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TMI Blog2018 (12) TMI 1746X X X X Extracts X X X X X X X X Extracts X X X X ..... f the share capital - This evinces an intention to avoid compliance with necessary provisions of Companies Act, 2013 and SEBI regulations. Petition dismissed. - CP. No. 459/BB/ 18 - - - Dated:- 5-12-2018 - Hon'ble Shri Rajeswara Rao Vittanala (Judicial) And Hon'ble Shri Ashok Kumar Mishra, Member (Technical) Shri Parameshwar Bhat and Shri K Dushyantha Kumar, Practicing Company Secretaries on behalf of the Petitioner Company. Shri Binoy Chacko, Practicing Company Secretary on behalf of the Objector-Mr. Mahendra Girdharilal ORDER Shri Ashok Kumar Mishra, Member (Technical) 1. This Company Petition has been filed on behalf of the Petitioner Company under Section 61(1)(b) of the Companies Act, 2013 read with Rule 71 of the National Company Law Tribunal Rules, 2016 for the purpose of consolidation and division of the equity shares of the Company. 2. The averments made in the Company Petition are briefly described hereunder:- A. M/S. Chembra Peak Estates Limited (Hereinafter referred to as Company ) was incorporated on 20th July, 1932 under the provisions of the Companies Act, 1913 as a public lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th respect to consolidation of its authorized, issued, subscribed and paid up equity share capital of the Company subject to the approval of the shareholders of the Company at the extra-ordinary general meeting of the Company. G. The Company in its duly convened and validly held Extra Ordinary General Meeting held on 14th April, 2018, proposed and offered consolidation of Equity shares of the Company pursuant to Section 61 (l)(b) and the Companies (Share Capital and Debenture) Rules, 2014 of the Companies Act, 2013 read with Rule 71 of the National Company Law Tribunal Rules, 2016 by way of Special Resolution. The Company issued notice dated 19.3.2018 to all the Shareholders and Extra-Ordinary General Meeting was convened at 10 30 AM on Saturday, the 14th day of April, 2018 at the registered office of the Company. The members of the Company have passed the special resolution by requisite majority in accordance with the provisions of the Companies Act, 2013 with respect to the said consolidation as follows: RESOLVED THAT pursuant to the provisions of Section 61(1)(b) of the Companies Act, 2013 (including any statutory modification(s) or re-enactment thereof, for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ESOLVED FURTHER THAT for Shareholders holding Equity Shares in dematerialized form as of the Record Date, Shareholders hereby accord their consent for the discontinuation of dematerialization of the Shares and to hold the fully paid consolidated equity shares in physical form only and fresh Share certificates be issued for the fully paid consolidated equity shares to such shareholders in lieu thereof pursuant to the Companies (Share Capital and Debenture) Rules, 2014. RESOLVED FURTHER THAT for the purpose of giving effect to the above resolutions, the Board or any person authorized by the Board of Directors of the Company thereof be authorized on behalf of the Company to take all necessary steps in this regard in order to facilitate the legal and/ or procedural formalities and to do all such acts, deeds, matters and things as it may, in its absolute discretion, deem necessary for such purpose and with power on behalf of the Company to settle any questions, difficulties or doubts that may arise in this regard without requiring the Board of Directors of the Company to secure any further consent or approval of the Shareholders of the Company. H. In the EGM held on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed share consolidation. Each consolidated share will rank pari passu in all respects with each other. L. The circumstances and reasons which justify and necessitate the proposed consolidation of equity shares and the major benefits that will accrue are as follows: i. Sale of the shares resulting from the consolidation of fractional entitlements is at a fair price equal to ₹ 76/-, being more than 15% above the Exit Price arrived at during the Exit Offer provided to the Public Shareholders by the Company. ii. Since, the shares of the Company are unlisted, it does not have liquidity and with consolidation of equity shares, the minority shareholders will be able to have liquidity benefit. iii. The shares of the Company have been held by the same shareholders for a very long time now and many of them are not traceable; multiple annual reports/ dividend warrants being sent are returned for lack of proper address. iv. Subsequent to delisting of the shares of the Company, it has been observed that the number of shareholders attending the annual general meeting has diminished significantly evidencing a substantially reduced interest in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, 2003 were the guidelines prevailing at the time of issue of circular dated 29th December, 2008. Subsequently, SEBI (Delisting of Equity Shares) Guidelines, 2009 was notified and thereby repealing the SEBI (Delisting of Equity Shares) Guidelines, 2003. As SEBI specifies the applicability of existing delisting regulations, SEBI (Delisting of Equity Shares) Guidelines, 2009 is the existing regulation which is required to be followed by the companies in dissemination board to give exit to the public/ non-promoter shareholders. ii. Also a circular has been issued by SEBI on 10 October 2016, by which it specified separate guidelines for providing exit to public/ non-promoter shareholders. The clarification given by SEBI with respect to implementation of this circular also mandates the ELC to follow the guidelines prescribed in the 10 October 2016 circular. In view of these provisions, providing exit opportunity to the public/ non-promoter shareholders by way of consolidation of capital by increasing the face value of each share from ₹ 10/- to ₹ 60,550/- under Section 61(1)(b) of Companies Act, 2()13, is against the provisions of law. c. Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Promoter got tendering of just 3,829 shares in 2017-18 and (2.64% tendering of the total offering) and 11,320 shares in 2016-17 (7.81% tendering of the total offering) ₹ 10 each at an exit price of ₹ 6 per share from the public shareholders in the said Exit Offer as against targeted 1,44,919 shares. The Company has failed to inform its shareholders and explicitly reflect this fact in its Directors' Report of 2016-2017 and 2017-18 as also in the Explanatory Statement given under Section 102 of the Companies Act, 2013 for the EGM notice held on 14 April 2018. h. The resolution of the Extra Ordinary General Meeting dated 14 th April, 2018 is in violation of the Companies Act, 2013 and SEBI Regulations, prejudicial to the interest of the Company, non-promoter shareholders including shares held by Government through Investor Education and Protection Fund. i. Section 61(1)(b) of the Companies Act, 2013 is being illegally misinterpreted by the Company and its Directors for the cancellation or extinguishment of shares held by non-promoter shareholders. It is a regressive step as it may lead to selective cancellation of minority shareholding using the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of shares by changing the face value of share from ₹ 10/- to ₹ 60,550/- is unprecedented, against the minority shareholders and violates the principles of public policy, norms as well as delisting regulations, SEBI Circulars and deserves to be rejected by the Tribunal. 4. The Registrar of Companies, Karnataka, Bangalore has filed his report dated 5th December, 2018 stating inter alia as follows: a. The present company application filed by the applicant company seeking approval from the Tribunal for the consolidation of the equity shares of the Company from the existing 10/- per share to ₹ 60,550/- per share which will result into consolidation of authorised, issued and the paid up share capital in terms of nominal value of equity shares resulting in the exit of minority shareholders of the company at the exit price of ₹ 76/- per equity share. In the petition, it has been stated that the Company has provided an exit opportunity to all the public shareholders offering to buy equity shares of the Company. The exit offer was valid up to 18.3.2018. The present Company Petition is for allowing company for consolidation of equity shares by p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istrar of Companies, Karnataka, Bangalore, it is clear that the Company should rather opt for the procedure prescribed under Section 68, Companies Act, 2013 if it wishes to reduce the public shareholders and save costs. 6. Furthermore, on perusal of the Circular No. SEB1/HO/MRD/DSA/CIR/P/2016/110 dated October 10, 2016, at the Annexure-A, para (vi), the Promoters are liable to acquire shares that are not offered under the exit offer up to a period of one year from the completion of offer. However, it appears the Promoters of the Company have not utilised this provision to acquire all the shares of the public shareholders after completion of one year. Instead, they have appeared before this Tribunal for purchasing shares and providing an exit route to the public shareholders, but under the pretext of consolidation of the share capital. This evinces an intention to avoid compliance with necessary provisions of Companies Act, 2013 and SEBI regulations. We are also concerned about the interests of the minority shareholders that expressed their concern of reduction in their voting percentage in an arbitrary manner. 7. In light of the foregoing, we are of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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