Challenge to share valuation dismissed

LEGAL DIGEST

The Supreme Court has dismissed the challenge to the valuation of the shares of Hindustan National Glass & Industries Ltd under the takeover code in which the acquirers were ACE Glass Containers and C K Somany.

The main grievance in the batch of appeals against the ruling of the Securities Appellate Tribunal was that the Securities & Exchange Board as well as the merchant banker, UTI Bank, had not properly evaluated the shares of the target company. In reply, the acquirers argued that the valuation was done by three reputed firms of valuers and the board approved the highest price per share determined by the firm appointed by the board, namely, Patni & Co.

The Supreme Court said: "The board committed no error in accepting the report of Patni & Co. The board acted in a reasonable manner and made its best efforts to secure a reasonable price for the shares of the shareholders. It has exercised its discretion wisely and we find no reason to interfere."

The court further emphasised that valuation of shares is a technical and complex problem which can be appropriately left to the consideration of experts in the field of accountancy. So many imponderables enter the exercise of valuation of shares.

"It may be that views may differ and it is no gainsaying that even experts may differ in their conclusions or even reasoning. The court must take notice of this fact and must not interfere unless there are compelling reasons to upset the finding of the expert valuer," the judgment explained.

Madras High Court decision set aside

The Supreme Court last week set aside the judgment of the Madras High Court and allowed the appeal of Southern Petrochemical Industries Co Ltd in the case challenging the validity of the Tamil Nadu Tax on Consumption or Sale of Electricity Act 2003.

A large number of generating companies and consumers, buying electricity from the Tamil Nadu Electricity Board challenged the validity of the Act in the high court and it dismissed their writ petitions. It had ruled that the levy of tax on consumption was invalid as the law had not received the presidential assent.

It also held that the 2003 Act was contrary to the Electricity Regulatory Commissions Act. The Supreme Court ruled that these and other findings of the high court were wrong, thus granting relief to hundreds of units.

Ex-chief justice appointed arbitrator

The Supreme Court last week appointed former Chief Justice of India, Y K Sabharwal, as the sole arbitrator to decide the dispute between Arvind Constructions Co Pvt Ltd and Kalinga Mining Corporation of Orissa. Kalinga, a partnership firm, had mining leases from the Orissa government.

It entered into agency agreement with Arvind Constructions. Certain disputes arose between them and the arbitration clause was invoked. Each party nominated its arbitrator but the presiding arbitrator was not selected. Meanwhile, Arvind Constructions moved the district court of Cuttack which ordered status quo.

On appeal, the high court struck it down. On further appeal to the Supreme Court, it appointed the ex-Chief Justice to settled the issue by arbitration.

Relax Safety's appeal dismissed

The Supreme Court has dismissed the appeal of Relax Safety Industries which had imported defective medical equipment from the US and misdeclared its value to the Customs authorities. The items included respirators, earplugs and moulds.

They were manufactured in California and the company certificate declared that they did not conform to the federal regulations. They were trashed or given away for use to countries like Mexico, Columbia and India.

However, the importer used different descriptions for the goods so as to mislead the Customs authorities into not treating them as consumer goods. The collector of customs at first confiscated the goods and later released the goods after payment of fine and enhancing their value.

Crushed bone does not include horn

The Supreme Court has set aside the judgment of the Allahabad High Court which had ruled that crushed bone would include crushed horn and hoof for the purpose of central sales tax as well as Uttar Pradesh trade tax.

Animal horn and hoof cannot be a part of animal bone even in common parlance, as ruled by the high court, according to the Supreme Court which delivered the judgment in the case, Noorie Manure Mill vs Commissioner, UP Trade Tax.

Dealers in crushed bones challenged the stand of the state revenue authorities that horns and hooves were not exempt from trade tax. Fertiliser is exempted from payment of the tax. The question whether crushed horns and hooves were exempt from tax as they are manure has not been decided. No expert evidence has been obtained on this point. Therefore, the Supreme Court remitted the question to the tribunal to be decided after weighing the facts.

Tax scheme's scope expanded

The Supreme Court ruled in Master Cables Pvt Ltd vs State of Kerala that the provisions of the Kar Vivad Samadhan Scheme framed under the Finance Act 1998 would not be applicable to state revenue laws.

"The scheme must be read as limited to those laws which Parliament has the legislative competence to enact and not which falls within the exclusive legislative field of a state, save and except where expressly so stated or inferred by necessary implication," the judgment said. It added: "A legislature is presumed to enact a law only within its domain of field of legislation. Otherwise it would amount to colourable piece of legislation."

Customs' appeal dismissed

The Supreme Court has dismissed the appeal of the Commissioner of Customs against the decision of CEGAT which had struck down the demand of duty against Galaxy Entertainment Pvt Ltd for importing the largest bowling alley in Asia from the US.

The question involved was whether technical and installation fee amounting to Rs 59 lakh was required to be loaded in the assessable value of the 20-lane bowling alley equipment from AMF Bowling Inc for installation in Mumbai.

The authorities alleged that there was gross undervaluation and the assessee had disguised part of the cost of the equipment as technical and installation fee. The adjudicating authority also concluded that the cost was artificially divided with the intention of evading payment of customs duty. The tribunal rejected this view and ruled that there was no undervaluation.