HC appoints valuers for Cadbury shares; investors relieved

HC appoints valuers for Cadbury shares; investors relieved

Hearing an intervention application filed by Investors Grievances Forum, a body for protection of small investors, Justice S J Kathawala, in an order on April 15, asked Ernst & Young to independently value the shares of Cadbury India and submit a report in a sealed cover within six weeks.

Cadbury shareholders opposed valuation of shares based on the report prepared by Independent Valuers M/s Bansi Mehta and Co and M/s SSPA and Co which arrived at Rs 1340 per share, IGF Counsels Chandu Mehta and Darshan Mehta told reporters.

According to IGF, the company has proposed share capital reduction scheme whereby 97.4 per cent majority promoter shareholders plan to acquire 2.5 per cent minority shareholding at a price fixed by the valuers. Cadbury's Counsel, Janak Dwarkadas, said the exercise of valuation of Cadbury shares by M/s Bansi Mehta and Co and M/s SSPA and Co was in conformity with the law laid down by the apex Court, pertaining to value of shares, in many judgements.

However, the company is agreeable to get the valuation done by an independent valuer appointed by the Court. But this valuation should be treated as final and binding on all the objectors and shareholders of Cadbury who would not be allowed to pursue their objections later, he said.

Cadbury's counsel Dwarkadas submitted that an assurance from the Court to make valuer's report binding on shareholders was necessary to avoid the matter from getting delayed and also not to cause any prejudice to the company. The objectors agreed to the suggestion of the Cadbury's Counsel with a caveat that this would be free to interfere with the report in the event it finds any grave infirmity in the valuation report obtained from the independent valuer.

Appointing Ernst & Young as independent valuers, the judge ordered that fresh valuation will be as on appointed date and shall be based on the unaudited balance sheet as on July 31, 2009, on the same material as provided to earlier valuers. Accordingly, the company-appointed valuers were asked to hand over the material relied upon them in a sealed cover to the court appointed valuer.

The objectors have been allowed to file their objections to the court appointed valuer by April 29 which shall be considered by the latter. The court further ruled that the valuation by Ernst & Young shall be final and binding on all the objectors and shareholders, subject to the caveat. 

According to IGF, Cadbury has 8088 shareholders in and outside India. Of them, 800 are minority non-promotor shareholders. At an extra ordinary general body meeting of the Company, only 79 out of over 8,000 shareholders were present. Considering that resolutions to be passed at EGBM would result in total loss of ownership of shares by the minority shareholders, the company ought to have invited votes by postal ballot instead of expecting all shareholders to remain present and vote on such a crucial issue, IGF argued.

This compulsory acquisition of shares without even being heard is completely in violation of constitutional right of minority shareholders conferred to them under article 300A of the Constitution, IGF contended. IGF argued that the reason given by Cadbury to reduce share capital was that the global policy of the parent company has always been to operate in all the jurisdictions across the world through a wholly owned subsidiary or as a branch.

IGF contended that in February 2010, Cadbury investors had accepted the bid of Krafts Food to take over the company and hence Cadbury has ceased to exist and decision whether to operate as a wholly owned subsidiary in all jurisdictions or to issue fresh shares and get relisted in all jurisdictions will now be decided by Krafts Food and not Cadbury.

IGF argued that proposed share reduction will result in substantial increase in value of shares of the Company which will be more than Rs 1340 per share, now sought to be foisted upon small shareholders. By reducing capital only promoters would benefit at the cost of small shareholders.

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