2004 (5) TMI 317 - HC - Companies Law

Summary

Issues Involved:
1. Reduction of Securities Premium Account.
2. Adjustment of diminution in the value of investments.
3. Compliance with procedural requirements for reduction of share capital.
4. Objections raised by shareholders.
5. Adequacy of notice and opportunity for inspection of documents.
6. Legality and fairness of the proposed scheme.

Detailed Analysis:

1. Reduction of Securities Premium Account:
The petitioner-company, Zee Telefilms Limited, sought to reduce its Securities Premium Account by invoking sections 78 and 100 to 104 of the Companies Act, 1956. The reduction was necessitated by a permanent diminution in the value of investments in its overseas subsidiaries, as assessed by M/s. Deloitte Haskins & Sells and M/s. Jaiswal & Associates.

2. Adjustment of Diminution in the Value of Investments:
The company had made significant investments in overseas subsidiaries, including Zee Multimedia Worldwide Limited and Winterheath Company Limited. Due to regulatory changes, the uplinking of channels was moved to India, leading to a substantial reduction in the value of these investments. The diminution was valued at Rs. 17,716 million by Deloitte Haskins & Sells and Rs. 896 million by Jaiswal & Associates. The company proposed to adjust these losses against its Securities Premium Account.

3. Compliance with Procedural Requirements for Reduction of Share Capital:
The Board of Directors decided to adjust the losses by reducing the Securities Premium Account by Rs. 19,207 million. A Special Resolution was passed unanimously in a meeting held on 25th March 2004. The notice of the meeting and the explanatory statement were duly recorded, and the requisite formalities under sections 78 and 100 to 104 of the Companies Act were complied with.

4. Objections Raised by Shareholders:
Two shareholders, Aradhana Shivkumar Khera and Shivkumar Khera, holding 665 shares, raised objections. They requested inspection of documents and filed Company Application (Lodg.) No. 459 of 2004 for directions to furnish xerox copies of various documents. The objections were considered but ultimately deemed not bona fide and raised with ulterior motives. The court noted that the objectors did not attend the meeting despite due notice and advertisement.

5. Adequacy of Notice and Opportunity for Inspection of Documents:
The petitioner-company provided adequate notice and opportunities for inspection of documents. The court found that all requisite materials and statutory documents were made available as per the provisions of the Companies Act. The objections raised by Mr. Khera were found to be unsupported and vague, and the request for inspection at the final hearing stage was rejected.

6. Legality and Fairness of the Proposed Scheme:
The court concluded that the proposed reduction of the Securities Premium Account was fair, just, and within the framework of the law. The scheme did not involve any diminution of liability in respect of unpaid share capital or payment to any shareholder of any paid-up share capital. The creditors were not adversely affected, and there were no pending proceedings under sections 235 to 251 of the Companies Act against the petitioner. The court found no breach of any legal provisions and sanctioned the reduction as prayed.

Conclusion:
The petition for reduction of the Securities Premium Account by Zee Telefilms Limited was allowed. The objections raised by the shareholders were dismissed as not bona fide. The court found that the reduction was fair, just, and within the legal framework. The oral application for a stay of the order was also rejected. The parties were directed to act on an ordinary copy of the order, duly authenticated by the Company Registrar.