TaxTMI 
TaxTMI 
2020 (2) TMI 1408
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....rized share capital of the petitioner Company is Rs. 23,00,00,000/- divided into 2,30,00,000 Equity Shares of Rs. 10 each. 4. The Counsel for the petitioner Company submits that Article no. 5(a) of its Articles of Association of the Petitioner Company empowers it to reduce its share capital in any manner for the time being authorized by law by passing a Special Resolution. 5. The Counsel for the petitioner Company submits that the shareholders of the petitioner Company having passed the Special Resolution on 11th January, 2019 have unanimously approved the said reduction of capital of the Petitioner Company. 6. The Counsel for the Petitioner Company submits that this petition is for confirmation of a special resolution passed by the shareholders of the Petitioner Company for reduction of the paid up equity share capital of 58,80,000 (Fifty Eight Lakhs and Eighty Thousand) equity shares of Rs. 10/- each held by Essentialentropy Technology LLP and Mr. Ramkrishna Gaddipati. Accordingly, the equity share capital will stand reduced from Rs. 22,61,53,850 divided into 2,26,15,385 equity shares of Rs. 10 each to Rs. 16,73,53,850 divided into 1,67,35,385 equity shares of Rs. 10 each, and....
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....cancellation of 58,80,000 equity shares) Cr 11,00,00,000 The Petitioner Company states that a portion of cash lying in its books were invested in short term mutual funds and will accordingly liquidate the same to the required extent inorder to facilitate the payment of cash to the shareholders as aforesaid. Further, as required under section 133 read with section 66 of the Companies Act, 2013 the Petitioner Company has obtained a certificate from the statutory Auditor, certifying the proposed accounting treatment on reduction of capital. Copy of the certificate of the said auditor dated 10th January 2019 is annexed at page No 114 of the Petition as Exhibit -L to the Petition. This accounting treatment is in accordance with the Generally Accepted Accounting Principles followed in India. 9. The Counsel for the petitioner Company further submits that rationale for reduction is that M/s Essentialentropy Technology LLP and Mr. Ramakrishna Gaddipati holding 26% aggregated stake (i.e 58,80,000 equity shares of Rs. 10 each) have expressed their desire to exit from the petitioner Company and had put forth the proposal for approval before the Board of Directors of the petitioner ....
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....ntion, the Counsel for the Petitioner Company has relied upon Judgement of the Delhi High Court in case of Reckitt Benckiser (India) Ltd., In re [2005] 122 DLT 612 passed by Justice A.K. Sikri. J then judge of the Delhi High Court. After referring to various judgments under the English laws and judgment of the Madras High Court Panruti Industrial Co. (P.) Ltd., In re AIR 1960 Mad. 537, in paragraph 21 of the judgment it has observed that: - 21. The principals which can be distilled from the aforesaid judicial dicta, are summarized as under: (i) The question of reduction of share capital is treated as matter of domestic concern, i.e. the decision of the majority which prevails. (ii) If majority by special resolution decide as to how this reduction should be carried into effect. (iii) While reducing the share capital company can decide to extinguish some of its shares without dealing in the same manner as with all other shares of the same class. Consequently, it is purely a domestic matter and is to be decided as to whether each member shall have his share proportionately reduced, or whether some members shall retain their shares unreduced, the shares of others being extingui....
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....e capital 'in any manner'. Further, the section states that reduction may 'in particular' be undertaken in the manner specified in section 66(1)(a) or b(i) or (ii) of the Companies Act, 2013. Accordingly, the current capital reduction is squarely covered by section 66(1) of the Companies Act, 2013. 16. The Counsel for the petitioner Company further submits that although in the judgments cited above some of the shareholders had opposed selective reduction of share capital, in the present case, the proposed capital reduction has been unanimously approved by 100% of the Shareholders holding issued, subscribed and paid up share capital of the petitioner Company. 17. As regards observation in Para 8(B)(a) raised by the Regional Director in his report is that petitioner has to undertake to serve notice to the Reserve Bank of India ('RBI') as shareholders are foreign entities, the Counsel for the petitioner submits that the Exiting Shareholders are Indian Residents. Accordingly, there are no compliances or filing requirements under applicable Foreign Exchange Regulations in India for the proposed capital reduction or requirement to serve notice to the RBI. 18. A....