Case: In Re: Vs. Cadbury India Limited

general principles of universal application in such matters. 7.1.1. Section 100 requires three things: that (1) the Articles of Association of the company must permit such a reduction of share capital; (2) the scheme for reduction must be approved as a special resolution, i.e., at an extraordinary general meeting called for that purpose; and (3) the Courts sanction must be obtained to such a resolution, if passed by the requisite majority. 7.1.2. In considering the application for sanction, the Court must ensure that (1) the scheme is not against the public interest; (2) the scheme is fair and just, and not unreasonable; and (3) the scheme does not unfairly discriminate against or prejudice a class of shareholders. 7.1.3. Prejudice here must mean something more than just receiving less than what a particular shareholder may desire. It means a concerted attempt to force a class of shareholders to divest themselves of their holdings at a rate far below what is reasonable, fair and just. Prejudice in this context must connote a form of discrimination, a stratagem by which an entire class is forced to accept something that is inherently unjust. 7.1.4. One test of such reasonableness might be to consider the past open offers, extinguishments or buy-backs, and the rate at which these were effected. Where it is found, for instance, that the present offer is significantly higher than previous ones, the burden on an objector is exponentially higher to show that even this enhanced rate, price or valuation is unfair or unreasonable. 7.1.5. Before a Court can decline sanction to a scheme on account of a valuation, an objector to the scheme must first show that the valuation is ex-facie unreasonable, i.e., so unreasonable that it cannot on the face of it be accepted. That unreasonableness must exist on the face of the valuation: one so apparent that he who runs can read. To upset a valuation, a wrong approach must be demonstrated clearly and unequivocally, and the result must be plainly invidious. A plausible rationale provided by a valuer is not be readily discarded merely because an objector has a different point of view. 7.1.6. In considering an application for sanction will ask itself if, at a minimum, these tests are met: Is a fair and reasonable value being offered to the minority shareholders Have the majority of non-promoter shareholders voted in favour of the resolution Can it be said, on reading a valuation as any fair-minded and reasonable person would do, and without microscopic scrutiny, that the valuation is so egregiously wrong that the judicial conscience will not permit it Has the valuer gone so far off-track that the results his valuation returns cannot but be wrong 7.1.7. A court called upon to sanction such a scheme is not bound by the ipse dixit of a majority. It must weigh the scheme and look at it from all angles. It must see whether the scheme is fair, just and reasonable, not unconscionable and is not contrary to any provisions of law and it does not violate any public policy. But it must also balance the commercial wisdom of the shareholders expressed at a properly convened meeting against the desires and fancies of the few. The court will take into account, but not be bound by, the views of the majority. In particular, the court will see what the views are of most of the non-promoter (minority) shareholders at the meeting. If the bulk of them have voted in favour, the court will not lightly disregard this expression of an informed view, one that lies in the domain of corporate strategy and commercial wisdom. 7.1.8. The unfairness must apply to a class, even if that class is of one. This class is not to be identified not by a shared ire against the petitioning company or even an ideological animosity, but by the character or nature of their holding, and by the way that class is sought to be singled out for differential, unfair treatment. 7.1.9. The sanctioning court has no power or jurisdiction to exercise any appellate functions over the scheme. It is not a valuer. It does not have the necessary skills or expertise. It cannot substitute its own opinion for that of the shareholders. Its jurisdiction is peripheral and supervisory, not appellate. The Court is not a carping critic, a hair-splitting expert, a meticulous accountant or a fastidious counsel; the effort is not to emphasize the loopholes, technical mistakes and accounting errors. 7.1.10. Valuation is not an exact science. Far from it. It is always and only an estimation, a best-judgment assessment. The fact that a particular estimation might not catch an objectors fancy is no ground to discredit it. All valuations proceed on assumptions. To dislodge a valuation, it must be shown that those assumptions are such as could never have been made, and that they are so patently erroneous that the end result itself could not but be wrong, unfair and unreasonable. The court must not venture into the realm of convoluted analysis, extrapolation, and taking on itself an accounting burden that is no part of its remit or expertise, and no part of a statutory obligation. In particular, the court must guard against the seductiveness of a proposition that suffers from the fallacy of the undistributed middle: all x is z; some y is z; ergo, all y is z.6 The errors and consequent unreasonableness must be shown to be patent and self-evident. 7.1.11. It is impossible to say which of several available valuation models are best or most appropriate. In a given case, the CCM method may be more accurate; in another, the DCF model. There are yet others. No valuation is to be disregarded merely because it has used one or the other of various methods. It must be shown that the chosen method of valuation is such as has resulted in an artificially depressed or contrived valuation well below what a fair-minded person may consider reasonable. 8 SECTION 8: CONCLUSIONS

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It seems to me logical to first consider the settled law on the appropriate judicial approach in such cases. It is only if the objectors fall within those well-defined parameters that their objections can be considered. It is not any and every objection, irrespective of whether it has any basis in fact or justification in law that a Court must uphold.4.2. The decision of a Division Bench of this Court in Sandvik Asia Limited vs. Bharat Kumar Padamsi&Ors.2009 (3) Bom CR 57, relied on by Mr. Dwarkadas, is perhaps a fitting starting point. For not only was the situation before the Court in Sandvik very like the present one, but it considered at least four of the decisions separately cited by Mr. Samant in his written submissions: British American Trustee & Finance Corporation Ltd. & Reduced vs. John Couper, 1894 A.C. 399 (H.L.) Poole &Ors vs. National Bank of China, (1907) A.C. 229 (H.L.) In Re: Elpro International Ltd.,2008 (86) SCL 47 (Bom) : [2009] 149 Company Cases 646  (Bom.) and In Re Reckitt Benckiser (India) Ltd.122 (2005) DLT 612  4.3. In Sandvik, a petition was filed seeking the Courts sanction to a special resolution for reduction in its share capital passed by the members of the appellant-company at an extraordinary general meeting. The resolution was that the share capital of the company would be reduced by paying off or returning to non-promoter equity shareholders an amount of Rs. 850/- per share, of which Rs. 750/- was a premium. That petition, like this one, was filed under Section 100 of the Companies Act, 1956. The petition was opposed. The objectors were non-promoter shareholders. The learned Single Judge declined to sanction the resolution. The company appealed. In appeal it was pointed out, inter alia, that the special resolution was passed by an overwhelming majority of 99.05% of the votes polled of the equity shareholders present and voting, and that only about 0.05% of the votes polled were against the special resolution. Sandvik Asia, like Cadbury India, was de-listed from both stock exchanges. The result was that its shares, like Cadbury Indias, were not freely traded. Sandvik Asia provided an exit option to non-promoter equity shareholders (the price of Rs. 850/- per share) and this was much higher than the book value of the shares at the relevant time. After noting the rival submissions, the Division Bench held that it is permissible for a company applying under Section 100 to reduce its share capital in any way. In that case too, as in the present case, there was no argument that the special resolution at the extraordinary general meeting was invalidated for any reason or that did not comply with the statutorily mandated procedure. There was also no argument that the articles of association prohibited such a share capital reduction. The issue before the Court was whether the proposed scheme had the effect of wiping out entirely a class of shareholders, namely, the non-promoter shareholders, though on payment of certain compensation.4.4. The Sandvik Division Bench held itself to be bound by the decision of the Supreme Court in Ramesh B. Desai &Ors. vs. Bipin Vadilal Mehta &Ors.:(2006) 5 SCC 638  , paragraph 11 In paragraph 9 of Sandvik, the Division Bench held:9. In our opinion, the above quoted observations of the House of Lords from its judgment in the case of Poole &Ors, referred to above, squarely apply to the present case. In our opinion once it is established that non-promoter shareholders are being paid fair value of their shares, at no point of time it is even suggested by them that the amount that is being paid is any way less and that even overwhelming majority of the non-promoter shareholders having voted in favour of the resolution shows that the Court will not be justified in withholding its sanction to the resolution. As the Supreme Court has recognised that the judgment of the House of Lords in the case of British & American Trustee and Finance Corporation Ltd. is a leading judgment on the subject, we are justified in considering ourselves bound by the law laid down in that judgment. As we find that there is similarity in the facts in which the observations were made in the judgment in the case of British & American Trustee and Finance Corporation, we will be well advised to follow the law laid down in that case. In our opinion, therefore, the learned single Judge was in error in declining to grant sanction to the special resolution.4.5. The Supreme Court decision in Ramesh B. Desai followed the decision of the House of Lords in British & American Trustee and Finance Corporation Ltd. (Supra) Paragraph 11 of Ramesh B. Desai reads:11. The vexed question of the legality of the purchase by a limited company of its won shares was set at rest by the decision of the House of Lords in (Trevor Vs. Whitworth), 1887 (12) AC 409, since which it has been clear law that a limited company cannot purchase its own shares except by way of reduction of capital with the sanction of the court. (See Buckley on the Companies Act, 14 the Edn. p. 1499.) In the same decision it was also held that even express authority to the contrary in the memorandum is unavailing. The main reasons for this prohibition were that such a purchase could either amount to trafficking in its own shares, thereby enabling the Company in an unhealthy manner to influence the price of its own shares on the market, or it would operate as a reduction of capital which can only be effected with the sanction of the Court and in the manner laid down in the statute (see Palmers Company Law, 23rd Edn. p. 440), in Guide to the Companies Act by A. Ramaiya (16th Edn., 951) apart from Trevor Vs. Withworth, British & American Trustee and Finance Corporation Vs. Couper, 1894 AC 399   has also been referred to as a leading authority on the subject....4.6. The Division Bench in Sandvik held that the Supreme Court decision in Ramesh B. Desai was on point and binding. The appeal was allowed.4.7. Carefully read, these decisions seem to me to suggest that before a Court can decline sanction to a scheme on account of a valuation, an objector to the scheme must first show that the valuation is ex-facie unreasonable, i.e., so unreasonable that it cannot on the face of it be accepted; alternatively, that it is discriminatory; or that it has not been approved by a sufficient majority or, at a minimum, that a substantial number or percentage voted against it at an extraordinary general meeting. None of these are demonstrated in the present case. What the Samant Group suggests is, quite simply, that there are other possible methods of valuing Cadbury Indias shares; that the present values are not to their liking; that it matters not that they constitute a miniscule fraction of the non-promoter shareholders, and, too, a very small percentage of those who voted against; and that it is entirely irrelevant that a overwhelming majority of non-promoter shareholders voted in favour of the special resolution. By an extension of this reasoning, every single shareholder can hold to ransom the collective wisdom of shareholders expressed in a properly called, convened and conducted extraordinary general meeting. That cannot possibly be the purpose, ambit or conspectus of Section 100 of the Companies Act, 1956. Were these submissions to be accepted, the entirety of Section 100 might be rendered a dead letter:100. Special resolution for reduction of share capital.(1) Subject to confirmation by the Court, a company limited by shares or a company limited by guarantee and having a share capital, may, if so authorised by its articles, by special resolution, reduce its share capital in any way; and in particular and without prejudice to the generality of the foregoing power, may(a) extinguish or reduce the liability on any of its shares in respect of share capital not paid up;(b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost, or is unrepresented by available assets; or(c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company; and may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.(2) A special resolution under this section is in this Act referred to as a resolution for reducing share capital.4.8. On a plain reading of the statutory provision, the basic requirements of Section 100 are that (1) the Articles of Association of the company must permit such a reduction of share capital; (2) the scheme for reduction must be approved as a special resolution, i.e., at an extraordinary general meeting called for that purpose; and (3) the Courts sanction must be obtained to such a resolution, if passed by the requisite majority. Now the third requirement has this trifecta, albeit not expressly stated: viz., to ensure that (1) the scheme is not against the public interest; (2) the scheme is fair and just; and (3) the scheme does not unfairly discriminate against or prejudice a class of shareholders. Prejudice here must mean something more than just receiving less than what a particular shareholder may desire in an ideal world. It does not mean merely a lower rate-per-share than the shareholder wants. It means a deliberate and studied attempt to force a class of shareholders to divest themselves of their holding at a rate far below what is reasonable, fair and just. One test of such reasonableness might be to consider the rate of any past open offers, extinguishments or buy-backs. Are these rates much higher than the one now proposed Does the present valuation posit a rate that is so egregiously low that a shareholder might receive a mere pittance4.9. The section plainly says a company may reduce its capital in any way. In the Sandvik appeal, it was argued that the legislative mandate is directed towards preventing the forced acquisition of shares of the public or the extinguishment of the entire class of public shareholding by use of the brute force of the promoter majority shareholding. But what if the majority is that of the non-promoters The binding decision of the Division Bench in Sandvik deals with precisely this situation when it says that:... once it is established that non-promoter shareholders are being paid fair value of their shares, at no point of time it is even suggested by them that the amount that is being paid is any way less and that even overwhelming majority of the non-promoter shareholders having voted in favour of the resolution shows that the Court will not be justified in withholding its sanction to the resolution.4.10. The word less here cannot possibly mean less than what a minority shareholder fancies. It must mean, and mean only, less than what the Court feels reasonable. Therefore, the Court in considering an application for sanction will ask itself if the valuation is fair; if this fair value is being offered to the minority shareholders; and will also test if, on facts, a majority of non-promoter shareholders have voted in favour of the resolution.4.11. Now in the present case, although an attempt is made to show that the compensation, i.e., the valuation, is per se unfair, incorrect or unreasonable, in fact what is being suggested is that non-promoter shareholders are being discriminated against. Yet, in the present case, nobody suggests that promoter shareholders, or the non-promoters who voted in favour, or any other class of shareholder have got a better deal than any of the objectors. They are not in any way being paid or offered any less. An overwhelming majority of the non-promoter shareholders have already voted in favour of the resolution: there were 7,51,120 non- promoter shares represented at the meeting. Those against held only 12,784 shares. In such a situation, following Sandvik, a court would not be justified in withholding its sanction.4.14. I believe Mr. Samants submission to be entirely unfounded. It is nobodys suggestion that the mere ipse dixit of the majority will dictate the hand of the Court. But in assessing whether the scheme is fair, just and reasonable, the Court must have regard to both the terms of these scheme as also to the informed decision taken by the majority of the shareholders. When such a scheme is assessed, there must be cogent, clear and unambiguous material to show that the scheme is inherently unjust or unreasonable. A sanctioning court is not an appellate body. It will not and cannot substitute its own view, however strongly held, for the collective, commercial wisdom of the voting members.4.15. The only decision cited by Mr. Samant on behalf of the Samant Group in Court was that of the Supreme Court in Dr. Mrs. Renuka Datla vs. Solvay Pharmaceutical B.V. &Ors. (Supra) To my mind, this decision does not support a single one of Mr. Samants submissions. To the contrary: it elucidates certain fundamental principles, the first of which is that to upset a valuation, a wrong approach must be demonstrated clearly and unequivocally. A plausible rationale provided by the valuer is not be readily discarded merely because an objector has a different point of view. What is to be borne in mind is that as a result of Court-ordered valuation, the objectors today have a significantly higher valuation than originally proposed. Cadbury India has not challenged the Court-ordered valuation. It has accepted it. Whether the increase is due to altered parameters and considerations or different methodologies makes little difference. Indeed I would venture to suggest that the Samant Group has, in a manner of speaking, run itself onto its own sword. Every single one of the charges that it levels against the E & Y reports could conceivably be levelled by Cadbury India against the report that the Samant Group claims to have independently obtained.4.16. In its compilation of judgments the objectors have report to the following decisions never cited in Court. The Petitioners counsel had no opportunity to deal with the objectors submissions on these: Miheer H. Mafatlal vs. Mafatlal Industries Ltd.1, Re: Alabama New Orleans Texas & Pacific Junction Railway Company, 1891 (1) CD 213 KEC International Ltd. v. Kamani Employees Union &Ors.,2002 (109) Com Cas 659 (Bom.) Bhagwan Singh & Sons Pvt. Ltd. v. Kalawati&Ors.,1986 (60) Company Cases 94 (Delhi)  Dean v. Prince &Ors., 1954 (1) All ER 749 and Burgess v. Purchase & Sons. 1983 (2) All ER 4 In addition, although not circulated there is a reference in these written submissions to other judgments as well: Piramal Spinning and Weaving Mills Ltd.,[1980] 50 Com Cas 514 (Bom); Re: Scheme of Amalgamation ICICI Ltd.;(2002) 4 BCR 450   In Re: Grierson Oldham & Adam Ltd., [1967] 1 WLR 357 In Re: Bluestar Ltd., [2001] 104 Com Cas 371   and Sidhpur Mills Company Ltd.AIR 1964 Gujarat 305 It is true that many, and perhaps all, these referenced in Cadbury Indias affidavit dated 20th March 2012. But none were sought to be distinguished by Mr. Samant during oral arguments.4.17. I do not see how the Samant Groups submissions advance their cause. Indeed, some of them are against the Samant Group. Bluestar, for instance, holds that where a valuation is done by a reputed firm, and is accepted by a majority, even if assets are being transferred at a low price, that does not per se vitiate a valuation report. To dislodge a valuation from a reputed firm, an objector must show mala fides or fraud.2 To show is not merely to allege. Mala fides or fraud must be established. The decisions in Piramal Spinning, ICICI Ltd., Re: Grierson, Oldham and others are all authorities for the proposition that in any valuation, opinions may vary; and that no court should be swayed by acidulated allegations in generalities. A court must be satisfied that the unfairness is gross and patent. Further, as Mr. Dwarkadas points out, business strategies and corporate planning are not the province of courts.34.18. There is no quarrelling with the propositions that where there is sufficient material to dislodge a valuation, the Court is justified in withholding its sanction, and that a scheme should not be unfair, unconscionable or contrary to public interest. Indeed, the statement of law in Sidhpur Mills is actually against the objectors: the Court must test every scheme from the perspective of a reasonable and fair-minded person. Given its conduct, especially toward the Court, I do not think these are adjectives that I would use to describe the Samant Group. There is nothing before me to establish that the majority is acting dishonestly or without care or caution. The Court is not, in the words of the Gujarat High Court in Sidhpur Mills,a carping critic, a hair-splitting expert, a meticulous accountant or a fastidious counsel; the effort is not to emphasize the loopholes, technical mistakes and accounting errors. The perspective is to be that of the ordinary shareholder exercising his discretion in a reasonable and businesslike manner.4.19. Casuistry, carping and caviling : these are not the courts guiding principles. Yet these are all apt descriptions of the Samant Groups objections.5.4. Let us consider for a moment the fallibility of Samant Groups suggested price of Rs. 2,500/- per share. This is based not on any data or material pertaining to Cadbury India, but on the supposed market value of Nestle India Limited. The Samant Groups claim is that since on 19th January 2010, Nestles shares were being traded at Rs. 2,542/- per share, Cadbury Indias shares should be at least Rs. 2,500/-, for the two must be held to be competitors. For the reasons I have discussed, this comparison and submission is entirely untenable. Even if the net worth of the two companies is proximate, it does not necessarily follow that the market or fair value of their shares would be close, let alone the same.5.5. The takeover of Cadbury Indias grandfather holding company Cadbury Plc by Kraft can have no possible bearing on the valuation of Cadbury Indias shares; nor have the objectors shown how this development would affect Cadbury Indias operations, profits, P/E ratios or other financial metrics in the least. The argument seems to be this: Kraft is an enormous multinational conglomerate. It has very wide business interests. Through a series of subsidiaries and subsidiaries of subsidiaries, and also perhaps directly, its product portfolio is large. Therefore, Cadbury India, despite its localised markets and restricted product range, must necessarily benefit. In short: Kraft has a high share valuation; Kraft now owns the holding company of the holding company of Cadbury India; therefore Cadbury Indias share valuation must also be high. Clearly, this is incorrect. It ignores every salient parameter in an assessment of Cadbury Indias share valuation.5.6. The third, much-repeated, allegation relates to the sale of Cadbury House. Cadbury India is reported to have recently sold its property at Bhulabhai Desai Road. Mr. Samant contends that this affects Cadbury Indias share valuation and must be taken into account inter alia because that property has significant development potential. There are two problems with this. The first is that this involves yet another change in the valuation parameters. As I have noted, the Court itself altered the frame of reference when it asked for the second E & Y report. Had that report been dealt with and this matter decided at that time this issue could never have arisen, for the sale is a matter post facto. It simply cannot be that on account of the vagaries of litigation, a petitioner is placed on constantly shifting stands in this manner. Second, the suggestion in oral arguments seemed to be that the sale price was too low, and that E & Y should have factored in the real sale price, as the property is very valuable and can be developed. While the sale price of the property may be known, the value of the development or redevelopment of that property is predicated on several imponderables incapable of quantification. All that development is subject to development control rules; these change frequently. There may be other restrictions. It would require an entirely distinct set of metrics to evaluate the development potential of this property. Lastly, it is unclear how and in what manner the sale price of this immovable property or its development potential would possibly affect the break-up values or share valuations for Cadbury India. There is nothing, even in the written submissions, to affirmatively show that had the sale price been factored (and not the potential of shifting from Cadbury House), the valuation would have gone up sufficiently significantly to warrant a discarding of the second E & Y report.5.7. The statement in at paragraph 3 of the Samant Groups written submissions as to the alleged lack of transparency in the valuation of shares has only to be stated to be rejected. I find it regrettable that any party, and even more so an advocate at our Bar, should choose to describe Court-ordered valuation reports thus: colourable, suspicious and devoid of any transparency. That is irresponsible. As I have noted, the Court was extremely cautious. It first asked for an independent valuation (the first E & Y report). This was, evidently, to assuage any concerns the objectors might then have had. There was, again as I have previously noted, a certain amount of soul-searching after the first E & Y report was submitted. The Court did not simply accept it. It changed the reference parameters. This was to test whether, on a second pass, a very different result might obtain. It therefore asked for a second report, moving the reference date and asking for the DCF method to be used too. That second E & Y report returned a higher result. How either of these can ever be said to be colourable, suspicious or devoid of transparency defeats me. In paragraph 3 it is even more regrettable that the Samant Group has attempted to place on record matters that are alleged to have transpired at hearings in Court but which form no part of the record. There is absolutely no substance in these submissions.5.8. In the second E & Y report of 2011, Cadbury Indias shares have been valued by the CCM and DCF methods. Strangely, the results of both these methods are unacceptable to the objectors. The objectors claim that E & Y approach on the CCM method is fraudulent, erroneous and incorrect. They also claim that the valuation of shares on the DCF method is not transparent and is, therefore, unfair as it does not allegedly, have a disclosed basis, and that the projections of Cadbury India have not been disclosed in relation to the DCF analysis in the second E & Y report. Not only is this submission couched in extremely intemperate temperament language, but it does not disclose, other than ungraciously worded allegations, any substantial basis for the challenge on this ground. It ignores, importantly, the fact that the order of 8th July 2011 tied E & Y hand and foot to a non-disclosure and confidentiality requirement. No such disclosure could have been made by E & Y.5.9. It is not possible for a Court to go into the exercise of carrying out a valuation itself. That, as the Supreme Court said in Miheer H. Mafatlal, is not the Courts remit. Courts do not have the expertise, the time or the means to do this. I do not believe that they are expected to do it. What the Courts approach must be to examine whether or not a valuation report is demonstrated to be so unjust, so unreasonable and so unfair that it could result and result only in a manifest and demonstrable, inequity or injustice. This injustice must be shown to apply to a class. This has not been done. It always possible that there may be two views on any approach to accounting and valuation.4 The fact that the objectors prefer one valuation or method, or prefer their own valuation, is no answer. The Samant Group is unable to demonstrate any such injustice or inequity. All that it says is that the values are not to its liking and that it believes that it is entitled to Rs. 2,500/- per share on the basis of a valuation that it has itself obtained. This is not a valid test in law. Indeed, I have very little doubt that had the Samant Groups valuation of Rs. 2,500/- per share been the result returned by E & Y, the Samant Group would undoubtedly had even found that to be unfair, unjust and unreasonable. The unhappiness or disgruntlement of an individual or a group of individuals is not the measure by which a share valuation can ever be tested.5.10. Take for instance the submissions that in computing the share value on the CCM method, the amount utilised for buyback of shares has been deducted. This, according to the Samant Group, cannot be done according to accounting functions and policies pertaining to valuation and it has resulted in further depressing the valuation by Rs. 37/-. Not only is there no material to establish this, it is entirely possible that on this ground alone, more than one view is plausible. The deduction made by accountant is, in fact, logical, given that the petition was filed after a series of open offers and buybacks had already taken place. In effect, what the submission means is that Cadbury Indias shares ought to be valued at a time when it was still a publicly held, listed and traded company with no buybacks having taken place. That would also necessarily mean that the total number of shares in consideration would have to be of the pre-buyback era. This is, after all, a ratio (total equity value divided by number of shares). It is, clearly, an untenable proposition to use a higher numerator (the enterprise equity value before the buyback) and a lower denominator (the total number of shares after the buyback). That seems to be the Samant Groups suggestion. What is manifestly incorrect is, therefore, not what E & Y did, but what the Samant Group proposes.5.11. The same reason must apply to the further submissions regarding the allegedly incorrect weightage given by the valuer to the DCF and CCM methods respectively. What weightage should be given is itself dependent on a slew of other factors. To merely say that the weightage is incorrect is hardly a sufficient basis to dislodge what, after all, is the collective, commercial decision of a majority, including a majority of the non-promoter minority. In any event, this point was never once argued or urged despite the matter been heard over several days.5.12. Paragraph 6 of the Samant Groups written submissions contains a repetition of many submissions made elsewhere, including that the future prospects of the company had not been taken into account; that the discounting rate for the DCF method is incorrect; that weightage to the two methods was wrongly given; and that the amount utilised for buybacks options was wrongly taken into account. It is hardly the kind of material on which an entire scheme can be dislodged.5.13. The next submission that the valuation has been depressed is again not one that lends itself to acceptance. Various grounds have taken under this head. These include that the terminal growth rate has been estimated at 6% while sales and profits are growing by 20% and 40%, respectively. Just as it is not possible to accept an extremely low figure, it is equally not possible to accept other, possibly inflated, figures. These might be transient or may depend on multiple variables. Moreover, a look at the second E & Y report indicates that this terminal growth rate of 6% is not a random figure plucked out of thin air. A rationale is supplied. This may or may not be to the Samant Groups liking, but it is certainly not without basis. The second E & Y report seems to indicate that E & Y compared future projections with past performance, and with the projections of comparable companies. It then arrived at an assumption of the terminal growth rate for the relevant period. It is important to notice that the projections by E & Y are across a very long time range. The terminal growth rate is one that is used for a period six years hence (eight or nine years from the date of the report, and over ten years beyond the valuation date), post December 2020. As I have noted in Section 6, terminal growth rates are routine in DCF analysis. A conservative terminal growth rate over that time frame is probably a more accurate indicator of a projection.5.14. Another submission made is that the income tax rate has been considered at a flat 33.99%. The submission is that since Cadbury India enjoys various tax benefits, its profits are being taxed at the rate lower than 20% over the past few years.Again there is no substance to this submission. Tax regimes are liable to change. Often they change at short notice. A flat tax rate in a projection might, in fact, provide a very realistic and fairer value than something that is presently at a lower marginal rate. I have already noted that there has been a steadily rising progression in the amount offered by Cadbury India to various non-promoter shareholders for a buyback of their shares. This pattern, one that is self evident, does not sit well with the Samant Groups objections of unfairness.5.15. I turn now to a set of submissions that are singularly distressing. Paragraph 8 of the Samant Groups written submission is captioned Conduct of the Petitioner Company. Couched in much the same immoderate tone and language as the rest of these written submissions, the contentions under this head are actually not so much about the conduct of Cadbury India as a frontal attack on the Court itself. In using the kind of language that it does, and in making the kind of submissions that it does, the Samant Group sails dangerously close to the wind. Motives are attributed to the Court. It is not permissible for any party to speculate as to why a Court passed a particular order. Our orders speak for themselves.5.16. What is significantly worse is that on page 23 of the written submissions, the Samant Group has purported to record something that allegedly transpired before the Court. It attributes observations and comments to Court that find no place in any order. An allegation is made that a representative of E & Y tendered a white envelope to the Honble Court and that contents of this were never made known to the minority shareholders. To my mind, this is possibly contemptuous. It is almost certainly contumacious. This is nothing but an attempt to spin this matter out well beyond any reasonable life span. Indeed, I myself specifically dispensed with the presence of the representative of the Court appointed valuer on 13th February 2014 and I did so in open Court dictating an order in court and in the presence of all concerned, including the counsel for the Samant Group. Not once did anyone object.5.18. This, presumably, is the infamous white envelope. There is, among the court papers, an annexure by E & Y to its second report. This annexure is dated 14th March 2012, one year prior to the 1st February 2013 order. The annexures cover sheet says that it contains Cadbury Indias projections, along with relevant explanations from its management; and workings on the DCF method. This material had been earlier excised on account of the previous confidentiality restriction. It is said to have been submitted apparently in compliance with directions issued 2nd March 2012. I find no order of 2nd March 2012. None has been uploaded, and there is no such order on file. The E & Y annexure has been wholly disregarded by all courts, including myself. It cannot possibly be anybodys case that it has been looked into by one side, or by the Court, and not shown to the objectors. Anything the Court can see, every party before it should, except in the most extraordinary circumstances, be entitled to see. That document remains as it is; unseen, unconsidered and silent. It can furnish the Samant Group no cause for complaint.5.19. In paragraph 8, for the first time, it is now alleged that there was a violation of any principle of natural justice. Using words such as manipulated, twisted and the like, especially in reference to what happened in court, is a reprehensible practice to be deprecated in formal legal documents, especially those filed in courts. All law is discourse; and the discourse of law is the discourse of civility. It is easy to make strongly worded and even egregious allegations. More often than not, such allegations are meant only to camouflage a lack of all substance. This case is no exception. The Samant Groups submission is a straw man argument: it seeks to destroy a non-existent case. The submission says very little; but it says it very badly.5.20. Paragraph 8 of the written submissions also contains a startling submission never made before that no fair valuation can ever be made on the basis of unaudited accounts. This was not once the case in arguments before me. There is neither logic nor material to support this.5.21. The submissions in paragraph 9, regarding an undervaluation of shares of the Petitioner Company comes for the first time in these written submissions. Many of the subsidiary submissions under this head are repetitive. What is undoubtedly true is that valuation is not an exact science.5 It is always and only an estimation. The fact that a particular estimation might not catch an objectors fancy is no ground to discredit it. The objective of a Courts exercise of its discretionary jurisdiction under Section 100 of the Companies Act is not to entertain every fanciful wish or peevish complaint. It is to examine whether, on a standard or a test as detached and as objective as it is possible to be, a Court might plausibly conclude that a particular valuation is one that is, on the face of it, unreasonable, unjust and inequitable.5.22. The submission that Cadbury India treats its shareholders badly, and that this is evidenced by its steady pay out of dividend at only 20% is one so entirely without merit that it is surprising that it should ever have been advanced. No shareholder was compelled to continue his or her holding while the shares of Cadbury India were freely traded. No shareholder has any statutory right to any particular dividend. This can have no possible bearing on the question of valuation either.5.23. What the Samant Group overlooks is that it is not the only set of non-promoter shareholders, nor has it been sought to be ousted at the extraordinary general meeting by promoter shareholders. On the date of the extraordinary general meeting notice, 7,51,120 shares were held by persons other than the Cadbury Group, i.e., non-promoters. The Samant Group itself holds only 499 shares. The Churiwala group holds 1400 shares. This means that an overwhelming majority of the shareholders outside the Cadbury Group and also constituted in the minority voted in favour of the scheme.5.24. I must, at this stage, consider this question of what exactly is meant by minority and majority in the context that is being discussed presently. In the abstract, and at the simplest level, majority would connote the majority of all shareholders of the company across all classes. That is not the correct test here. There are admittedly two classes, the promoter shareholders and the non-promoter shareholders. The promoter shareholders far out-number the non-promoter shareholders. Let us for a moment put aside the promoter-shareholders assent to the scheme, and focus only on the responses of the minority, i.e., the non-promoter shareholders. Within this minority, there are again two classes or divisions: those who voted in favour of the proposed resolution at the extraordinary general meeting, and those who voted against. Where among the non-promoters those in favour out-number those against, it is these that must constitute the relevant majority for the present purposes. When viewed like this, the allegation that has been made by the Samant Group is not so much that they have been done in by the promoter group of Cadbury India, but by those non-promoter shareholders (a minority in the context of all shareholders) who voted in favour of the scheme. We have here, thus, a peculiar situation: overall, the majority of shareholders (including the promoter-shareholders) voted for the scheme. At the same time, the overwhelming bulk of non-promoter shareholders (i.e., a majority of the minority) have also voted in favour of the scheme. Those who voted against held only 12,784 shares. Of those, excluding the Gidwani group, the present group of objectors (the Samant and Churiwala Groups) hold collectively less than 2000 shares of Cadbury India; only 1899 shares. What is this in percentage terms They represent 0.25% of the non-promoter shares at the extraordinary general meeting (7,51,120); under 15% of those who voted against (12,784); and a mere 0.0063% of the total votes cast at the extraordinary general meeting (3,03,31,248).5.25. It is one thing to speak of the tyranny of a majority in general terms sans context. That implies that those with nothing to lose have somehow unleashed their collective will on those with everything to lose. It is another thing to ignore altogether the essential democratic discipline without which the functioning of any company would degenerate into mere chaos and anarchy. Here, the bulk of the non-promoter minority opted for the scheme. It is in this factual context that I must view Samant Groups shrill lamentations of unjust and inequity.5.27. There was no appeal from this order. There could not have been. I am at a loss to understand how, having once given its solemn assurance to the Court, the Samant Group can attempt to constantly resile from it; to constantly impeach the slightest exercise of discretion by the valuer and paint it as a grave infirmity. I am unable to find any infirmity, let alone one that is grave. The objectors must be held to their assurance solemnly given to the Court. It was, after all, on the basis of that assurance alone that the Court acted as it did, accepting the suggestion from Cadbury India and calling for an independent valuation (twice). It is because of that assurance that Cadbury India, adhering to its own assurance, finds itself faced with a valuation several hundred rupees higher than the one with which it first came to court. Cadbury Indias share purchase offers rose from an initial Rs. 500/- per share to an amount four times as high in the second E & Y report, Rs. 2,014.50/- per fully paid up equity share. Even this does not state the Samant Groups appetency.5.28. The Samant and Deepak Gidwani groups both submit that they are entitled to interest. All told the Gidwani Groups 30,157 equity shares in Cadbury India are about 15 times more than the Samant and Churiwala Groups. The Gidwani Group has, after an initial objection, specifically accepted the valuation in the second E & Y report of Rs. 2,014.50/- per fully paid up equity share. In its written submissions, the Deepak Gidwani Group claims interest from 30th July 2011 (i.e., from the day after the submission of the second E & Y report) till date. The basis is that had the amount been paid out then, the Gidwani Group would have had use of these funds. This delay is not attributable to the Gidwani Group. Its interests ought, therefore, to be protected. At least as far as the Deepak Gidwani Group is concerned, this is not a submission to be dismissed out of hand. Unfortunately, it so happens that the responsibility for the delay cannot be laid at the door of Cadbury India. That delay was partly attributable to the vicissitudes of litigation in this country. The matter was considerably exacerbated by the Samant Groups attempts constantly to alter the frame of reference. When this demand comes from the Samant Group, it is inherently unjust. That it works to the prejudice of the Gidwani Group is perhaps a matter of regret, but one without solution. I do not think it is possible to distinguish between the Deepak Gidwani Group and the Samant Group in this respect. Mr. Dwarkadas is justified in his submission that the pendency of this petition is not attributable to Cadbury India at all. Cadbury India has done nothing to delay the matter. Indeed, to cut short the controversy, it volunteered to have its own valuations set to one side and to have an independent valuation made. Just as no act of a Court can prejudice a party, similarly the inaction of a Court can also not deliver to any party any such prejudice. Such are the perils of litigation in India. I am unable to see any justification for foisting Cadbury India with an interest payment liability even for Deepak Gidwani Group.6.12. It is impossible, on any fair reading of the two E & Y reports, to conclude that there is anything in either of them that is so egregious that it would undoubtedly result in a manifestly skewed, distorted and depressed valuation.6.13. There is one final matter to which I must refer. There is, in the records, a letter from E & Y dated 2nd March 2012 addressed to the Court. Annexed to this is a statement of sorts. It is E & Ys response to the objections to its second report. I have not referred to or considered this letter or its annexures in this judgment. This was a small, and certainly immaterial, misstep in E & Ys otherwise unexceptionable, even exemplary, conduct. I do not believe that in writing to Court E & Ys intention was to step into the arena. All it sought to do was, in a sense, to defend its report. It is, after all, a firm of considerable standing, and the broadsides from the Samant Group, set on affidavit at about that time, could not have made for pleasant reading, especially since they contained allegations of bias, fraud and worse, and accused E & Y of entering the fray. E & Ys response could only have been an attempt, entirely unnecessary, to defend its integrity and reputation, not to join battle.7.1. In Section 4, I have examined the various authorities cited at the Bar. From these, and from a reading of the statute, I believe it is possible to cull the following principles in such matters. It is not my intention to suggest that these are the only principles, or that this listing is comprehensive. There are undoubtedly other propositions and principles as well. Some of these are stated in the earlier analysis of the objectors submissions. What follows is a listing of what I believe to be general principles of universal application in such matters.7.1.10. Valuation is not an exact science. Far from it. It is always and only an estimation, a best-judgment assessment. The fact that a particular estimation might not catch an objectors fancy is no ground to discredit it. All valuations proceed on assumptions. To dislodge a valuation, it must be shown that those assumptions are such as could never have been made, and that they are so patently erroneous that the end result itself could not but be wrong, unfair and unreasonable. The court must not venture into the realm of convoluted analysis, extrapolation, and taking on itself an accounting burden that is no part of its remit or expertise, and no part of a statutory obligation. In particular, the court must guard against the seductiveness of a proposition that suffers from the fallacy of the undistributed middle: all x is z; some y is z; ergo, all y is z.6 The errors and consequent unreasonableness must be shown to be patent and self-evident.7.1.11. It is impossible to say which of several available valuation models are best or most appropriate. In a given case, the CCM method may be more accurate; in another, the DCF model. There are yet others. No valuation is to be disregarded merely because it has used one or the other of various methods. It must be shown that the chosen method of valuation is such as has resulted in an artificially depressed or contrived valuation well below what a fair-minded person may consider reasonable.