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 shareholders in a limited company called the Nilgiri Neergundi Estates Company, Limited, hereinafter called the Neergundi Company which was incorporated on 22nd July, 1957 with a paid up capital of Rs. 3,67,076 consisting of 2000, 7 per cent, preference shares of Rs. 75 each, and 1,08,538 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, Limited, which will hereinafter be referred to as Kil Kotagiri Company. Perumal held 14,900 ordinary shares and Mahajan held 5,900 ordinary shares in the company on the material date. On 31st August, 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 Section 208-C of the Indian Companies Act, 1913, be transferred to The Kil Kotagiri Tea and Coffee Estates Company, Limited, 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 Company Limited 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 & 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 Section 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.
2. In pursuance of the said resolution an agreement of sale and purchase, dated 1st October, 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 crop for seasons 1954-55 be delivered to the agents of the Indian Coffee Board and all out standing book debts to the selling company. On 3rd September, 1955, both the appellants before us sent notices to the Liquidators appointed by the resolution under Section 208-C of the Indian Companies Act, 1913, requiring them to purchase their interests 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 Liquidator did not agree. After some correspondence eventually the two appellants before us filed two applications on the Original Side of this Court, Applications 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 Section 208-C(3) of the Indian Companies Act suo motu or by arbitration. On these two applications Balakrishna Iyer, J., passed an order on 6th January, 1956, appointing Sri P.S. Chandrasekhara Iyer, retired District Judge and advocate as the sole Arbitrator for determining the price to be paid for 5,900 and 14,900 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 17th June, 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 Section 14(2) of the Indian Arbitration Act of 1940 and Rule 5 of the rules framed thereunder.
3. 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 Iyer, J., and on 21st March, 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 21st March, 1957 herein and that the said arbitrator do submit his decision to this Court on or before the 21st July, 1957.
Accordingly the arbitrator again heard the parties by their counsel and taking into consideration the directions contained in the said order of Balakrishna Iyer, 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. 70,800 and the amount payable to Perumal in respect of the shares held by him would be Rs. 1,78,800. 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 21st March, 1957, was untenable in law. When the matter came up before Balakrishna Iyer, J., finally on 15th October, 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 21st November, 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 therein a sum of Rs. 70,800 (rupees seventy thousand and eight hundred) being the value of 5,900 shares and (b) respondent 2 therein a sum of Rs. 1,78,800 (rupees one lakh seventy eight thousand and eight hundred) being the value of 14,900 shares at Rs. 12(rupees twelve) per share, with interest on both the said sums at 6 per cent, per annum from 15th October, 1957, to the date of payment;
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, advocates fee at Rs. 5,000 (rupees five thousand) for each party (treating D.R. Mahajan and R.T. Perumal as one party) be 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; 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 the Liquidators of the Neergundi Company. The appeals now before us were then filed by the two shareholders respectively.
4. 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 Section 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.
5. It is necessary to refer to the other provisions of the Act to follow the contentions of the learned Counsel on both sides. Under Section 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 documentary evidence 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) Where an award is remitted under Sub-section (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-section (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 Section 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 Section 2(c) as meaning a Civil Court having jurisdiction to decide the questions forming-he subject-matter of the reference if the same had been the subject-matter of a. suit.
6. Mr. Nambiar's contention was that the appeals purport to be against the decree passed by Balakrishna Iyer, J., agreeing to the award and Section 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.
7. Mr. Gopalaswami Iyengar for the appellants sought to maintain the appeals on several grounds. He attempted to get over the bar of Section 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 Section 17. The award referred to in Section 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 Section 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 Section 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 Section 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 to 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.
8. Mr. Gopalaswami Iyengar's next contention was that the appeals are maintainable, under Clause (vi) of Section 39 of the Act. The judgment of Balakrishna Iyer, 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. Muthirulayee (1954) 1 M.L.J. 7, 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 be tantamount to an application for setting aside the award within the meaning of Section 17 of the Arbitration Act. A similar view was taken in Ram Alam Lal v. Dukhan I.L.R. (1952) All. 664. 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 : AIR1952All802 , and Antarijami v. Ketaki Debi : 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 Section 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.
9. 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 : (1908)18MLJ485 , which was followed by the Lahore High Court in Hem Chandra v. Amiyabala 84 Ind.Cas. 693. There were also other decisions cited to us, namely, George v. Vastian Soury I.L.R.(1898) Mad. 202, and Vengu Iyer v. Yegyam Iyer : 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 in a pending suit but there are observations in the decision, Subbiah Iyer v. Subramania Iyer : (1908)18MLJ485 , which prima facie appear to support the contention or 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 Section 520, Civil Procedure Code 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 Section 520, Civil Procedure Code, was improperly made or improperly refused.'
Much of the force of the observation 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 Section 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.
10. In this view it is not necessary to consider the other contention of Mr. Gopalaswami Iyengar that Section 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.
11. On the merits the only question which arises is whether Balakrishna Iyer, J., was justified in remitting the award made by the arbitrator on 17th June, 1956.
12. The power of the Court to remit an award to the arbitrator for reconsideration is contained in Section 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 Section 16(1) of the Act and on no other ground. Vide Shree Meenakshi Mills Ltd. v. Patel Brothers (1994) 2 M.L.J. 17 : 71 I.A. 106 : I.L.R. (1944) Bom. 469 (P.C.) 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.
It was also his case that the only ground on which Balakrishna Iyer, J., remitted the award is that an objection to the legality of the award was apparent upon the face of it. Mr. Gopalaswami Iyengar, learned Counsel for the appellants contended that there was no such valid objection to the legality of the award apparent upon the face of it. The reference to the arbitrator was made under Section 208-C(3) of the Indian Companies Act which runs thus:
If any member of the transferor company who did not vote in favour of the special resolution expressed 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 arbitration 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 Company who are the appellants before us. The arbitrator 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 from his award gives details of the calculation:
Fixed Assets.Rs. Rs.Freehold land .. 16,87,750Buildings .. 1,54,935Plant and machinery .. 19,627Furniture .. 10,801___________ 18,73,113Add motor cycle, etc., as per Liquidators' statement. 6,28,365__________25,01,478Less Liabilities .. 4,44,617__________Net value of estate as on 1st July, 1955 .. 20,56,861__________Number of ordinary shares at Rs. 2 each Rs.108,538.Value per share Rs. 18-15-0 (omitting pies in thecalculation)The amount payable for Mr. Mahajan's 5,900 share is 1,11,731-4-0The amount payable for Mr. Perumal's 19,500 shares is 2,82,168-12-0
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 Section 208-C(3) of the Companies Act. He came to the conclusion that the interest of a dissentient shareholder 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 Section 208-C(3) of the Act and the language used in the earlier section, namely, Section 153-B and observed:
Under Section 208-C of the Act it is not the shares of the dissentient shareholder that have to be purchased as in Section 153-B but the interest of the dissentient shareholder 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 Iyer, 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 shareholders 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 one cannot be fixed as a fraction of the other. It is not correct to say in law that the Neergundi Company 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:
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. None the less 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 Section 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 Section 153-B and Section 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 Section 153-B and the purchase of interest in Section 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 wound up or directed to be wound up; whereas Section 208-C deals with a case where the company is proposed to be, or is in the course of being wound 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'.
13. 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 & Co. Ltd. L.R. (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 Section 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.
14. 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 share holdings. Vide Short v. Treasury Commissioners L.R. (1948) 1 K.B. 116 . Reference was made by Mr. Gopalaswami Iyengar, learned Counsel for the appellants to Section 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 members including the shareholders. In our opinion this section does not support the argument which is involved in the contention of the appellants' 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 Section 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 tanamount 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.
15. Before Balakrishna Ayyar, 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. Imperial Land Co. of Marseilles, In re (1870) L.R. 6 Ch. A.C. 96 (Vining's case) a company having resolved on a voluntary winding up, and reconstruction of the company, with a new capital, new articles and a new name, a dissentient shareholder gave notice to the liquidators under Section 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 Section 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 Sir 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 interest 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.
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 shareholders.
16. Mysore West Gold Mining Co., In re (1889) L.R. 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 Section 162 of the Companies Act, 1862 corresponding to Section 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 re-construction has been effected is to be carefully considered and to have due weight given to it, but it is not in itself conclusive so as to fix the proper price which the liquidators 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 at 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.
17. 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.
18. What should not be overlooked is that under Section 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. Eng. L.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) All. E.R. 1018.
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.
19. 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 Iyer, 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 basis of the Aribtrator'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 shareholders in respect of the company's assets. Balakrishna Iyer, J., was, therefore, justified in remitting the award back to the Arbitrator for reconsideration in as much 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.
20. 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 Section 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.