1995 (4) TMI 222 - HC - Companies Law

Summary

Issues: Reduction of share capital, Confirmation of reduction by the High Court, Approval of proposed minute, Compliance with Companies Act, 1956

The judgment pertains to a company petition seeking confirmation of the reduction of share capital as per a special resolution dated 5-12-1994. The petition requested confirmation of the reduction, approval of the proposed minute, and necessary directions. The High Court of Madras, upon hearing the petitioner and the Additional Central Government standing counsel, confirmed the reduction of share capital, approved the proposed minute, and ordered the delivery of a certified copy of the order to the Registrar of Companies within 21 days. Additionally, it mandated the publication of the registration notice in 'Economic Times' within 14 days. The reduction involved paying off a portion of the capital to shareholders and issuing non-convertible debentures. The resolution specified the reduction from Rs. 98,18,00,000 to Rs. 50 crores, with detailed mechanisms for repayment and issuance of debentures. The resolution further outlined rounding off the number of equity shares to the nearest marketable lot of 50 shares.

The judgment confirmed the reduction of share capital of the company as per the special resolution passed on 5-12-1994. The court approved the proposed minute detailing the reduction from Rs. 98,18,00,000 to Rs. 50 crores, involving repayment of a specified amount to shareholders and issuance of non-convertible debentures. The court's order mandated the delivery of a certified copy to the Registrar of Companies within 21 days and publication in 'Economic Times' within 14 days. The resolution's compliance with section 100(1)(c) of the Companies Act, 1956 was crucial for the court's confirmation. The court emphasized the need for approval from appropriate authorities and compliance with legal provisions for the reduction to take effect.

The judgment highlighted the specific mechanisms for the reduction of share capital, including repayment in cash and issuance of non-convertible debentures. The resolution detailed the repayment of Rs. 48.18 crores to shareholders through a combination of cash repayment and debenture issuance. The debentures, with a face value of Rs. 100, were redeemable in four equal annual installments, carrying a redemption premium of 10% per annum. The rounding off of equity shares to the nearest marketable lot of 50 shares ensured a smooth transition post-reduction. The court's approval of these detailed mechanisms underscored the adherence to legal requirements and shareholder protection in the capital reduction process.

The judgment concluded with the approval and confirmation of the reduction of share capital, emphasizing compliance with the Companies Act, 1956. The court's order for delivery of a certified copy to the Registrar of Companies and publication in a designated newspaper within specified timelines ensured transparency and legal validity of the reduction process. The detailed schedules outlining the reduction mechanisms and rounding off of equity shares provided a clear framework for implementing the reduction while safeguarding the interests of the company and its shareholders.