2018 (9) TMI 1967 - Tri - Companies Law

Reduction of Share Capital - Notification Nos. G. S. R. 1119(E) - HELD THAT - There is no adverse material available on record which goes against the relief sought for by the petitioner-company seeking proposed reduction of share capital nor it will prejudicially affect the interest of any shareholder or creditor nor it will have any adverse effect on public at large. Further, the accounting treatment, as proposed by the company for such reduction of the share capital is in conformity with the accounting standards specified in section 133 and other provisions of the Companies Act, 2013. Hence, it may be seen that the petitioner-company has duly complied with all statutory requirements pursuant to the direction of the Tribunal and filed necessary affidavit of undertaking before this Tribunal. In the matter of HINDUSTHAN COMMERCIAL BANK LTD. VERSUS HINDUSTHAN GENERAL ELECTRICAL CORPN. 1959 (8) TMI 22 - HIGH COURT OF CALCUTTA , the Calcutta High Court held that the question of reducing capital is a domestic affair to be decided by the majority. The court further held that the Companies Act, 1956 leaves it to the company to decide for itself the extent and mode of reduction and application of the moneys thereby. This is, however, subject to the confirmation of the court, which is required for safeguarding the interests of creditors and minority shareholders and seeing that it is fair, just and reasonable. The prescribed statutory procedure have been duly followed with the approval of the members and creditor of the company and that no objection has been received against the proposed reduction and therefore proposed reduction can be confirmed by passing order in terms of rule 6 of the Rules - Registrar of Companies shall issue a certificate of Registration of Order and Minute in Form RSC-7 of the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016.

Summary

Issues Involved:
1. Confirmation of the proposed reduction of share capital.
2. Compliance with statutory requirements and procedural formalities.
3. Impact on shareholders, creditors, and public interest.
4. Accounting treatment conformity with relevant standards.
5. Objections from regulatory authorities and stakeholders.

Detailed Analysis:

1. Confirmation of the proposed reduction of share capital:
The petitioner, M/s. Nippon Signal India P. Ltd., filed a petition under sections 100 to 104 of the Companies Act, 1956, seeking confirmation for the reduction of share capital pursuant to a special resolution passed on April 28, 2016. The reduction aimed to extinguish the unpaid liability of ?5 per share, reducing the subscribed share capital from ?75,00,00,000 to ?37,50,00,000.

2. Compliance with statutory requirements and procedural formalities:
The petitioner complied with section 66 of the Companies Act, 2013, which governs the reduction of share capital. The special resolution was passed in accordance with section 114 of the Companies Act, 2013, and article 41 of the company's articles of association. The petitioner affirmed no arrears of deposits and provided a certificate from the statutory auditor confirming the accounting treatment's conformity with section 133 of the Companies Act, 2013.

3. Impact on shareholders, creditors, and public interest:
The petitioner-company had two shareholders and one unsecured creditor, all of whom consented to the proposed reduction. No objections were received from any stakeholders, and the reduction did not adversely affect shareholders, creditors, or the public. The company affirmed sufficient cash flow to meet current and future requirements without the unpaid share capital.

4. Accounting treatment conformity with relevant standards:
The statutory auditor certified that the accounting treatment for the proposed reduction was in line with generally accepted accounting principles in India, as required by section 133 of the Companies Act, 2013. The Regional Director's report confirmed the absence of any arrears of deposits and compliance with accounting standards.

5. Objections from regulatory authorities and stakeholders:
The Regional Director and the Income-tax Department raised no specific objections to the proposed reduction. The Income-tax Department noted that no adverse impact on revenue was perceived, and no outstanding demands were present. The Tribunal confirmed that the requirements of section 66 of the Companies Act, 2013, were fulfilled.

Conclusion:
The Tribunal found no adverse material against the proposed reduction and confirmed that it would not prejudicially affect any shareholder or creditor, nor have an adverse effect on the public. The petitioner-company complied with all statutory requirements, and the reduction was deemed fair, just, and reasonable. The Tribunal ordered the reduction of share capital, directing the petitioner to deliver a certified copy of the order to the Registrar of Companies and publish the order in two newspapers. The Registrar was instructed to issue a certificate of Registration of Order and Minute in Form RSC-7.

Order:
The minutes for the reduction were approved, and the petitioner was directed to comply with the statutory requirements, including publication and registration of the order. The Tribunal allowed any person to apply for necessary directions in this matter. Copies of the order were to be served to the parties involved.