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TMI Blog2007 (9) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Ms. Manisha Tyagi for the Official Liquidator. R.D. Kashyap for the Respondent. JUDGMENT 1. This order shall dispose of this petition under sections 101, 102 and 103 of the Companies Act, 1956, seeking reduction of share capital of the petitioner-company, Siel Ltd. up to an amount of Rs. 24,63,86,251 by cancelling equity share capital of Rs. 49,31,21,830, which amount shall be credited to the general reserve account of the company. The said reduction has been approved by a special resolution passed in accordance with section 189 of the Companies Act, 1956 in the extraordinary general meeting held on 11-6-2007. 2. The petitioner-company was incorporated on 27-3-1961, under the Companies Act, 1956, under the name and style of India Refrigeration Industries Ltd. Thereafter, the name of the company was changed to Usha Refrigeration Industries Ltd. on 21-4-1962. The name was thereafter, again changed to Shriram Refrigeration Industries Ltd. on 7-6-1966. The name of the company was yet again changed to Shriram Industrial Enterprises Ltd. on 20-5-1992. Subsequently, the name of the company was changed to its present name on 10-5-1995, with the Registrar of Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the scheme of amalgamation and arrangement has been considered and unanimously approved by the board of directors by a resolution dated on 11-6-2007. The company is, therefore, entitled to reduce the share capital of the company. The copy of the minutes of the board meeting has been produced. The Part II of the scheme which provides for reduction of share capital is as under : "5.1 Upon coming into effect of this scheme and in consideration of the transfer and vesting of the undertaking of the transferor company in the transferee company, the shareholders of the transferor company, whose names appear in the register of members of the transferor company as on the record date shall, subject to the provisions of clause 5.2 of the scheme as mentioned hereunder without any further application or deed, be entitled to receive from the transferee company 3 (three) equity shares of value of Rs. 10 each in the transferee company as fully paid-up (hereinafter referred to as "the exchange shares") for every 2 (two) equity shares of Rs. 10 each fully paid-up held in transferor company. It is clarified that consequent to the reduction of share capital of the transferee company as provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new equity shares") of the face value of Rs. 10 each in the transferee company as fully paid-up, in the following manner : ( a )1 (one) new equity share of Rs. 10 each fully paid-up of transferee company for every 2 (two) equity shares of Rs. 10 each fully paid-up held in transferor company, i.e. , MSL. ( b )1 (one) new equity share of Rs. 10 each fully paid-up of transferee company for every 3 (three) equity shares of Rs. 10 each fully paid-up held in transferee company, i.e. , Siel. 5.4 The reduction of share capital of the transferee company pursuant to the scheme shall be given effect as an integral part of the scheme and the consent given to the scheme by the shareholders and the creditors of the transferee company shall be deemed to be their consent under the provisions of section 100 and all other applicable provisions of the Act to such reduction of capital of the transferee company and the transferee company shall not be required to convene any separate meeting for that purpose. The order of the Hon ble High Court sanctioning the scheme shall be deemed to be an order under section 102 of the Act. 5.5 The total number of new equity shares of transferee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company and transferee company shall be deemed to have been automatically cancelled and have no effect. ( f )No fractional certificate(s) shall be issued by the transferee company and transferee company in respect of any fractions which the members of the transferor company and transferee company may be entitled to on issue and allotment of the new equity shares as aforesaid by the transferee company. The board of directors of the transferee company shall instead, consolidate all such fractional entitlements and allot new equity shares in lieu thereof to a director or an officer of the transferee company or such other person(s) as the board of directors of the transferee company shall appoint in this regard who shall hold the new equity shares in trust on behalf of the members entitled to such fractional entitlements with express understanding that such director or officer or person(s) shall sell the same in market at such time(s) (not later than six months upon coming into effect of this scheme) at such price(s) and to such person(s) as it/he/they may deem fit, and pay to the transferee company the net sale proceeds thereof. Thereupon, the transferee company shall distribute t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val of the shareholders of the transferor company and the transferee company respectively. 5.6 The issue and allotment of the shares under the provisions of this scheme to the non-resident shareholders will be made subject to applicable regulations of the Reserve Bank of India under the Foreign Exchange Management Act, 1999 and on such terms as the Reserve Bank of India may impose. 5.7 The transferee company holds 50,000 (fifty thousand only) equity shares of Rs. 10 each fully paid-up in transferor company. The transferor company holds 80,00,000 (eighty lakhs only) equity shares of Rs. 10 each fully paid-up in transferee company. Pursuant to the scheme, the said shares held by the transferee in transferor and vice versa shall be delivered up and cancelled. 5.8 The authorized capital of the transferor companies shall stand added to and consolidated with the authorized share capital of the transferee company without any further act or deed." 8. The paragraph 5.4 of Part II of the scheme provides that the reduction of share capital of the petitioner/transferee company pursuant to the scheme shall be given effect as an integral part of the scheme and the consent given to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity shares in the transferee company and the paid-up equity share capital of transferee company will stand altered accordingly." 11. Pursuant to the petition filed by the petitioner vide order dated 10-7-2007, the notices were directed to be issued to the Regional Director and the official liquidator. The citations were also directed to be published in the newspapers The Statesman (English) and Veer Arjun (Hindi), in accordance with Companies (Court) Rules, 1959. However, vide order dated 19-7-2007, the said publication of citation was dispensed with on the ground that the reduction of share capital is being effected as an integral part of the scheme of amalgamation, for which a separate petition was filed along with this reduction petition. 12. Pursuant to the notice issued to the Regional Director, an affidavit of Sh. Rakesh Chandra, Regional Director, Northern Region dated 24-8-2007, has been filed deposing that the copy of the petition has been examined and the Regional Director is acquainted with the facts of the matter and the Central Government has no objection to the proposed reduction of share capital. 13. Section 100 of the Companies Act, 1956, aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all have his share proportionately reduced, or whether some members shall retain their shares unreduced, the shares of others being extinguished totally, receiving a just equivalent. ( iv )The company limited by shares is permitted to reduce its share capital in any manner, meaning thereby a selective reduction is permissible within the framework of law. ( v )When the matter comes to the court, before confirming the proposed reduction the court has to be satisfied that ( i ) there is no unfair or inequitable transaction and ( ii ) all the creditors entitled to object to the reduction have either consented or been paid or secured. 16. In Novopan India Ltd. , In re [1997] 14 SCL 233 (AP), the scheme of amalgamation of Novopan India Ltd. with G.V.K. Hotels Ltd., was also involved reduction of share capital. Relying on rule 85 of the Companies (Court) Rules, 1959, regarding proposed reduction of the share capital, it was held that since the reduction has already been approved by the shareholders unanimously and even the creditors have given their consent to the proposed scheme of arrangement and since the secured creditors had expressed that they had no objection to the amalga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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