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2021 (3) TMI 661 - Tri - Companies LawReduction of shares - seeking rectification of the register of members of the 1st Respondent Company by cancelling the allotment of shares - to appoint an Independent Auditor directing to audit the accounts - seeking to direct the 1st Respondent Company to conduct a valuation of shares of the Company before further allotment of Securities. HELD THAT - The Companies Act, 2013 came into effect w.e.f. 01.04.2014. Hence, further issue of share capital will be done by complying the Companies Act, 2013. Section 62 of the Companies Act, 2013 deals with issue of Share Capital, which is applicable to all companies. It does not make any distinction whether it is a public or private company. This Tribunal also note that Section 62(1)(a) of the Companies Act, 2013 deals with issuance of shares on the principle of Rights basis. Section 62(1)(b) of the Companies Act, 2013 deal with issuance of shares to employees under a scheme of employees stock option, subject to special resolution passed by company and subject to such conditions as may be prescribed. Section 62(1)(c) deals with issue of shares to any person. Since the shares have been allotted to Applicants/Petitioners and their nominees as per the Interim Order dated 12.01.2017, the shares so issued must have the compliance of Section 62(1)(c) of the Companies Act, 2013. A reading of the Section 62(1)(c) shows that (a) special resolution has to be passed by the company; and (b) that the price of share as will be determined by valuation report of registered valuer - It is again noticed that the special resolution can be passed only in the AGM or EOGM where all the shareholders will have a say. No such material has been produced or pleaded before this Tribunal that the special resolution has been passed in the AGM or EOGM. Neither any material has been placed before the Tribunal that the fair price has been determined with the approval of the registered valuer. It is noted that the allotment has been done at the face value of ₹ 10/-. In the absence of fair value, it cannot be determined that the ₹ 10/- is the fair value of the equity share. Compliance of Section 62(1)(c) ensures that the allotment is done to any person at a price which is not prejudicial to the interest of other shareholder or to the interest of the company. Though enough has been pleaded to justify allotment of shares to 2nd Respondent, not a single evidence could be placed or pleaded to show that the compliance of Section 62(1)(c) has been done. In view of the above position, allotment of shares to 2nd Respondent cannot be held to be validly done - the exercise carried out is not only illegal but oppressive to the Shareholders. Petition is disposed of with a direction to the Respondent No. 1 to cancel the allotment of 1,10,00,000 equity shares in favour of Respondent No.2 and thereby rectify the Register accordingly.
Issues Involved:
1. Rectification of the register of members by canceling the allotment of equity shares. 2. Appointment of an Independent Auditor to audit the accounts. 3. Valuation of shares before further allotment of securities. Issue-wise Detailed Analysis: 1. Rectification of the Register of Members by Canceling the Allotment of Equity Shares: The petitioners argued that the allotment of 1,10,00,000 equity shares to the 2nd Respondent was illegal and an abuse of the directions issued by the NCLT Chennai Bench. They contended that the shares were issued at a face value of ?10 each without proper valuation, resulting in the 2nd Respondent's shareholding increasing from nearly 4% to 52.86%. The respondents countered that the share allotment was done to settle the dues with Federal Bank as per the NCLT Chennai Bench's order and could not be questioned. The Tribunal noted that compliance with Section 62(1)(c) of the Companies Act, 2013, which requires a special resolution and a valuation report from a registered valuer, was not demonstrated. The Tribunal found the allotment to be illegal and oppressive to shareholders, directing the cancellation of the allotment and rectification of the register. 2. Appointment of an Independent Auditor to Audit the Accounts: The petitioners requested the appointment of an independent auditor to audit the accounts of the 1st Respondent Company from 1st March 2017. The Tribunal declined this prayer, focusing instead on the rectification of the share allotment issue. 3. Valuation of Shares Before Further Allotment of Securities: The petitioners argued that the value of each share should have been determined by a registered valuer in compliance with Rule 13(g) of the Companies (Share Capital and Debentures) Rules, 2014. The Tribunal agreed that the lack of proper valuation was a significant issue. It directed that before any further allotment of shares, an independent valuation must be conducted to ensure fairness and compliance with statutory provisions. Findings: The Tribunal concluded that the allotment of shares to the 2nd Respondent was not validly done due to non-compliance with Section 62(1)(c) of the Companies Act, 2013, and directed the cancellation of the 1,10,00,000 equity shares allotted to the 2nd Respondent. The Tribunal also emphasized the need for an independent valuation of shares before any future allotment. The request for appointing an Independent Auditor was declined. Order: The Tribunal disposed of CP/122/KOB/2019 with directions to cancel the allotment of 1,10,00,000 equity shares in favor of the 2nd Respondent and rectify the register accordingly. It also mandated an independent valuation of shares before any further allotment. The request to appoint an Independent Auditor was declined.
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