2024 (8) TMI 1284 - Tri - Companies Law

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 ... Seeking for the reduction of issued, subscribed and paid-up equity share capital of the Petitioner company - Section 66 of the Companies Act, 2013 - HELD THAT:- The necessary compliance of the requirements of Section 66(1) along with its proviso; Section 66(2) & Section 66(3) proviso has been made/satisfied by the Petitioner Company. In the circumstances, it is hereby ordered to confirm the reduction of share capital of the Petitioner Company by approving the Special Resolution dated 10.08.2023 read with the subsequent Circular Board Resolution dated 08.11.2023 where in it was resolved to reduce the issued, subscribed and paid-up equity share capital of the Petitioner Company from Rs.483,66,21,630/- consisting of 48,36,62,163/- equity shares of Rs. 10/- each to Rs. 483,65,81,190/- consisting of 48,36,58,119/- equity shares of Rs. 10/- each by cancelling and extinguishing the paid-up equity share capital of Rs. 40,440/- divided into 4,044 equity shares of Rs. 10/- each held by the non-promoter shareholders of the Petitioner Company representing in aggregate approximately 0.00083% (zero point zero zero zero eight three percent) of the total issued, subscribed and paid-up equity share capital of the Petitioner Company from the non-promoter equity shareholders being the Remaining Identified Shareholders more particularly set out herein below, for an aggregate consideration of Rs. 66,88,776/- being determined for 4,044 (Four Thousand Forty-Four) equity shares at 1,654/-per Equity share to be paid out of the free reserves of the Petitioner Company as per the latest audited financial statements. The copy of the Minutes approved along with the order shall be delivered to the ROC by filing the e-Form INC 28, within 30 days of the receipt of the copy of the order. Accordingly, the Registry shall prepare an order in Form No. RSC-6 as per the National Company Law Tribunal (Procedure for Reduction of Share Capital of the Company) Rules, 2016 and issue to the Applicant/Petitioner Company. The Petitioner Company shall publish this order of confirmation in The Hindu', English daily, Bengaluru edition and 'Udayavani' Kannada daily, Bengaluru Edition, expeditiously, and not later than 30 days from the receipt of copy of the order, as required under Section 66(4) of the Companies Act, 2013. 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 CapitalThe 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 ObligationsThe 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 LimitedZenith 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 TribunalThe 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.ConclusionThe 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.