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TMI Blog2003 (9) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation of an independent valuer. On this basis, the Petitioner estimates, that as on 31-3-2003, they would suffer a loss not exceeding Rs. 700 lakhs in the process. 3. The further case of the Petitioner is that the Petitioner has as on 31-3-2003, an accumulated loss of Rs. 1642.20 lakhs which includes a one time expenditure of Rs. 1456 lakhs incurred towards product withdrawal and the expenditure relating to the business method restructuring costs for the year ended 31-3-2000. Further, the Petitioner also has a balance of deferred Voluntary Retirement/Separation Expenditure, incurred at Manappakkam to the extent of Rs. 73 lakhs as on 31-3-2003. For the reasons set out in para 8 of the Petition, namely to undertake a financial restructuring the Petitioner proposed to apply its Securities Premium Account and to utilize an amount not exceeding Rs. 2500 lakhs out of such account to set-off the above three heads of losses/expenditures. The Petitioner has also explained in para 10 of the Petition, how this would enhance shareholder value while not affecting the Petitioner's operations. The Petitioner therefore convened an Extraordinary General Meeting of its Shareholders on 23-6- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and things as it may, in its absolute discretion, deem necessary, expedient, usual or proper and to settle any question or difficulty that may arise with regard to utilization/adjustment of the Securities Premium Account including passing of such accounting entries and/or making such other adjustments in the books of account as considered necessary to give effect to the above Resolution, finalizing the amounts involved or to carry out such modifications/directions as may be ordered by the Hon'ble High Court of Judicature at Madras to implement the aforesaid Resolution." 5. The petition further averred that the requisite form 23 reflecting the above special resolution has been filed with the Registrar of Companies, Chennai. 6. The Petitioner further states that the form of minute proposed to be registered under section 103(1)(b) of the Companies Act is as follows : "Pursuant to the provisions of sections 78, 100 and other applicable provisions, if any of the Companies Act, of 1956 and Article 45 of the Article of Association of the Company, the expected loss as on 31-3-2003 arising out of the Plant and Machinery held for disposal at Manappakkam location not exceeding Rs. 700 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Securities Premium Account were the paid up share Capital of the Company. Section 78(1), the Securities Premium Account may be applied by the Company for the purposes set out therein, which are the purposes extracted in the affidavit of the Asstt. Registrar of Companies. Therefore, while reading the two sub-sections together, the conclusion that would follows would be that where a Company proposes to apply its Securities Premium Account in the manner provided for in sub-section (2), the provisions relating to reduction of Capital would not be attracted and the Company can do so without either being required to pass a special resolution or seek the confirmation of Court. Section 78(2) is however not exhaustive of the methods in which the Securities Premium Account can be applied by the Company and is only exhaustive of the methods in which such application can take place without following the reduction procedure. Where however, a Company proposes to apply its Securities Premium Account in a manner other than that contemplated in sub-section (2), then the provisions relating to Reduction of Share Capital would have to be followed in respect of such application. 11. The Learned Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ognition of this position all such secured creditors have signified their consent to the restructuring. I find that it is purely a business decision arrived at by the shareholders on the basis of the commercial principles as the restructuring does not involve any cash outflow, the same will not affect the normal operations of the Petitioner or its ability to honour its commitments and to pay its debts, in the ordinary course of business and the restructuring is in accordance with sound commercial and accounting practice and would enable the Petitioner to project a more realistic picture of the Petitioner's operations, which would be to the benefit of the Petitioner's shareholders and investors. In recognition of this position, the shareholders of the Petitioner have unanimously approved such restructuring. 15. Section 100 of the Companies Act empowers a Company Limited by shares, if so authorised by its articles to reduce its share capital by special resolution. The circumstances mentioned in section 100(1) (a ), (b) and (c ) of the Act are only illustrative and not exhaustive and it is open to a company covered under section 100 of the Companies Act to reduce its Securities Premi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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