9911796707
TMI Blog2004 (3) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... The said company was incorporated on 21st March, 2000 under the Companies Act, 1956 with its registered office at No. 66, 11th Main, Malleswaram, Bangalore-560 003. The authorized capital of the first transferor-company is 1,00,000 equity shares of Rs. 10 each amounting to Rs. 10,00,000 and the issued, subscribed and paid up capital is 110 equity shares of Rs. 10 each amounting to Rs. 1100. The first transferor-company was incorporated to carry on business of delivery, comprehensive capsules of information in bilingual form in an easily accessible and user friendly form in all spheres of activities and provisions of convenience services like utility payments, travel and tourism books and other businesses as clearly set out in the memorandum of associa- tion. The first transferor company and Comat Infoscribe Pvt. Ltd., the second transferor company formulated a scheme of amalgamation as per Annexure-G under which they proposed to amalgamate with Comat Technologies Pvt. Ltd., the transferee-company as both these transferor companies are 100% subsidiaries of the transferee companies. On account of amalgamation no shares are proposed to be issued to the shareholders of the transferor c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the issued, subscribed and paid up capital is 15,98,200 equity shares of Rs. 10 each amounting to Rs. 1,59,82,000. The main object of the second transferor company is to carry on a 100 per cent export oriented business of Data processing and information analysis for the Medical industry, Data processing for the other industries, Medical Transcription, General Tran- scription, software design and other business as clearly set out in the memorandum of association. The first transferor company and the second transferor company formulated a scheme of amalgamation as per Annexure-G under which they proposed to amalgamate with Comat Technologies Pvt. Ltd., the transferee-company as both these transferor companies are 100% subsidiaries of the transferee companies. On account of amalgamation no shares are proposed to be issued to the shareholders of the transferor companies No. 1 and 2 in terms of the scheme of amalgamation. The Board of Directors of the second transferor company approved the said scheme of amalgamation and thereafter filed an application before this court in C.A. No. 60/2003 seeking leave of the court to convene a meeting of the shareholders and creditors of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... textual and images formats, formatting process as per various standards and environments, to act as designers and developers of software for various applications and platforms and other business as clearly set out in the articles of association. The transferee-company formulated a scheme of amalgamation as per Annexure-G under which the first and second transferor companies proposed to amalgamate with Comat Technologies Pvt. Ltd., the transferee-company. As both the transferor companies are 100 per cent subsidiaries of the transferee-company, no shares are proposed to be issued to the shareholders of the first and second transferor companies in terms of the scheme of amalgamation. The Board of Directors of the transferee-company approved the said scheme of amalgamation and thereafter filed an application before this court in C.A. No. 55/2003 seeking leave of the court to convene a meeting of the shareholders and creditors of the company to consider the said scheme of amalgamation and to grant approval. Accordingly this court by order dated 21st January, 2003 allowed the application and directed convening of the meeting of the equity shareholders and creditors of the company. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submit the report within four weeks. After submission of the said report by the Chartered Accountant to the effect that the affairs of the company has not been conducted in the manner prejudicial to the interest of the shareholders and creditors and the public, the Official Liquidator has submitted his report stating that he has no objection for grant of sanction prayed for. However, the Regional Director, Department of Company Affairs, Chennai, brought to the notice of the court two facts which he requires the court to consider before passing any orders in these petitions. The first point made out was that the second transferor company has collected share application money to the tune of Rs. 4,25,000 as per the company s balance sheet as at 31-3-2002 but the scheme is silent about the treatment of the same upon amalgamation. The second point made out was clause 15( g ) of the scheme provides that the balance in share premium accounts in the books of the transferee-company shall stand reduced to Rs. 3,45,50,813 after adjusting the amount as specified in clause 4 of the scheme. As per clause 17 of the scheme of transferee-company shall make an application/petition under section 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. Cas. 596 1 ; and in the case of Raasi Cement Ltd. In re. [1999] 22 SCL 363 . The Gujarat and Andhra Pradesh High Courts have taken a view that the scheme of amalgamation and reduction of share capital could be approved simultaneously when the scheme of reduction of share capital is a part of the scheme of amalgamation proposed by the companies. In order to appreciate these contentions it is necessary to have a look at the various provisions of the Companies (Court) Rules. 9. Rule 85 of the Company (Court) Rules, 1959 provides for Compromise or arrangement involving reduction of capital, which reads as under : " Compromise or arrangement involving reduction of capital. Where a proposed compromise or arrangement involves a reduction of capital of the company, the procedure prescribed by the Act and these rule relating to the reduction of capital, and the requirements of the Act and these rules in relation thereto, shall be complied with, before the compromise or arrangement so far as it relates to reduction of capital, is sanctioned." Therefore the aforesaid provision makes it abundantly clear that before a scheme of amalgamation is sanctioned by court where reduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid up share capital, and in any other case if the Court so directs, the procedure prescribed therein shall be followed. In other words, a list of creditors has to be settled and notice of this reduction of share capital has to be given to them personally and also by public notice so that they can object to the same and it is only thereafter appropriate orders could be passed after considering such objection. Yet another provision which is required to be noticed in this context is section 78 which deals with application of premiums received on issue of shares which reads as under : " Application of premiums received on issue of shares. (1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the share premium account ; and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the share premium account were paid up share capital of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the resolutions which is approved by them there is a specified reference to the reduction in the share capital and unanimously both shareholders of the company and creditors of the company have approved the resolution approving for reduction in the share capital. Thus, the requirement of law as contemplated in rule 85 read with rule 47 and sections 100 and 78 are complied with. In this regard it is useful to refer to the judgments relied on by the learned counsel for the petitioners. 11. In Maneckchowk Ahmedabad Mfg. Co. Ltd. s case ( supra ), the question before the Gujarat High Court was when sanction was sought for reorganisation of the share capital of the company which included reduction of share capital whether it was permissible to have reduction of share capital and sanctioning of the scheme of re-organization simultaneously. After discussing the law on the point it was held as under : "That takes me to the last attack under the head reorganization of share capital , namely, that the scheme envisages reduction of share capital and that cannot be done without following the procedure as prescribed in section 100 onwards of the Companies Act, even if it be done a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liciter, are not entitled to object and it makes no difference if reduction is brought about by following the procedure prescribed in section 100 onwards or by way of a scheme of compromise and arrangement. Thus, if it can be done in a given set of circumstances as part of a scheme of compromise and arrangement, it has been properly done in this case and while sanctioning the scheme ipso facto the reduction of share capital ought to be confirmed." (p. 867) In the case of Navopan India Ltd./G.V.K. Hotels Ltd. (supra) the Andhra Pradesh High Court while dealing with the scheme of amalgamation where reduction of share capital was also involved after following the aforesaid judgment has held as under : "( xvii )There is nothing objectionable in the company proposing a scheme of compromise and arrangement and simultaneously proposing reduction of share capital and both can be considered and approved simultaneously. ( xviii )Where the scheme of compromise and arrangement comprises within its ambit reduction of share capital, the procedure for reduction must be gone through, but if it is shown that the procedure prescribed under section 100 onwards has been carried out simultan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the procedure prescribed in section 101(2) shall apply, he shall fix a date for hearing of the petition and give such directions as he may think fit as to the advertisement of the petition...." (p. 609) Again in Raasi Cement Ltd. s case ( supra ) the Andhra Pradesh High Court relying on the aforesaid two judgments has held as under : "11. From a perusal of the record, it appears that the requisite statutory procedure has been substantially complied with, that the scheme of arrangement and the reduction of share capital and restructure of RCL have been duly approved by the overwhelming majority votes of the equity shareholders, that the secured creditors have given their consent for the proposed arrangement and reduction of share capital as their integrity has been preserved. The majority decision of the concerned class appears to be just and fair to the class as a whole. It does not appear that the proposed scheme of arrangement, reconstruction of RCL and the reduction of share capital are violative of any provisions of law and it does not appear contrary to public policy. The whole scheme of arrangement appears to be just, fair and reasonable from the point of view of a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved in this process. Therefore the procedure prescribed under section 100 of the Act is substantially complied with. That is what rule 85 provides for. This provision is made for very good reasons. Thus reduction of share capital can be brought about as part of scheme of compromise, arrangement or amalgamation. Once shareholder and creditors of the company by a statutory majority approve the scheme of amalgamation and in the said scheme of amalgamation is not opposed to public policy and when the auditor has given a report stating that the affairs of the company have not been conducted in a manner prejudicial to the interests of the members or public interest the scheme which includes reduction of shares requires to be approved. However, further procedure prescribed under section 100 insofar as share capital is to be followed in addition to the procedure to be followed after sanctioning of the scheme. 13. In the instant case, the facts set out above clearly demonstrates that the petitioners have complied with the requirement of sections 78, 100 read with rules 85 and 47 of the Rules. They have also complied with the provisions of section 391 of the Act. The scheme of amalgama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the view that there is no legal impediment for according sanction sought for by the petitioner for the scheme of amalgamation which includes reduction of share capital. Hence I pass the following order: That the reduction of the share premium account of Comat Technologies Private Limited resolved on and effected by a Special Resolution passed in General Meeting of the said company held on 22-2-2003 which resolution was in the words and figures following : "( a )On this Scheme coming into effect, on and from the appointed date the balance standing in the Share Premium Account of CTPL shall get adjusted and reduced by an amount not exceeding Rs. 21,67,187 by writing down the book value of computers, furniture fixtures, office equipments and intangibles as on 31st March 2002. ( b )The write off not exceeding Rs. 21,67,187 shall be deemed to be an adjustment in accordance with and for all purposes relating to the provisions of this Act. ( c )The application and reduction of Share Premium Account, as per this clause, shall be effected as an integral part of the scheme itself as the same does not involve either diminution of liability in respect of unpaid share capital or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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