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TMI Blog1939 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... y to what was required by Section 56 of the Act. The other matter was merely treated as the back ground for the action taken to reduce the share capital. This had the effect of cutting down the ground from under the feet of the objectors, for their main grievance was founded on what they imagined would be the benefit Which would be derived by the new shareholders at the expense of the present shareholders. Mr. B.C. Paul who argued the case for the objectors referred to In re Development Company of Central and West Africa (1902,1 Ch. 547) as authority for the proposition that the Court should go into the matter of the increase of capital. But it will be seen that there the reduction scheme in its entirety really involved an increase of capital and an issue of part thereof at 99 per cent. discount without any consideration to the company. It was not suggested that any part of the capital was lost or unrepresented by available assets or that any sum should be returned to the shareholders as being in excess of the wants of the company. Because the scheme was really for an increase of capital and for the extent of the increase of nominal capital the company would receive no consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation v. Couper, (1894, A.C. 399), the House of Lords held that the reduction of capital was within the powers conferred by the Companies Act, 1867 and 1877, and that the arrangement being a fair and equitable one there was no reason why it should not be confirmed. Lord Macnaghten stated: "The proposed arrangement has been approved by special resolution at general meetings, in which the American shareholders apparently took no part. The application to the Court was for an order confirming a reduction of capital to meet the arrangement. It is for the company, and the company alone, to judge of the prudence of the course proposed." The Court had to be satisfied that the reduction was fair and equitable to all concerned, as between different classes of shareholders. The reduction here is shared equally by all the shareholders who are all of one class. Standing by itself no fault can be found with the reduction. The objectors have some fears for the future, but this Court's function does not extend to the exercise of a paternal care of the shareholders of a company so as to make it interfere in the internal management of a company acting within its powers. Article 68 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolve the diminution of any liability in respect of unpaid capital or the payment to any shareholder of any paid-up capital. The only questions therefore to be considered are these: 1. Ought the Court to refuse its sanction to the reduction out of regard to the interests of those members of the public who may be induced to take shares in the Company? and 2. Is the reduction fair and equitable as between the different classes of shareholders?" In the present case creditors are not concerned at all, and the reduction does not involve the diminution of any liability in respect of unpaid capital or the payment to any shareholder of any paid-up capital. The second question does not arise for the reason that there is only one class of shareholders to be considered, and no differences are made among the one class of shareholders. The first question is the only one for consideration, and I have not heard any suggestion how any member of the public who may be induced to take shares in the company can be adversely affected. It may be that there should be some evidence of capital being lost or unrepresented by available assets, because of the wording of Section 55, sub-section (1) Clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em. In that way the amount of capital left over after wiping off the loss and the reserve fund would be increased to Rupees 95,056. That is how the reduction to Rs. 2 of the Rs. 25 fully paid-up shares was arrived at, for, there were 47,528 shares issued and fully paid-up. The figures are all to be found in the profit and loss account for the year ending 31st August 1936, and the balance sheet as at 31st August 1936. As I have said, the reason for the objections to the application was the fact that other resolutions dealing with matters beyond the reduction were also passed. But in an application such as this, under Section 56, Companies Act, the Court is only concerned to confirm the proposed reduction and not the resolutions passed by the company. This was laid down by Sterling J., in In re Hyderabad ( Deccan ) Co. Lt, (1897, 75 L.T. 23), who stated it was the duty of the Court to confirm the reduction if it was satisfied as to its fairness. That is all the Court is asked to do on this application. An attempt has been made to induce the Court to go into the question of the validity of the resolution. The shareholders who originally objected to the application and who were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication under Section 56, Companies Act, and was therefore made the subject matter of a suit instituted a few days before this application was actually filed. After succeeding in holding up this application for a considerable time that suit was eventually dismissed upon withdrawal, after notice to all the shareholders, none of whom chose to continue the suit. Belayethaly was a party in this application which was to be heard with the suit, and he did not choose to carry on that suit. I am not sure if he was not present on the day that the compromise was mentioned. The question of the validity of the resolution cannot be decided in this application. The opportunity to have that decision in the suit has been lost. As matters stand, the resolution was duly passed at an extraordinary general meeting no one disputes that. The minutes produced by the Secretary are prima facie evidence of the matters stated in such minutes see Art. 141 of the Articles of Association and the minutes of the adjourned extraordinary general meeting held on 4th July 1937 are to be found from page 55 onwards of the Minute Book, Ex. A. That same day the adjourned ordinary general meeting had been held, as e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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