2021 (6) TMI 483 - Tri - Companies Law

Reduction of Share Capital - Section 66 of the Companies Act, 2013 read with the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016 - HELD THAT - Since all the requisite statutory compliance having been fulfilled and that the proposed reduction of Share Capital shall not cause any prejudice either to the members or the creditors of the Petitioner Company and in consideration of the affidavit submitted by the Regional Director, Eastern Region, representing the Central Government and the Registrar of Companies, West Bengal, the scheme for reduction is passed. The capital of M/s. Titagarh Enterprises Limited is henceforth ₹ 2,57,50,000/- divided into 2,57,50,000 equity shares of ₹ 1/- each, reduced from ₹ 25,75,00,000/- divided into 2,57,50,000 equity shares of ₹ 10/- each by cancelling and extinguishing, in aggregate ₹ 23,17,50,000/- i.e. 90% (ninety per cent.) of the total Face Value of issued, subscribed and paid-up equity share capital of the Company by way of reduction of Face Value of Equity share of ₹ 10/- (Rupees Ten only) each to Re. 1/- (Rupee One only) each, by adjustment with the accumulated negative balance of statement of profit loss amounting to ₹ 30,07,74,367/- of the Company. Signed on this, the 18th day of March, 2021.

Issues Involved:
1. Approval for reduction of share capital.
2. Compliance with statutory requirements.
3. Impact on creditors and stakeholders.
4. Confirmation of proposed accounting treatment.

Issue-Wise Detailed Analysis:

1. Approval for Reduction of Share Capital:
The Petitioner Company filed a petition under Section 66 of the Companies Act, 2013, seeking approval for a special resolution passed at the Extraordinary General Meeting (EOGM) on 03/06/2020. The resolution proposed a reduction of ?23,17,50,000, which is 90% of the total face value of the issued, subscribed, and paid-up equity share capital, reducing the face value of equity shares from ?10 each to ?1 each. This reduction was aimed at rationalizing the capital structure and improving the net worth of the Company.

2. Compliance with Statutory Requirements:
The Company complied with all statutory requirements, including:
- Filing a list of equity shareholders and creditors.
- Serving notices to the Central Government, Registrar of Companies, and other authorities.
- Publishing notices in newspapers and on the Company’s website.
- Filing affidavits of compliance.
The Regional Director, Eastern Region, confirmed that no complaints or objections were received against the proposed reduction, and the Company was up-to-date with its statutory returns.

3. Impact on Creditors and Stakeholders:
The Company asserted that the reduction of capital would not affect its ability to meet its obligations or pay its debts. It was stated that the Company had no secured or unsecured creditors as of 29/02/2020, except for security deposits and debenture holders. The reduction did not involve any diminution of liability or payment by any shareholder of unpaid capital. The proposed reduction was deemed beneficial for the Company, its shareholders, and creditors, with no prejudice caused to any party.

4. Confirmation of Proposed Accounting Treatment:
The Statutory Auditors certified that the proposed accounting treatment for the reduction of equity share capital was in conformity with the applicable Accounting Standards. The reduction involved adjusting the face value of equity shares against the accumulated negative balance of the statement of profit & loss.

Judgment:
The Tribunal confirmed the reduction of share capital as resolved by the special resolution passed at the EOGM on 03/06/2020. It ordered the following:
- Approval of the reduction of share capital from ?25,75,00,000 to ?2,57,50,000 by reducing the face value of equity shares from ?10 to ?1 each.
- Delivery of a certified copy of the order to the Registrar of Companies within thirty days for registration.
- Publication of the notice of registration in specified newspapers within two weeks after receiving the certificate.
- Compliance with statutory requirements under the Companies Act, 2013.
- Direction to all concerned regulatory authorities to act on the certified copy of the order.

The petition was disposed of with no order as to costs.

Schedule:
The capital of the Company is henceforth ?2,57,50,000 divided into 2,57,50,000 equity shares of ?1 each, reduced from ?25,75,00,000 divided into 2,57,50,000 equity shares of ?10 each, by canceling and extinguishing ?23,17,50,000 and adjusting it against the accumulated negative balance of the statement of profit & loss.

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