2010 (9) TMI 1306 - HC - Companies Law

Issues Involved:

1. Confirmation of the reduction of share capital under sections 100 to 104 of the Companies Act, 1956.
2. Compliance with statutory requirements for the reduction of capital.
3. Consent from secured and unsecured creditors.
4. Adequate notice and opportunity for objections from creditors and shareholders.
5. Approval and registration of the capital reduction by the Registrar of Companies.

Issue-wise Detailed Analysis:

1. Confirmation of the Reduction of Share Capital:

The primary issue in this case was the confirmation of the reduction of share capital as resolved by a special resolution under sections 100 to 104 of the Companies Act, 1956. The petitioner-company proposed to reduce its paid-up equity share capital by extinguishing 10,50,399 equity shares held by non-promoter shareholders. This reduction involved paying an aggregate sum of Rs. 1,05,03,990, which included the face value of Rs. 1 per share and a premium of Rs. 9 per share. The court confirmed the resolution passed at the Extraordinary General Meeting held on 11-6-2010, subject to certain terms and conditions, including fixing a record date for determining the shareholders eligible for payment and completing the payment within 30 days of the record date.

2. Compliance with Statutory Requirements:

The petitioner complied with statutory requirements by passing a special resolution and obtaining the necessary approvals from the High Court of Karnataka. The company's Articles of Association authorized the reduction of share capital, and the resolution was passed following due notice as provided under the Companies Act, 1956. The court noted that the reduction would not adversely affect the interests of the creditors or shareholders.

3. Consent from Secured and Unsecured Creditors:

The petitioner-company had secured and unsecured creditors whose consent was necessary for the reduction of capital. The company had four secured creditors, all of whom consented to the proposed reduction after the outstanding loan from State Bank of India was taken over by Lakshmi Vilas Bank, which also consented. The company also had 116 unsecured creditors, and all consented except for two, who were subsequently paid off. The court accepted the consent letters provided by the creditors and dispensed with individual notices to them.

4. Adequate Notice and Opportunity for Objections:

The court ensured that adequate notice was given to creditors and shareholders by directing the petitioner to advertise the petition in English and Kannada dailies. Despite the advertisements, no creditors or shareholders appeared before the court to oppose the resolution. The court was satisfied that the proposed reduction did not adversely affect their interests.

5. Approval and Registration by the Registrar of Companies:

The court ordered that a certified copy of the order confirming the reduction of capital be delivered to the Registrar of Companies in Karnataka within 21 days. Furthermore, the notice of registration by the Registrar was to be published in English and Kannada newspapers within fourteen days of registration. The court approved the minutes reflecting the reduced share capital, which was now Rs. 1,22,59,601 divided into 1,22,59,601 equity shares of Re. 1 each, reduced from Rs. 1,33,10,000.

In conclusion, the court confirmed the reduction of share capital as per the special resolution, ensuring compliance with statutory requirements and safeguarding the interests of creditors and shareholders. The process was conducted transparently, with all necessary consents obtained and public notices issued.

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