2017 (8) TMI 758 - Tri - Companies Law

Tribunal approves reduction of share capital and name change for Jubilant Clinsys Limited

In Re : Jubilant Clinsys Limited

The Tribunal allowed the application for the reduction of share capital by Jubilant Clinsys Limited, extinguishing and canceling Preference Shares worth ... Reduction of Share Capital - whether the interests of those members of the public who may be induced to take shares in the company are secured - whether the reduction is fair and equitable as between different classes of shareholders? - Held that:- The question of reduction of capital is a matter of domestic concern, one for the decision of the majority of the shareholders of the Company. Since the decision for reduction is based on commercial considerations undertaken by businessmen who are in the best position to know of the necessities and interests of the company concerned, in the absence of serious allegations as regards the bona fides of the proposed scheme, the Courts are hesitant. In interfering with the view of the majority. The Court has to consider whether the interests of those members of the public who may be induced to take shares in the company are secured and whether the reduction is fair and equitable as between different classes of shareholders. See Reckitt Benckiser (2005 (5) TMI 665 - DELHI HIGH COURT) The present Company Application for reduction of share capital is deserved to be allowed. Hence it is allowed and made absolute in the terms of its prayer clause. In the result the petitioner company is dispensed with the use of word “and reduced” in the name of the petitioner company or even in the memorandum of association, as no special reason is shown by the Central Government to be existing which may call for giving such direction by this Tribunal to the Company. Issues Involved:1. Reduction of share capital.2. Dispensation of the use of the words 'AND REDUCED' in the company’s name.3. Approval of the form of Minute under Section 66(5) of the Companies Act, 2013.4. Compliance with applicable provisions of FEMA/RBI.Issue-wise Detailed Analysis:1. Reduction of Share Capital:The applicant, Jubilant Clinsys Limited, filed an application under Section 66 of the Companies Act, 2013, seeking confirmation for the reduction of its share capital. The company proposed to reduce its share capital by extinguishing and canceling its Preference Shares, which have an aggregate paid-up value of Rs. 27,05,00,000, and paying this amount to the holders of 2,70,50,000 Preference Shares as on March 31, 2016. The principal reasons for this reduction were that the company is no longer engaged in the clinical trial business and has excess capital, and it has adequate cash and liquid assets to continue its business activities. Article 44 of the Articles of Association of the company empowers it to reduce its share capital by a special resolution. The Board of Directors approved this reduction in their meeting held on November 24, 2016. The extraordinary general meeting saw unanimous approval from six out of seven equity shareholders and the sole preference shareholder. The company has no secured or unsecured creditors, and thus, the reduction will not prejudice any creditors.2. Dispensation of the Use of the Words 'AND REDUCED':The petitioner company sought to dispense with the use of the words 'AND REDUCED' in its name. The Tribunal found no special reason, as shown by the Central Government, to necessitate this direction and hence allowed the dispensation.3. Approval of the Form of Minute under Section 66(5) of the Companies Act, 2013:The Tribunal approved the form of Minute as proposed by the petitioner under Section 66(5) of the Companies Act, 2013. The approved Minute states: 'The paid-up capital of Jubilant Clinsys Limited is henceforth Rs. 1,99,97,660/- divided into 1,999,766 Equity Shares of Rs. 10/- each reduced from Rs. 29,04,97,660/- divided into 1,999,766 Equity Shares of Rs. 10/- each and 2,70,50,000 Preference Shares of Rs. 10/- each.'4. Compliance with Applicable Provisions of FEMA/RBI:The Central Government, through the Regional Director, filed a representation affidavit directing the applicant company to comply with the applicable provisions of FEMA/RBI. The Company Secretary, Mr. Vipul Sharma, provided an undertaking to comply with all legal provisions and policy directions under FEMA/RBI relevant to the reduction of capital.Tribunal’s Consideration and Order:The Tribunal considered the facts, heard submissions from both sides, and reviewed the affidavits and reports from the Regional Director and Registrar of Companies. The Tribunal found no adverse material against the relief sought by the applicant and confirmed that the proposed reduction of share capital is in conformity with the accounting standards specified in Section 133 of the Companies Act, 2013. The Tribunal also noted that no objections were received against the proposed reduction.Legal Precedents:The Tribunal referred to several legal precedents, including decisions from the Bombay High Court, Calcutta High Court, and Madras High Court, which support the view that the reduction of share capital is a domestic matter decided by the majority of shareholders, subject to the confirmation of the Court to safeguard the interests of creditors and minority shareholders.Final Orders:1. The application for the reduction of share capital was allowed.2. The use of the words 'AND REDUCED' in the company's name was dispensed with.3. The form of Minute under Section 66(5) was approved.4. The petitioner company was directed to publish the order of confirmation in two newspapers.5. The company was instructed to deliver a certified copy of the order and the Minute to the Registrar of Companies within 30 days.6. The Registrar of Companies was directed to issue a certificate of Registration of Order and Minute in Form RSC-7.7. No order as to costs.8. All concerned regulatory authorities were directed to act on the certified copy of the order.