NCLAT uphelds NCLT's judgement on Bharti Telecom Limited Selective Capital Reduction of Minority Shareholders

The core issue revolves around a scheme of selective and compulsory equity share capital reduction of minority public shareholders implemented by Bharti Telecom Limited (BTL). BTL, which was earlier listed company, is the holding company of Bharti Airtel Ltd (BAL), the leading telecom operator of India.

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Certain minority shareholders filed the appeals challenging the:

• Minorities shareholders never perused for exit.

• Validity of voting done by promoters in case of selective capital reduction.

• Selective reduction applicability under section 66 of the Companies Act, 2013.

• Challenging the fair valuation.

Non-sharing of valuation report

Significant downsizing of valuation for capital reduction vis-à-vis preferential allotment done just prior to capital reduction

Applicability for discount for lack of marketability

Independency of valuer

Let us understand history & brief facts:

Bharti Telecom Limited (BTL): The Respondent No. 1 in the appeals. It was initially listed on stock exchanges, delisted, and later became a Core Investment Company primarily holding shares in Bharti Airtel Limited. The legal proceedings revolve around its scheme of capital reduction and the valuation offered to minority shareholders.

Bharti Airtel Limited (BAL): A subsidiary/associate of BTL, the Respondent No.2. BTL's investment in BAL forms the significant majority of BTL's assets. BAL launched an IPO and became listed.

The Appellants (Identified Shareholders): The appellants are a group of identified minority shareholders, constituting approximately 0.11% of BTL's shareholding, who are contested this reduction before NCLAT.

BTL post 2017

We look at the BTL intention of partnering with Singtel by allotment of preferential shares and selective share capital reduction.