2020 (8) TMI 428 - Tri - Companies Law

Reduction of share capital - section 66 of the Companies Act, 2013 - reduction on the ground that petitioner-company is not carrying on any business activities and has no immediate plans to revive the same - HELD THAT - There is no objection from any quarter regarding the reduction of share capital as contemplated by the petitioner-company. The present petition seeking approval for reduction of capital is allowed as follows (a) The special resolution approving the capital reduction as approved by the shareholders in the general meeting held on February 26, 2018 is hereby confirmed. The petitioner-company shall comply with all applicable laws and procedures in this regard. (b) The petitioner-company shall comply with all the applicable pro visions of the Income-tax Act, 1961 and all tax issues arising out of the application will be met and answered in accordance with law. (c) The petitioner-company shall submit an affidavit before the Registrar of Companies, Maharashtra, Mumbai, that the interests of the creditors and all other stakeholders are protected under the scheme. (d) The minute set forth in the schedule hereto is hereby approved. (e) The certified copy of this order including the minute as approved be delivered to the Registrar of Companies, Maharashtra, Mumbai, within thirty days of receipt of this order. (f) Paper publication confirming the reduction of share capital by this Tribunal be issued in the same newspapers in which publications were carried out earlier, within a period of thirty days from the date of this order.

Issues:
1. Reduction of share capital under section 66 of the Companies Act, 2013.
2. Compliance with statutory requirements for reduction of share capital.
3. Approval of reduction of share capital by the Tribunal.
4. Tax implications and compliance with the Income-tax Act, 1961.
5. Protection of interests of creditors and stakeholders under the reduction scheme.

Reduction of Share Capital under Section 66 of the Companies Act, 2013:
The petitioner sought approval for reducing the issued, subscribed, and paid-up equity share capital of the company. The reduction was proposed from ?2,02,00,000 to ?1,00,000 by utilizing the excess share capital and bank balance. The petition was filed under section 66 of the Companies Act, 2013, and the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016.

Compliance with Statutory Requirements for Reduction of Share Capital:
The shareholders approved the reduction by special resolution in a meeting held on February 26, 2018. The reduction was to be made from the company's cash/bank balance as per the statutory requirements. The petitioner ensured compliance with all directions of the Tribunal and filed the necessary affidavit. The Regional Director's report highlighted the tax implications subject to the decision of the Income-tax authorities.

Approval of Reduction of Share Capital by the Tribunal:
After considering the submissions and the Regional Director's report, the Tribunal found no objections to the reduction of share capital. The petition seeking approval for the reduction was allowed, confirming the special resolution and directing compliance with applicable laws and procedures. The Tribunal approved the minute detailing the reduction and ordered its delivery to the Registrar of Companies.

Tax Implications and Compliance with the Income-tax Act, 1961:
The Tribunal directed the petitioner to comply with all provisions of the Income-tax Act, 1961, ensuring that all tax issues arising from the reduction would be addressed in accordance with the law. The decision of the Income-tax authority was deemed binding on the petitioner-company.

Protection of Interests of Creditors and Stakeholders under the Reduction Scheme:
As part of the approval, the petitioner-company was required to submit an affidavit ensuring the protection of creditors and stakeholders' interests under the reduction scheme. The Tribunal mandated paper publication confirming the reduction of share capital within a specified timeframe to inform stakeholders and the public about the approved reduction.

This detailed analysis covers the issues involved in the legal judgment regarding the reduction of share capital under the Companies Act, compliance with statutory requirements, approval by the Tribunal, tax implications, and protection of interests of creditors and stakeholders.

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