2010 (8) TMI 778 - HC - Companies Law

Share capital - reduce the face value of equity shares - Held that - The special resolution of the company dated February 12, 2009, stands confirmed as stated in the minutes of the resolution and thereby the company is permitted to add the words, and reduce the words. However, the confirmation is subject to the condition that the company shall obtain necessary approval from the Securities and Exchange Board of India in accordance with section 55A of the Companies Act, 1956

Summary

Issues:
Confirmation of special resolution for reducing share capital under sections 78, 100, and 101 of the Companies Act, 1956.

Analysis:

1. Background and Capital Structure:
The petitioner-company sought confirmation of a special resolution passed in an extraordinary general body meeting to reduce its share capital due to business losses. The company's authorized share capital was Rs. 25 crores, with issued share capital at Rs. 15,89,91,000 and paid-up share capital at Rs. 13,26,20,000.

2. Resolution Details:
The special resolution aimed to reduce the face value of equity shares from Rs. 10 to Rs. 5, write off Rs. 864.53 lakhs from the share premium account, and utilize the reduced capital to offset accumulated losses. The resolution empowered the board to take necessary actions for implementation.

3. Creditor Claims and Settlement:
Creditors' claims were scrutinized, and settlements were made with Bhagyanagar Laboratories, Vaibhav Plastimoulds, and Indian Potash Ltd. However, a dispute arose with Bekae Properties P. Ltd., claiming Rs. 19.39 crores based on an assignment from HDFC Bank, which the petitioner contested.

4. Legal Proceedings and Approvals:
The court directed the petitioner to notify creditors and obtained their claims. The Regional Director raised an objection regarding SEBI approval for a listed company under section 55A of the Companies Act, 1956.

5. Judgment and Conditions:
After considering all aspects, the court confirmed the special resolution, subject to obtaining SEBI approval. The company was allowed to modify its capital structure as per the resolution. The petitioner was directed to pay Rs. 2,500 to the Regional Director's counsel.

This detailed analysis outlines the background, resolution details, creditor claims, legal proceedings, and the final judgment of the High Court of Madras regarding the confirmation of the special resolution for reducing the share capital of the petitioner-company.