Minority Squeeze-Out explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Two questions had made every selective reduction uncertain: must there be an independent valuation, and can illiquidity be discounted? The Supreme Court answered both in 2026.
The minority squeeze-out route
Selective capital reduction under Section 66 of the Companies Act has become an established route for a promoter or controlling shareholder group to exit minority shareholders, typically following a delisting where a residual minority continues to hold stock.
The situation is a common one. A delisting offer succeeds but a small number of shareholders do not tender; the company is delisted with a residual minority holding shares that are now unlisted and illiquid. Section 66 provides a mechanism to cancel those shares for cash.
The historical uncertainty around a minority squeeze-out
The session referenced Cadbury India's long-litigated minority buy-out as the classic, extensively debated Indian example of this route, noting that different NCLT benches had historically taken inconsistent positions on the permissibility and fairness of selective reduction.
The session pointed to the Supreme Court's 2026 decision in Pannalal Bhansali v. Bharti Telecom Limited & Ors. as a significant recent authority upholding a selective capital reduction under Section 66 that cancelled shares held by identified minority shareholders of Bharti Telecom, the promoter holding company of Bharti Airtel.
Two holdings do the work.
Section 66 does not mandate an independent valuation report. This is significant because the absence of one had been a standard objection — a minority being bought out argued that a company-commissioned valuation could not establish fairness. The Court confirmed that the statute does not require it.
A Discount for Lack of Marketability applied to unlisted, illiquid shares is a legitimate valuation adjustment. This is the more consequential holding for pricing. A DLOM reduces the value attributed to shares that cannot readily be sold — and a residual minority holding in a delisted company is the paradigm of an illiquid holding.
The minority's objection to a DLOM has an obvious appeal: the illiquidity was created by the delisting the promoter carried out, and the promoter then relies on it to reduce the exit price. The Court nonetheless held the adjustment legitimate.
Together the two holdings give considerably greater comfort to promoters structuring a squeeze-out along these lines — the process needs no independent valuation, and the price may reflect illiquidity.
The session is careful to note the contrary authority: an NCLT bench in Kolkata had, in an earlier and distinguishable case, declined to sanction a similar minority squeeze-out. Distinguishable, but a reminder that facts matter.
The cautionary order on securities premium
The session separately flagged a cautionary and unusual recent Mumbai NCLT order rejecting a scheme that sought to set off accumulated losses against securities premium under Sections 230 to 232, on the basis that such an adjustment more properly fell to be structured, if at all, under the standalone capital-reduction mechanism of Section 66 rather than as an omnibus scheme of arrangement.
This is the same boundary drawn elsewhere in these sessions — a scheme may incorporate a capital reduction as part of a broader restructuring, but may not be used as a substitute for the section 66 route.
The session's assessment: it is a departure from the traditionally expansive reading of Sections 230-232 that the session urged practitioners to track closely before advising on similarly structured schemes.
The two decisions read together
| Pannalal Bhansali | The Mumbai NCLT order | |
|---|---|---|
| Direction | Expands what section 66 permits | Narrows what sections 230-232 permit |
| Effect on structuring | Selective reduction is a viable squeeze-out route | Adjustments proper to section 66 should be done under section 66 |
| Common theme | Use the mechanism the statute provides for the outcome sought, rather than the one with fewer safeguards | |
Common mistakes
- Assuming an independent valuation report is mandatory under section 66.
- Pricing a minority squeeze-out without considering the marketability discount.
- Structuring a securities premium adjustment as an omnibus scheme.
- Reading Pannalal Bhansali as validating any minority squeeze-out regardless of its facts.