2015 (5) TMI 405 - HC - Companies Law

Application for reduction in issued, subscribed and paid-up share capital under Sections 100 to 105 of Companies Act, 1956 and other applicable provisions of the Companies Act, 2013 read with Companies (Court) Rules, 1959 - Reduction of share capital by paying off the Non-Promoter Shareholders for extinguishment and cancellation of their subscribed and paid-up equity share capital, which will give a fair exit to the Non-Promoter Shareholders - Held that - It is submitted that the petitioner that the Board of Directors of the petitioner company felt it imperative to separate the Promoter Group shareholder from the Non-Promoter Shareholders and re-emphasizing the control and ownership of the Promoter Group shareholder over the petitioner company, as previously held prior to Scheme of Amalgamation and preferential allotment. Accordingly, the company has proposed a selective reduction of share capital by paying off the Non-Promoter Shareholders for extinguishment and cancellation of their subscribed and paid-up equity share capital, which will give a fair exit to the Non-Promoter Shareholders. It is claimed by the petitioner that the proposed reduction is a practical and efficient available option which will help the Non-Promoter Shareholders in realizing the fair value of their investments in the petitioner company which can be gainfully deployed elsewhere. The Board of Directors of the petitioner company recommended payment of ₹ 675/- per equity share to the Non-Promoter Shareholders of the company as a part of the capital reduction process. It is submitted that the proposed reduction does not involve either diminution of any liability in respect of unpaid share capital or payment to shareholders of any paid up share capital. It is further submitted that the proposed reduction in capital does not violate or override or circumvent any provision of the Companies Act, 1956 and the Companies Act, 2013, as applicable or any rules or regulations made thereunder. It is further submitted that no investigation proceedings under Section 235 to 251 of the Companies Act, 1956 are pending against the petitioner company. Learned counsel also confirms that the petitioner company is engaged in a business/industry where there is no sectoral cap and a non-resident shareholder is permitted to hold upto 100% of the paid-up equity share capital of the petitioner company under the automatic route as per the provisions of Foreign Exchange Management Act and regulations made thereunder. In response to the notice issued, Mr. A. K. Chaturvedi, Regional Director, Northern Region, has filed his report dated 11th February, 2015 raising no objection to the proposed reduction of share capital of the petitioner company. Despite publication of notice, no objection has been received from any creditor or any member of the public. The petitioner company, in the affidavit dated 10th February, 2015 of Sh. N.P.S. Chawla, Advocate of the petitioner company has submitted that neither the petitioner company nor its counsel have received any objection pursuant to citations published on 8th December, 2014. Thus, there appears to be no legal impediment in allowing the present petition. In view of the averments made in the petition and there being no objection from any creditor or any member of the public, the petition is hereby allowed. The resolution passed by the petitioner company in its Extra Ordinary General Meeting held on 13th November, 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 M , is also approved. - Application for reduction in share capital approved.

Summary

Issues:
Petition under Sections 100 to 105 of Companies Act, 1956 and other applicable provisions of Companies Act, 2013 for confirming reduction of share capital.

Analysis:
1. The petitioner company, originally vCustomer Services India Private Limited, changed its name to RAMPgreen Solutions Private Limited in 2012. The company sought approval for the reduction of its issued, subscribed, and paid-up share capital.

2. The company's authorized share capital was Rs. 3,25,00,000 divided into 32,50,000 equity shares of Rs. 10 each, with the issued, subscribed, and paid-up share capital amounting to Rs. 2,02,07,990 divided into 20,20,799 equity shares of Rs. 10 each.

3. The petitioner company proposed a selective reduction of share capital to separate the Promoter Group shareholder from Non-Promoter Shareholders, recommending a payment of Rs. 675 per equity share to the Non-Promoter Shareholders to provide a fair exit.

4. The Board of Directors unanimously approved the reduction, and a special resolution by the equity shareholders confirmed the reduction. No objections were received from any creditor or the public.

5. The petitioner claimed compliance with all legal requirements and that the reduction did not violate any provisions of the Companies Act, 1956 or 2013. The Regional Director raised no objections to the proposed reduction.

6. The Court allowed the petition, approving the resolution for the reduction of share capital. A certified copy of the order was directed to be delivered to the Registrar of Companies for necessary alterations and registration. Publication of the order in newspapers was also mandated within specific timelines.

Conclusion:
The court approved the reduction of share capital, ensuring compliance with legal provisions and due process, as requested by the petitioner company to separate the Promoter Group shareholder from Non-Promoter Shareholders. The judgment highlighted the unanimous approval by the Board of Directors and equity shareholders, absence of objections, and compliance with regulatory requirements, ultimately allowing the petition and directing necessary actions for registration and publication.