Securities premium utilisation to write off losses permitted where procedure complied and creditors' interests are protected.

Petition sought approval to utilise the securities premium account to write off accumulated losses and to reduce the nominal value of equity shares from Rs.10 to Rs.5. The court examined statutory compliance, unanimous special resolution, service and publication of notices, absence of secured creditors, written consent of unsecured creditors, lack of any pending investigation, and audited financials showing ability to meet obligations. Applying the principle of minimal judicial interference where procedure is followed and creditors/members are not prejudiced, the petition was allowed enabling the proposed write off and capital reduction.

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Issues: Whether the petition under the Companies Act for utilisation of the securities premium account to write off accumulated losses and for reduction of the face value of equity shares from Rs.10 to Rs.5 should be allowed.

Analysis: The petition concerns a company scheme to write off accumulated losses by utilising the securities premium account and to reduce the nominal value of shares. The Court considered the statutory provisions invoked, the passing of a unanimous special resolution by members, service and publication of notices, absence of secured creditors, written consent of unsecured creditors, absence of any pending investigation under relevant Companies Act provisions, and the audited/unaudited financial statements showing the company's ability to meet its obligations. The Court applied the principle that judicial interference in a company's commercial decision should be minimal where the procedure prescribed by law has been complied with and the interests of creditors and members are not prejudiced.

Conclusion: Petition allowed; the Company is permitted to utilise the securities premium account to write off accumulated losses and to reduce the face value of its equity shares from Rs.10 to Rs.5.

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