Valuation Report Can Be Rejected By The Court If It Is Illegal Or Fraud

The National Company Law Tribunal has recently held that the valuation report can be challenged on the ground of patent illegality, fraud, collusion or partiality.

This issue was raised in the case of Dr. Syed Sabahat Azim vs. Sahaj –E- Village Ltd. & Others, wherein the petitioner’s grievance was about the valuation of his holding in the concerned company. The final valuation report was challenged for being systematically and intentionally diluted in a malafide attempt to oppress the petitioner and mismanage the affairs of the Company.

NCLT while reaching its decision, referred to Miheer H. Mafatlal vs. Mafatlal Industries Ltd. in which the Supreme Court has observed that unless the approach adopted in valuation is patently erroneous or that relevant factors have not been considered, the Court would not interfere. The tribunal also referred to Sumana Bhasin vs. Eastern Connexion (Exports) P. Ltd. and Others where the Supreme court has emphasized on the fact that calculation of share is a technical issue and court must not interfere unless there are compelling reasons to upset the finding of the expert valuer.

After considering the above rulings, NCLT held that valuer’s final valuation report can be challenged on the ground of patent illegality, fraud, collusion or partiality and not due to parties’ dissatisfaction.