2015 (1) TMI 1354 - HC - Companies Law

Reduction of the Preference Share Capital - Held that - Having perused the petition and more particularly the reasons given in support of the proposed reduction this court is of the view that there is no reason not to confirm the proposed action of the petitioner to reduce its capital. The form of the minute proposed vide Para 11 of the Petition to be registered under section 103(1)(b) of the Companies Act is hereby approved and confirmed. The petitioner is directed to publish the Notice of Confirmation of Reduction of Capital and approval of the Minutes in the Ahmedabad editions of the English daily Indian Express and the Gujarati daily the Jansatta within 14 days of the registration of the order with the Registrar of Companies.

Summary

Issues:
Petition seeking confirmation of proposed reduction of Preference Share Capital by repayment.

Analysis:

1. Background and Proposal: The petitioner company, engaged in providing knowledge-based services to the financial industry in the US, sought to reduce its Preference Share Capital. The excess capital was raised for a project that was later abandoned due to economic circumstances, making the capital unnecessary.

2. Compliance with Legal Provisions: The company held meetings with equity and preference shareholders, where a special resolution for the reduction was unanimously passed. The petition was filed for court approval, and necessary directions were issued for publication of notice inviting objections, which were not raised.

3. Financial Stability: Despite the proposed reduction, the company's ability to meet its obligations and operate normally would not be affected. The company had no secured or unsecured creditors at the time of the petition, as confirmed by a Chartered Accountant's certificate.

4. Court's Decision: After reviewing the petition and reasons for the reduction, the court found no reason to deny the proposed action. The court confirmed the reduction of Preference Share Capital as per the resolution passed by the Board of Directors on 15th July, 2014.

5. Confirmation and Publication: The court approved the form of the minute to be registered under the Companies Act and directed the petitioner to publish the Notice of Confirmation of Reduction of Capital in specified newspapers within a specified timeframe.

6. Conclusion: The petition seeking confirmation of the reduction of Preference Share Capital was disposed of with no order as to costs, indicating the court's approval of the proposed reduction based on the company's circumstances and compliance with legal requirements.