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TMI Blog2020 (8) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, Mumbai Bench with the Registrar of Companies within 30 days of receipt of this order - Application for the reduction of share capital allowed subject to the directions given. Application for the reduction of share capital allowed. - C. P. No. 4475 of 2018 and Miscellaneous Application No. 3857 of 2019. - - - Dated:- 10-12-2019 - M. K. Shrawat (Judicial Member) And Chandra Bhan Singh (Technical Member) For the Petitioner : Darius J. Khambatta , Senior Counsel along with Hemant Sethi instructed by Hemant Sethi And Co. For the Respondent : Hemant Sethi instructed by Hemant Sethi And Co. For the Objector : M. A. No. 3857 of 2019. Gaurav Joshi Senior Counsel along with Manik Joshi , Mantul Bajpai instructed by Crawford Bayley And Co. For the Intervener/Applicant in M. A. No. 3857 of 2019 : Rahul Sarda along with Mrs. Manik Joshi along with Mantul Bajpai instructed by Crawford Bayley And Co. ORDER CHANDRA BHAN SINGH (TECHNICAL MEMBER) - 1. The learned senior counsel for the petitioner-company submits that article 8 of the articles of association of the petitioner-company empowers the petitioner-company to reduce its share capital in any mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hundred and ten only), comprising of 2,17,31,951 fully paid-up equity shares of ₹ 10 (Indian rupees ten only) each. This reduction as mentioned above will be effected by cancelling and extinguishing 3.68 per cent. of the total issued, subscribed and paid-up equity share capital of the petitioner- company comprising 8,29,613 issued, subscribed and fully paid-up equity shares of ₹ 10 (Indian rupees ten only) each which are held by the non- promoter public shareholders of the petitioner-company. 5. The Regional Director, Western Region, Mumbai in his report dated September 11, 2019 has made certain observations with relation to the proposed reduction of share capital of the petitioner-company. These observations made by the Regional Director, are reproduced as under : (a) Applicant to submit an affidavit to the effect that the interest of the creditors and all stakeholders and Government Revenue are protected as well as statutory dues are paid off. (b) The tax implication if any arising out of the proposal for reduction is subject to final decision of Income-tax authorities. The approval of the company petition by this hon'ble court may not deter the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order inform the petitioner-company, in writing, if they would like to participate in the said reduction or continue holding shares in the petitioner-company. In the event the objecting shareholders of the extraordinary general meeting held on October 25, 2018 do not respond within 15 days of the communication of this Bench's order it shall be presumed that the objecting shareholder intends to participate in the said reduction. 11. In carrying out the selective reduction of share capital the petitioner- company has relied on the judgment of the hon'ble High Court of Delhi in Reckitt Benckiser (India) Ltd., In re [2005] 122 DLT 612 wherein it was held that : During the course of hearing 2 persons also joined the objector. Statement was made by learned counsel for the petitioner that if these objectors do not want to part with their equities, the company shall not insist upon the same. In view of this statement, in fact, nothing survive in the objections, as the objections are not going to be affected by the proposed reduction of share capital, because their share would remain intact and they would continue to be the share holders. After all, on the exit offers give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares after the conclusion of the extraordinary general meeting were well aware that the petitioner-company was in the process of undertaking the proposed reduction and the same had already been approved by the requisite majority of the shareholders at the extraordinary general meeting. Therefore, it is not fair or permissible for them to raise any objections against the proposed reduction given that they were fully aware of the decision of the petitioner-company and its shareholders prior to becoming shareholders of the petitioner-company. (b) Those who did not attend the extraordinary general meeting of October 25, 2018 of the petitioner-company : As regards the position of shareholders who did not attend the extra-ordinary general meeting the observations of the hon'ble Supreme Court of India in Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp Cas 792 (SC) ; AIR 1997 SC 506, are most relevant (page 829 of 87 Comp Cas) : If he was feeling that the scheme was unfair to him or was not going to protect his interest as a shareholder in the respondent-company, nothing prevented him from remaining present and voicing his grievance before the general body of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in any manner, meaning thereby a selective reduction is permissible within the framework of law (see Denver Hotel Co., In re [1893] 1 Ch D 495. (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. As regards the contentions in relation to the valuation report obtained by the petitioner-company, the principles set out by the hon'ble Bombay High Court in Cadbury India Ltd., In re [2014] SCC Online Bom 4934 and Sandvik Asia Ltd. v. Bharat Kumar Padamsi [2009] 151 Comp Cas 251 (Bom) ; [2009] SCC Online Bom 541 are relevant : In Cadbury India Ltd., In re [2014] SCC Online Bom 4934 the following general principles have been set out in paragraph No. 7 : 7. General Principles 7.1.5 Before a court can decline sanction to a scheme on account of a valuation, an objector to the scheme must first show that the valuation is ex-facie unreasonable, i. e., so unreasonable that it cannot on the face of it be accepted. That unreasonableness must exist on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an estimation, a best judgment assessment. The fact that a particular estimation might not catch an objector's fancy is no ground to discredit it. All valuations proceed on assumptions. To dislodge a valuation, it must be shown that those assumptions are such as could never have been made, and that they are so patently erroneous that the end result itself could not but be wrong, unfair and unreasonable. The court must not venture into the realm of convoluted analysis, extrapolation, and taking on itself an accounting burden that is no part of its remit or expertise, and no part of a statutory obligation. In particular, the court must guard against the seductiveness of a pro position that suffers from the fallacy of the undistributed middle : all x is z ; some y is z ; ergo, all y is z. The errors and consequent un-reasonableness must be shown to be patent and self-evident. 7.1.11 It is impossible to say which of several available valuation models are 'best' or most appropriate. In a given case, the CCM method may be more accurate ; in another, the DCF model. There are yet others. No valuation is to be disregarded merely because it has used one or the other of variou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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