1998 (11) TMI 498 - HC - Companies Law

Summary

Issues:
Petition for reducing share capital under section 101 of the Companies Act, 1956.

Analysis:
The company initially had a capital of Rs. 5,50,00,000 divided into equity shares. Subsequently, a public issue was made to raise funds. Due to a downturn in the capital markets, the company faced delays in receiving the second instalment of allotment monies. As a result, a special resolution was passed to modify the allotment and cancel the unpaid shares. The resolution aimed to extinguish the liability against the shareholders towards share capital and share premium. Public notice was given, and no objections were received from creditors or the public. The High Court found no impediment and allowed the petition to reduce the share capital. The minute confirming the reduction was approved, and the Registrar of Companies was directed to update the records accordingly. The approved minute was to be published in two newspapers.

This judgment showcases the process of reducing share capital under the Companies Act, 1956. It highlights the company's actions in response to challenges faced in the capital markets, leading to the need for a special resolution. The Court's analysis focused on the compliance with legal requirements, including public notice and creditor notifications. The decision to allow the reduction of share capital was based on the absence of objections and the company's adherence to the prescribed procedures. The judgment emphasizes the importance of following statutory provisions and obtaining court approval for such corporate actions to ensure legal compliance and protection of stakeholders' interests.