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The Bombay High Court has asked E&Y to independently value the shares of Cadbury India and submit a report within six weeks
In a relief to over 8,000 investors, the Bombay High Court has appointed Ernst & Young (E&Y) as independent valuers to evaluate shares of Cadbury India whose promoters have proposed to acquire 2.5% minority shareholding, reports PTI.
Hearing an intervention application filed by Investors Grievances Forum (IGF), a body for protection of small investors, Justice SJ Kathawala on 15th April asked E&Y 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 Bansi Mehta and Co & SSPA and Co, which arrived at Rs1,340 per share, IGF counsels Chandu Mehta and Darshan Mehta told PTI.
According to IGF, the company has proposed a share capital reduction scheme whereby 97.4% majority promoter shareholders plan to acquire 2.5% minority shareholding at a price fixed by the valuers.
Cadbury's counsel, Janak Dwarkadas, said that the exercise of valuation of Cadbury shares by Bansi Mehta and Co & 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, Cadbury’s counsel said. 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 Mr Dwarkadas submitted that an assurance from the Court to make the 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 Cadbury's counsel with a caveat that they would be free to interfere with the report in the event that they find any grave infirmity in the valuation report obtained from the independent valuer.
Appointing E&Y as independent valuers, the judge ordered that fresh valuation will be as on the appointed date and shall be based on the unaudited balance sheet as on 31 July 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 29th April which shall be considered by the latter.
The Court further ruled that the valuation by E&Y shall be final and binding on all the objectors and shareholders, subject to the caveat.
According to IGF, Cadbury has 8,088 shareholders in and outside India. Of them, 800 are minority non-promoter shareholders. At an extraordinary general body meeting (EGBM) of the Company, only 79 out of over 8,000 shareholders were present.
Considering that resolutions to be passed at the 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 the constitutional right of minority shareholders conferred to them under Article 300 (A) 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 Kraft Foods to take over the company and hence Cadbury has ceased to exist and the 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 Kraft Foods and not Cadbury.
IGF argued that the proposed share reduction will result in substantial increase in value of shares of the Company which will be more than Rs1,340 per share, now sought to be foisted upon small shareholders. By reducing capital only promoters would benefit at the cost of small shareholders, it argued.