1986 (11) TMI 338 - HC - Companies Law

Reduction of share capital Application to Tribunal for confirming order, objections by creditors, and settlement of list of objecting creditors

Summary

Issues:
1. Confirmation of resolution for reduction of share capital under Companies Act, 1956.

Analysis:
The petitioner company filed a petition under section 101 of the Companies Act, 1956, seeking confirmation of a resolution passed for the reduction of its share capital. The company, Indian National Press (Indore) Limited, was registered under the Companies Act, 1956, with a capital of Rs. 25,000,00 divided into 25,000 equity shares. Due to heavy losses and financial constraints, the company accumulated losses of Rs. 39,52,38623 by December 31, 1985. The company proposed a reduction of Rs. 18,45,540 to reflect a true and fair position of its capital structure in the balance sheet. The resolution for reduction was passed in an extraordinary general meeting and required confirmation by the High Court of Madhya Pradesh Bench at Indore.

The company justified the reduction stating that it would benefit the company and its shareholders by accurately representing the capital structure, facilitating future finance and dividend declarations. The reduction involved canceling the lost or unrepresented capital, not affecting liabilities or payments to shareholders. The company ensured creditor protection by offering a bank guarantee for those not consenting to the reduction. The court emphasized the need to protect the interests of minorities and creditors while confirming the reduction of capital.

The court approved the petition, confirming the special resolution for capital reduction and approving the submitted minute. The company was directed to publish notices of the order and minute approval in specified newspapers, add "and reduced" to its name, publish reasons for reduction, and deliver a certified copy of the order to the Registrar of Companies. Additionally, the company was required to furnish a bank guarantee to secure payments to creditors who did not consent to the reduction.

In conclusion, the court allowed the petition, confirming the resolution for share capital reduction and outlining necessary steps for compliance and publication to safeguard the interests of all stakeholders involved.