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TMI Blog2009 (11) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... this order shall be delivered to him within 21 days from today. Publication in the Official Gazette is dispensed with. The company petition is allowed as above. The Registry shall issue order in the appropriate from prescribed under the Companies (Court) Rules. - COMPANY PETITION NO. 1 OF 2009 - - - Dated:- 16-11-2009 - S. SIRI JAGAN, J. Philip Mathew for the Petitioner. T.P.M. Ibrahim Khan for the Registrar of Companies. P. Gopinatha Menon for the Amicus Curiae. ORDER 1. This is an application filed by a company to sanction a scheme of compromise and arrangement, entered into by them with the equity shareholders of the company. The compromise and arrangement is on the following terms : "( a )The issued, subscribed and paid up capital of the Petitioner-Company will stand reduced from Rs. 14,10,00,900 to Rs. 1,41,00,900 and transfer the balance of 90 per cent of the paid up share capital of the Company amounting to Rs. 12,69,00,810 to the unsecured loan account of the shareholders of the Company in proportion to the face value of the respective number of shares held by each shareholder. Only 10 per cent of the existing value of the equity shareholdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company and its creditors. The Scheme does not in any way affect the Company s ability to service its loans and its repayment." 2. By an order made on 28-10-2008, in MCA No. 114 of 2008, this Court directed convening a meeting of equity shareholders of the company the company to consider a resolution as to whether the shareholders of the company approves the scheme. Consequently, the Advocate chairman appointed by this Court has convened a meeting of the shareholders of the company on 19-12-2008 and filed a report, which has been produced along with the company petition, wherein it is stated thus : "(1)The said meeting was attended personally by 15 (Fifteen) members and by proxy numbering 10 (Ten) representing the members of the said Company entitled together to 62,80,040 equity shares. (2)The Scheme of Arrangement under sections 391 to 394 of the Companies Act, 1956 was read out and explained by me to the meeting and the question submitted to the said meeting was whether the equity shareholders of the said Company approved of the said Scheme of Arrangement submitted to the meeting as agreed thereto. (3)The said meeting was unanimously of the opinion that the said Scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nglish decisions the above conclusions were arrived at by the Court. He therefore, points out that the question as what to do with the amounts released on reduction of the share capital is the sole concern of the company and its shareholders and unless this Court comes to a finding that the mode of such reduction is prejudicial to the interest of the shareholders, creditors or the public, it is not for this Court look into the object behind the application of the released funds. But he points out that this being a reduction of share capital the procedure prescribed under section 100 of the Companies Act should have been followed and not the procedure prescribed under Rules 246 and 265 of the Companies (Court) Rules as applicable to sanction of a scheme of compromise or arrangement. He points out that the petitioner has followed the procedure prescribed for sanction of compromise or arrangement under sections 391 and 394 of the Companies Act which may not be technically correct. 5. The counsel for the petitioner submits that in view of the fact that the reduction of share capital was with a further reciprocal arrangement with the shareholders that the money released on reduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of reduction of share capital and the reciprocal arrangement with the shareholders for conversion of the released share capital as unsecured loan, under sections 391 and 394, is perfectly in order. 8. Regarding the other issue raised by Registrar of Companies, as pointed out by Sri P. Gopinatha Menon, the Amicus Curiae appointed by the Court in this case, the entire gamut of the judicial precedents, both Indian and English has been discussed by the Madras High Court in Panruti Industrial Co. (P.) Ltd. s case ( supra ). The principles discernible therefrom on the question of law involved may be summarised as follows : "A company has power to reduce share capital subject to confirmation by the Court. The issue of reduction of share capital is a domestic one to be decided by the shareholders by majority. It is for the company to determine the extent, mode and incidence of the reduction including the application of the moneys which may be set free as a result of the reduction. The duty of the Court is only to protect the interest of minority shareholders and creditors and see whether the reduction of share capital affects them prejudicially. The Court will also consider wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement with the shareholders are hereby sanctioned without any modification. 10. The sanctioned scheme of arrangement and compromise with the shareholders shall be published in one issue of Mathrubhumi daily and one issue of Indian Express daily in their editions having circulation in and around Thrissur within two weeks after registration of the same with the Registrar of Companies, for which purpose a certified copy of this order shall be delivered to him within 21 days from today. Publication in the Official Gazette is dispensed with. The company petition is allowed as above. The Registry shall issue order in the appropriate from prescribed under the Companies (Court) Rules. 11. This judgment would not be complete without a word of appreciation for the efforts put in by the Amicus Curiae . In view of the fact that there are no objectors to the company petition apart from the Registrar of Companies, I had requested Advocate Sri P. Gopinatha Menon to assist the Court as Amicus Curiae . He, despite his pre-occupation with his own work, accepted the assignment and worked up the position of law with great alacrity and enlightened the Court on every aspect of the is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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