TaxTMI 
TaxTMI 
2022 (1) TMI 362
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....15/5, Mathura Road, Faridabad-121003, Haryana, India. A certified true copy of the Certificate of Incorporation is annexed in the main petition and marked as Annexure-A. 2. The Petitioner Company is engaged in the business of manufacturing, developing, designing, improving, hiring, repairing, buying, selling, dealing in importing and exporting ferrous and non-ferrous castings and of all kinds and all machinery, implements, spare parts, appliances, apparatuses, lubricants and all other things capable of being used therewith or in manufacture, maintenance and working thereof. 3. The petitioner company submits that the proposed preferential issue and allotment has been approved by the Board of Directors of Company keeping in view the future outlook of the Company, its growth targets and prospects, additional funding requirement for the purpose of further expansion of its agri-machinery business. And also with the aim of attracting a globally reputed player such as the Investor in the Petitioner Company to meet its business objectives and at the same time to ensure that there is no dilution in shareholding of the existing shareholders (including public shareholders) of the Petiti....
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....rporation, a company duly organised and existing under the laws of Japan and having its principal office at 2-47, Shikitsuhigashi 1-chome, Naniwa-ku, Osaka 556-8601, Japan ("Investor") and certain specified promoters of the Company (as confirming parties), whereby the Investor has agreed to subscribe to 1,22,57,688 (one crore twenty two lakhs fifty seven thousand six hundred and eighty eight) equity shares of face value INR 10 (Indian Rupees Ten) ("Subscription Shares") at INR 850 (Indian Rupees Eight Hundred and Fifty)-per share amounting to 9.09% of the post-issue share capital of the Company, subject to compliance with the provisions of the Act. v. The proposed preferential issue and allotment was approved by the Board of Directors of the Company keeping in view the future outlook of the Company, its growth targets and prospects, additional funding requirement for the purpose of further expansion of its agri machinery business. vi. With the aim of attracting a globally reputed player such as the Investor in the Company to meet its business objectives and at the same time to ensure that there is no dilution in shareholding of the existing shareholders (including....
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....pany in its meeting held on March 20, 2020, inter alia, provided an in-principle approval to consider reducing the share capital of the Petitioner Company by cancelling and extinguishing 1,22,57,688 (One Crore Twenty Two Lakhs Fifty Seven Thousand Six Hundred and Eighty Eight) equity shares held by EBWT, without payment of any consideration to EBWT and in its meeting held on July 15, 2020, has approved cancellation and extinguishment of 1,22,57,688 (One Crore Twenty Two Lakhs Fifty Seven Thousand Six Hundred and Eighty Eight) equity shares held by EBWT, without payment of any consideration to EBWT. Certified true copy of the Board Resolution dated March 20, 2020, and July 15, 2020, passed by the Board of Directors of the Petitioner Company is annexed with the main petition and marked as ANNEXURE "E". 7. The Petitioner Company submits that the list of Equity shareholders (in the format as per Regulation 31 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015) as on March 5, 2021 duly certified by Chartered Accountant is annexed in the main petition and marked as ANNEXURE "H". 8. The Special Resolution passed by the Equity shareholders by e-voting is repro....
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....en only) each, which are currently held by Escorts Benefit and Welfare Trust ("EBWT" or the "Trust"), and having a value of investment aggregating to INR 1,13,21,25,002 (Indian Rupees One Hundred and Thirteen Crores Twenty One Lakhs Twenty Five Thousand and Two), without payment of any consideration to the aforesaid Trust ("Capital Reduction") and making corresponding adjustments by way of debit to: (i) the outstanding paid-up equity share capital for INR 12,25,76,880 (Indian Rupees Twelve Crores Twenty Five Lakhs Seventy Six Thousand Eight Hundred and Eighty); and (ii) the securities premium account of the Company for INR 1,00,95,48,122 (Indian Rupees One Hundred Crore Ninety Five Lakhs Forty Eight Thousand One Hundred and Twenty Two), on the terms and conditions as contained in the Scheme." "RESOLVED FURTHER THAT upon the confirmation of the Scheme by NCLT and the aforesaid authorities and becoming effective and operative, without any further act or deed by the equity shareholders (including but not limited to sending appropriate instructions to the depository participants), the abovementioned 1,22,57,688 (One Crore Twenty Two Lakhs Fifty Seven Thousand Six Hundred and E....
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....ers and things as they may deem fit and proper for the purposes of the Scheme and settle any questions or difficulties that may arise in regard to the Scheme." 9. It can be seen that the Petitioner Company avails the option of cancellation and extinguishment of paid-up equity share capital is in consonance with Section 66 of the Companies Act, 2013. Following are the provisions:- "66. Reduction of Share Capital: (1). Subject to confirmation by the Tribunal on an application by the Company, a company limited by shares or limited by guarantee and having a share capital may, by a special resolution, reduce the share capital in any manner and in particular, may- (a) extinguish or reduce the liability on any of its shares in respect of the share capital not paid-up; or (b) either with or without extinguishing or reducing liability on any of its shares,- (i) cancel any paid-up share capital which is lost or is unrepresented by available assets; or (ii) pay off any paid-up share capital which is in excess of the wants of the company, alter its memorandum by reducing the amount of its share capital and of its shares accordingly: ....
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.... 4,413.08 crore and that the Petitioner Company is a solvent company with sound financial position capable of meeting all its outstanding debts. A Net-worth certificate issued by a practicing Chartered Accountant is annexed in main petition and marked as ANNEXURE "L". The said certificate demonstrates that the Petitioner Company has sufficient liquidity to pay all its outstanding creditors as per the commercial terms agreed with them. 17. The present scheme envisages no pay-out in the proposed capital reduction of the Petitioner Company, and as such creditors will not be adversely affected by the said scheme. 18. The Petitioner Company submits that the equity shares of the Petitioner Company is listed on the NSE and BSE, pursuant to Regulation 37(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 read with SEBI Circular CFD/DIL3/CIR/2017/21 dated March 10, 2017, as amended from time to time, the Petitioner Company had filed the draft Scheme with NSE and BSE on September 30, 2020 and September 29, 2020 respectively, to seek their observations on the Scheme. It is submitted that the BSE and NSE, pursuant to their observation letters dated January....
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....lue of share capital and security premium) as part of the petition for considering confirmation of the Petition for reduction of share Capital and Security premium amount as prayed in the Petition." Petitioner Company stated that vide letters dated September 14, 2021 and October 26, 2021, it submitted its response to the query raised by the Regional Director, wherein the Petitioner Company explained that the capital reduction shall be given effect to in the books of Petitioner Company in accordance with para 8 of the Scheme which states as under: "Upon the Scheme becoming effective, investment, aggregating to the value of investment representing 1,22,57,688 (one crore twenty two lakhs fifty seven thousand six hundred and eighty eight) equity shares of the Company recorded as non-current investment in the books of the Company as 'Sole beneficiary interest in Escorts Benefit and Welfare Trust' i.e. INR 1,13,21,25,002 (Indian Rupees One Hundred and Thirteen Crore Twenty One Lakh Twenty Five Thousand and Two) shall be cancelled, with corresponding adjustment by way of debit to: (i) the outstanding paid-up equity share capital for INR 12,25,76,880 (Indian Rupee....
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....tion of share capital and security premium amount. This aspects need further clarification from the Petitioner Company. In this regard, Petitioner Company referred to para 8 of the Scheme which states as under: "Upon the Scheme becoming effective, investment, aggregating to the value of investment representing 1,22,57,688 (one crore twenty two lakhs fifty seven thousand six hundred and eighty eight) equity shares of the Company recorded as non-current investment in the books of the Company as 'Sole beneficiary interest in Escorts Benefit and Welfare Trust' i.e. INR 1,13,21,25,002 (Indian Rupees One Hundred and Thirteen Crore Twenty One Lakh Twenty Five Thousand and Two) shall be cancelled, with corresponding adjustment by way of debit to: (i) the outstanding paid-up equity share capital for INR 12,25,76,880 (Indian Rupees Twelve Crores Twenty Five Lakhs Seventy Six Thousand Eight Hundred and Eighty); and (ii) the securities premium account of the Company for INR 1,00,95,48,122 (Indian Rupees One 12 Hundred Crore Ninety Five Lakhs Forty Eight Thousand One Hundred and Twenty Two)) in compliance with the generally accepted accounting principles in India." ....
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....d to their respective addresses appearing in the said list on 23.07.2021. Further, Petitioner Company dispatched copy of the notice to each of the respective persons whose names, addresses and descriptions appeared in the list of unsecured creditors filed on 28.02.2021 by sending such copies by Courier to their respective addresses appearing in the said list on 2226.07.2021.(sic) Courier receipts and acknowledgement of above notices were submitted with Hon'ble Tribunal. Further, the Petitioner Company vide its affidavit dated 27.10.2021 confirmed that the Petitioner Company had not received any objection from the creditors of the Petitioner Company. In terms of the provisions of Section 66 of Companies Act, 2013, it was submitted that in absence of any representation from creditors of the Petitioner Company within three months from the date of receipt of notice i.e. 22.07.2021, it shall be presumed that the creditors of the Petitioner Company have no objection to the proposed scheme of capital reduction. Notwithstanding above, Petitioner Company also submitted that it is a solvent company with net-worth of INR 4,413.08 crore as on March 31, 2020. Furt....
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.... company. Further observed that decision for reduction is based on commercial consideration undertaken by the businessmen who are in the best position to know of the necessities and interests of the company concerned, in the absence of serious allegations as regards the bona fides of the proposed Scheme, the Courts are of the view that no interference in such decisions are acquired. It has also been observed that considering the commercial aspect of the decision it is not permissible for the Court to come to the conclusion that the exit opportunity offered is inequitable and unjust. Likewise, in the case of Reckitt Benckiser (India) Ltd. (Company Petition No. 206 of 2004) Order dated 31.05.2005, after due consideration of the pre and post reduction, admittedly selective one, it was held that if majority by a special resolution decides to reduce share capital of company, it has also right to decide as to how this reduction should be carried into effect. 23. In the light of discussion forgoing, it is ordered to confirm the reduction of share capital of Petitioner Company by approving the minutes of the EOGM commenced on 23rd January 2021 and concluded on 21st February 2021, wherei....