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2020 (9) TMI 55
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....3, having its registered address at Neville House, J. N. Heredia Marg, Ballard Estate, Mumbai-400 001. 3. The authorized share capital of the petitioner is Rs. 50,00,000 consisting of 4,99,000 equity shares of Rs. 10 each and 100, 11 per cent. non-cumulative redeemable preference shares of Rs. 100 each. The issued, subscribed and paid-up share capital is Rs. 44,29,480 consisting of 4,42,948 equity shares of Rs. 10 each. 4. As on September 28, 2017 the petitioner had 13,063 members, out of which 13,053 members belong to the non-promoter group and collectively hold 10.81 per cent. of the share capital, while the remaining 10 members belonging to the promoter group hold the balance 89.19 per cent. of the share capital of the petitioner. 5. The petitioner-company in the past several years received several applications from individual shareholders with the request to purchase their shareholding in the petitioner-company. In view of this request, various methods of exit to the public shareholders were discussed during the board meeting on June 5, 2017 pursuant to which the petitioner-company proposed to reorganize the share capital by way of consolidation of equity shares into l....
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....ectors of the petitioner has appointed IDBI Trusteeship Services Ltd., who consented to act as a "trustee" to sell/dispose off the consolidated equity shares resulting from consolidation of such fractional entitlements at the sale price of Rs. 3,400 equity shares of Rs. 10 each to such person(s) as the trustee may deem fit and distribute the sale proceeds among the fractional shareholders in due proportion of their fractional entitlements. The proceeds will be deposited with an escrow agent appointed by the trustee, who shall be responsible for proportionately distributing the proceeds amongst the shareholders who would otherwise have been entitled to fractional entitlements. The escrow agent shall upon receiving instructions for release from the trustee, release the funds to the fractional shareholders as provided herein. 9. The petitioner submits that proposed consolidation of shares would not cost reduction of share capital and would not cost in any way detrimental to the creditors of the petitioner. 10. The share capital of the petitioner upon consolidation of shares is set out hereinabove : Particulars No. of equity shares of Rs. 5,000 each Amount (Rs.) Autho....
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....consolidation will also reduce the costs involved in handling and serving the large number of shareholders, more particularly when their holdings are very small. (d) The main petition also states that the petitioner had obtained a valuation report from an independent and reputed valuer, M/s. Bansi S. Mehta and Co., Chartered Accountants for the purpose of valuation, which was presented before the board of directors meeting held on June 5, 2017. The price per equity share of nominal value of Rs. 10 each of the petitioner, calculated on the basis of asset based approach method was fixed at Rs. 3,400 per fully paid-up equity share of Rs. 10 each. The copy of the valuation report is annexed as exhibit D in its petition by the petitioner. (e) The petitioner had passed the special resolutions at the extraordinary general meeting held on July 18, 2017 (exhibit E of the petition) for reclassification and for consolidation of shares. The members of the petitioner also passed another resolution for resultant increase in the issued, subscribed and paid-up share capital by Rs. 520 in the annual general meeting held on September 28, 2017 (exhibit E of the petition). (....
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.... (IEPF), if applicable. (m) That section 61 of the Companies Act, 2013 is being illegally mis interpreted by the company and its directors for the cancellation or extinguishment of shares held by non-promoter shareholders. It is a regressive step as it may lead to selective cancellation of minority shareholding using the brute majority by the promoter shareholders which is act of oppression and mismanagement and in any case outside the scope of section 61 of the Companies Act, 2013. (n) The tone and tenure of the resolution 2 and the explanatory statement make it clear that the same is targeting the minority shareholders. The equity interest, justice and good conscience have been totally ignored by the company and its directors in order to protect and enrich the promoter shareholders in the said resolution. Reply to the objection by the petitioner-company : 14. The petitioner-company made the following objections in reply to the above raised objections by the shareholders : (a) The petitioner-company has given the detailed distribution of shareholding in the petition which is annexed as exhibit A to the petition. He further submits that for re....
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....ny further says that under the earnings approach, the valuer arrived at a fair value of the petitioner-company based on the capitalized value of its further maintainable earnings as the valuation date and an approach based on earnings is relevant in case of companies generating a steady stream of income and however, the petitioner-company is in the business of providing financial services and its assets primarily comprise of investment and financial assets and there is an element of uncertainty attached to the future stream of income as in case of investment, the gains/loss/dividend cannot be ascertained with certainty over future, they further say that under the market value approach, the valuer had arrived at a fair value considering the volume weighted average price of the share over a suitable period of time and however, the equity shares of the petitioner-company are not listed on any stock exchange and therefore the market value approach is not relevant. They further say that the same has been provided in the valuation report. (e) The valuation report was made available for inspection by the members of the company at the registered office of the company on all workin....
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....held in the company. The consolidation will provide an exit option to the shareholders more particularly to the share holders whose holdings are very small. (b) Moreover, the cost involved in handling and serving the large number of shareholders is very high, more particularly when their holding in the company is very small. (c) Due to small shareholding of many shareholders, the dividend amount payable to such shareholders are also small and negligible owing to which, many of them don't encash the dividend amounts. (d) The proposed share consolidation does not involve any payment to be made by any shareholders. (e) Each consolidated share will rank pari passu in all respects with each other. There will be no impact on the effective dividend yield of the company's shares. (f) The shareholders will have good liquidity in their hands and rea sonable return on their investments. 19. The extraordinary general meeting further captured the aspect that the consolidation of the equity shares of the company would require approval of the shareholders and further confirms that this consolidation of the equity shares of the company are in....
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....e a reduction of share capital." 23. The petitioner-company has duly followed the process of law and passed the resolution of the consolidation of shares. Section 61(1)(b) further enables consolidation of company to alter its share capital by consolidation and divide all or any of its share capital into shares of larger amounts than its existing shares. Thus, consolidation can be approved in terms of section 61(1)(b) of the Companies Act, 2013. 24. The objections raised by two shareholders who have failed to attend the extraordinary general meeting despite receipt of notice have not been able to make tenable grounds to oppose such consolidation, which is proposed and resolved by the members in the extraordinary general meeting dated July 18, 2017 in the best interest of the shareholders and in view of the valuation of the shares carried out by the valuer appointed by the petitioner-company. The objector has questioned the valuation report with reference to the fair market value and the offer of Rs. 3,400 to the non-promoter share value being offered by the petitioner-company. Such objections cannot be considered as the petitioner-company is not a listed company and as such th....