TaxTMI 
TaxTMI 
2018 (6) TMI 951
X X X X Extracts X X X X
X X X X Extracts X X X X
....9/HDB/2017 by the National Company Law Tribunal, Hyderabad Bench, Hyderabad (hereinafter referred to as the "Tribunal") dated 5th October, 2017 under Section 59 of the Companies Act, 2013. 2. The brief facts of the case are that the Appellant company was incorporated as Private Limited Company on 13th October, 1997 under the provisions of Companies Act,1956. The main object of the appellant company is to establish, engage, in carry on and run or to carry on business as provided in India or elsewhere diagnostic centres, hospitals, nursing homes, convalescent homes, blood banks, medicinal and allied training research centres, laboratories, mobile diagnostics centres and dispensaries, run libraries hold health centres and such other facilit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Bank of India the company sought no objection from 1st respondent for rectification of register in the form of cancellation of 219658 equity shares of Rs. 10 each excess allotted to him. The appellant company, therefore, filed company petition under Section 59 of the Companies Act, 2013 thereby contending that the violation in question has taken place due to the circumstances beyond the control of the company and there is no malafide intention on their part and approaching the Tribunal voluntarily. 4. After hearing the parties, the Tribunal passed the order dated 5th October, 2017, relevant portion of which is as under:- "14. While the case is pending adjudication before the Tribunal, the Registrar of Companies at Hyderabad fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and circumstances of the case, the company petition bearing No.CP/35/59/HDB/2017 is hereby dismissed. However, the dismissal of this petition, will not come in the way of filing fresh appropriate petition by the company, duly following extant provisions of law. No order as to costs." 5. Being aggrieved by the said order the appellant has filed the present petition and sought the following relief: i) Decide the substantial question of law as set out above. ii) Allow the appeal by quashing and setting aside the order of the National Company Law Tribunal Hyderabad Bench dated 5.10.2017 passed under Section 59 of the Companies Act, 2013 read with Rule 70 of the National Company Law Tribunal Rules, 2016 in CP No.35/59/HDB/....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cancelling the excess shares allotted is merely an accounting entry whereby the amount paid up on the excess shares sought to be cancelled is credited to the securities premium account and there is no return of capital and does not tantamount to reduction of capital as contemplated under Section 66 of the Companies Act. 11. 2nd respondent forwarded its report vide letter dated 9.3.3018 stating therein the facts of the case what has been stated submitted in para 2 above. 2nd appellant however submitted that in accordance with FEMA Regulations, the price/conversion formula of convertible capital instruments should be determined upfront at the time of issue of the instruments and the price at the time of conversion should not in any case b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....b) either with or without extinguishing or reducing liability on any of its shares cancel any paid-up share capital which is lost, or unrepresented by available assets; or (c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company, And may, if an so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly." 16. Application of premiums received on issue of shares is defined in Section 78 of Companies Act, 1956 (Section 52 of Companies Act, 2013) which is as under:- 52. Application of premiums received on issue of shares "(1) Where a company issues s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....B) Bring in additional funds equivalent to the shares allotted; and thereafter apply for compounding for the contraventions stated. As the appellant has opted to unwind the excess shares allotted, therefore, this will make a case of rectification of wrongful calculation of share capital and securities premium and not reduction of share capital because the security premium account is also to be treated as paid up share capital. This is a case where security premium amount will be increased and equal amount of paid up capital will be decreased and there will be no change in the overall amount allocated to paid up share capital and security premium account. 19. In view of the above the following order is passed. 20. The appellant shal....