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2017 (10) TMI 1348 - Tri - Companies LawReduction of the share capital - Held that - As mentioned by the Applicant Company that the process of reduction of capital has been initiated in Board Meeting dated 05.10.2016 wherein, M/s. P. Pattabiramen & Co., Chartered Accountants were appointed to value the shares of the 1st Respondent Company. Therefore, the SEBI circular dated 10.10.2016 cannot be made applicable retrospectively. It has also been mentioned that on different dates three letters have been sent to NSE i.e., 13.10.2016, 11.11.2016 and 08.12.2016. The company has not received any objections from NSE to the proposed exit offer given. Then, as per the Order of this Bench, private notice was also sent to NSE and SEBI. The soft copy of the above notice was sent by the Applicant Company through e-mail to NSE and reply has been sent by NSE on 18.08.2017 stating that they have no comments to offer. In other words, the reply of the NSE refers that they do not have any objection to the methodology of exit opportunity given by the 1st Respondent Company. In the light of the above, it is quite clear that the proposal for the reduction of the share capital is not contrary to any regulations or the provisions of the Companies Act, 2013. It is not for the court to suspect the correctness or bonafides of the valuation report as long as there is no inherent defect or other vitiating factor in the valuation and it is well settled principle that court must not sit in judgment over the commercial wisdom of Directors. In view of this, the objections raised by the Objectors are devoid of merits, and the same are rejected. Therefore, we allow the Application for reduction of the share capital of the Company. We confirm the reduction of share capital of Applicant Company
Issues Involved:
1. Application for reduction of share capital under Section 66(1) of the Companies Act, 2013. 2. Objections raised by shareholders regarding the valuation of shares and procedural compliance with SEBI circulars. 3. Legality and fairness of the valuation method used for share reduction. Issue-wise Detailed Analysis: 1. Application for Reduction of Share Capital: The Applicant Company filed an application under Section 66(1) of the Companies Act, 2013, seeking confirmation for the reduction of its share capital. The company proposed to reduce its share capital from ?1,07,68,090/- to ?43,48,470/- by canceling 6,41,962 equity shares held by non-promoter shareholders and paying ?107 per canceled share. The reduction was to be adjusted from the securities premium account and general reserves of the company. The special resolution for this reduction was passed with an 89.56% majority in favor. 2. Objections Raised by Shareholders: Several shareholders, including Mr. Dilip Kumar Surana, raised objections stating that the SEBI circular dated 10.10.2016, which prescribes procedures for providing exit opportunities to public shareholders of exclusively listed companies on de-recognized stock exchanges, was not followed. They contended that the valuation of ?107 per share was unfair and that the explanatory statement did not disclose the actual value of shares or the valuation report. They also argued that the votes of public shareholders and promoters were not counted separately, which would have shown the defeat of the resolution. Additionally, they claimed that the valuation was not done by an independent valuer from the panel of expert valuers of the designated stock exchange, as required by the SEBI circular. 3. Legality and Fairness of the Valuation Method: The tribunal referred to several legal precedents to address the objections regarding the valuation method. It cited the Supreme Court ruling in G.L. Sultania v. SEBI, which emphasized that courts should not interfere with the valuation of an expert unless there is a fundamental error or departure from well-accepted principles. The tribunal also mentioned the ruling in Hindustan Lever Employees Union v. Hindustan Lever Ltd., which stated that the court's obligation is to ensure that the valuation was carried out by an independent body and in accordance with the law. The tribunal found that the objections regarding the valuation were devoid of merit as the shareholders did not challenge the legality of the valuer's report on the basis of fraud, collusion, or partiality. Conclusion: The tribunal concluded that the proposal for the reduction of share capital was not contrary to any regulations or provisions of the Companies Act, 2013. It stated that the court should not suspect the correctness or bona fides of the valuation report as long as there is no inherent defect. The tribunal allowed the application for the reduction of share capital and confirmed the special resolution dated 12.12.2016. It ordered the necessary alterations to be made in the Memorandum of Association and instructed the Applicant Company to file the altered Memorandum of Association and minute approved along with the Order to the ROC within thirty days. Order: The tribunal confirmed the reduction of share capital of the Applicant Company by approving the minutes of the Special Resolution dated 12.12.2016. The share capital was reduced from ?1,07,68,090/- to ?43,48,470/- by canceling 6,41,962 equity shares held by non-promoter shareholders and paying ?107 per canceled share. The necessary alterations were to be made in the Memorandum of Association, and the Order was to be delivered to the ROC by filing E-form INC-28 within thirty days. The Registry was instructed to prepare an Order in FORM No.RSC-6 as per the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016.
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