Squeeze-out of minority shareholders under Section 236: the 90% buyout procedure (India 2026)

A multinational consumer-electronics company already controlled more than 96% of its Indian subsidiary. The remaining shares (roughly 3.87% in public hands) had been illiquid since the company delisted back in 2004. So the majority did what any acquirer wanting a clean cap table would do: it moved to squeeze out the minority shareholders, offering ₹915 per share through a selective capital reduction. That price was a 24% premium over the company’s own discounted cash flow fair value of ₹740.

The board had the votes. It had the premium. It had the lawyers.

It still lost.

On 19 September 2024, the Kolkata bench dismissed the petition, holding that the deal was effectively a buyback dressed up as a capital reduction, and that a reduction cannot be used to do what the buyback provisions forbid. A 96% majority, a premium price, and a fully papered scheme, defeated on the route, not the number. That is the puzzle at the heart of every squeeze-out in India, and it is the reason Section 236 of the Companies Act, 2013 exists at all.

Now look at the mirror image. Two years earlier, a retail giant ran the same selective-reduction mechanism to cancel its non-promoter shares, paying ₹1,380 a share. That figure was a 56% premium fixed by two independent registered valuers, and the special resolution carried with 99.99% approval. In September 2025, the appellate tribunal upheld it.

Same statutory route. Opposite result. The difference was not the size of the majority (both had an overwhelming one); it was route fit and valuation discipline.

Both companies were chasing the outcome the Companies Act, 2013 tried to streamline through Section 236, the “purchase of minority shareholding” provision that lets a 90% holder buy out the rest at a registered-valuer price. Yet neither used it. They reached instead for capital reduction under Section 66, because Section 236 carries a structural weakness most practitioners only learn the hard way, in a tribunal corridor, after the deal has already cracked.

Here is where it gets interesting. For years, the selective-capital-reduction route lived under a cloud. Was it a legitimate “domestic concern of the majority”, or a coercive expropriation of helpless minorities? Tribunals split.

Then, in March 2026, the Supreme Court, in Pannalal Bhansali v. Bharti Telecom Limited, 2026 INSC 213, finally settled it: selective reduction is permissible, provided fair value is paid and the tribunal confirms the scheme. A contested practice became settled law, almost overnight.

So if you advise on M&A, going-private deals, or corporate restructuring, the question has shifted. It is no longer whether you can squeeze out a minority. It is which of five routes gets you there without a five-year fight. This guide maps all of them, starting with the provision built for the job.

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Section 236 of the Companies Act, 2013 (“purchase of minority shareholding”) lets an acquirer or group holding 90% or more of a company’s equity, reached through amalgamation, share exchange, or conversion of securities, offer to buy out the remaining minority at a registered-valuer price. The minority holds a reciprocal right to be bought out, but is not compelled to sell.

Start with that 90% rule and the procedure built around it. Then we will widen out to the four other routes, the valuation battleground where these deals are actually won, and the 2024 to 2026 case law that now governs the field.

What is Section 236 and the squeeze-out of minority shareholders?

Why does a company that already owns 90% of itself bother with the remaining 10%? Because that residual sliver carries real cost: continuing disclosure obligations, the risk of dissent at general meetings, exposure to oppression petitions, and a cap table that complicates any future fundraise or sale. The squeeze-out removes the friction by paying the minority to leave.

A squeeze-out of minority shareholders is the compulsory or near-compulsory purchase of the small remaining shareholders by a dominant majority, so the company ends up under single (or single-group) ownership. Under Section 236 of the Companies Act, 2013, the provision drafted specifically for this under the heading “purchase of minority shareholding”, once an acquirer, person, or group becomes the registered holder of 90% or more of the issued equity share capital by virtue of an amalgamation, share exchange, conversion of securities, or “for any other reason”, they may notify the company of their intention to buy out the remaining minority at a registered-valuer price.

That single sentence packs three ideas a practitioner must keep separate: the 90% threshold (who qualifies), the trigger (how they got there), and the price mechanic (a registered-valuer valuation, not a negotiated number). Miss the threshold-versus-trigger distinction and you misadvise a client on whether Section 236 is even available. The common misconception is that it hands a 90% holder a one-click eviction button. It doesn’t: the provision is an offer with a reciprocal right, and that architecture is why so many deals route around it.

The 90% threshold and who counts as a “minority shareholder”

The 90% line is the gateway, measured by registered holding of issued equity share capital. If an acquirer or a group acting together holds at least 90%, the residual holders (the up-to-10% balance) are the “minority”. There’s no separate statutory definition floating free of this arithmetic; the minority is simply whoever is left once the 90% block is assembled.

Two refinements matter. First, the 90% is computed on equity share capital, so preference shares and other instruments are generally outside the count until converted. Second, the “group of persons” language means the threshold can be reached collectively, by promoters and persons acting in concert, which makes the provision useful after a promoter consolidation. It is a hard registered-holding test: a holder at 89.6% has no Section 236 right, and counting beneficial rather than registered holdings is how acquirers get caught out when the company secretary checks the register.

Does Section 236 apply to private companies? Yes. The section sits in Chapter XV and isn’t confined to listed or public companies. But private-company squeeze-outs more often run through capital reduction, because the shares are already illiquid and the parties want a binding extinguishment rather than a refusable offer. Before any private-company buyout, the acquirer’s team will usually run the target through legal due diligence for a private company acquisition to confirm the share register and identify untraceable holders.

“Purchase of minority shareholding”: the statutory wording

The heading (“purchase of minority shareholding”) is doing precise work. The legislature chose “purchase”, not “acquisition” or “expropriation”, and that is the seed of the whole “is it really a squeeze-out?” debate, because a purchase needs a willing seller while a squeeze-out is meant to override unwillingness. Section 236 resolves the tension awkwardly: it empowers the 90% holder to make the offer at a registered-valuer price, but also gives the minority a mirror-image right to demand purchase. The drafting reads less like a clean compulsory-acquisition power (of the kind found in some foreign regimes) and more like a structured exit channel either side can open.

You read Section 236 alongside its rules, not on its own. The mechanics (valuation, deposit, disbursal, the treatment of untraceable holders) live in Rule 27 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and the Companies (Registered Valuers and Valuation) Rules, 2017, not in the bare section. Advising off the section text alone is how practitioners miss the separate-bank-account requirement and the one-year hold.

Why the route you choose decides whether the squeeze-out works

Here is the strategic point the rest of this guide circles back to. Section 236 is one of at least five statutory routes to eliminate a minority, and they aren’t interchangeable. Each carries a different threshold, trigger, role (or absence) for the tribunal, valuation discipline, and answer to the single most important question: is the minority actually bound to go? A 90% majority that picks Section 236 may find the minority simply declines the offer and stays on the register. The same majority that picks selective capital reduction under Section 66 can extinguish those shares outright, but only if the valuation holds up and the tribunal confirms the scheme.

So the threshold question every deal team should answer before drafting a single notice is not “do we have the votes?” but “which route makes the exit binding, survives valuation scrutiny, and fits how we reached control?” Get that wrong and even a 96% majority loses.

What triggers Section 236 (and what does not)

Reaching 90% is necessary, but not sufficient. Section 236 only switches on if you reached that 90% through the right kind of corporate event. This is the most litigated threshold issue in the provision, and it’s where many acquirers discover, too late, that their 90% doesn’t unlock the section at all. So what counts as a qualifying trigger?

The section is invoked when a person or group becomes a 90% holder “by virtue of amalgamation, share exchange, conversion of securities or for any other reason”. The first three are concrete corporate events. The fourth, “for any other reason”, looks like a catch-all that would let any 90% holder in, however they got there. The appellate tribunal closed that door in 2019. The trigger inquiry runs before the procedure inquiry: there’s no point drafting Rule 27 valuation instructions if the route into 90% doesn’t qualify. Acquirers reaching 90% through a merger often need CCI merger-control clearance for large acquisitions first, and no buyout notice should go out before the acquirer has run the M&A due-diligence checklist that precedes a buyout, which confirms the share register, the qualifying event, and the absence of competing claims on the minority’s stock.

The qualifying events: amalgamation, share exchange, conversion of securities

The three named triggers share a common feature: each is a defined corporate transaction that results in the 90% holding, rather than a gradual market accumulation. An amalgamation merges one company into another and can leave the surviving entity’s holder at 90%-plus of a target. A share exchange swaps the acquirer’s shares for the target’s, concentrating holding. A conversion of securities (debentures or preference shares converting into equity) can tip a holder over the line in one stroke.

What ties them together is that the 90% is a consequence of a structured event, with a clear before-and-after the company and its other shareholders can see coming, vote on, or contest, not stealthy creep. That structural feature is precisely what the tribunal seized on when it read down the catch-all, looking at substance over label, so that a creeping acquisition dressed up as a “conversion” invites the same fate as a bare one.

What “for any other reason” means after OBO Bettermann

The 2019 appellate ruling in S. Gopakumar Nair v. OBO Bettermann India Pvt. Ltd., Company Appeal (AT) No. 272 of 2018 is the interpretive anchor of the entire trigger analysis. The tribunal held that “for any other reason” cannot be read as an open-ended licence for any 90% holder. Applying ejusdem generis (a general phrase at the end of a list takes its colour from the specific items before it), it confined “for any other reason” to reasons of the same genus as amalgamation, share exchange, and conversion of securities: a structured corporate event, not market accumulation.

What does this mean on a live deal? A holder who crept to 90% by buying shares on the market, or by a series of private purchases, doesn’t get Section 236 simply because the catch-all words are broad. The 90% must have arrived through a qualifying-type event. This reading turns the section from a universal squeeze-out tool into a narrow one keyed to specific transactions, and sharpens the line between Section 235 (dissenting shareholders in a scheme or contract) and Section 236 (the assenting majority that has already crossed 90% by a qualifying event).

[FUTURE] Expect tribunals to keep policing the trigger tightly. As acquirers grow more creative about reaching 90% (through layered conversions, group consolidations, and scheme-embedded swaps), expect more litigation testing whether a given path is genuinely a qualifying event or a creeping acquisition in disguise. The ejusdem generis reading should harden rather than loosen.

Can a creeping or piecemeal acquisition trigger Section 236?

The short answer, after the 2019 ruling, is no. A creeping acquisition (steadily mopping up shares from the market or through scattered private deals until you cross 90%) is exactly the kind of “other reason” the tribunal refused to admit. An acquirer that assumes its market-bought 90% qualifies and pushes a Section 236 notice out hands the minority a clean jurisdictional objection: the trigger was never met, and the process unravels before valuation is even reached.

The mistake we see most often is treating Section 236 as the default exit for any dominant holder. It’s a conditional right tied to how control was achieved. If your client reached 90% by creep, the honest advice is capital reduction under Section 66 or a scheme-based route, not a Section 236 notice that will be challenged on trigger and lost.

The 90% buyout procedure, step by step

Most explainers stop at “the acquirer offers a registered-valuer price”. That skips the part practitioners actually get sued over: the deposit, the timeline, the separate bank account, and the treatment of holders who never respond. So here is the full procedure, in sequence, with the statutory basis for each step (see Infographic 1). The order matters, because a misstep early (notifying before valuing, or valuing without a registered valuer) is fatal later. Read it as a checklist, because that’s how a company secretary will run it.

1. Reach 90% via a qualifying event. The acquirer or group must already hold 90%-plus by amalgamation, share exchange, conversion, or a qualifying “other reason” under Section 236 of the Companies Act, 2013.
2. Notify the company of the intention to buy out the remaining minority.
3. Obtain a registered-valuer valuation under Rule 27 of the 2016 Rules to fix the offer price.
4. Deposit the total consideration in a separate bank account.
5. Disburse to the minority within 60 days of determining the price.
6. Hold the consideration for untraceable or non-responding holders in trust, with the shares disbursed for at least one year.

That sequence is the spine. Each step below adds the detail that decides whether a scheme survives challenge: Section 236 is procedurally light in the bare section but exacting in the rules, which is where unprepared teams stumble.

Steps 1 to 2: notifying the company and the minority of the intention to buy out

Once the 90% qualifying-event threshold is crossed, the acquirer notifies the company of its intention to buy out the remaining equity holders, and the company facilitates the offer to the minority. Does Section 236 require NCLT approval? No, not as a precondition to the buyout itself. Unlike capital reduction, the section works without a confirming order, which is part of its appeal (speed) and part of its weakness (no tribunal stamp to make the outcome binding). The tribunal comes in only at the edges: disputes over price, or where untraceable holders’ money sits.

The practical drafting point is precision in the notice. It should record the qualifying event that produced the 90% holding, the acquirer’s intention to purchase, and the basis on which the price will be fixed (registered valuer under Rule 27). A vague notice that asserts a right without evidencing the trigger is the first thing a sophisticated minority will attack, so keep the documentary trail of the qualifying event attached: it’s the jurisdictional foundation of everything that follows.

Step 3: registered-valuer valuation under Rule 27

The price under Section 236 is not negotiated and not set by the board. It is determined by a registered valuer, in accordance with Rule 27 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, read with the Companies (Registered Valuers and Valuation) Rules, 2017. The valuer holds a valid registration in the applicable asset class, and the valuation must follow recognised methodology rather than a number reverse-engineered to suit the acquirer.

The valuer applies accepted methods (net asset value, discounted cash flow, comparable companies, and market price where available) and produces a reasoned report supporting the offer price. Rule 27 anchors the price to that determination rather than to the acquirer’s preference, which is the single most important safeguard the minority has under Section 236. The methodology choice (how NAV is weighted against DCF against comparables) is where the real fight starts, because each method can produce wildly different numbers for the same company.

Steps 4 to 5: separate bank account, 60-day disbursal, and the one-year hold

This is the part the bare section hides and the rules make mandatory. The acquirer must deposit the total consideration for the entire minority into a separate bank account before the money flows out. The separateness isn’t cosmetic: it demonstrates that the consideration is genuinely set aside for the minority and not commingled with the acquirer’s working capital, and a failure to keep it separate is a procedural vulnerability.

From that account, the minority must be paid within 60 days of the price being determined. That hard timeline stops the acquirer from holding the minority in limbo after fixing a price. Miss it, and the minority gains both a grievance and a litigation hook.

The one-year hold addresses money that can’t be paid out immediately, typically because a holder is untraceable. The consideration for those shares is held, and the shares are transferred to the acquirer for at least one year, with the unclaimed money held in trust for the absent holders. This keeps the squeeze-out from being defeated by a handful of shareholders who can’t be found, while preserving their right to claim later. It’s the closest the section comes to a genuinely compulsory feature.

What happens to untraceable or non-responding minority shareholders

Every real squeeze-out has them: the holder who emigrated decades ago, the estate of a deceased shareholder with no clear successor, the address that bounces. Section 236 anticipates this. The consideration attributable to such holders is held in trust for the absent shareholder (or their successors), claimable when they surface, and their shares can still be moved to the acquirer, so a clean cap table isn’t hostage to a few missing names. Prolonged unclaimed amounts can interact with the broader unclaimed-amounts machinery of company law, so the acquirer’s team should document the trust carefully and not treat the held sum as a windfall, the kind of corner-cutting that resurfaces in later litigation.

Tax and stamp duty on the buyout: capital gains for the exiting minority

A squeeze-out is a sale, and a sale has tax consequences for the seller. The consideration is a transfer of a capital asset, so the exiting minority faces capital-gains tax on the difference between the consideration and the cost of acquisition. For unlisted shares (the usual case, since the target is typically private or already delisted), the holding-period threshold is 24 months under Section 2(42A) of the Income-tax Act, 1961: more than 24 months yields a long-term gain, anything shorter a short-term gain. A long-term gain on unlisted shares is taxed at 12.5% without indexation under Section 112 (for transfers on or after 23 July 2024), while a short-term gain is added to income and taxed at the seller’s slab rate. Listed shares run on a different track (a 12-month threshold and the Section 112A regime), but that rarely bites in a squeeze-out.

There’s a structural wrinkle unique to Section 236. Under Section 236(4) to (6), the company receives and holds the purchase consideration as agent for the minority being bought out. But the tax incidence doesn’t shift to the company merely because it acts as conduit: the capital gain still accrues to the selling minority shareholder, who is the person transferring the asset. Advisers who assume the company “absorbs” the tax misread the section.

Stamp duty is the second cost. Since the centralised collection mechanism took effect on 1 July 2020 (under the Finance Act, 2019 and the Indian Stamp (Collection of Stamp Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019), transfers of dematerialised shares are stamped at a uniform 0.015% on a delivery basis, collected through the depository system, with the duty falling on the transferee. Physical-share transfers still follow the older instrument-based regime under the Indian Stamp Act, 1899. The commercial point: someone bears it, and the buyout documentation should allocate it expressly rather than leave it to a later argument.

[SECOND-ORDER] Tax treatment can quietly reshape the route decision. A minority facing a large long-term capital gain may prefer the certainty and timing control of a registered-valuer Section 236 price over a contested capital-reduction scheme, turning a “pure valuation” dispute into a valuation-plus-tax conversation most acquirers don’t see coming.

The “is it really a squeeze-out?” paradox

Here is the part that surprises most people new to Section 236: the provision the legislature drafted for squeezing out a minority doesn’t actually compel anyone to sell. Read closely, it’s an offer, not a guillotine. So is Section 236 a squeeze-out at all, or just a polite invitation the minority can decline?

The tension is structural. A true squeeze-out, as understood internationally, lets a dominant holder force the residual shares out for fair value, with no opt-out. Section 236 stops short: it gives the 90% holder a right to offer at a registered-valuer price and the minority a reciprocal right to demand a buyout, but doesn’t clearly say the minority must accept.

[SECOND-ORDER] The downstream effect is that Section 236 has quietly pushed deal volume toward capital reduction. Because it can’t reliably deliver a binding extinguishment, the provision meant to be the clean squeeze-out tool has become the route of last resort, while a provision not designed for squeeze-outs (Section 66) has become the practitioner default.

Section 236 is an offer, not a compulsory acquisition

Strip the section to its core and you find an offer mechanism: the 90% holder notifies, the registered valuer prices, and the offer goes to the minority. Nothing there reads like the automatic, court-free expropriation a Delaware-style short-form merger delivers. The minority is offered fair value; on the plain words, it isn’t dragged across the line.

Is the offer binding? This is genuinely contested. The dominant practitioner reading is that Section 236 does not compel the minority to sell; it creates a structured exit they can take up or, on a strict reading, decline. A more acquirer-friendly view holds that once the machinery is invoked and fair value deposited, the purchase can proceed. That the question is open at all is the problem: a determined holdout can frustrate the buyout by simply staying on the register, which is why acquirers who need certainty use a route that ends in extinguishment, not a maybe.

The minority’s reciprocal sell-out right

The flip side is the minority’s own right, and it’s easy to miss. The section doesn’t only empower the 90% holder; it empowers the minority to require the majority to buy them out at the registered-valuer price. So a small shareholder stranded in a company that has gone effectively private can use Section 236 as an exit ramp, forcing the dominant holder to purchase rather than stay locked in illiquid stock.

Section 236 is a two-way door: the majority can open it to clear the cap table, and the minority can open it to escape. That reciprocity is the clearest signal the legislature was trying to balance majority efficiency against minority protection, and it matters most after a delisting or near-total consolidation, when the minority has no market to sell into.

Why practitioners call Section 236 a “weak” squeeze-out tool

Section 236 is widely described as a “weak” or even “toothless” provision, and the criticism is fair. It doesn’t unambiguously bind the minority, it offers no tribunal-confirmed extinguishment, and its trigger is narrowed by the ejusdem generis reading to specific corporate events. The mistake we see most often is advising a client “you have 90%, so use Section 236”. The better approach is to start from the outcome the client needs (a binding, irreversible exit) and ask which route delivers it, which is frequently selective capital reduction under Section 66.

That’s not to say the section is useless. For a minority seeking exit, the reciprocal right is valuable; for a majority that reached 90% by a clean qualifying event facing a cooperative minority, the offer mechanism works. But as a forcing tool against resistance, it underdelivers.

Valuation of minority shares: where squeeze-outs are won or lost

If you take one thing from this guide, take this: squeeze-outs are not won on the size of the majority, they are won on the valuation. Philips had 96% and lost. Reliance Retail had an overwhelming majority and won. The difference, again and again, is whether the price survives scrutiny. So how is the price actually fixed, and where does it break?

Valuation under any squeeze-out route ultimately rests on a registered valuer’s reasoned determination of fair value, and fair value is not a single number. It is a range produced by competing methods, and the choice and weighting of methods is the whole game. The data infographic in this section sets three real outcomes side by side (see Infographic 4): Cadbury’s court-corrected price, Philips’ dismissed reduction, and Reliance Retail’s upheld one. Together they show the tribunal cares less about the headline premium than about the integrity of the method.

[SECOND-ORDER] As fair value becomes the litigated battleground, demand for credentialed registered valuers and fairness-opinion specialists has climbed, and the lawyers who can read a valuation report critically (rather than accept it) have become disproportionately valuable on both the buy and sell side. The valuation report has become the deal’s centre of gravity.

Accepted valuation methods: NAV, DCF, comparable companies, market price

Four methods dominate Indian minority-share valuation. Net asset value (NAV) values the company on its balance sheet, netting assets against liabilities, and tends to suit asset-heavy businesses. Discounted cash flow (DCF) projects future cash flows and discounts them to present value, and is sensitive (sometimes wildly so) to its growth and discount-rate assumptions. Comparable companies pricing benchmarks the target against listed peers on multiples. Market price, where the shares trade with any liquidity, supplies a further reference, though it is unreliable for illiquid or delisted stock.

Which method governs? There is no single mandated method; the registered valuer selects and weights methods appropriate to the business, and that selection is exactly what gets challenged. A minority arguing for a higher price will press comparable-companies or a more optimistic DCF; the acquirer will lean on whichever method produces the lower figure. The Philips dispute crystallised this: the company anchored to a DCF fair value of ₹740, while the minority’s comparable-companies view pointed dramatically higher.

The assumptions matter more than the method label. A DCF can be made to say almost anything by adjusting the discount rate by a couple of percentage points or trimming the terminal growth rate. The skilled adviser does not ask “which method?” so much as “are these assumptions defensible in front of a tribunal?” That is where a valuation either holds or collapses.

Worked example: the Cadbury price revision

The clearest illustration of judicial control over price is the Cadbury reduction. In In re Cadbury India Limited, 2015 (125) CLA 77 (Bom), the group held roughly 97.583% and sought to buy out the 2.417% minority through a reduction-of-capital scheme launched in 2009. The originally offered price was ₹1,340 per share. The minority fought it, and the litigation ran for years.

When the Bombay High Court finally sanctioned the scheme, it did so only after the price was revised sharply upward to ₹2,014.50 per share, roughly a 50% increase on the original offer. The court did not simply rubber-stamp the majority’s number; it scrutinised the valuation and laid down general principles on the exercise of valuation discretion in reductions. The lesson is unmistakable: even a 97%-plus majority cannot dictate price, because the tribunal is the gatekeeper on fair value.

What does this mean for you? The headline premium is not the test. Cadbury’s original ₹1,340 was a premium to some references and still got revised by roughly 50%. A majority that treats the offer price as a take-it-or-leave-it number, rather than a defensible valuation, exposes the whole scheme to a years-long upward correction. Price, not power, decides these cases.

How minority shareholders challenge an unfair valuation

A minority that thinks the price is low is not without recourse. The first move is to attack the valuation report itself: the choice of method, the discount rate, the comparables selected, the treatment of surplus assets. Because the registered valuer’s reasoning is disclosed, a well-advised minority can put up a competing valuation and force the tribunal to weigh the two. The second move is procedural: where the squeeze-out runs through a tribunal-confirmed route (capital reduction, or a scheme), the minority can object at the confirmation stage, and the tribunal will not confirm a scheme where the valuation is unfair or the process is tainted. Even under Section 236, a price dispute can be taken to the tribunal.

For minority counsel, the realistic strategy is to make the valuation expensive to defend. A credible competing valuation, a sharp cross-examination of the acquirer’s assumptions, and a clean procedural record turn a quick squeeze-out into a contested, price-escalating fight. That cost is the minority’s negotiating capital, and using it well is the difference between accepting a lowball and extracting a Cadbury-style revision.

What stops the majority from lowballing the price

So what actually prevents a 90% holder from simply naming a cheap price? Three things. First, the registered-valuer requirement removes the price from the majority’s direct control and hands it to a regulated professional applying recognised methods. Second, the disclosure of the valuation reasoning lets the minority test and contest it. Third, on the tribunal-confirmed routes, the tribunal will refuse to confirm a scheme built on an unfair price, as Cadbury shows and Philips reinforces.

The catch is that none of these safeguards is automatic. A passive minority that does not contest the valuation may well be bought out at the acquirer’s number, because the safeguards are activated by objection, not self-executing. The majority is not stopped from offering low; it is stopped from getting away with low when challenged. And the inverse pitfall bites the majority: a deliberately low price invites the very contest that derails the deal, because a defensible valuation passes the tribunal quickly while an aggressive one buys years of litigation and, frequently, a court-ordered increase anyway.

Selective capital reduction under Section 66: the practitioner’s preferred route

If Section 236 is the provision built for squeeze-outs that practitioners avoid, selective capital reduction under Section 66 is the provision not built for squeeze-outs that practitioners actually use. This is the route Philips tried and failed with, Reliance Retail tried and succeeded with, and the Supreme Court finally blessed in 2026. Why has a capital-reduction power become the squeeze-out tool of choice? Because, done right, it does the one thing Section 236 cannot: it binds.

Capital reduction under Section 66 of the Companies Act, 2013 lets a company reduce its share capital by special resolution, confirmed by the tribunal. A selective reduction targets a particular class or block of shares (the non-promoter minority) for cancellation, paying them out and extinguishing their holding while leaving the majority’s shares intact. The result is a binding squeeze-out: the minority’s shares are gone, not merely offered for purchase, and that bindingness is the entire attraction.

[HISTORICAL] The route is not new. Tribunals and High Courts have sanctioned selective reductions that extinguish minority shareholdings for decades, from the pre-2013 authorities through to the present. What changed across 2024 to 2026 is the clarity: a run of contested orders (Philips, Reliance Retail) and finally a Supreme Court ruling converted a workable-but-uncertain practice into settled law. The timeline infographic placed near this section traces that evolution (see Infographic 3).

How Section 66 squeezes out minorities (and the “disguised buyback” limit)

The mechanics are straightforward in outline. The company passes a special resolution to reduce capital by cancelling the minority’s shares, pays those holders fair value, and applies to the tribunal to confirm the reduction. On confirmation, the shares are extinguished. Unlike Section 236, there is no reciprocal sell-out structure and no “offer the minority can decline”; the reduction, once confirmed, is binding on everyone.

But there is a hard limit, and it is the limit Philips crashed into. A selective reduction cannot be used as a disguised buyback. Buyback of a company’s own shares is separately regulated under Section 68 of the Companies Act, 2013, with its own conditions and limits, and a company cannot evade those conditions by dressing a buyback up as a capital reduction. When the substance is a buyback (the company funding the repurchase of its own shares) but it is structured as a Section 66 reduction to escape the buyback constraints, a tribunal can strike it down.

So why prefer Section 66 over Section 236 despite this limit? Because, where the transaction is a genuine reduction paying fair value and not a buyback in disguise, Section 66 delivers a tribunal-confirmed, binding extinguishment that Section 236 cannot. A buyback repurchases shares from holders (often pro rata) and extinguishes them under Section 68’s conditions; a selective reduction cancels a specific minority block by court-confirmed reduction. They can look similar in effect, which is why the disguised-buyback line exists to keep them apart.

Philips India: how a 96% majority lost (2024)

Return to the opening story, now with the legal frame in place. In In re Philips India Limited (NCLT, Kolkata Bench, CP/312(KB)/2023, order dated 19 September 2024), the multinational parent held more than 96% and sought to eliminate the residual minority (roughly 3.87%) through a Section 66 selective reduction at ₹915 per share, against its own DCF fair value of ₹740. On 19 September 2024, the Kolkata bench dismissed the petition.

The reasoning is the lesson. The tribunal held that the transaction did not fall within the legitimate grounds for a Section 66 reduction and was, in substance, a disguised buyback under the reduction route. Having dismissed on that jurisdictional footing, the bench did not even resolve the valuation gap between the company’s ₹740 DCF and the minority’s higher figure. The deal failed on route and characterisation, before price was ever decided. The pitfall is structural, not numerical: pick a route the facts cannot support, and no premium saves you. Philips is why “route fit” is the first question, not the last.

Reliance Retail: the same route done right (2025)

Now the mirror image. In In re Reliance Retail Limited, Company Appeal (AT) No. 155 of 2025 (NCLAT), the company ran a selective capital reduction to cancel its non-promoter minority shares, paying ₹1,380 per share. That price was a 56% premium over the fair value fixed by two independent registered valuers, and the special resolution carried with 99.99% approval. In September 2025, the appellate tribunal upheld the reduction.

Why did the same mechanism that defeated Philips succeed here? Because the transaction was a genuine reduction paying demonstrable fair value, supported by two independent valuers and overwhelming approval, not a disguised buyback. The tribunal treated it as a legitimate “domestic concern of the majority”, binding where objecting shareholders are paid fair value. Same statutory route, opposite outcome, and the variable was valuation discipline plus genuine route fit.

Read Philips and Reliance Retail as a matched pair: together they define the boundary. Stay on the right side of the disguised-buyback line, pay a valuation you can defend with independent valuers, and document overwhelming approval, and the Section 66 route binds the minority cleanly. The boundary is not the majority’s size; it is the integrity of the structure.

Pannalal Bhansali v. Bharti Telecom: the Supreme Court’s March 2026 capstone

For years, the selective-reduction route worked but lived under a doctrinal cloud, reached through case-by-case reasoning rather than a single apex authority. The foundational pre-2013 authority, Sandvik Asia Ltd. v. Bharat Kumar Padamsi, (2009) 3 Bom CR 57, had validated selective reduction extinguishing non-promoter shares where fair value is paid and an overwhelming majority approves, and a line of cases built on it. But there was no Supreme Court seal. That changed in March 2026.

In Pannalal Bhansali v. Bharti Telecom Limited, 2026 INSC 213, decided on 10 March 2026, the Supreme Court affirmed that selective capital reduction (targeting one class of shareholders) is permissible under Section 66, framing it as a “domestic concern of the majority” and rejecting any requirement that a reduction be uniform across all holders. The permission is conditioned on fair valuation and tribunal confirmation. With those met, the majority may reduce capital selectively to eliminate a minority, and the courts will not withhold sanction merely because the minority is forced to exit.

[FUTURE] With apex-court backing, expect selective reduction under Section 66 to consolidate as the practitioner default for going-private and minority-elimination deals, displacing Section 236 further. But valuation scrutiny should intensify rather than relax, because once the route is settled, the price becomes the only remaining battleground. Practitioners should brace for more disputes about DCF assumptions and disguised-buyback characterisation, not fewer.

Alternative squeeze-out routes compared: Section 236 vs 235 vs 230(11) vs 66 vs 61(1)(b)

By now the central message is clear: there is no single squeeze-out button in Indian company law, there are five, and choosing between them is the whole skill. Which route binds the minority? Which needs the tribunal? Which is fastest? The comparison infographic in this section puts all five side by side (see Infographic 2), and the table below is the snippet-ready version.

[HISTORICAL] The fragmentation is a historical accident as much as a design. The 1956 Act carried a single dissenting-shareholder acquisition power (the ancestor of Section 235); the 2013 Act added Section 236, and practice layered capital reduction, scheme-embedded takeover offers, and consolidation on top. The result is a patchwork, not a system.

Section 235: the dissenting-shareholder acquisition route

Section 235 is the older logic, carried forward from the 1956 Act. Under Section 235 of the Companies Act, 2013, where a scheme or contract for the transfer of shares to a transferee company is approved by holders of not less than nine-tenths in value of the shares affected (within a defined period), the transferee may give notice to the dissenting shareholders that it desires to acquire their shares, and may then acquire them on the scheme’s terms unless the tribunal orders otherwise on the dissenters’ application.

The defining feature is that Section 235 operates on dissenting shareholders in a scheme or contract context. The 90% nine-tenths approval is approval by the holders of the shares being acquired, and the dissenters are then swept in unless they persuade the tribunal to intervene. This is genuinely binding on the minority, which is why it has teeth that Section 236 lacks, but it is keyed to a scheme/contract structure rather than to a holder who has simply crossed 90%. The next H2 unpacks the distinction in detail; the headline is that Section 235 acquires dissenters under a scheme, while Section 236 lets a 90%-by-qualifying-event holder offer to buy out the rest.

Section 230(11) to (12): the NCLT takeover offer in a scheme

The scheme route adds another option. Under Section 230(11) to (12) of the Companies Act, 2013, a takeover offer can be embedded within a scheme of arrangement, allowing an acquirer holding or seeking control to make a takeover offer through the tribunal-supervised scheme process. The scheme itself requires the usual high approval threshold, and the takeover offer rides inside it, with safeguards including an escrow requirement for the consideration.

The attraction of the Section 230(11) route is that it is tribunal-supervised and therefore binding within the scheme, while offering a structured takeover mechanism that Section 236 does not. The trade-off is speed and complexity: a scheme of arrangement is a heavier, slower process than a bare Section 236 notice, and it pulls in the tribunal, creditors, and the broader scheme machinery. For an acquirer that needs certainty and is already running a scheme, the takeover-offer route is often the cleaner fit, even though it is slower than a standalone Section 236 notice would be.

Section 61(1)(b): squeeze-out by consolidation of shares

The least obvious route is consolidation. Under Section 61(1)(b) of the Companies Act, 2013, a company can consolidate and divide its share capital into shares of a larger denomination. Pushed far enough, consolidation can leave minority holders with fractional entitlements (less than one whole share of the new larger denomination), and those fractions can then be sold and the holders paid out, effectively removing them. It is squeeze-out by arithmetic rather than by direct purchase.

The mechanism has been used and, where it amounts to a variation of shareholders’ rights or requires a reduction, it can attract tribunal scrutiny. Supporting authority in the capital-reduction and consolidation line, such as In re Chembra Peak Estates Limited (NCLT, order dated 5 December 2018), has upheld squeeze-outs achieved through reduction or consolidation where there was overwhelming consent, independent valuation, and procedural fairness.

The catch with consolidation is that it can look contrived, and a tribunal will look past the form to the substance. If the consolidation ratio is engineered purely to manufacture fractions for the minority and squeeze them out, it invites the same fairness scrutiny as any other route. Reduction under Section 66 directly cancels the minority block with tribunal confirmation; consolidation removes them indirectly through fractions, and is more vulnerable to a “this is artificial” challenge. Reduction is the cleaner, better-trodden path.

The five-route comparison table

Here is the operational summary. Read across the row for the route, down the column for the factor you care about most. The single most important column is “binding on minority?”, because that is the column Philips and Reliance Retail were really fought over.

Which route is fastest? Section 236, on paper, because it skips tribunal confirmation. But “fastest” is a trap if the route is non-binding: a fast offer the minority can decline is slower in real terms than a confirmed reduction that actually finishes the job. Which routes need the tribunal? Section 235 (on dissent), Section 230(11), and Section 66 always; Section 61(1)(b) sometimes; Section 236 not for the core offer. That last row is why Section 66, slow as it is, has become the default.

Section 236 vs Section 235: assenting vs dissenting shareholders

Of all the comparisons, the Section 235 versus Section 236 pairing causes the most confusion, because the two sit next to each other in the same chapter and both involve a 90% figure. But they do opposite jobs. One acquires dissenters; the other lets an assenting 90% holder offer to buy out the rest. Confuse them and you pick the wrong notice, the wrong threshold, and the wrong tribunal posture.

[HISTORICAL] Section 235 is the lineal descendant of the older dissenting-shareholder acquisition power, while Section 236 is the 2013 Act’s newer “purchase of minority shareholding” innovation. They were never meant to be twins; reading them as alternatives for the same situation is the error.

What changed from Section 395 of the Companies Act, 1956

[HISTORICAL] The 1956 Act had a single mechanism: Section 395, which allowed a transferee that had secured nine-tenths approval of a scheme or contract to acquire the dissenting shareholders’ shares. It was a dissenting-shareholder acquisition power, and it carried forward into the 2013 Act essentially as Section 235. So what did the 2013 Act actually add?

It added Section 236, a new provision keyed to the assenting 90% holder and equipped with the reciprocal sell-out right. So the headline change from 1956 to 2013 is not that Section 395 was rewritten, but that a second provision was bolted on alongside its successor, giving India two overlapping mechanisms where it once had one. Whether that was an improvement is debatable: adding Section 236 without clearly making it binding produced the “weak tool” problem this guide keeps returning to, widening the menu without resolving the question of compulsion.

Dissenting (s.235) vs assenting (s.236): the practical distinction

The cleanest way to hold the distinction in your head is by whose consent the provision runs on. Section 235 runs on the consent of the holders who approved the scheme and then sweeps in those who dissented. Section 236 runs on the assenting 90% block that already controls the company and now wishes to clear out the residual minority. Dissent versus assent is the axis.

That axis has a practical payoff. If your client is acquiring a target through a scheme or contract and faces a dissenting tail, Section 235 is the natural tool, and it binds. If your client has already reached 90% through a qualifying event and faces a scattered residual minority, Section 236 is the natural tool, but it may not bind. The fact pattern tells you which section; do not start from the section and force the facts.

One clarifying note on the nine-tenths approval under Section 235, because people misread it: it is nine-tenths in value of the shares affected by the scheme or contract, approving the transfer, not nine-tenths of the whole company in every case. Getting that wrong can sink an acquisition that thought it had cleared the bar.

Minority protection: oppression, Article 300A, and “reverse oppression”

A squeeze-out is, by definition, the majority overriding the minority. So where is the minority’s protection, and how far does it reach? Indian law answers on three fronts: the oppression-and-mismanagement remedy, the constitutional right to property, and a quieter dynamic where minorities turn protection into leverage. Each squeeze-out route runs against this backdrop of minority rights, and reading it is what lets a practitioner predict when a deal will draw a counter-petition rather than quiet acquiescence.

Can a squeeze-out amount to oppression under Sections 241 to 242?

The oppression-and-mismanagement remedy is the minority’s heaviest weapon. Under Section 241 of the Companies Act, 2013, a member may apply to the tribunal complaining that the company’s affairs are being conducted in a manner oppressive to members or prejudicial to the company’s interests, and the tribunal has wide powers under Section 242 to make orders to set things right, including regulating the company’s affairs and, in appropriate cases, ordering a purchase of shares.

Can a squeeze-out amount to oppression? It can, where the squeeze-out is coercive, conducted at an unfair price, or used as a device to harm the minority rather than for a legitimate corporate purpose. But the bar is real: a squeeze-out conducted at fair value, through a proper route, with tribunal confirmation, is not oppression merely because the minority is forced out. The Sandvik and Reliance Retail line treats a fair-value reduction as a legitimate domestic concern of the majority, so the grievance has to be about unfairness, not about the bare fact of exit.

For a minority weighing this remedy, the realistic path is to pair a valuation grievance with the oppression machinery, and the procedural craft of putting that case together is its own skill. Minority counsel preparing such a challenge will often work from a structured precedent for drafting an application for relief against oppression and mismanagement, because a well-pleaded petition that ties the price unfairness to specific oppressive conduct is far harder to dismiss than a vague complaint about being squeezed out.

The constitutional angle: Article 300A and the right to property

There is a constitutional layer most squeeze-out discussions skip. Article 300A of the Constitution provides that no person shall be deprived of their property save by authority of law. Shares are property. So a compulsory squeeze-out, which deprives the minority of their shares, has to be authorised by law and carried out through due process to withstand an Article 300A challenge.

What is the constitutional basis for squeeze-out, then? The deprivation is authorised by law (the relevant Companies Act provision) and accompanied by fair value, which is what saves it from being an arbitrary expropriation. The minority cannot generally argue that any forced exit is unconstitutional, because the statute authorises it. But it can argue that a squeeze-out conducted without fair value or outside the statutory route is a deprivation not saved by Article 300A, because it lacks the authority-of-law and fair-process the protection demands.

In practice, the Article 300A argument rarely stands alone; it reinforces the fair-value and due-process points rather than supplying a separate veto. It elevates “you underpaid us” from a commercial complaint to a deprivation-of-property concern, sharpening the tribunal’s scrutiny. It is a pressure point, not a trump card.

“Reverse oppression”: minorities using valuation as leverage

[SECOND-ORDER] Here is the non-obvious downstream effect most acquirers miss. As valuation scrutiny has tightened post-Philips and post-Pannalal, minorities have learned to weaponise it. The phenomenon sometimes called “reverse oppression” is the minority using a valuation dispute and the threat of an oppression petition not to stop the squeeze-out, but to extract a higher price for going quietly. The mechanics are rational: a minority that can credibly tie up a deal in years of litigation, with a real prospect of a Cadbury-style court-ordered increase, holds genuine leverage despite a tiny stake, and the majority often finds it cheaper to settle than to fight. The 2.4% holder becomes, in effect, a tollbooth on the majority’s exit.

Is this abusive? It can be, when pushed into pure greenmail, but more often it is the system working as designed: the threat of scrutiny is what makes the majority pay fair value. For acquirers, the lesson is pre-emptive. Pay a defensible price, document independent valuation and overwhelming approval, and you starve the play of oxygen. Offer a lowball, and you hand the minority the leverage.

Listed companies and the SEBI delisting interface

Everything so far assumes an unlisted or already-delisted company. But what about a company whose shares still trade on an exchange? Does Section 236 even apply to a listed company, and how does it sit alongside the SEBI delisting machinery? This is where two regulatory worlds overlap, and the practical question is rarely “Section 236 or nothing”; it is how the Companies Act provisions and the SEBI delisting regulations interact for a particular listed target.

Does Section 236 apply to listed companies?

Section 236 is not, by its terms, restricted to unlisted companies, so it is not automatically inapplicable to a listed entity. But the moment a company is listed, the exit of public shareholders engages the SEBI regime, and the SEBI (Delisting of Equity Shares) Regulations, 2021 become the dominant framework for taking a listed company private. A listed-company majority cannot use a Companies Act provision to sidestep the investor-protection architecture securities law imposes.

So for a listed company, the squeeze-out conversation usually starts with delisting, not with Section 236. The company first goes private through the SEBI delisting route, and only once unlisted do the Companies Act mechanisms (Section 236, Section 66 reduction) come into clean play for residual holders. This is exactly why Philips, already delisted since 2004, was using a Section 66 reduction rather than a delisting process. The sequencing matters: delist under SEBI first, mop up the residue under the Companies Act second.

Reverse book-building under the SEBI Delisting Regulations vs Section 236

The SEBI delisting framework’s signature mechanism is reverse book-building, a price-discovery process in which public shareholders tender shares at prices they are willing to accept, and the discovered price (subject to the regulatory floor and acceptance thresholds) sets the delisting price. This is a fundamentally different pricing logic from Section 236’s registered-valuer determination: one is market-driven price discovery, the other professional valuation. The delisting route hands more price-setting power to the dispersed public; the Companies Act route concentrates it in a valuer’s report subject to tribunal review. For an acquirer, that is a meaningful strategic difference, because reverse book-building can push the exit price up unpredictably.

The interface is a live regulatory area. Practitioners advising on listed-company exits should track SEBI’s 2025 takeover-code amendment on valuers and pricing, because changes to how registered valuers and pricing operate on the securities-law side feed directly into how a delisting-then-reduction sequence is priced and defended.

India’s squeeze-out regime vs global standards

Step back from the Indian detail for a moment. How does India’s fragmented, five-route, partly-non-binding system compare to the clean squeeze-out mechanisms abroad? The honest answer is that most major jurisdictions have something India lacks: a single, binding, compulsory-acquisition provision keyed to a clear threshold.

[HISTORICAL] India’s fragmentation is not the global norm. Several jurisdictions long ago consolidated squeeze-out into one mechanism, while India accumulated overlapping provisions across two Companies Acts and layered securities regulation on top. That is why Indian practitioners spend so much energy on route selection that their foreign counterparts simply do not have to.

The US Delaware, EU, and UK 90% models

Three reference points frame the global picture. In the US, Delaware’s short-form merger lets a parent holding a high threshold (commonly cited at 90%) of a subsidiary merge it out without a subsidiary shareholder vote: a clean, fast, binding squeeze-out with appraisal rights as the safeguard. The EU and UK models center on the 90% threshold through a takeover-offer logic: an offeror that acquires 90% of the shares an offer relates to can compulsorily acquire the rest on the offer terms, with the minority able to apply to court, and the EU framework mirrors this with a squeeze-out and reciprocal sell-out right at 90% following a bid. The common thread is a single, binding mechanism with a fair-value or court safeguard.

The contrast is stark on the “binding” column. Where Delaware, the EU, and the UK each give a 90% holder a single binding tool, India gives a 90% holder a non-binding offer (Section 236) and makes them reach for a capital-reduction workaround (Section 66) to get the binding outcome the foreign provisions deliver directly. And that workaround, remember, is the very route Philips got wrong.

Why India lacks a single clean squeeze-out mechanism, and what reform may bring

So why does India not have one clean provision? Partly history (two Companies Acts layering provisions), partly drafting (Section 236’s compulsion gap was never resolved), and partly a strong minority-protection tradition that made legislators cautious about an unambiguous forcing power. Many commentators call Section 236 loosely drafted, in our view fairly, pointing to its uncertain bindingness, its narrowed trigger, and the absence of fixed timelines in the bare section.

[FUTURE] There is sustained pressure to create a single, clean, binding squeeze-out provision that would do for India what the short-form merger does for Delaware, likely coupling a clear 90% compulsory-acquisition power with a strong fair-value safeguard, learning from Cadbury and Philips that price scrutiny is non-negotiable. Until then, Indian practitioners must master the five-route menu, because there is no single button to press: knowing which route binds, which survives valuation, and which fits the path to control is precisely the expertise that distinguishes a deal-structuring specialist from a generalist.

Common mistakes and practitioner takeaways

After all the doctrine, here is the field-tested distillation: the handful of errors that sink squeeze-outs, and the discipline that prevents them. What separates a clean exit from a five-year fight?

[SECOND-ORDER] The deeper pattern across every mistake below is that squeeze-outs fail at the structuring stage, not the litigation stage. By the time a scheme is dismissed or a price is revised upward, the fatal decision (wrong route, weak valuation, sloppy timeline) was already made months earlier. The most valuable work happens before any notice is drafted, which is exactly the work that under-resourced deal teams skip.

Picking the wrong statutory route

The cardinal error is starting from a section rather than from the outcome. A client says “we have 90%”, the adviser reaches for Section 236, and the deal stalls when the minority declines a non-binding offer or challenges the trigger. The discipline is to reverse the order: define what the client needs (binding extinguishment? a fast offer? an exit for a trapped minority?), confirm how control was reached (qualifying event or creep?), and only then select the route. Where binding certainty matters, that usually points to Section 66 reduction (now blessed by the Supreme Court) or a Section 230(11) scheme, not Section 236.

Underestimating the valuation battleground

The second recurring mistake is treating valuation as a formality. Cadbury (₹1,340 revised to ₹2,014.50) and Philips (₹915 offered, dismissed) both turned on valuation, not on the majority’s size. So treat the valuation report as the deal’s most important document: fix the methodology early, use independent and credible valuers (two, as Reliance Retail did, where the stakes justify it), stress-test the assumptions a hostile minority will attack, and offer a premium defensible on the face of the report. A fair price bought quickly beats a cheap price litigated for years.

Ignoring timelines and the “disguised buyback” trap

The third cluster is procedural. The bare section is famously thin on timelines, but the rules impose real ones (the 60-day disbursal, the one-year hold), and missing them hands the minority a clean procedural challenge, as does sloppiness on the separate bank account or the documentary trail of the qualifying event. The disguised-buyback trap deserves a final flag: a Section 66 reduction that is, in substance, a buyback of the company’s own shares can be struck down for evading the Section 68 conditions, exactly as Philips was. Keep the transaction a genuine reduction, clearly distinct from a buyback, paired with fair value and clean tribunal confirmation. Get the route, the valuation, and the process right and the squeeze-out holds; miss any one, and even a 96% majority can lose.

Frequently asked questions

1. What is Section 236 of the Companies Act, 2013? Section 236, titled “purchase of minority shareholding”, is the provision that lets an acquirer or group holding 90% or more of a company’s equity (reached through amalgamation, share exchange, or conversion of securities) offer to buy out the remaining minority at a registered-valuer price. It also gives the minority a reciprocal right to be bought out. It is the Companies Act’s purpose-built minority-buyout mechanism.

2. What is a squeeze-out of minority shareholders? A squeeze-out is the compulsory or near-compulsory purchase of small remaining shareholders by a dominant majority, so the company ends up under single (or single-group) ownership. In India it can be achieved through several routes, including Section 236, selective capital reduction under Section 66, Section 235, a Section 230(11) scheme takeover offer, or consolidation under Section 61(1)(b).

3. What is the 90% threshold under Section 236? The 90% threshold is the registered holding of issued equity share capital that an acquirer or group must reach before Section 236 becomes available. It is measured on equity share capital, can be reached collectively by persons acting together, and is a hard registered-holding test on the relevant date. A holder below 90% has no Section 236 right at all.

4. Who is a “minority shareholder” under Section 236? There is no free-standing statutory definition. For Section 236 purposes, the minority is simply whoever holds the residual up-to-10% balance once the 90% block is assembled. The provision defines the minority by arithmetic (the shares left over) rather than by a separate qualitative test, so the “minority” is the target of the buyout offer.

5. Does Section 236 require NCLT approval? No, not for the core buyout. Section 236 is designed to operate company-to-shareholder without a tribunal confirming the purchase, which is part of its speed and part of its weakness. The tribunal comes in only at the edges, such as a dispute over price or the handling of untraceable holders’ money. Capital reduction under Section 66, by contrast, always needs tribunal confirmation.

6. Does Section 236 apply to private companies? Yes. Section 236 sits in Chapter XV of the Companies Act and is not confined to listed or public companies, so a private-company majority can in principle invoke it. In practice, private-company squeeze-outs more often run through selective capital reduction, because the shares are already illiquid and the parties usually want a binding extinguishment rather than a refusable offer.

7. Does Section 236 apply to listed companies, and how does it interact with SEBI delisting? Section 236 is not by its terms barred for listed companies, but the exit of public shareholders from a listed entity engages the SEBI (Delisting of Equity Shares) Regulations, 2021. In practice the company usually delists first (through reverse book-building) and then uses the Companies Act routes for any residual holders, rather than using Section 236 to bypass the securities-law framework.

8. What does “for any other reason” mean under Section 236(1)? After the 2019 appellate ruling, “for any other reason” is read using ejusdem generis, meaning it is confined to reasons of the same genus as amalgamation, share exchange, and conversion of securities. It is not an open licence for any 90% holder. A holder who crept to 90% by market purchases does not qualify, because the 90% must arrive through a structured corporate event.

9. How is the offer price for minority shares determined? The price is fixed by a registered valuer under Rule 27 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, read with the Registered Valuers and Valuation Rules, 2017. The valuer applies accepted methods (net asset value, discounted cash flow, comparable companies, market price) and produces a reasoned report. The price is not negotiated by the board, which is the minority’s core safeguard.

10. What is the minority’s reciprocal sell-out right under Section 236? Section 236 does not only empower the majority; it lets the minority require the 90% holder to buy them out at the registered-valuer price. So a small shareholder trapped in an effectively private company can use Section 236 as an exit ramp, forcing the dominant holder to purchase. It is the minority-protection half of a provision often read only as a majority tool.

11. Is the offer under Section 236 binding on minority shareholders? This is genuinely contested. The dominant practitioner reading is that Section 236 does not clearly compel the minority to sell against their will; it creates a structured offer the minority can, on a strict reading, decline. Because the bindingness is debatable, acquirers who need certainty use capital reduction or a scheme route instead, both of which deliver a binding extinguishment.

12. What if a minority shareholder simply refuses to sell? On the cautious reading of Section 236, a determined holdout can frustrate the buyout by declining the offer and staying on the register, because the section lacks unambiguous compulsion. That is precisely why acquirers needing certainty avoid betting the deal on Section 236 and instead use selective capital reduction under Section 66, which extinguishes the shares on tribunal confirmation regardless of the holder’s refusal.

13. Section 235 vs Section 236: what is the difference? Section 235 acquires dissenting shareholders under a scheme or contract approved by nine-tenths in value of the shares affected, and it binds the dissenters unless the tribunal intervenes. Section 236 lets an assenting 90%-by-qualifying-event holder offer to buy out the residual minority, with a reciprocal sell-out right. In short, Section 235 runs on dissent and binds; Section 236 runs on assent and may not.

14. Section 236 vs selective capital reduction under Section 66: which is better? For binding certainty, Section 66 is usually better and is the practitioner default, because a tribunal-confirmed selective reduction extinguishes the minority’s shares outright, while Section 236 is a non-binding offer. The catch with Section 66 is that it must be a genuine reduction paying fair value, not a disguised buyback, and it is slower because it needs tribunal confirmation.

15. Companies Act 1956 Section 395 vs Companies Act 2013 Section 236: what changed? The 1956 Act had a single mechanism, Section 395, a dissenting-shareholder acquisition power that carried forward as Section 235 in 2013. The 2013 Act added Section 236 alongside it as a new “purchase of minority shareholding” provision keyed to the assenting 90% holder, with a reciprocal sell-out right. So 2013 widened the menu rather than rewriting the old provision.

16. Squeeze-out vs buyback under Section 68: how do they differ? A buyback is the company repurchasing its own shares (often pro rata) under the conditions and limits of Section 68, extinguishing them. A squeeze-out specifically targets the minority for exit, through routes like Section 236 or selective capital reduction. The two cannot be mixed: a selective reduction that is, in substance, a buyback can be struck down as a disguised buyback, as Philips found in 2024.

17. What did the NCLAT hold in S. Gopakumar Nair v. OBO Bettermann? The 2019 appellate ruling held that Section 236(1) is available only when 90% is reached by a qualifying event (amalgamation, share exchange, or conversion of securities), reading “for any other reason” ejusdem generis. It rejected squeeze-out by creeping or piecemeal acquisition and sharpened the line between Section 235 (dissenting shareholders) and Section 236 (assenting majority). It is the core authority on the Section 236 trigger.

18. Why did the NCLT reject Philips India’s capital reduction in 2024? The Kolkata bench dismissed the petition on 19 September 2024, holding that the Section 66 selective reduction fell outside the legitimate grounds for a reduction and was, in substance, a buyback prohibited as a disguised buyback. Having dismissed on that jurisdictional footing, it did not resolve the valuation gap between the company’s DCF figure and the minority’s higher number. The deal failed on route and characterisation, not price.

19. What taxes apply when minority shareholders are squeezed out (capital gains and stamp duty)? The exiting minority faces capital-gains tax on the difference between the consideration and the cost of acquisition of the shares. For unlisted shares (the usual squeeze-out case), the gain is long-term if held over 24 months, taxed at 12.5% without indexation under Section 112 of the Income-tax Act, 1961 (for transfers on or after 23 July 2024); a short-term gain is taxed at the seller’s slab rate. Demat share transfers also attract stamp duty at 0.015%, borne by the transferee and collected through the depository system. The consideration mechanic under Section 236(4) to (6) does not shift the capital-gains incidence away from the selling minority.

References

Case Law

1. In re Cadbury India Limited, 2015 (125) CLA 77 (Bom) (Bombay High Court, Company Petition No. 1072 of 2009, sanctioned 9 May 2014) – reduction-of-capital squeeze-out; price revised upward from ₹1,340 to ₹2,014.50; general principles on valuation discretion in reductions.
2. In re Chembra Peak Estates Limited (NCLT, order dated 5 December 2018) – consolidation under Section 61(1)(b) as a minority-exit mechanism, valid where overwhelming consent, fair treatment of fractions, and procedural fairness are shown.
3. Foss v. Harbottle, (1843) 2 Hare 461; 67 ER 189 (English Court of Chancery) – the proper-plaintiff and majority-rule principle against which minority-protection limits are framed; context-setting only.
4. Pannalal Bhansali v. Bharti Telecom Limited & Ors., 2026 INSC 213 – 2026 LiveLaw (SC) 222 (Supreme Court of India, 10 March 2026). Affirms selective capital reduction under Section 66 as a “domestic concern of the majority”, reduction may be made “in any manner” including selectively, conditioned on fair value and tribunal confirmation; Section 66 does not require a registered-valuer report as a condition precedent. Freshness capstone.
5. In re Philips India Limited (NCLT, Kolkata Bench, CP/312(KB)/2023, order dated 19 September 2024) – dismissed a Section 66 selective reduction (offer ₹915 vs KPMG DCF fair value ₹740) as falling outside the permitted grounds of s.66 and being in substance a buyback (disguised buyback). Cautionary tale.
6. In re Reckitt Benckiser (India) Ltd., (2005) 122 DLT 612 (Delhi High Court, 31 May 2005) – early authority approving selective capital reduction (post-delisting) where the prescribed majority decides on the reduction and objecting holders are protected.
7. In re Reliance Retail Limited, Company Appeal (AT) No. 155 of 2025 (NCLAT, order dated 26 September 2025) – upheld a selective capital reduction at ₹1,380 per share (56% premium fixed by two independent registered valuers; special resolution carried with 99.99% approval) where objecting shareholders are paid fair value. “Done-right” contrast to Philips.
8. S. Gopakumar Nair & Anr. v. OBO Bettermann India Pvt. Ltd. & Anr., Company Appeal (AT) No. 272 of 2018 (NCLAT, 9 July 2019) – core authority on the Section 236 trigger; “for any other reason” read ejusdem generis; no squeeze-out by creeping acquisition; distinguishes s.235 (dissenting) from s.236 (assenting).
9. Sandvik Asia Ltd. v. Bharat Kumar Padamsi & Ors., (2009) 3 Bom CR 57 (Bombay High Court, Division Bench, 4 April 2009) – foundational pre-2013 authority validating selective capital reduction as a squeeze-out route where fair value is paid and an overwhelming majority approves.

Citation note: the Cadbury, Chembra Peak, Philips, and Reliance Retail orders are not currently indexed on Indian Kanoon and are therefore listed in plain text with their official case numbers; their existence and figures are confirmed against the respective court records and reputable legal sources. Monitor should add Indian Kanoon URLs on the next refresh cycle if they are indexed.

Statutes

1. Indian Stamp Act, 1899 – stamp duty on share transfers; demat transfers stamped at 0.015% (delivery-based), borne by the transferee and collected centrally through depositories under the Indian Stamp (Collection of Stamp Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019 (effective 1 July 2020).
2. Constitution of India, 1950 – Article 300A (right to property; deprivation only by authority of law).
3. Companies Act, 1956 – Section 395 (predecessor dissenting-shareholder acquisition power; carried forward as Section 235 of the 2013 Act).
4. Income-tax Act, 1961 – sections cited: 2(42A), 112. Capital gains on the consideration received by the exiting minority; unlisted shares are long-term if held over 24 months and taxed at 12.5% without indexation under s.112 (transfers on or after 23 July 2024), short-term gains at the seller’s slab rate.
5. Companies Act, 2013 – sections cited: 61(1)(b), 66, 68, 230(11) to (12), 235, 236, 241, 242. Read with Rule 27 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, and the Companies (Registered Valuers and Valuation) Rules, 2017.
6. SEBI (Delisting of Equity Shares) Regulations, 2021 – reverse book-building framework for listed-company exits.

Regulatory primary sources

• mca.gov.in: Companies Act provisions, rules, and forms.
• indiacode.nic.in: central statute texts (Companies Act, 2013; Income-tax Act; Indian Stamp Act).
• sebi.gov.in: Delisting Regulations and valuer/pricing circulars.
• incometaxindia.gov.in: capital-gains rate and holding-period reference.

This article is for informational purposes only and does not constitute legal advice. For specific legal guidance, consult a qualified legal professional.