potential buyer to compensate for the lack of effective control.Having opined in his first valuation report that instead of any control premium being applied, the circumstances called for a discount being given on account of the fact that the Appellant was already having management control, Mr Raghuram in his second report did a complete turn around and concluded that in the same circumstances as stated above, a control premium to the extent of 84.85 % would be applicable and that too on the fair value of share and not the market value thereof, which at that time was approximately Rs.65/per share. The Arbitrator considered all these factors (especially in paragraphs 59, 65, 70, 74 and 75 of the award) and concluded that there was no basis for the inclusion / addition of any control premium. We find that the Arbitrator has considered all the relevant evidence placed before him and then come to the conclusion that the rationale for control premium would, therefore, not exist in the facts of this case. We do not think that the findings of the Arbitrator on this aspect suffer from any perversity or patent illegality, entitling us to interfere with the same under section 34 of the Arbitration and Conciliation Act, 1996.99. For the reasons stated earlier in this judgment, we do not find any merit in the Cross Objections. We must mention here that under the arbitral award, the Arbitrator directed that the 30,85,712 equity shares of MSL held by the Respondent herein, are to be valued for the purpose of sale to the Appellant at Rs.151.63/per share. As per the said direction, the amount that would have to be paid by the Appellant to the Respondent for the purchase of the said 30,85,712 equity shares would come to Rs.46,78,86,510.56. In the peculiar facts and circumstances of the case, and considering the fact that this amount has admittedly not been paid till date by the Appellant to the Respondent herein, we think that the interests of justice would be served, if this amount is paid by the Appellant to the Respondent together with simple interest @ 18% per annum from the date of the Award (14th January, 2006) till payment.