# Pannalal Bhansali v. Bharti Telecom Limited & Ors

- **Citation:** 2026 INSC 213
- **Court:** Supreme Court of India
- **Decided:** 2026-03-10
- **Case number:** Civil Appeal No. 7655 of 2025
- **Bench:** Sanjay Kumar, K. Vinod Chandran
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/pannalal-bhansali-v-bharti-telecom-limited-ors-39172
- **Pages:** 32

## Headnote

Issue arose whether the reduction of share capital u/s.66 of the
Companies Act, 2013, and the consequent forced exit of minority
shareholders, was arbitrary and unfair.
Headnotes†
Companies Act, 2013 - s.66 - Reduction of share capital -
Appellants-minority public shareholders in the respondent
company, held a fraction of 1.09% of shares - Respondent
no.1 decided to reduce its share capital u/s.66, by cancelling
28,457,840 equity shares held by the minority shareholders and
paying them an exit price of Rs.163.25 per share which was
subsequently raised to Rs.196.80 per share by the NCLT - Said
reduction approved by 99.9% of total shareholders - Minority
shareholders including appellants filed appeal challenging the
same on the ground that the explanatory note of the General
Meeting was a tricky notice to mislead them because it did
not include the actual valuation reports, and valuation was
done by an internal auditor - Correctness:
Held: Notice not vitiated by non-disclosure or mis-disclosure merely
for reason of the valuation and fairness report not being placed
before the shareholders as there was no statutory mandate for a
valuation report for the reduction of a share capital - Valuation in the
process of reduction of capital was resorted to by the company only
to arrive at a fair value and the fair value arrived, after the deduction
of tax was disclosed in the notice and the method adopted itself
was kept open for verification by the identified shareholders at the
registered office - It was disclosed fully in the proceedings before the
NCLT where the investors objected, despite the special resolution
having been passed with a thumping majority - Reduction of share
capital can be achieved by a special resolution and confirmation
* Author
494
[2026] 3 S.C.R.
Supreme Court Reports
by the tribunal, without a report of valuation from an approved/
registered valuer and hence, it does not fall within the ambit of a
relevant material; without the full and complete disclosure of which
the reduction of capital cannot be acted upon - However, company
despite any legal requirement adopted a valuation exercise, which
was further affirmed in a fairness evaluation by a different agency,
both of which reports were retained in the Registered Office of the
Company, kept open for verification by the investors - Thus, no
procedural infraction or misleading disclosure to style the notice
as 'tricky notice' - Notice contains the full disclosure as required
in a measure employed for reduction of share capital u/s.66, which
is the price offered by the company which translates as an exit
option for the identified shareholder - Furthermore, appointment
as an internal auditor, does not bring in a bias with respect to
the activities of the company which would essentially go against
the scope and spirit of an audit carried out of the accounts of
the company as an inhouse verification, which is also a statutory
requirement, available for scrutiny before a statutory auditor -
Not even a probability found that the internal auditor would act
in a biased manner, leave alone the valuation agency which is
an affiliate of the former - Plea that arbitrarily and without legal
sanction, the method of Discount for Lack of Marketability-DLOM
was applied to further reduce the value of share, cannot be
accepted - Applicability of DLOM cannot be held invalid and in
any event, what has to be looked at by the tribunal in scrutinising
the scheme of reduction of capital is only as to whether there was
a fair measure employed which cannot be termed unreasonable
or prejudicial to the individual shareholders - Fair and reasonable
value was offered to the minority shareholders and the majority
of the identified shareholders present and voting, voted in favour
of the resolution - Even on a microscopic scrutiny the valuation
cannot be found to be egregiously wrong especially looking at the
previous offers and also the rights issue offered at par, prior to
the reduction of sha

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[2026] 3 S.C.R. 493 : 2026 INSC 213
Pannalal Bhansali
v.
Bharti Telecom Limited & Ors.
(Civil Appeal No. 7655 of 2025)
10 March 2026
[Sanjay Kumar and K. Vinod Chandran,* JJ.]
Issue for Consideration
Issue arose whether the reduction of share capital u/s.66 of the
Companies Act, 2013, and the consequent forced exit of minority
shareholders, was arbitrary and unfair.
Headnotes†
Companies Act, 2013 - s.66 - Reduction of share capital -
Appellants-minority public shareholders in the respondent
company, held a fraction of 1.09% of shares - Respondent
no.1 decided to reduce its share capital u/s.66, by cancelling
28,457,840 equity shares held by the minority shareholders and
paying them an exit price of Rs.163.25 per share which was
subsequently raised to Rs.196.80 per share by the NCLT - Said
reduction approved by 99.9% of total shareholders - Minority
shareholders including appellants filed appeal challenging the
same on the ground that the explanatory note of the General
Meeting was a tricky notice to mislead them because it did
not include the actual valuation reports, and valuation was
done by an internal auditor - Correctness:
Held: Notice not vitiated by non-disclosure or mis-disclosure merely
for reason of the valuation and fairness report not being placed
before the shareholders as there was no statutory mandate for a
valuation report for the reduction of a share capital - Valuation in the
process of reduction of capital was resorted to by the company only
to arrive at a fair value and the fair value arrived, after the deduction
of tax was disclosed in the notice and the method adopted itself
was kept open for verification by the identified shareholders at the
registered office - It was disclosed fully in the proceedings before the
NCLT where the investors objected, despite the special resolution
having been passed with a thumping majority - Reduction of share
capital can be achieved by a special resolution and confirmation
* Author
494
[2026] 3 S.C.R.
Supreme Court Reports
by the tribunal, without a report of valuation from an approved/
registered valuer and hence, it does not fall within the ambit of a
relevant material; without the full and complete disclosure of which
the reduction of capital cannot be acted upon - However, company
despite any legal requirement adopted a valuation exercise, which
was further affirmed in a fairness evaluation by a different agency,
both of which reports were retained in the Registered Office of the
Company, kept open for verification by the investors - Thus, no
procedural infraction or misleading disclosure to style the notice
as 'tricky notice' - Notice contains the full disclosure as required
in a measure employed for reduction of share capital u/s.66, which
is the price offered by the company which translates as an exit
option for the identified shareholder - Furthermore, appointment
as an internal auditor, does not bring in a bias with respect to
the activities of the company which would essentially go against
the scope and spirit of an audit carried out of the accounts of
the company as an inhouse verification, which is also a statutory
requirement, available for scrutiny before a statutory auditor -
Not even a probability found that the internal auditor would act
in a biased manner, leave alone the valuation agency which is
an affiliate of the former - Plea that arbitrarily and without legal
sanction, the method of Discount for Lack of Marketability-DLOM
was applied to further reduce the value of share, cannot be
accepted - Applicability of DLOM cannot be held invalid and in
any event, what has to be looked at by the tribunal in scrutinising
the scheme of reduction of capital is only as to whether there was
a fair measure employed which cannot be termed unreasonable
or prejudicial to the individual shareholders - Fair and reasonable
value was offered to the minority shareholders and the majority
of the identified shareholders present and voting, voted in favour
of the resolution - Even on a microscopic scrutiny the valuation
cannot be found to be egregiously wrong especially looking at the
previous offers and also the rights issue offered at par, prior to
the reduction of share capital, exponentially increasing the take
aways of the individual shareholders and the valuation cannot at
all be said to have gone off-track, so as to make it egregiously
wrong - Appellants were seasoned retail investors who made a
calculated decision - Valuation is an exercise best left to experts,
and the Court found no blatant unfairness - Furthermore, plea as
regards the jurisdictional defect on the composition of the NCLAT
and the status-quo order cannot be accepted. [Paras 29, 32, 34,
38, 46, 48, 50]
[2026] 3 S.C.R.
495
Pannalal Bhansali v. Bharti Telecom Limited & Ors.
Companies Act, 2013 - s.66 - Reduction of share capital -
Requirements - Explained. [Para 47]
Case Law Cited
Union of India v. Madras Bar Association [2010] 6 SCR 857 : (2010)
11 SCC 1; Madras Bar Association v. Union of India [2015] 6 SCR
638 : (2015) 8 SCC 583; State of M.P. v. B.R. Thakare (2002)
10 SCC 338; State of West Bengal v. Anwar Ali Sarkar [1952] 1
SCR 284 : AIR 1952 SC 75; LIC v. Escorts Ltd and Others [1985]
Supp. 3 SCR 909 : (1986) 1 SCC 264; Claude-Lila Parulekar
(SMT.) v. Sakal Papers (P) Ltd. and Others [2005] 2 SCR 1063 :
(2005) 11 SCC 73; Devas Multimedia (P) Ltd. v. Antrix Corpn. Ltd.
[2022] 11 SCR 291 : (2023) 1 SCC 216; N.K. Bajpai v. Union of
India [2012] 2 SCR 433 : (2012) 4 SCC 653; Mihir H. Mafatlal v.
Mafatlal Industries Ltd. [1996] Supp. 6 SCR 1 : (1997) 1 SCC
579 - referred to.
In Re: Reckitt Benckiser (India) Ltd., 2005 SCC OnLine Del 674;
In Re: Cadbury India Limited, 2014 SCC OnLine Bom 4934;
Firestone Tyre & Rubber Co. v. Synthetics and Chemicals Ltd.
(1971) Comp. Cases 377 (Bom.) - referred to.
British and American Trustee and Finance Corporation v. Couper
(1894) SC 399; Kiri Industries Ltd. v. Senda International Capital
Ltd. [2022] SGCA (I) 5; Baillie v. Oriental Telephone and Electric
Co. Ltd. [1915] 1 Ch 503; Foss v. Harbottle, 67 E.R. 189; Kaye v.
Croydon Tramways & Co. Ltd. [1898] 1 Ch. 358; Thio Syn Kym
Wendy and Others v. Thio Syn Pyn and Others [2018] SGHC 54;
Liew Kit Fah and Others v. Koh Keng Chew and Others [2020] 1
SLR 275 - referred to.
Books and Periodicals Cited
"Shareholder Oppression and 'Fair Value': of Discounts, Dates and
Dastardly Deeds in Close Corporation" by Professor Douglas Moll
(2004) 54 (2) Duke LJ 293 - referred to.
List of Acts
Constitution of India; Companies Act, 2013; Companies (Accounts)
Rules, 2014; Special Court (Trial of Offences relating to Transactions
in Securities) Act, 1992; Chartered Accountants Act, 1949.
496
[2026] 3 S.C.R.
Supreme Court Reports
List of Keywords
Buy-back offer; Discount for Lack of Marketability (DLOM); Fair
market value; Fair value; Fairness report; Indian Accounting
Standards; Internal auditor; Minority shareholders; Oppression and
mismanagement; Reduction of share capital; Special Resolution;
Tricky notice; Valuation report.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7655 of 2025
From the Judgment and Order dated 03.04.2025 of the National
Company Law Appellate Tribunal in CAAT No. 340 of 2019.
With
Civil Appeal No(s). 9862, 9601, 9797, 7666, 9478, 9599, 9849,
and 13824 of 2025
Appearances for Parties
Advs. for the Appellant(s):
K. Parameshwar, Sr. Adv., Masoom K. Shah, Udit Gupta, Ms. Veda
Singh, Prasad Hegde, N Sai Kaushal, Adit Garg, Rohan Chawla,
Ms. Aashvi P. Shah, M/s. Udit Kishan And Associates.
Advs. for the Respondent(s):
Shyam Divan, Ramji Srinivasan, Percival Billimoria, Sr. Advs.,
Ms. Arti Singh, Kamal Shankar, Tanmay Sharma, Aakashdeep
Singh Roda, Arjun Narang, Shivam Jain, Ms. Shefali Munde, Arjun
Bhatia, Arpith Jacob Varaprasad, Ankur Singhal, Ms. Pooja Singh,
B P Singh, Soumya Dutta, Khowaja Siddiqui, Arvind Gupta, Kshitij
Arora, Ms. Rachita Sood, Ms. Priyamvada Paneru, Rahul Bhaskar.
Judgment / Order of the Supreme Court
Judgment
K. Vinod Chandran, J.
1.
The appellants, investors in a minority, cry foul on the allegation of
their being arbitrarily disgorged of their shareholdings and eased out
of the 1st respondent company, (BTL for brevity) in a grossly unfair
manner, making a sham of an evaluation fixing the share price at
an unreasonably low value. Shorn of the details, the 1st respondent,
[2026] 3 S.C.R.
497
Pannalal Bhansali v. Bharti Telecom Limited & Ors.
a closely held company having 1.09% of its shareholding with
individuals, decided to reduce its share capital under Section 66 of
the Companies Act 20131 by cancelling 28,457,840 equity shares
held by the identified minority shareholders by paying an amount of
Rs.163.25/- per equity share of Rs.10/- each. The resolution was
passed by a Special Resolution with a majority of more than 99.90%,
the sanction for which was sought before the National Company Law
Tribunal (the NCLT hereinafter). The NCLT found that the decision
to deduct the Dividend Distribution Tax from the price fixed for the
individual shares was arbitrary and directed the BTL to pay the
identified individual investors; without the tax deduction, Rs.196.80/-
per equity share. BTL acceded to the NCLT's order but thirty-five of
the shareholders, those who voted in favour of the reduction of share
capital, filed appeals before the National Company Law Appellate
Tribunal (NCLAT hereinafter), unsuccessfully, some of whom are
before us; precisely eleven of them. The intervention attempted by
some others were disallowed by us.
2.
Sri. K. Parmeshwar, learned Senior Counsel led the arguments
on behalf of appellants and forcefully urged the unfairness in the
fixation of share value, which edged out the individual investors
with a raw deal for the shares held for long. The Directors and the
majority have a fiduciary relationship with not only the Company but
also with the minority, negated totally in fixing the share prices. The
challenge according to Sri. Parmeshwar is on three counts which
are subtly encapsulated as the Manner, the Method and Matter,
which he styles as the three objectionable Ms. The manner being
the procedure followed, the method being the measure employed
in valuation and the matter being the very low price determined.
Insofar as the manner is concerned, it is pointed out that the Board
resolution does not speak of a request made by the shareholders
to give them an escape route, which is included in the notice of the
General Meeting; misleading since such a request was absent. The
Board peremptorily decided to reduce the shareholding and entrusted
the valuation to the company's own internal auditor's associate, a
related entity. Though a fairness report was obtained, it has the same
date as the valuation report, indicating the hasty manner in which
valuation and fairness evaluation were proceeded with, a clear sham.
1
For brevity 'the Act of 2013
498
[2026] 3 S.C.R.
Supreme Court Reports
3.
Further, there were essential aspects of valuation as revealed from
documents, which were relevant insofar as the consideration of the
value fixed for reduction of shareholding, which was never supplied
to the independent shareholders, who were in a minority. Those were
merely kept in the registered office as indicated from the notice of
the General Meeting, which is insufficient as has been declared by
the decisions of this Court. Despite some of the shareholders having
asked for a copy of the valuation and fairness reports, the same were
not supplied. There are serious procedural infractions and inadequate,
misleading disclosures, in violation of the mandate of Section 102
of the Act of 2013, which vitiates the entire process of reduction of
shareholding. On a summing up of the procedural infractions, it is
urged that the explanatory note of the General Meeting is a 'tricky
notice' for : (i) it does not have a summary of or the valuation report
itself, (ii) non-disclosure of the methodology adopted in valuation;
reference not being made to the share value of Bharti Airtel Limited
(BAL for brevity), a subsidiary company the shareholding in which
is the only business of the first respondent company and (iii) the
valuation having been made by an interested entity. The 'tricky notice'
disabled an informed decision by the individual shareholders, is the
contention, fortified with decisions. This encompasses the challenge
to the manner in which the procedure was carried out.
4.
Insofar as the methodology is concerned, it is argued that the BTL,
earlier listed in the Stock Exchanges was delisted between 1999-2000
and BAL was incorporated as a subsidiary. On the BAL launching an
IPO in January 2002, it was listed on the Bombay Stock Exchange
and the majority shareholding of the first respondent in BAL fell
considerably, making BAL & BTL associate companies. It was by a
rights issue brought out in the year 2016 and the resultant capital
increase in BTL, BAL again became a subsidiary of BTL. Since, the
BTL's only business was the investment made in BAL, the share
price fixed of BTL should have been fixed with reference to the
share value of BAL. The valuation report indicates the share value
of BAL at Rs.368.22/- as it's listed price while the value of BTL was
calculated based on the market value of BAL and the Net Asset Value
of BTL. More importantly, arbitrarily and without legal sanction, the
method of Discount for Lack of Marketability (DLOM) was applied
to further reduce the value of share. The method of DLOM applied
is against the accepted norms of valuation as has been deprecated
[2026] 3 S.C.R.
499
Pannalal Bhansali v. Bharti Telecom Limited & Ors.
internationally too, as revealed from the judgment of the Court of
Appeal of Singapore in Kiri Industries Ltd. v. Senda International
Capital Ltd.2 The reliance on Professor Aswath Damodaran's opinion
also is not relevant, since it applies to valuation of private companies
plagued with illiquidity. The method applied hence is arbitrary and
unfair is the contention.
5.
Insofar as the material irregularity, the price fixation is argued to
be wholly deficient and arbitrarily low. It is argued that in the year
2001, the first respondent had offered an exit price of Rs.96/- per
share and later in the year 2006 @ Rs.400/- per share. There was
a private offer by a commodity broker in the year 2007 @ Rs.2000/-
per share. Reliance is also placed on the various purchase offers,
as produced at Annexure 2 series, in the Convenience Compilation.
It is based on the capital infusion of the rights issue that the first
respondent again rose to the position of a holding company of BAL
and in the year 2018 for the induction of a foreign entity, an estimate
of fare share value was made by a qualified agency, which put
the per share price @ Rs.310/- as is evident from Annexure A5. It
is at this price SingTel purchased 49% of the shares in BTL. The
reduction of the share capital then made was intended at edging
out the investors from amongst the public, who were in a minority,
in which circumstance there should have been a higher standard of
fairness and transparency applied.
6.
The reference to market value is no basis since the investors had
remained in the company for long, admittedly even without payment
of dividends. A fair value for their exit from the company cannot
be equated with the fair market value. The several offers made for
buy-back and purchase at a higher value and the value at which
SingTel purchased shares in the BTL, almost simultaneous to the
reduction in share capital would definitely regulate valuation under
Section 66. Reference is also made to Section 68 and Section 230
of the Act of 2013, respectively of a voluntary exit and one based
on compromise which procedure ought to have been applied to
bring in the standard of fairness even under Section 66, which is
an involuntary purchase made by the majority in oppression of the
minority shareholders; a forced exit. The material defect is the low
2
[2022] SGCA (I) 5
500
[2026] 3 S.C.R.
Supreme Court Reports
value of the share fixed for the exit of the minority shareholders. Sri.
Parmeshwar while summing up cautions that we would be laying
down the law with respect to edging out of minority shareholders,
which necessarily has to satisfy the judicial conscience with a higher
standard of fairness than applicable in a voluntary or optional exit or
an exit by compromise, especially since it is the majority will running
roughshod over the minority rights.
7.
Sri. Masoom K. Shah, learned counsel appearing in one of the
appeals, for the appellant while adopting the submissions of Sri.
Parmeshwar, points out a defect in the constitution of the NCLAT
insofar as it being comprised of two Technical Members and one
Judicial Member. Reliance is placed on Union of India v. Madras
Bar Association3 (2010-MBA) (paragraph 120 (xii)) to contend that a
Constitution Bench of this Court deprecated the practice of a majority
of Technical Members sitting in a Bench of the NCLT or the NCLAT,
which substitutes the High Court. In anticipation, to preempt that
contention, it is pointed out that there cannot be raised a ground of
acquiescence, insofar as the defect going to the root of jurisdiction
by reason of the illegal composition, as has been held in State of
M.P. v. B.R. Thakare4. Sri Shah also points out from the valuation
report and the documents pertaining to various associates of the
agency which carried out the valuation that it has an inextricable link
and connection with the Internal Auditor of BTL. The one who signed
the valuation report itself is in the Board of the internal auditor, thus,
throwing a cloud of absence of impartiality on the valuer, coupled with
a bias in favour of the majority shareholders revealing a collusion
in arriving at a lower value of shares for the exit of the individual
members from the public; which does not augur well on the facts of
the case especially on the minority shareholders being given a raw
deal and forced out of their shareholding.
8.
Sri Sumit Kumar, learned counsel appearing for one of the appellants
refers to Annexure A7 in C.A. No.2864 of 2021, wherein there was a
status quo order, which is even now in force; and reduction of share
capital having been made in the interregnum, falling flat, requiring
immediate resumption of shares. The valuation made by the Custodian
also is pointed out to assail the price fixed now.
3
(2010) 11 SCC 1
4
(2002) 10 SCC 338
[2026] 3 S.C.R.
501
Pannalal Bhansali v. Bharti Telecom Limited & Ors.
9.
Sri Ramji Srinivasan & Sri. Shyam Divan learned Senior Counsel
appearing for BTL commenced their arguments with Section 423
of the Act, which jurisdiction the appellants have invoked, wherein
there should be a clear question of law raised, which is absent in
the present case. Every legal requirement has been complied with
for the reduction of share capital under Section 66 of the Act of 2013
and there is no violation complained of but for a mere allegation of
prejudice which the appellants have failed to substantiate as real and
compelling, enabling this Court to interfere. Valuation is dependent
on multiple factors and not possible of mathematical certainty. It is
urged that in the formation of companies, the shareholders come
together and enter into a contract or charter as revealed from the
Articles of Association to which each of them are bound. The decisions
are of the majority of such shareholders, failing which there would
be mayhem and no corporate entity would be able to perform its
functions and arrive at its collective goal of realizing its objectives.
In the present case, it is pointed out that the appellants, eleven
in number and those before the NCLAT, thirty-five in number do
not together satisfy the definition of a minority as coming out from
Section 244 of the Act of 2013. Neither do they have the number
of shareholders, nor do their total value of shareholding satisfy the
minimum requirement thereunder of a minimum 100 persons or 1/10th
of the share value, thus disabling even an application for oppression
or mismanagement on their combined efforts.
10. It is pointed out that there is no valuation provided under Section 66
as would be the requirement under various other provisions of the
Act of 2013 which demolishes the ground of an interested valuation
having been taken up by a related agency of the internal auditor of
the company. Even otherwise on that sole ground prejudice cannot
be found unless it is shown in reality. Section 66 does not require
a valuation and the safeguards as provided therein of a special
resolution being passed in the General Meeting of the Company and
more importantly confirmation by the Tribunal have been scrupulously
followed. Though, a valuation is not mandated as per the Section,
definitely there should be some method by which a fair value is
arrived at insofar as providing an exit for the identified shareholders.
A Valuer was appointed who is an agency, with its associates, having
a global presence and a reputation in corporate matters including
502
[2026] 3 S.C.R.
Supreme Court Reports
financial aspects. When the company could have done the valuation
by itself, then thought it fit to appoint an independent valuer only to
ensure transparency and to avoid a contention of bias being raised.
The valuer had examined the books of accounts and submitted the
valuation report, which was scrutinized by another agency who had
also affirmed the valuation as fair and reasonable by its fairness report.
11. The fact that the valuer was a sister concern of BTL's Internal Auditor
does not bring forth any conflict of interest or validate the contention
of lack of independence. The Internal Auditor as is mandated by
the guidelines issued by the Institute of Chartered Accountants of
India (ICAI) is an independent agency appointed by the Company
for the purpose of carrying out audit, as per the mandate of the Act
of 2013. The mere fact that the signatory of the report valuing the
shares of BTL was in the Board of Directors of BTL's Internal Auditor
does not create any conflict or relation insofar as the affairs of BTL.
The Internal Auditor acts as an independent agency and so did the
valuer on accepted accounting norms. It is reiterated that the same
was affirmed by an independent agency and it also was affirmed as
a fair and true valuation by two other agencies having no connection
with BTL or the Internal Auditor as was sought for by the Custodian
who is a party in Civil Appeal No. 2864 of 2021. The valuation and
fairness report being on the same date only denotes the day of
issuance and is no reflection of the time taken for evaluation.
12. On facts it is pointed out that BTL having been delisted from all stock
exchanges made a buy-back offer of Rs.96/- per share in the year
2001, which was the only buy-back offered by the company itself.
One of the promoters of BTL, Bharti Overseas Trading Company had
offered Rs.400/- per share in May 2006. But for that there is nothing
substantial brought out from the various documents produced as to
a clear value of the share of BTL, whose only investment was in
BAL. In 2016, there was a rights issue which increased the share
base exponentially causing significant lowering of the monetary
value of the shares. This was followed up with a preferential
allotment of shares at the rate of Rs.310/- per share in favour of a
Strategic Long-Term Promoter, SingTel, so as to infuse funds into
the company. The share value for the said transaction was on the
basis of the prevailing market price of BAL and in accordance with
the applicable FEMA regulations mandating a certain floor price. In
any event, there can be no equation of the share price determined for
[2026] 3 S.C.R.
503
Pannalal Bhansali v. Bharti Telecom Limited & Ors.
preferential allotment to the present reduction of shares. Therein the
investors were entering into a strategic partnership in the business
which definitely would have required a premium to be paid on the
share value. It is also pointed out that BAL share value fell sharply
from January 2018 to May 2018 due to the tariffs imposed and the
fierce competition in the telecom market, which also impacted the
share value of BTL. There is no misrepresentation insofar as the
shareholders having requested for a buyback, which is evident from
the Minutes of the various AGMs, some of which were handed over
across the Bar. The shares having been delisted and there being
no payment of dividend for long coupled with a constant clamor for
buy-back the reduction of share capital was proposed, by which
measure the Company out of its own funds, would purchase the
shares of the identified shareholders which had no marketability.
13. We were taken through the valuation report, figure by figure and
page by page pointing out the manner in which the valuation was
arrived at and the DLOM applied at the rate of 25%, at the minimum,
for reason of the existing illiquidity, approved by Indian Accounting
Standards as brought out in the ICAI Valuation Standards. The
valuation as earlier pointed out was approved in the fairness report
issued by a totally different agency. The same was placed in the Board
of Directors and a resolution was passed subject to the approval
of the shareholders for which notice was issued as per Annexure
A18. The notice specifically indicated the relevant documents having
been kept in the Registered Corporate Offices of BTL, available for
inspection between 19.06.2018; the date of notice and 26.07.2018;
the last day of receipt of postal ballot or e-voting. It is emphasized
that there can be no case raised of the relevant documents having
not been supplied, especially since the voting period extended over a
month and in fact the Advocate of one of the investors had inspected
the documents and sought for further details as is evident from the
e-mail projected by the appellants themselves. It is emphatically
contended that 99.90% of the equity shareholders of BTL passed
and approved a special resolution and 76.35% of the identified
shareholders present and voting also voted in favour of the special
resolution approving the share value of Rs.196.80/-. No Objection
Certificates were also received from all the creditors and hence,
the petition under Section 66 of the Act seeking confirmation of the
scheme of capital reduction before the NCLT.
504
[2026] 3 S.C.R.
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14. The NCLT as is the mandate, called for a report from the Regional
Director of the Department who confirmed compliance of the
procedure prescribed under the Act for reduction of capital. The
NCLT having confirmed the capital reduction after looking at the
objections filed by public shareholders, the NCLAT has also approved
the same. There is hence no scope for interference, especially since
no prejudice is shown. It is pointed out that the capital reduction
was proceeded with immediately after the rights issue which put the
identified shareholders in a position enhancing their shareholding
exponentially, especially since the rights issue offered 115 shares at
par for Rs.10/-, as against every single share held by an investor.
Hence, the capital reduction after the rights issue put the investors
in a very favorable position and the appellant in Civil Appeal No.
7655 of 2025 who would have obtained Rs.16 lakhs before the rights
issue, on the very same valuation went home with an astronomical
amount of Rs.47.30 crores. The fair value cannot be fixed at the
ipse dixit of the investor, and it has to be with reference to the
market value. There cannot be a fair value fixed divorced from the
market value, especially in the case of BTL which had no other
commercial activity other than the investment in BAL. The shares
of BAL were listed in the stock market, and the value therein could
not have been adopted for BTL which was the holding company,
having only investment in the listed company; the shareholdings
of which holding company was not marketable by reason of the
delisting. It is pointed out that the identified investors are neither
fly-by-night operators nor persons unfamiliar to investor domains but
are shrewd operators who have earned substantial payouts; though
not by way of periodic dividends which were practically absent, in
the reduction of share capital, despite their shares being locked in
for long. They have waited patiently and benefited with bountiful
yields and crave more on an impulsive caprice, with nothing more
and in total absence of any real prejudice having been shown to
have visited them.
15. Both sides have placed reliance on a host of decisions to buttress
their contentions which we shall refer to, as are applicable, in the
course of our adjudication. We also refer from the documents in the
Convenience Compilation and otherwise from the specified volumes
of the numbered appeals.
[2026] 3 S.C.R.
505
Pannalal Bhansali v. Bharti Telecom Limited & Ors.
Jurisdictional defect on the composition of the NCLAT & the
status-quo order:
16. The contention first taken is of the constitution of the Bench of the
NCLAT running foul of the mandate declared in 2010-MBA3. The
Constitution Bench in 2010-MBA3 considered the challenge against
the Companies (Second Amendment) Act, 2002, constituting the
NCLT & NCLAT; pointedly for our purpose, with reference to Section
10-FL insofar as the constitution of Benches. Paragraph 120(xii),
one of the several corrections suggested, required two members of
the Tribunal to always have a Judicial Member and any Larger or
Special Benches constituted to have more Judicial Members than
Technical Members.
17. Section 10-FL by sub-section (1) provided for the Tribunal to exercise
the powers conferred by Benches constituted by the President out
of which one shall be a Judicial Member and another a Technical
Member. The first proviso empowered the President of the Tribunal by
general or special order to permit Members to sit single and exercise
the jurisdictional powers and authorities of the Tribunal with respect
to such class of cases or matters with respect to a class of cases,
as specified. The above provision is no more applicable since the
Companies Act, 1956 has been replaced by the Companies Act,
2013. Sections 418A and 419 of the new statute speak of Benches
of the NCLAT and that of the NCLT. The proviso to sub-section (1)
of Section 418A requires a Bench of the NCLAT to have at least
one Judicial Member and one Technical Member and the proviso
to Section 419(3) mandates a similar composition in constitution
of Benches of two Members. Section 419 further provides that the
Tribunal shall exercise the powers in respect of such class of cases
or such matters pertaining to a class of cases as the President by
general or special order specifies, by a Bench consisting of a Single
Judicial Member.
18. The provisions leading to the constitution of the NCLT and NCLAT
were again challenged in Madras Bar Association v. Union of India5
(2015-MBA). Section 419, as we see from the law reports, was not
challenged before the Constitution Bench and Section 418A came to
be introduced by Act 29 of 2020, later to the decision. Three issues
5
(2015) 8 SCC 583
506
[2026] 3 S.C.R.
Supreme Court Reports
arose in the 2015-MBA5, which were with respect to (i) the constitution
of NCLT and NCLAT, held to be valid; (ii) qualification of President
and the Members of NCLT and NCLAT, Section 409(3)(a) & (e) as
also Section 411(3) held invalid as making eligible a person other
than a Secretary or Additional Secretary to be a Technical Member
and (iii) the constitution of the Selection Committee for Members;
held to be possible if comprising of only four Members, two from the
Judicial side being the Chief Justice of India or his nominee and a
Senior Judge of the Supreme Court or the Chief Justice of a High
Court and two Secretaries, one from the Ministry of Finance and
Company Affairs and the other from the Ministry of Law and Justice,
with the Chief Justice of India or his nominee having a casting vote;
following the earlier judgment. Thus, ensuring that the Judiciary
has the final say, untrammeled by any governmental influence or
interference in the appointment of a Member of the Tribunal, be it a
Judicial Member or a Technical Member.
19. The provisions as of now do not require a majority of Judicial Members
in the Larger Benches of the NCLT or the NCLAT. We cannot but
notice the extract made in 2010-MBA3 from State of West Bengal v.
Anwar Ali Sarkar6 in the context of Article 14, applies equally to
the issue raised before us, attempting a distinction drawn between
judicial members and technical members. The extract was made
consequent to the finding in paragraph 102 that "The fundamental
right to equality before law and equal protection of laws guaranteed
by Article 14 of the Constitution, clearly includes a right to have
the persons rights adjudicated by a forum which exercises judicial
power in an impartial and independent manner, consistent with the
recognized principles of adjudication" (sic). Anwar Ali Sarkar6 held
that even a criminal is entitled to set up a defense, and a special
trial, as was contemplated in the legislation under challenge though
is in public interest, would interfere with his fundamental rights.
20. Examining the special law contrasted with the ordinary law of the
land, Vivian Bose J. in paragraph 87; Anwar Ali Sarkar6 opined
that the test is not merely academic, for equality should be tested
on the collective conscience of a sovereign democratic republic as
to whether substantially equal treatment would be found by 'men of
6
AIR 1952 SC 75
[2026] 3 S.C.R.
507
Pannalal Bhansali v. Bharti Telecom Limited & Ors.
resolute minds and unbiased views'. Whether these men would find
it right or proper in a democracy of the kind we have proclaimed
ourselves, is the true test. We respectfully adopt the definition as
applicable to adjudications in every sphere and branch involving
interpretation and resolution of disputes, complex and simple, both.
All adjudicators first and foremost are or should be reasonable
persons having resolute minds and unbiased views. Though judicial
experience is valuable, administrative officers and technocrats; to
whom judicious consideration is not alien in their long tenures of
service dealing also with quasi-judicial matters, statutory appeals
and the like, when permitted by the legislature to be included as
Tribunal Members to aid, assist and promote a holistic adjudication
of disputes and interpretation of laws, having administrative and
technical ramifications, we cannot after permitting them to sit sideby-side treat them or their capabilities, with disdain or label them
lower in status or in quality.
21. In the present case, we also have to notice that the Bench was
headed by a Judicial Member and had two Technical Members, and
the opinion was unanimous at the NCLAT. We also find no parallel
infirmity as arising from B.R. Thakare4, wherein a single Member
of the Tribunal, an Administrative Member, was tasked with the
adjudication of a dispute relating to cadre determination involving
interpretation of the respective rules. It was held as a measure of
proper administration of justice that '... while allotting work to a Single
Member, whether judicial or administrative, the Chairman should keep
in mind the nature of the litigation and where questions of law and
its interpretation are involved, they should be assigned to a Division
Bench of which one of them is a Judicial Member' (sic). No distinction
was drawn with reference to the source from which the Members
come and there is no application to the facts of the present case.
As of now, the Companies Act permits a Single Bench to sit only in
the NCLT and that too a Bench of a Judicial Member. The NCLAT
as provided in Section 418A always comprises of two Members, one
of whom is a Judicial Member or such larger composition where the
prescription is only of the presence of a Member from the Judicial
side and not in the majority.
22. We find absolutely no reason to interfere with the order on the
question raised of the composition of the Bench of the Appellate
Tribunal. We also notice the further contention taken based on the
508
[2026] 3 S.C.R.
Supreme Court Reports
order of status quo, wherein the first respondent company was not a
party, to only reject it immediately. Obviously, the matter arose from
a scam in which a Custodian was appointed for the sale of assets
of the person involved in the scam, the assets being represented
by the legal representatives. The Custodian had proceeded to
sell the properties belonging to the legal representatives in which
circumstance this Court had issued a status quo order which binds
the Custodian and not the first respondent company, who was not a
party to that proceeding. The status quo order is only insofar as the
preservation of the assets, which in the circumstance of a reduction
of shareholding, as is the subject matter of the present case, would
only have the consequence of the shareholding being converted to
money which would be held by the Custodian, the disbursement and
adjustment of which would depend on further orders passed by this
Court in the pending appeal. Reference is also made to Annexure-22
in Civil Appeal No. 2864 of 2021 to contend that the undertaking
before the Custodian to disclose the Special Courts order before
the NCLT was not complied with. The Special Courts order or even
this Court's as we perceive it has no bearing on the share capital
reduction of BTL. What assumes relevance is the custody of certain
shares being with the Custodian, in which circumstance the proceeds
with respect to that, on reduction of share capital, will have to be
submitted to the Custodian. It does not have any significance to
the reduction of share capital or the proceedings before the NCLT.
The Manner; The procedural infraction:
23. Under this head is raised issues of; (i) a request from the shareholders,
though disclosed in the notice having not been indicated in the Board
Resolution; (ii) the 'tricky notice' issued insofar as the elements
constituting valuation having not been disclosed, especially the
valuation and fairness reports; (iii) the valuation having been effected
by a related agency; (iv) the fairness report having been issued on
the very same date of the valuation report and (v) the valuation and
fairness reports having not been sent along with the notice and kept
out of reach of the investors by making it open for verification only
at the Registered Office of the Company. As was pointed out by the
respondent company, the shares of the company remained locked
in for long after the initial buyback offer, pursuant to delisting. There
were also no dividends paid, in which circumstance the individual
[2026] 3 S.C.R.
509
Pannalal Bhansali v. Bharti Telecom Limited & Ors.
investors had sought for an exit option at the Annual General Meetings
(AGM), the minutes of which were handed over to us, across the
Bar. That the investors herein did not opt for the buyback offer and
had been holding the shares despite no payment of dividend for
long is crystal clear from the minutes of the AGM. Also, it is revealed
that there were requests made for buyback or another opportunity
by which an exit is provided to the shareholders. That the company
resorted to reduction in share capital, which in turn provided an exit
option, as sanctioned under the Act of 2013 cannot also be disputed.
24. Even when the request made by the individual shareholders from the
minutes of the AGM was pointed out, there was stiff opposition by
the appellants on the ground that they never asked for a forced exit
from the company.