2021 (12) TMI 794 - Tri - Companies Law

Reduction of share capital of Company - Section 66 of the Companies Act, 2013 r/w National Company Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016 - HELD THAT - The present position of law, while dealing with provisions of Section 66 is that if none of the shareholders are objecting for the proposed reduction, then after considering the merits of the case as also connected facts and circumstances such petition generally deserves to be admitted. It is hereby ordered to confirm the reduction of paid up share capital of the Petitioner Company by approving the minutes of AGM dated 25.09.2019 wherein the members of the Petitioner Company resolved for the proposed reduction of the Paid-up Share Capital of the Company by cancelling the extinguishing Paid-up Equity Share Capital of ₹ 9,20,00,000/- divided into 92,00,000 Equity Shares of ₹ 10/- each fully paid up, from ₹ 1,21,19,66,320/- divided into 12,11,86,482 Equity Shares of ₹ 10/- each to ₹ 1,11,99,66,320/- divided into 11,19,86,482 Equity Shares of ₹ 10/- each fully paid up. The necessary alteration shall be made in the Memorandum of Association by the Petitioner Company for reduction of the paid-up share capital - Application allowed.

Issues Involved:
1. Application under Section 66 of the Companies Act, 2013 for confirming the reduction of share capital.
2. Compliance with statutory requirements and addressing objections raised by authorities.
3. Confirmation of the reduction of share capital by the Tribunal.

Detailed Analysis:

1. Application under Section 66 of the Companies Act, 2013 for confirming the reduction of share capital:

The Petitioner Company sought confirmation from the Tribunal for the reduction of its share capital under Section 66 of the Companies Act, 2013, read with the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016. The company was incorporated on 31.12.1993 and had its registered office in Bengaluru, falling within the jurisdiction of the Tribunal. The company's main business involved dealing in computers and their components. According to Article 8 of the Articles of Association, the company could reduce its share capital by special resolution. The company aimed to reduce its paid-up share capital by cancelling 92,00,000 equity shares, which were unrepresented by available assets due to an arbitration award.

2. Compliance with statutory requirements and addressing objections raised by authorities:

The Tribunal noted the company's compliance with procedural requirements, including obtaining shareholder approval and filing necessary affidavits and publications. The Regional Director and Registrar of Companies raised several objections, including non-compliance with CSR provisions, violations of Section 185 and Section 203 of the Companies Act, and unpaid statutory dues. The company responded by undertaking to file requisite compounding applications for non-compliances, explaining reasons for unspent CSR funds, and confirming compliance with Section 42 regarding the increase in paid-up capital. The company also provided an undertaking to remit tax dues when demanded and justified the reduction of share capital as per the arbitration award.

3. Confirmation of the reduction of share capital by the Tribunal:

The Tribunal considered the merits of the case and the absence of objections from shareholders. It referenced several precedents, including Elpro International Limited and Reckitt Benckiser (India) Limited, which established that reduction of share capital is a matter of domestic concern and should be based on commercial considerations. The Tribunal confirmed the reduction of the paid-up share capital from ?1,21,19,66,320 to ?1,11,99,66,320 by cancelling 92,00,000 equity shares. The order required the company to alter its Memorandum of Association and file the necessary forms with the Registrar of Companies within 30 days.

Conclusion:

The Tribunal confirmed the reduction of the Petitioner Company's share capital, emphasizing compliance with statutory requirements and addressing objections raised by authorities. The reduction was deemed to strengthen the company's financial position and reflect a more accurate financial statement. The Tribunal's decision was based on established legal precedents and the absence of objections from shareholders.

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