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2016 (4) TMI 1458 - HC - Companies LawReduction of Share Capital - HELD THAT - In view of the averments made in paragraph Sixteen and Seventeen (16 17) of the Affidavit in support of summons for Direction interalia stating that the proposed Reduction of Share Capital would not in any way adversely affect the interests of any of the Applicant s Unsecured Creditors or the ordinary operations of the Applicant or the ability of the Applicant to honour its debts in the ordinary course of business. In view of the above, the procedure prescribed under Section 101(2) of the Companies Act, 1956 is dispensed with.
Issues Involved:
Reduction of Share Capital by Company through Special Resolution. Analysis: The judgment pertains to an application by the Applicant Company for reducing its Share Capital through a Special Resolution. The Court considered the Affidavit dated February 4, 2016, and an Additional Affidavit dated March 28, 2016, submitted by the Director of the Applicant Company in support of the Summons for Directions. The Company had Clause 38 in its Articles of Association, empowering it to reduce its Share Capital by passing a Special Resolution as authorized by law. The Special Resolution was passed at an Extraordinary General Meeting held on February 2, 2016, approving the reduction of Equity Share Capital from Rs. 14,43,80,370 to a maximum of 91,00,000 Equity Shares of Rs.10 each, with a return of capital not exceeding Rs. 100,00,00,000 for Equity Shares of Rs.10 each. The judgment noted that the Applicant Company had obtained consent letters from all three Secured Creditors, as evidenced by Exhibit C1 to C3, supporting the reduction of Share Capital. It was also highlighted that the proposed reduction would not adversely affect the interests of any Unsecured Creditors or the ordinary operations of the Applicant Company, ensuring its ability to honor debts in the ordinary course of business. Based on these facts, the Court dispensed with the procedure prescribed under Section 101(2) of the Companies Act, 1956, thereby allowing the reduction of Share Capital as per the Special Resolution passed by the Company. This detailed analysis of the judgment showcases the legal process involved in reducing Share Capital by a Company, highlighting the importance of complying with the provisions of the Companies Act and obtaining necessary approvals from creditors to safeguard the interests of all stakeholders involved in such corporate actions.
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