2007 (7) TMI 401 - HC - Companies Law

Summary

Issues Involved:

1. Reduction of share capital under section 101 of the Companies Act, 1956.
2. Compliance with section 100(1)(b) of the Companies Act.
3. Procedural requirements under section 101(2) of the Companies Act.
4. Confirmation of reduction under section 102 of the Companies Act.
5. Alteration of the memorandum of association under section 103 of the Companies Act.
6. Requirement to add "and reduced" to the company name and publication of reasons for reduction under section 102(2) of the Companies Act.

Detailed Analysis:

1. Reduction of Share Capital:
The petitioner-company sought an order of confirmation from the court to reduce its share capital. The company aimed to reduce its paid-up capital from Rs. 10,50,43,000 to Rs. 4,20,17,200 by cancelling Rs. 6,30,25,800 of equity share capital, which had been lost or was unrepresented by available assets. This reduction was intended to write off accumulated losses of Rs. 9,68,79,188.

2. Compliance with Section 100(1)(b) of the Companies Act:
The company was authorized by its articles of association to reduce its share capital. Article 12(f) of the articles of association explicitly allowed the company to reduce its share capital in accordance with section 100 of the Companies Act. The shareholders unanimously passed a special resolution in the eighth annual general meeting held on 28-9-2006, satisfying the twin requirements of section 100(1)(b).

3. Procedural Requirements under Section 101(2):
The company petition was filed after securing affidavits of consent from both unsecured creditors, and no secured creditors existed. Notices were published in the Economic Times and Vaartha newspapers, inviting claims from creditors. No claims were received, and the court deemed compliance with clauses (a) to (c) of section 101(2) unnecessary.

4. Confirmation of Reduction under Section 102:
The court confirmed that the requirements of section 102(1) were met, as the company had no secured creditors, and both unsecured creditors consented to the reduction. The court ordered the reduction of share capital as per the special resolution passed by the shareholders.

5. Alteration of the Memorandum of Association under Section 103:
The court agreed that section 103(5) is a deeming provision, where registration of the minute approved by the court would automatically alter the memorandum of association. Therefore, no separate steps for alteration were required before the court's order.

6. Requirement to Add "and Reduced" to the Company Name and Publication of Reasons:
The court considered whether to direct the company to add "and reduced" to its name or to publish the reasons for the reduction. Given that the company was listed on the Bombay Stock Exchange, the court decided that adding "and reduced" to the company name until 31-3-2008 would adequately inform prospective investors and safeguard public interest.

Judgment:
The court confirmed the reduction of the company's share capital as resolved by the shareholders on 28-9-2006. The company was directed to add "and reduced" to its name until 31-3-2008. The court approved the minute detailing the new capital structure and ordered the company to publish a notice of the registration of the order in specified newspapers.

Order:
1. The reduction of share capital was confirmed.
2. The company was directed to add "and reduced" to its name until 31-3-2008.
3. A certified copy of the order and the approved minute was to be delivered to the Registrar of Companies within 21 days.
4. Notice of registration was to be published in Deccan Chronicle and Eenadu newspapers within 14 days of registration.

Conclusion:
The petition was ordered accordingly, confirming the reduction of share capital and ensuring compliance with statutory requirements while safeguarding the interests of creditors, shareholders, and the public.