2018 (9) TMI 2036 - Tri - Companies Law

Application for reduction of share capital - Section 66 (1) of the Companies Act, 2013 - HELD THAT - The scheme of reduction of capital has been examined and it has been decided not to make any objection to the scheme and it is therefore prayed that this Tribunal may dispose of the application on merits and pass such order/orders as deemed fit and proper. In this case as per the provisions of the Companies Act, 2013, notices were issued to the statutory authorities as per the procedure prescribed. However, there was no objection to the Reduction of Share Capital under reference. The Application is allowed for reduction of the share capital of the Company.

Summary

Issues Involved:
1. Application under Section 66(1) of the Companies Act, 2013 for confirming the reduction of share capital.
2. Compliance with statutory requirements and procedural norms under the Companies Act, 2013.
3. Examination of the reasons and justifications for the reduction of share capital.
4. Verification of financial statements and auditor’s reports.
5. Consideration of objections, if any, from statutory authorities and stakeholders.
6. Approval and implementation of the reduction of share capital.

Issue-wise Detailed Analysis:

1. Application under Section 66(1) of the Companies Act, 2013 for confirming the reduction of share capital:
The applicant company filed an application under Section 66(1) of the Companies Act, 2013 to confirm the reduction of its share capital. The company proposed to reduce its paid-up equity share capital from ?1,80,00,000/- divided into 18,00,000 equity shares of ?10/- each to ?1,25,00,000/- divided into 12,50,000 equity shares of ?10/- each, thereby reducing 5,50,000 equity shares.

2. Compliance with statutory requirements and procedural norms under the Companies Act, 2013:
The company followed the necessary statutory requirements and procedural norms. A special resolution was passed in accordance with Section 66(1) of the Companies Act, 2013, during a general meeting held on 21.02.2018, after due notice as provided in the Act. The resolution was approved by the members, and the reduction of share capital was resolved.

3. Examination of the reasons and justifications for the reduction of share capital:
The company justified the reduction of share capital by stating that it had surplus funds not being utilized for business purposes. The Board of Directors, after evaluating various options, decided to remit back the excess share capital by reducing the paid-up share capital. This decision was made to return ?55,00,000/- to the shareholders, which would not adversely affect the company’s ability to honor its commitments or meet its obligations.

4. Verification of financial statements and auditor’s reports:
The Independent Review Report on the Interim Financial Statements confirmed that the financial statements were free of material misstatements and gave a true and fair view in accordance with applicable accounting standards. The company also furnished certificates from auditors confirming that it had not accepted any deposits and did not have any creditors. The ROC, Chennai, stated that the company was regular in filing statutory returns.

5. Consideration of objections, if any, from statutory authorities and stakeholders:
Notices were issued to statutory authorities as per the prescribed procedure, and no objections were raised against the reduction of share capital. The Regional Director (RD) also did not object to the scheme of reduction of capital and prayed for the application to be disposed of on merits.

6. Approval and implementation of the reduction of share capital:
The Tribunal heard the case, perused the pleadings and documents filed, and allowed the application for the reduction of share capital. The Tribunal confirmed the reduction of share capital by approving the minutes of the EoGM dated 21.02.2018. The necessary alterations were ordered to be made in the Memorandum of Association, and the company was directed to file the altered Memorandum of Association and approved minutes with the ROC 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.

Conclusion:
The Company Application No. CA/374/66(1)/2018 was disposed of, confirming the reduction of share capital as proposed by the applicant company. The Tribunal's order ensured compliance with the statutory requirements and procedural norms, and the reduction of share capital was implemented as per the approved scheme.