MANU/TN/0129/1960

Equivalent Citation: AIR1960Mad43, [1960]30C ompC as340(Mad)

IN THE HIGH COURT OF MADRAS

Original Side Appeal No. 11 and 42 of 1958
Decided On: 24.12.1958
Appellants: R.T. Perumal
Vs.
Respondent: John Deavin and Ors.
Hon'ble Judges/Coram:
P.V. Rajamannar, C.J. and Ganapatia Pillai, J.
JUDGMENT
P.V. Rajamannar, C.J.
(1) R. T. Perumal the appellant in O. S. A. No. 11 of 1958 and D. R. Mahajan the appellant in O.
S.A. No. 42 of 1958 are two share-holders in a limited company called the Nilgiri Neergundi Estates
Co. Ltd., herein after called the Neergundi Company which was incorporated on 22-7-1927 with a
paid up capital of Rs. 3,67,076, consisting of 2000 seven per cent preference shares of Rs. 75 each,
and 108,538 ordinary shares of Rs. 2 each. The main object of the company was growing and
selling of tea and coffee. The company owned about 1447.62 acres of land out of which about 619
acres comprised coffee plantations and about 341 acres tea plantations. The company had no
factory of its own in which the green tea leaf grown on its estate could be processed into
marketable tea. The company used to sell its tea leaves to a neighbouring company called Kil
Kotagiri Tea and Coffee Estates Company, Ltd., which will hereinafter be referred to as Kil Kotagiri
Company. Perumal held 14,900 ordinary shares and Mahajan held 5900 ordinary shares in the
company on the material date. On 31-8-1955 the Neergundi company passed a special resolution
which ran as follows:
1. "That the company be wound up voluntarily.
2. That it is expedient that the business of the company should pursuant to S. 208-C of the
Indian Companies Act, 1913 be transferred to the kali Kotagiri Tea and Coffee Estates Co.
Ltd., upon the terms and subject to the conditions contained in the draft agreement
expressed to be made between the company and its liquidators of the one part and the said
Kil Kotagiri Tea and Coffee Estates Co. Ltd., of the other part, which draft is verified by the
signature of Lionel Aldred a director of the company.
3 . That Messrs. John Deavin, Norman Blenkinsop and John Ashton of Messrs. Fraser and
Ross, Madras be appointed liquidators of the company with joint and several powers for the
purposes of such winding up at a remuneration of Rupees two thousand and that they be
authorised to exercise all or any of the powers given to a liquidator by clauses (d), (e) and
(h) of S. 179 of the Indian Companies Act, 1913.
4 . That the liquidators be and are hereby expressly authorised to execute the said
agreement and to take all such steps and to do all such things as they may deem necessary
or expedient to complete the transfer of the business of the company upon the terms
contained in the said agreement."
In pursuance of the said resolution an agreement of sale and purchase dated 1-10-1955 was
entered into between the Neergundi company and the Kil Kotagiri Company. The consideration for
the sale and transfer was the allotment by the purchasing company, that is, the Kil Kotagiri
Company to every member of the selling company, that is, the Neergundi Company one ordinary
share of Rs. 2 each in purchasing company credited as fully paid up for or in respect of every two
fully paid ordinary shares in the selling company and a cash payment of Rs. 3,75,000 plus a sum
equal to all cash in hand and at the bank at the date of completion. It was provided that the
purchasing company should pay the selling company for all consumable stores belonging to the
latter and that the coffee crops for season 1954-55 be delivered to the agents of the Indian Coffee

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 Board and all outstanding book debts to the selling company.
On 3-9-1955 both the appellants before us sent notices to the liquidators appointed by the
resolution under S. 208C of the Indian Companies Act, 1913, requiring them to purchase their
interest as provided in that section. The liquidators offered to pay to the appellants at Rs. 10 per
share for the shares held by them but the appellants refused the offer. Mr. Perumal wanted Rs. 20
per share while Mr. Mahajan wanted Rs. 24-8-0 per share. The liquidators did not agree. After some
correspondence eventually the two appellants before us filed two applications on the Original side
of this court, Applns. Nos. 3254 and 3562 of 1955 inter alia praying that this court may be pleased
to fix the value of the shares belonging to the two appellants and standing in their names under the
provisions of S. 208C(3) of the Indian Companies Act suo motu or by arbitration.
On these two applications Balakrishna Aiyar J., passed an order on 6-1-1956 appointing Sri P. S.
Chandrasekhara Iyer retired District Judge and advocate as the sole arbitrator for determining the
price to be paid for 5900 and 14900 shares held by D. R. Mahajan and R. T. Perumal respectively in
the company. In accordance with this order Sri. P. S. Chandrasekhara Iyer after an elaborate
enquiry passed his award on 17-6-1956. In and by that award he fixed the amount payable as the
price of the shares held by Mahajan at Rs. 1,11,731-4-0 and the amount payable for the shares held
by Perumal at Rs. 2,82,168-12-0. It may be stated briefly that he arrived at the value of Rs. 18-15-0
per share by first valuing the gross assets of the company and subtracting therefrom the liabilities
thus arriving at the net value of the estate and dividing the same by the number of ordinary shares,
namely, 1,08,538. He then took out an original petition, O. P. No. 275 of 1956 praying that his
award may be received and suitable orders may be passed on the petition. This petition was filed
under S. 14(2) of the Indian Arbitration Act and rule 5 of the rules framed thereunder.
(2) The Liquidators of the Neergundi Company filed another petition O. P. No. 330 of 1956 praying
that the award may be set aside or in the alternative remitted back to the Arbitrator for
reconsideration. Both the petitions were heard together by Balakrishna Aiyar J., and on 21-3-1957
the learned Judge passed the following order:
"The award filed in O. P. No. 275 of 1956 by Mr. P. S. Chandrasekhara Iyer, Arbitrator be
and is hereby remitted back to the said arbitrator for reconsideration and decision in the
light of the observations contained in the judgment dated 21-3-1957 herein and that the
said Arbitrator do submit his decision to this Court on or before 21-7-1957."
Accordingly the Arbitrator again heard the parties by their counsel and taking into consideration the
directions contained in the said order of Balakrishna Aiyar J. and the evidence adduced before him
both before and after remittal he gave his decision fixing the price payable for each share held by
the appellants at Rs. 12. The amount payable to Mahajan at that rate would be Rs. 70800 and the
amount payable to Perumal in respect of the shares held by him would be Rs. 1,78,500. We have
ascertained from the records that both the appellants before us filed objections to the decision of
the Arbitrator after remittal which was in the nature of a revised award.
The main objection was that the order of remittal passed by Balakrishna Iyer J., on 21-3-1957 was
untenable in law. When the matter came up before Balakrishna Aiyar J., finally on 15-10-1957 the
only point pressed before him was as regards costs. After giving certain directions as to costs in the
proceedings before him he passed a decree in terms of the revised award. The petitions were again
mentioned before the learned Judge on 21-11-1957 on which date in terms of the revised award the
following decree was passed.
"That the respondents 3 to 5 in O. P. No. 275 of 1956 pay to (a) respondent 1 herein a sum
of Rs. 70800 (Rs. seventy thousand eight hundred) being the value of 5900 shares and (b)
respondent 2 therein a sum of Rs. 1,78,800 (Rs. one lakh seventy eight thousand and eight
hundred) being the value of 14900 shares at Rs. 12 (Rs. twelve) per share, with interest on
both the said sums at 6 per cent per annum from 15-10-1957 to the date of payment;
2 . That the parties herein excepting the arbitrator do pay and receive the proportionate
costs of these petitions as per the Award both before this court and before the said
Arbitrator when severally taxed and noted in the margin hereof with interest thereon at six
per cent per annum from the date of taxation to the date of payment; and in taxing the said
costs, Advocate's fee at Rs. 5000 (Rs. five thousand) for each party (treating D. R. Mahajan
and R. T. Perumal as one party) he allowed and that the said costs do also include the
amounts paid to the Arbitrator already by the respondents 3 to 5 in O. P. No. 275 of 1956;

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 3. That the liquidators, respondents 3 to 5 in O. P. No. 275 of 1956 shall be entitled to set
off or adjust the payments they have made to the arbitrator herein in the first instance in
the said manner." Respondent 1 is D. R. Mahajan, respondent 2 is R. T. Perumal and
respondents 3 to 5 are liquidators of the Neergundi company. The appeals now before us
were then filed by the two share-holders respectively.
(3) Mr. O. T. G. Nambiar, learned counsel for the respondents-liquidators took up a preliminary
objection that the appeals were not competent. He mainly relied on the provisions of S. 17 of the
Indian Arbitration Act which runs as follows:
"Where the court sees no cause to remit the award or any of the matters referred to
arbitration for reconsideration or to set aside the award, the court shall after the time for
making an application to set aside the award has expired, or such application having been
made, after refusing it, proceed to pronounce judgment according to the award and upon
the judgment so pronounced a decree shall follow and no appeal shall lie from such decree
except on the ground that it is in excess of, or not otherwise in accordance with, the
award."
It is necessary to refer to the other provisions of the Act to follow the contentions of the learned
counsel on both sides. Under S. 14 when the Arbitrator has made his award, he shall sign it and
shall give notice in writing to the parties of the making and signing thereof. He shall then cause the
award or a signed copy of it together with any depositions and documents which may have been
taken and proved before him to be filed in court and the court shall thereupon give notice to the
parties of the filing of the award. Section 15 gives power to the Court to modify or correct an
award. Section 16 is very material and is in the following terms:
(1) The Court may from time to time remit the award or any matter referred to arbitration to
the arbitrators or umpire for reconsideration upon such terms as it thinks fit-
(a) Where the award has left undetermined any of the matters referred to
arbitration, or where it determines any matter not referred to arbitration and such
matter cannot be separated without affecting the determination of the matters
referred; or
(b) where the award is so indefinite as to be incapable of execution; or
(c) where an objection to the legality of the award is apparent upon the face of it;
(2) Wherein an award is remitted under sub-s. (1) the court shall fix the time within which
the arbitrator or umpire shall submit his decision to the court;
Provided that any time so fixed may be extended by subsequent order of the court.
(3) An award remitted under sub-s. (1) shall become void on the failure of the arbitrator or
umpire to reconsider it and submit his decision within the time fixed.
Section 30 provides that an award shall not be set aside except on one or more of the following
grounds namely:
(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award has been made after the issue of an order by the court superseding the
arbitration or after arbitration proceedings have become invalid under S. 35;
(c) that an award has been improperly procured or is otherwise invalid."
Section 39 confers a right of appeal from certain orders and from no others passed under the Act to
the court authorised by law to hear appeals from original decrees of the court passing the order.
Such appealable orders include: an order setting aside or refusing to set aside an award. Section 44
enables the High Court to make rules consistent with the Act inter alia as to the filing of awards and
all proceedings consequent thereon or incidental thereto. "Court" is defined in S. 2(c) as meaning a
civil court having jurisdiction to decide the questions forming the subject-matter of the reference if
the same had been the subject matter of a suit.

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 (4) Mr. Nambiar's contention was that the appeals purport to be against the decree passed by
Balakrishna Iyer K., agreeing to the award and S. 17 of the Act prohibits an appeal from such
decree except on the ground that it is in excess of, or not otherwise in accordance with the award.
According to him such a ground does not exist in this case. He also contended that the validity of
the order remitting the award cannot be questioned in these appeals.
(5) Mr. Gopalaswami Aiyangar for the appellants sought to maintain the appeals on several
grounds. He attempted to get over the bar of S. 17 of the Act by contending that the revised award
according to which a decree has been passed is not in accordance with the award because the
remittal order was bad and consequently the only valid award must be deemed to be the original
award made by the arbitrator and the decree now passed is certainly not in accordance with that
award. We are unable to agree with this contention which places such a strained construction on the
language of S. 17.
The award referred to in S. 17 is the award which the Court accepts and following it passes
judgment and decree. There is no indication in the Act as to what should happen after the Court
remits the Award. Sub-section (2) of s. 16 implies that the arbitrator shall submit his decision to the
Court within the time fixed by the Court. It is not clear whether the decision so submitted should be
treated as a new award which has again to be filed. It is also not clear whether the parties would
urge their objections to the validity of the decision submitted by the arbitrator. The opening words
of S. 16(1) appear to contemplate the Court remitting the award from time to time.
It may be, if the Court is satisfied that one of the grounds mentioned in clauses (a), (b) and (c) of
S. 16(1) exists in respect of the decision submitted by the Arbitrator or as one may call it, a revised
award it may again remit the award t the arbitrator. But if the court sees no cause to remit the
award or to set aside the award, the Court shall pronounce judgment according to the award and a
decree will follow upon the judgment so pronounced. We are unable to hold that because an order
remitting the original award is bad, it follows that the decree passed on the basis of the revised
award could be said to be in excess of or not otherwise in accordance with, the award.
(6) Mr. Gopalaswami Iyengar's next contention was that the appeals are maintainable, under cl. (vi)
of S. 39 of the Act. The judgment of Balakrishna Aiyar, J., accepting the revised award must be
deemed to be also an order refusing to set aside the revised award. There was no formal application
as such to set aside the revised award but admittedly objections were filed to the revised award by
the two appellants before us mainly on the ground that the order of remittal was itself bad. These
objections can be deemed to be applications to set aside the award. He relied on a decision of
Chandra Reddi, J. in Ramaswami Servai v. Muthiralayee, MANU/TN/0291/1954 : AIR1954Mad560 ,
in support of his contention. In that case notice of the filing of the award was served on the party.
He filed a counter affidavit attacking the genuineness and validity of the award and prayed that the
court may be pleased to dismiss the petition but there was no application as such to set aside the
award. The learned Judge held that the counter affidavit can tantamount to an application for setting
aside the award within the meaning of S. 17 of the Arbitration Act. A similar view was taken in Ram
Alam Lal v. Dukhan, MANU/UP/0162/1950 : AIR1950All427 . It is true that there was no formal
order refusing to set aside the revised award but in the circumstances the order accepting the
revised award should be deemed to be a composite order comprising an order refusing to set aside
the award. Vide Ishwar Dei v. Chhedu, MANU/UP/0309/1952 : AIR1952All802 and Antarijami v.
Ketaki Debi MANU/OR/0046/1952 : AIR1952Ori173 .
So his argument ran. We did not understand Mr. Nambiar to say that no application to set aside a
revised award could be filed, If that be not so, it would mean that the court has no option except to
pass a decree in accordance with the award which is invalid for any of the reasons mentioned in S.
30 of the Act. All that he could say was that there was no formal application to set aside the revised
award. But this technical objection is not supported by any of the provisions of the Act.
(7) Mr. Nambiar, however, contended that the order of remittal cannot be questioned in these
appeals even if they were competent. He relied on a ruling of this court in Subbiah Iyer v.
Subramania Iyer ILR 31 Mad 479, which was followed by the Lahore High Court in Baland Baksh v.
Ram Chandra 84 Ind Cas 693: AIR 1925 Lah 267. There were also other decisions cited to us
namely, George v. Vastian Soury ILR 22 Mad 202 and Vengu Iyer v. Yegyam Iyer,
MANU/TN/0105/1951 : AIR1951Mad414 , but in our opinion these decisions do not materially help
us in this case because they all related to a different set of facts. In those cases the arbitration was

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 in a pending suit but there are observations in the decision, ILR 31 Mad 479, which prima facie
appear to support the contention of Mr. Nambiar namely,
"It was not contended that an appeal would lie against a decree passed by the court in
accordance with the award on the ground that the Court had improperly refused an
application for an order of remittal under S. 520, C. P. C. and the policy of the law appears
to be to refuse to allow appeals against decrees in accordance with awards on the ground
either that an order under S. 520 C. P. C. was improperly made or improperly refused."
Much of the force of the observations is lost by the obvious fact that it was practically conceded that
an appeal would not lie against a decree passed by the court in accordance with the award on the
ground that there had been an improper refusal of an application for an order of remittal. Mr.
Nambiar conceded that there was no right of appeal against the order of the Court remitting the
award to the arbitrator. He also had to admit that the Court would have jurisdiction to remit an
award only on one of the grounds specified in S. 16 and under no other ground. If, therefore, the
Court remitted an award on any ground other than those specified in that section such an order
would be without jurisdiction. We then asked Mr. Nambiar what was the remedy of the party
aggrieved by such an invalid remittal. Mr. Nambiar frankly stated that there was no remedy so far as
he could see. We do not think that we could subscribe to this result unless we are forced to. In our
opinion one of the grounds on which a revised award can be sought to be set aside is that it was
the result of an invalid order of remittal. That was the first objection which the appellants took in
their counter affidavits.
(8) In this view it is not necessary to consider the other contention of Mr. Gopalaswami Aiyangar
that S. 39 of the Act would have no application to an appeal under Letters Patent as it deals only
with appeals from one Court to another. We hold that the appeals are competent.
(9) On the merits the only question which arises is whether Balakrishna Aiyar J. was justified in
remitting the award made by the arbitrator on 17-6-1956. The power of the Court to remit an award
to the arbitrator for reconsideration is contained in S. 16 of the Indian Arbitration Act. It was
admitted by Mr. Nambiar learned counsel for the respondents who supported the order remitting the
award that an award could be remitted only on one or more of the grounds mentioned in clauses
(a), (b) and (c) of S. 16(1) of the Act and on no other ground. Vide Shree Meenakshi Mills Ltd. v.
Patel Bros. MANU/PR/0036/1944, where the Privy Council observed:
"The section specifies three sorts of defects which may necessitate reconsideration of an
award and empowers the Court to remit the defective award in the cases specified (and in
no others) to the arbitrator or umpire and to fix the time within which the arbitrator or
umpire is to submit his decision to the Court."
(10) It was also his case that the only ground on which Balakrishna Aiyar J. remitted the award is
that an objection to the legality of the award was apparent upon the face of it. Mr. Gopalaswami
Aiyangar, learned counsel for the appellants, contended that there was no such valid objection to
the validity of the award apparent upon the face of it. The reference to the arbitrator was made
under S. 208-C(3) of the Indian Companies Act, which runs thus:
"If any member of the transfer company who did not vote in favour of the special resolution
expresses his dissent therefrom in writing addressed to the liquidator and left at the
registered office of the company within seven days after the passing of the special
resolution, he may require the liquidator either to abstain from carrying the resolution into
effect or to purchase his interest at a price to be determined by agreement or by arbitrator
in manner hereafter provided."
Sub-section (6) of the same section makes the provisions of the Indian Arbitration Act other than
those restricting the application of the Act in respect of the subject matter of the arbitration
applicable to all arbitrations in pursuance of the section. What the arbitrator had, therefore, to
decide was what is the price of the interest of the dissentient members of the Neergundi Co., who
are the appellants before us. The arbitrators arrived at the price of Rs. 18-15-0 per share held by
the appellants thus:
He estimated the value of the assets of the Neergundi company and deducted therefrom the
liabilities of the company and took the balance as the net value of the estate. He divided the amount
of this value by the number of ordinary shares to fix the value per each share. The following extract

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 from his award gives details of the calculation. The valuation will be as follows:

In the course of his award the arbitrator confessed that no direct precedent was available as to how
the interest of a dissentient member should be valued under S. 208-C(3) of the Companies Act. He
came to the conclusion that the interest of a dissentient share-holder was to be valued on the basis
of his interest in the assets of the company that had been wound up. He agreed with the contention
of the appellants before us that the assets of the company had to be valued and the price payable to
the appellants should be fixed in proportion to the shares which they held in the company to the
total number of ordinary shares. He drew a distinction between the language of S. 208-C(3) of the
Act and the language used in the earlier section, namely, S. 153-B and observed:
"Under S. 208-C of the Act it is not the shares of the dissentient share-holder that have to
be purchased as in S. 153-B but the interest of the dissentient share-holder has to be
purchased at a price. What is the interest of a dissentient shareholder in a company which
has been wound up? His interest can only be in the assets of the company that has been
wound up."
Balakrishna Aiyer J., held that the basis on which the Arbitrator proceeded was wrong, and that he
erred in assuming that the dissentient shareholders were entitled to be paid their proportionate
share of the market-value of the net assets of the company. The reasoning of the learned Judge may
be summarised thus: The share-holders are not the co-owners of the properties of the company.
Though the value of the assets of the company would be a very material factor which would affect
the price of the interest of the dissentient shareholder, the once cannot be fixed as a fraction of the
other.
It is not correct to say in law that the Neergundi Co., stood wound up in the sense that it stood
dissolved when the special resolution for winding up was passed. The dissentient shareholder is
not, therefore, entitled to a proportionate part of the break-up value of the assets in the undertaking
for on the dissolution of a company every member thereof is entitled to be paid his proportionate
portion of the net assets of the company. He is so entitled to be paid only out of the amount
actually realised in exchange for the properties of the company, and not a proportionate portion of
their market value. The learned Judge pointed out what the arbitrator should have done but which
he did not do. He stated,

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 "He should have tried to find out what the price was which the interests of the dissentients
would have fetched immediately before the resolution to wind up was passed. He should
have posed the question, how much would a reasonable man have been prepared to pay for
that interest. No doubt a prudent purchaser would take into account the value of the assets
of the company in making his offer, but that would be only one consideration and the price
of the interest cannot be expressed as a fraction of the net assets of the company."
After holding that the arbitrator had proceeded on a completely wrong legal basis in determining the
value of the interest of the dissentient member he proceeded to indicate the various considerations
and factors which should be taken into account in arriving at the proper price to be fixed. The
learned Judge wound up his judgment thus:
"I recognise that it is not at all easy to make allowance for all these varying circumstances.
Nonetheless the final conclusion must represent the result of the examination of these
factors. The question is not what is the net value of the assets of the company, and what is
the fraction thereof that is represented by the shares which the dissentients hold. The
question is: If the interest of the dissentients is sold as a block, what money will it bring?
That is the question for which an answer must be found. I have set out various
considerations that must be taken into account but these are not to be regarded as being
exhaustive." In spite of diligent research, learned counsel appearing before us were unable
to draw our attention to any decision of the English courts or in India directly bearing on
the question. The question therefore, falls to be decided on an application of the general
principles of the company law and the language of the material provisions of the Indian
Companies Act. What a dissentient member is entitled to under S. 208-C(3) of the Indian
Companies Act is the price of his interest at which he can require the liquidator to purchase
it. It is such a price that has to be determined by arbitration. We consider that the
implication of the words "Purchase and price" should not be overlooked. A notional sale is
contemplated.
Obviously the interest of the dissentient member is dependent on the shares which he holds
in a transferor company. A distinction was sought to be drawn between the language in S.
153-B and S. 208-C. Section 153-B deals with a case of a scheme involving the transfer of
shares of a company to another company. It provides inter alia that if any shareholder
dissents from a scheme involving the transfer of shares the shares of such dissenting
shareholder are bound to be acquired. A distinction is drawn between the acquisition of
shares referred to in S. 153-B and the purchase of interest in S. 208-C of the dissenting
shareholder. We do not think that much can be made out of this difference.
Section 153-B deals with a case of a transfer of shares of a company which is a going
concern and which has not been would up or directed to be wound up; whereas S. 208-C
deals with a case where the company is proposed to be, or is in the course of being, would
up altogether voluntarily and it is in the case of such winding up that the whole or part of
the business or the property of the company is proposed to be transferred or sold to
another company. In the case of a company which is not being wound up it is appropriate
to speak of the shares as being acquired the price being the price of the shares at the
market-value but when the company is being wound up there can be no question of sale or
acquisition of shares as such. Hence the use of the word "interest."
(11) What is the interest of a shareholder by virtue of his holding the shares in a company? Farwell
J. in Borland's Trustee v. Steel Brothers and Co. Ltd. 1901-1 Ch 279, observed at page 288,
"A share is the interest of a shareholder in the company measured by a sum of money for
the purpose of liability in the first place, and of interest in the second, but also consisting
of a series of mutual covenants entered into by all the shareholders inter se in accordance
with S. 16 of the Companies Act, 1862. The contract contained in the Articles of Association
is one of the original incidents of the share. A share is not a sum of money settled in the
way suggested, but is an interest measured by a sum of money and made up of various
rights contained in the contract, including the right to a sum of money of a more or less
amount."
The shareholders are not in the eye of the law part owners of the undertaking. The undertaking is
something different from the totality of the shareholdings. Vide Short v. Treasury Commissioners,

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 1948-1 K. B. 116 at p. 122. Reference was made by Mr. Gopalaswami Aiyangar, learned counsel for
the appellants to S. 211 of the Indian Companies Act, which runs thus:
"Subject to the provisions of this Act as to preferential payments, the property of a
company shall, on its winding up, be applied in satisfaction of its liabilities, pari passu and
subject to such application shall, unless the articles otherwise provide, be distributed
among the members according to their rights and interests in the company."
He contended that this provision indicates the right of a shareholder to obtain a proportionate share
of the net assets of the company because at the end of the winding up after all liabilities have been
met and all preferential payments have been made the property of the company is distributed
among the embers including the shareholders. In our opinion this section does not support the
argument which is involved in the contention of the appellant's learned counsel that at any given
point of time a shareholder is notionally entitled to an aliquot part of the net assets of the company.
It may be that the prospect of distribution such as is contemplated under S. 211 at the conclusion of
a winding up, would be a material factor in assessing the value of the interest of a shareholder, in
virtue of his holding shares in the company. Undoubtedly if the net assets which will be available
for distribution are likely to be of considerable value then the value of the interest of the
shareholder will also be enhanced. It is not tantamount to saying that the value of the interest is an
arithmetical fraction of the estimated market-value of the net assets of the company on the date of
the winding up or on the date when the resolution is passed for the transfer of the business of the
company to another company.
(12) Before Balakrishna Aiyar J. and before us certain decisions of the English courts were cited.
Admittedly none of these directly bears on the question which falls to be decided. We shall,
therefore, briefly refer to some of them. In re Imperial Land Co. of Marseillis, (Vinning's case)
(1870) 6 Ch. A. 96, a company having resolved on a voluntary winding up, and reconstruction of
the company, with a new capital, new articles and new name, a dissentient shareholder gave notice
to the liquidators under S. 161 of the Companies Act, 1862, requiring them to purchase his interest
in the company. The liquidators took a transfer of his shares.
After the transfer the dissentient shareholder's name was placed on the list of contributories on the
ground that he was still liable to any future calls for payment of the liabilities of the company. Sir
Malins V. C. held that as the shares were sold by him to the liquidators after the transfer he ceased
to be a member of the company and his name must, therefore, be taken off the list of
contributories. The court of appeal reversed the decision of the Vice Chancellor and held that under
S. 161 the liquidators had no power to release the dissentient shareholder from his liability to the
creditors but only to purchase such interest as he had in the assets of the company and
consequently that the shareholder's name must be put on the list of contributories. The following
observations of Sri Mellish L. J. at page 102 must be understood in the context of the actual points
which arose for decision in that case. He said,
"The section says that a dissentient shareholder may give notice to the company 'either to
abstain from carrying such resolution into effect, or to purchase the interest held by such
dissentient member at a price to be determined in manner hereinafter mentioned.' What is
the meaning of the words 'purchasing the interest held by such dissentient member?' Does
it mean purchasing his shares and having them transferred? Surely it would have been easy
for the legislature to have said 'and to purchase the shares of the dissentient member', if
that is what they meant. But what they say is 'to purchase the interests held by such
dissentient member', that is to say, to purchase the interest which a shareholder of the
company has in the assets of the company that company being in the course of being
wound up. The Shareholder has still an interest in the assets of the company. He is entitled
to a share in whatever surplus there may be."
Further on the significance of these observations is brought out by the following subsequent
passage:
"I am of opinion that by the 161st section, all that is contemplated is, that the interest of
the shareholders in the company that is being wound up should be sold, and the purchase
money of it paid, but that it is not contemplated that the shares themselves should be
transferred."

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 These observations do not carry us very far because they do not support the basis of the arbitrator's
award, namely, the award of a proportionate share of the estimated value of the net assets of the
company as the value of the interest of the share-holders.
(13) In Re Mysore West Gold Mining Co., (1889) 42 Ch. D 535, the only question which directly
arose was whether a commission could issue for the examination of witnesses abroad pending a
reference to arbitration for the ascertainment of the price to be paid for the purchase of the interest
of a dissentient member under S. 162 of the Companies Act, 1862, corresponding to S. 208-C of the
Indian Companies Act, 1913. The Mysore West Gold Company passed a resolution to wind up
voluntarily and for the sale and transfer of its business and property to a new company. By
agreement between the liquidator of the said Mysore West Gold Company and the new company it
was agreed inter alia that three of the shares of the new company were to be given in respect of two
fully paid up shares in the old company.
The holders of certain shares in the old company served on the liquidator notice of dissent from the
scheme calling upon the liquidator either to abstain from carrying into effect the resolution for
reconstruction or to purchase their interest at a price to be determined by arbitration. The
arbitration was commenced and during the course of the arbitration for the purpose of ascertaining
the value of the company's assets which consisted of gold mines in India, and shares in another
company having gold mines in India, the liquidator took out summons for liberty to issue a
commission to India for the examination of witnesses there. It was held by Chitty J., that the court
had jurisdiction to order such a commission. In the course of his judgment Chitty J., dealt with an
argument that the liquidator must value the interest of the dissentient member according to the
valuation which had been made in the agreement between the old company and the new company
of the interest of the other non-dissentient members thus:
"Now I think that the fact of such a valuation being the basis upon which a reconstruction
has been effected is to be carefully considered and to have due weight give to it, but it is
not in itself conclusive so as to fix the proper price which the liquidator should pay in
respect of the interest of a dissentient member. Where a new company is purchasing the
assets of a company in liquidation and the new company brings new capital into the
concern, it does not all follow that the price per share as fixed between the company in
liquidation and the new company forms the true price which has to be determined by the
arbitration.
It is often worth a man's while if he has capital to buy a concern which had come to a
standstill for want of capital; he might give what after all was a fair price as between
vendor and purchaser, but much more than the breaking-up price obtainable in the market.
The dissentient member cannot ask for a valuation as between vendor and purchaser,
because the company, so far as he is concerned, has come to an end, and he is in the
position of a man who has not got capital wherewith to buy the concern which has come to
a standstill for want of capital."
We are unable to derive much assistance from this case either except to the extent that the value of
the assets of the company would have a material bearing on the value of the interest of the
dissentient member.
(14) What should not be overlooked is that under S. 208-C(3) what the arbitrator has to determine
is the price at which the interest of the dissentient members should be purchased by the liquidator.
The price assumes a sale at least notionally. The market may be hypothetical. Danckwerts, J.,
explained in Holt v. Inland Revenue Commissioners, 1953 2 All E. R. 1499, that a market is to be
assumed from which no buyer is excluded and at the same time the Court must assume a prudent
buyer who would make full inquiries and have access to accounts and other information which
would be likely to be available to him. In the words of Wyn Parry J., In Re Press Caps Ltd., 1949 1
All E. R. 1013, "a valuation is only an expression of opinion, It may be made on one of a number of
basis but the final test of what is the value of a thing is what it will fetch if sold".
(15) In fixing the price of a dissentient member's interest the arbitrator certainly will have to take
into account the assets of the company and its liabilities but he will have to take into account
several other factors as well. It is not necessary for disposing of these appeals to give an exhaustive
list of such factors. Indeed Balakrishna Aiyar J. after mentioning a few such factors concluded by
saying that they were not exhaustive. It is sufficient for the disposal of these appeals to say that the

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 basis of the arbitrator's first award was totally wrong in law, namely, the determination of the price
by dividing the estimated market-value of the net assets of the company by the number of ordinary
shares. Adopting that basis he has practically equated the position of a shareholder to that of a
tenant-in-common along with the other share-holders in respect of the company's assets.
Balakrishna Aiyar J., was therefore, justified in remitting the award back to the arbitrator for
reconsideration inasmuch as the award which the Arbitrator had made was vitiated by the adoption
of a wrong legal basis in fixing the price of the interest of the dissentient members.
(16) If the order of remittal was valid and proper Mr. Gopalaswami Iyengar did not contend that he
should ask the Court to set aside the revised award on any of the grounds mentioned in S. 30 of the
Arbitration Act. That award, therefore, stands and so will the decree which followed that award. The
appeals fail and are dismissed with costs.
(17) Appeals dismissed.

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