NCLAT stays share buyout order in oppression and mismanagement case due to concerns over independence and reliability of the valuation report for 33.2% stake.
NCLAT Stays Buyout Order Over Flawed Valuation in Share Dispute
The National Company Law Appellate Tribunal (NCLAT) has stayed a share buyout order in a case involving alleged oppression and mismanagement concerning a 33.2% shareholding, citing serious concerns about the independence and methodology of the valuation report. The appeal challenged the compulsory acquisition of minority shares based on a disputed expert assessment.
The minority shareholder argued that the valuation was conducted by a consultant with prior affiliations to the majority group, raising conflict of interest concerns. Additionally, the valuation allegedly ignored market comparables and used outdated financials, resulting in an undervaluation of the stake.
The NCLAT found prima facie merit in the challenge and emphasized that fair valuation is integral to equitable resolution under Section 241-242 of the Companies Act, 2013. The buyout process was stayed to allow for a fresh, independent valuation or hearing on methodology.
"Valuation in oppression cases must be impartial and transparent, especially where forced exit is mandated,"the Tribunal observed. This decision serves as a caution to tribunals and parties to ensure expert independence and methodological rigor in minority buyout proceedings.
Practitioners must now scrutinize valuations more closely in oppression cases. Reliance on conflicted or mechanically flawed reports may render buyout orders unenforceable.
Citations
- Companies Act, 2013, Sections 241, 242