NCLT Chennai Approves Roots Multi Clean Capital Reduction, Says Valuation Approval Is Majority's Wisdom

The National Company Law Tribunal (NCLT) at Chennai has recently declined to interfere with a share capital reduction scheme of an industrial cleaning equipment manufacturer, holding that valuation of shares falls within the commercial wisdom of the majority of shareholders and warrants no interference absent compelling reasons.

A bench of Judicial Member Jyoti Kumar Tripathi and Technical Member Ravichandran Ramasamy observed,

“. …the approval of the valuation is ultimately a matter of the commercial wisdom of the majority of shareholders.”

The tribunal further said:

“It is also noted that the valuation was determined by a Registered Valuer and approved through a validly passed resolution, and considering that the objecting minority has already exercised its statutory right to dissent and was outvoted, this Tribunal finds no reason to interfere with the proposed reduction. Consequently, the objections raised by 3A Capital Services Limited are hereby rejected. In view of the above IA/CA/254/2025 is dismissed..”

Roots Multi Clean Limited had approached the Tribunal seeking confirmation of a reduction of share capital pursuant to a special resolution passed on March 27, 2025.

The company proposed a Selective Share Capital Reduction Programme to cancel shares held by identified shareholders and provide them an exit at Rs. 2,000 per share, based on a valuation by a registered valuer.

The company, which manufactures industrial cleaning equipment, said the move was aimed at reducing the number of shareholders and facilitating its conversion into a private limited company.

The proposal was approved by 91.71% of shareholders. It also stated that it remained financially solvent and that the reduction would not affect its creditors or business operations.

Certain minority shareholders opposed the scheme, contending that the shares were undervalued. They argued that while the company fixed the value at around Rs. 1,997.67 per share, an independent assessment placed the fair value at about Rs. 12,752.76 per share.

The tribunal noted that one of the objecting shareholders, after opposing the resolution at the extraordinary general meeting, had created multiple new shareholders by transferring minimal shares, apparently to artificially inflate the shareholder base despite knowing the shares were liable to be extinguished.

“It is stated that shareholder holding a miniscule percentage of the paidup share capital of the Company, and not being part of the management, the Applicant has no locus to challenge the valuation determined by the Registered Valuer of the Company”

Finding no reason to interfere, the tribunal rejected the objections and approved the scheme of share capital reduction.

For Applicant: Advocate S Manjula Devi

For Respondent: Advocate Kaushik Chatterjee