TaxTMI 
TaxTMI 
2015 (4) TMI 1069
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....er the Scheme, the Petitioner Company is proposing to purchase not more than 221,231 Equity Shares of the Company either in physical form or dematerialized form of Rs. 100/each fully paid up, representing 30% of the issued, subscribed and paid up share capital. There is no compulsory purchase. An option, is given to the equity shareholders under the Scheme. The manner and procedure of purchasing the equity shares as provided in Clause 4.2 of the Scheme is reproduced below: "The Company shall send an option form to the Shareholders within 5 (five) days from the Effective Date. To exercise the option, a per clause 4.1, the Shareholders will have to return the duly filledin option forms to the Company within 10 (ten) days from the date of d....
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....t on 1st October, 2014 (hereinafter referred to as "the said Affidavit") raising various objections and opposing sanction of the Scheme. The Petitioner Company has filed an Affidavit dated 8th October, 2014, in reply to the said Affidavit. 4. The entire case of the Regional Director revolves around his contention that the buyback of shares must be effected only under Section 77A of the Companies Act, 1956/Section 68 of the Companies Act, 2013. According to the Regional Director if a buyback of shares is effected under Section 77A/Section 68, then the distributed income of the company as defined in Section 115QA of the Income Tax Act would be charged to tax, and it is for this reason that the company is not following the procedure prescri....
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....8 a company can buyback only 25% of the total paid up capital and free reserves of the company whereas under the Scheme the company proposes buyback of 30% of its paid up capital and free reserves, which is not possible under Section 77A/Section 68. Consequently the only manner in 1 Decided on 19th March, 2015 in CSP Nos. 137 and 138 of 2014. which the company can buyback the said shares is by following the procedure under Section 391 read with Sections 100 104 of the 1956 Act. In support of its contentions the Petitioner has relied upon the decision of the Division Bench of this Court in the case of SEBI V/s. Sterilite Industries (India) Limited2. 7. The Division Bench of this Court in the case of Sterilite Industries (supra) has held t....
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....dup equity capital in any financial year subject to compliance with subsections (2), (3) and (4). It does not supplant or take away 2 (2003) 45 SCL 475 any part of the preexisting jurisdiction of the company court to sanction a scheme for such reduction under sections 100 to 104 and section 391. 23. The submission of the appellants that the non obstante clause in section 77A gives precedence to that section over the provisions of sections 100 to 104, section 391 is misconceived. The non obstante clause in section 77A namely "notwithstanding anything contained in this Act...." Only means that notwithstanding the provisions of section 77 and sections with the conditions mentioned in that section without approaching the court under sections....
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.... impact on the law as laid down by this Court in the Sterilite case. However, at present Section 230 has not come into force and hence this question does not arise for consideration in this case and hence the same need not to be considered. At present the law as laid down in Sterilite Industries prevails and will be applicable to the present case. 5. In the circumstances it is open to a company to buy back its own shares by following the procedure prescribed under Section 77A/Section 68 or by following the procedure prescribed under Section 391 read with Sections 100 to 104 of the 1956 Act. The contentions of the Regional Director are therefore clearly contrary to the prevailing legal position. 6. According to the Regional Director if....
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....sion of the RBI if the transfer price does not exceed the fair market value as determined by a Chartered Accountant or a SEBI registered Merchant Banker as per the DCF method. In the present case the transfer price has been arrived at in accordance with the aforesaid circular of the RBI. The Regional Director has not disputed the fair market value of the shares so determined. In these circumstances it is clear that the buyback of shares under the Scheme is in accordance with the RBI Guidelines and that being so, there is no question of there being any draining away of foreign exchange. 8. In view of the above and particularly the fact that in law the Petitioner is entitled to buy back its own shares by means of a scheme under Section 391....