Tribunal approves share capital reduction, benefiting company, shareholders, creditors.

The Tribunal confirmed the reduction of share capital as proposed by the special resolution passed at the Extraordinary General Meeting. The capital was reduced from Rs. 25,75,00,000 to Rs. 2,57,50,000 by decreasing the face value of equity shares from Rs. 10 to Rs. 1 each. The Company complied with all statutory requirements, and the reduction was deemed beneficial for the Company, its shareholders, and creditors. The Statutory Auditors certified that the proposed accounting treatment was in conformity with applicable standards. The petition was disposed of with no order as to costs.

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Issues Involved:
1. Approval for reduction of share capital.
2. Compliance with statutory requirements.
3. Impact on creditors and stakeholders.
4. Confirmation of proposed accounting treatment.

Issue-Wise Detailed Analysis:

1. Approval for Reduction of Share Capital:
The Petitioner Company filed a petition under Section 66 of the Companies Act, 2013, seeking approval for a special resolution passed at the Extraordinary General Meeting (EOGM) on 03/06/2020. The resolution proposed a reduction of Rs. 23,17,50,000, which is 90% of the total face value of the issued, subscribed, and paid-up equity share capital, reducing the face value of equity shares from Rs. 10 each to Rs. 1 each. This reduction was aimed at rationalizing the capital structure and improving the net worth of the Company.

2. Compliance with Statutory Requirements:
The Company complied with all statutory requirements, including:
- Filing a list of equity shareholders and creditors.
- Serving notices to the Central Government, Registrar of Companies, and other authorities.
- Publishing notices in newspapers and on the Company’s website.
- Filing affidavits of compliance.
The Regional Director, Eastern Region, confirmed that no complaints or objections were received against the proposed reduction, and the Company was up-to-date with its statutory returns.

3. Impact on Creditors and Stakeholders:
The Company asserted that the reduction of capital would not affect its ability to meet its obligations or pay its debts. It was stated that the Company had no secured or unsecured creditors as of 29/02/2020, except for security deposits and debenture holders. The reduction did not involve any diminution of liability or payment by any shareholder of unpaid capital. The proposed reduction was deemed beneficial for the Company, its shareholders, and creditors, with no prejudice caused to any party.

4. Confirmation of Proposed Accounting Treatment:
The Statutory Auditors certified that the proposed accounting treatment for the reduction of equity share capital was in conformity with the applicable Accounting Standards. The reduction involved adjusting the face value of equity shares against the accumulated negative balance of the statement of profit & loss.

Judgment:
The Tribunal confirmed the reduction of share capital as resolved by the special resolution passed at the EOGM on 03/06/2020. It ordered the following:
- Approval of the reduction of share capital from Rs. 25,75,00,000 to Rs. 2,57,50,000 by reducing the face value of equity shares from Rs. 10 to Rs. 1 each.
- Delivery of a certified copy of the order to the Registrar of Companies within thirty days for registration.
- Publication of the notice of registration in specified newspapers within two weeks after receiving the certificate.
- Compliance with statutory requirements under the Companies Act, 2013.
- Direction to all concerned regulatory authorities to act on the certified copy of the order.

The petition was disposed of with no order as to costs.

Schedule:
The capital of the Company is henceforth Rs. 2,57,50,000 divided into 2,57,50,000 equity shares of Rs. 1 each, reduced from Rs. 25,75,00,000 divided into 2,57,50,000 equity shares of Rs. 10 each, by canceling and extinguishing Rs. 23,17,50,000 and adjusting it against the accumulated negative balance of the statement of profit & loss.

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