Company gets approval to reduce share capital under Section 66 by cancelling equity shares worth Rs. 66.88 lakh

The NCLT Bengaluru Bench approved the petitioner company's application for reduction of share capital under Section 66 of the Companies Act, 2013. The tribunal confirmed compliance with statutory requirements and approved the special resolution to reduce issued, subscribed and paid-up equity share capital from Rs. 483,66,21,630 to Rs. 483,65,81,190 by cancelling 4,044 equity shares held by non-promoter shareholders for aggregate consideration of Rs. 66,88,776. The company must file e-Form INC 28 with ROC and publish the order in specified newspapers within 30 days.

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Issues Involved:
1. Reduction of share capital under Section 66 of the Companies Act, 2013.
2. Compliance with procedural requirements and statutory obligations.
3. Objections raised by creditors, specifically Zenith Metaplast Private Limited.
4. Confirmation of reduction by the Tribunal.

Detailed Analysis:

1. Reduction of Share Capital
The Petitioner Company sought approval for the reduction of its issued, subscribed, and paid-up equity share capital from Rs. 483,66,21,630/- to Rs. 483,65,81,190/- by cancelling and extinguishing 4,044 equity shares held by non-promoter shareholders, representing approximately 0.00083% of the total share capital. This reduction was approved by a special resolution passed in the Annual General Meeting on 10.08.2023 and further modified by a circular resolution on 08.11.2023.

2. Compliance with Procedural Requirements and Statutory Obligations
The Petitioner Company complied with the procedural requirements under Section 66 of the Companies Act, 2013, and the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016. The company issued notices to unsecured creditors with outstanding debts above Rs. 10,00,000/-, and published the notice in "The Hindu" and "Udayavani" newspapers. The company also provided certificates from its Managing Director and statutory auditors confirming the list of creditors and compliance with accounting standards.

3. Objections Raised by Creditors, Specifically Zenith Metaplast Private Limited
Zenith Metaplast Private Limited, a creditor, raised objections, alleging non-payment for goods supplied and non-compliance with the MSME Development Act, 2006. The Petitioner Company countered that the claims were false and under arbitration, and that the company was financially sound with no other creditor objecting to the reduction. The Tribunal noted that the creditor's interests were not affected by the proposed reduction and that the matter was pending arbitration.

4. Confirmation of Reduction by the Tribunal
The Tribunal confirmed the reduction of share capital, stating that the Petitioner Company complied with all statutory requirements and that the reduction was a domestic concern approved by the majority of shareholders. The Tribunal referenced several case laws, including Elpro International Limited and Reckitt Benckiser (India) Limited, supporting the view that the reduction of share capital is a commercial decision best left to the company's management.

Conclusion
The Tribunal approved the reduction of share capital from Rs. 483,66,21,630/- to Rs. 483,65,81,190/-, cancelling 4,044 equity shares held by non-promoter shareholders. The Petitioner Company was directed to file the order with the Registrar of Companies and publish the confirmation in specified newspapers within 30 days. The reduction was deemed compliant with Section 66 of the Companies Act, 2013, and the objections raised by Zenith Metaplast Private Limited were dismissed as the matter was under arbitration and did not affect the reduction process.

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