2015 (5) TMI 323 - HC - Companies Law

Application for reduction of Paid-up share capital under Section 100(1) of the Companies Act, 1956 read with Rules 46 and 47 of the Companies (Court) Rules, 1959 - Minimum paid-up equity share capital not infused by the subscribers to the Memorandum of Association - Change in business plan - Held that - It was submitted by petitioner that the proposed reduction in capital neither involves in any financial outlay/outgo on the part of the petitioner company nor does it directly or indirectly involve in any outflow of the petitioner company s asset to its shareholders. Further, the petitioner company has not carried on any business since the date of its incorporation and it does not have any creditors or any other stakeholders whose rights would be prejudice by the proposed reduction. By order dated 5th February, 2015, notice of this petition was directed to be issued to the Regional Director, Northern Region. Since the petitioner company has not commenced its business operations and it does not have any creditor or stakeholders, therefore, the requirement to follow the procedure laid down under Section 101(2) of the Companies Act, 1956 is dispensed with.In response to the notice issued, Mr. A. K. Chaturvedi, Regional Director, Northern Region, has filed his report dated 17th March, 2015 raising no objection to the proposed reduction of share capital of the petitioner company. In view of the averments made in the petition and there being no creditor, the petition is hereby allowed. The resolution passed by the petitioner company in its Extra Ordinary General Meeting held on 8th December, 2014 for reduction of its share capital is approved. The 'Form of Minutes' proposed to be registered under Section 103(1)(b) and annexed to the petition as Annexure G , is also approved. - Application for reduction in paid up share capital approved.

Summary

Issues:
1. Petition under Section 100(1) of the Companies Act, 1956 for confirming reduction of paid-up share capital.

Analysis:
The petition was filed by a company seeking approval for the reduction of its paid-up share capital under Section 100(1) of the Companies Act, 1956. The company's registered office was in New Delhi, falling under the jurisdiction of the court. The company was incorporated under the Companies Act, 2013, with an authorized share capital of Rs. 6,00,00,000 divided into 60,00,000 equity shares of Rs. 10 each. The petitioner company had not commenced its business operations due to the lack of the minimum required paid-up equity share capital, leading to the decision to reduce it from Rs. 6,00,00,000 to Rs. 60,00,000 for trading purposes.

The Board of Directors unanimously approved the reduction of the paid-up share capital, and a special resolution was passed at the Extra Ordinary General Meeting of shareholders confirming the reduction. The company did not have any secured or unsecured creditors, as certified by a Chartered Accountant. The proposed reduction did not involve any financial outlay or outgo for the company and did not prejudice the rights of any stakeholders. The petition sought approval of the resolution passed at the Extra Ordinary General Meeting for the reduction in share capital.

The Regional Director raised no objection to the proposed reduction of share capital. Considering the absence of creditors and stakeholders, the court allowed the petition, approving the resolution for the reduction of share capital. The court directed the Registrar of Companies to register the order and effect necessary alterations, with a certified copy to be delivered within thirty days. Additionally, the order and resolution were to be published in specified newspapers. The petition was allowed in the stated terms.