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TMI Blog2021 (12) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... ded into 11,19,86,482 Equity Shares of ₹ 10/- each fully paid up. The necessary alteration shall be made in the Memorandum of Association by the Petitioner Company for reduction of the paid-up share capital - Application allowed. - C.P. No. 157/BB/2020 - - - Dated:- 8-12-2021 - Ajay Kumar Vatsavayi, Member (J) And Manoj Kumar Dubey, Member (T) For the Appellant : Parameshwar G. Bhat, PCS For the Respondents : Hemanth R. Rao, Adv. ORDER Ajay Kumar Vatsavayi, Member (J) 1. Under consideration is an application Under Section 66 of the Companies Act, 2013 r/w National Company Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016 for confirming the reduction of share capital. 2. The Petitioner Company was incorporated on 31.12.1993, under the provisions of the Companies Act, 1956, as a Limited Company. The registered office of the Company situated at #S5, Off 3rd Cross Peenya Industrial Area, 1st Stage Peenya, Bengaluru - 560058. Therefore, the matter lies within the territorial jurisdiction of this Tribunal. 3. The True copy of Memorandum Articles of Association is filed as annexure-B of the petition. The main objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany has made provision for impairment of these assets in their Statement of Profit and Loss created for the FY ending 31.03.2019. Thus the Shares issued are unrepresented by available assets correctness of the valuation and ascertain its consequent impact, if any, on the Ind AS Standalone financial statements. 9. The Arbitration award was passed by Justice V. Jagannathan, Former Judge, High Court of Karnataka, Hon'ble Arbitral Tribunal, in the matters of Arbitration Disputes under the Arbitration and Conciliation Act, 1996 on 22.03.2019 awarding cancellation/annulment of the allotment of Equity Shares held by 3 Singapore Entities without any pay-out for the shares being cancelled. A copy of Annual Reports of the Company for the FY ended 31.03.2018, 31.03.2019 and 31.03.2020 are enclosed to this application. Subsequent to the date of the aforesaid audited accounts, there has been no substantial change in the financial position of the Applicant Company except such changes arising or resulting from the normal course of the business. 10. It is stated that the Company has not maintained proper inventory records in its e-waste division. It has been informed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the 25th Annual General Meeting of the Company held at 10:00 AM, on Wednesday, 25th September, 2019, by passing of the below mentioned Special Resolution, by serving Notice dated 19th August, 2019 subject to the approval/No objection letters to be obtained by the both Stock Exchanges i.e., BSE Limited and National Stock Exchange of India Limited. Copy of the AGM Notice along with Explanatory Statement is enclosed to this Application. 16. It is submitted that pursuant to the Board meeting dated 12th August 2019, the Annual General Meeting was held on 25th September 2019 have unanimously approved the proposed reduction of capital by passing the following resolution: RESOLVED THAT, in full compliance with the Awards passed by the Hon'ble Arbitral Tribunal in the matter of Arbitration Dispute under the Arbitration and Conciliation Act, 1996 dated 22 March, 2019 without any payout for the Shares being cancelled, pursuant to the provisions of Section 66 of the Companies Act, 2013, if applicable read with the National Company Law Tribunal (Procedure for Reduction of Share Capital) Rules, 2016 (including any statutory modification, amendment or re-enactment thereof for the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Stock Exchange Ltd. through email and the Petitioner is also permitted to take notice to the aforesaid authorities and creditors, through authorised email along with the Company Petition and material papers as well as by Speed Post and submit proof of service in the Registry well before the next date of hearing. Aforesaid authorities are directed to file the reply within three weeks with a copy endorsing to the Petitioner and the Petitioner is directed to file reply affidavit to the observations of the said authorities, if any, well before the next date of hearing, with a copy endorsed to the respective authorities. The Petitioner is directed to cause Paper public in 'Financial Express' English daily and 'Sanjeuani' Kannada daily, and to file proof of service in the Registry well before the next date of hearing. 21. In compliance to the said order, the Petitioner Company has filed affidavit vide Diary No. 3547 dated 09.11.2020. Along with the affidavit the Petitioner Company has also filed the copies of paper publications of the advertisement made for the proposed reduction. 22. The Registrar of Companies, Karnataka, Bengaluru and the Regional Directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the tax dues will be remitted to the statutory authorities as and when demanded. g) The Paid-up Capital of the Company has increased from ₹ 108,49,66,320/- to ₹ 120,39,66,320/- in the year 2017-18 and from ₹ 120,39,66,320/- to ₹ 121,19,66,320/- in the year 2018-19. The company may be asked to explain the compliance of Section 42 of the Companies Act, 2013 and Listing Agreement including approval of NSE and BSE for listing such shares and furnish an affidavit with regard to the compliance as sought above. h) Though there were several violations observed by ROC/RD in the last three years balance sheets, Hon'ble NCLT may entertain the petition to enable the Company to comply with the award passed by Arbitration Tribunal vide order dated 22.03.2019 while considering the observations of the Regional Director and direct the Petitioner Company to comply with the above observations and decide the case as per the merits. It is further submitted that no prosecutions, complaints, Technical Scrutiny and Inspection are pending against the company. 23. The Petitioner Company in response to the common report of RD and ROC dated 11.03.2021 has filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position of CFO till 16.08.2020 i.e. till the date of his demise due to Covid-19. e) It is submitted that according to the Master Services Agreement dated 19.03.2010 with Cimelia Resource Recovery PTE Ltd. $ 1.25 Million has been paid to Enviro-hub Holdings Ltd. (parent company of Cimelia Resource Recovery PTE Ltd.) to take over Cimelia Resource Recovery PTE Ltd. In this regard, Messrs Grant Thorton, Leading Investment Advisers who conducted the Due Diligence, advised the Company to drop the acquisition. As per Arbitration Award dated 22.03.2019, the deposit of $ 1.25 Million was forfeited and 92,00,000 shares issued to Cimelia Resources Recovery PTE Ltd., Restorer Corp Ltd. and Leytron Technology PTE. Ltd., the Singapore based companies are to be cancelled. Keeping in view the award passed, it was decided to reduce the Paid-up Share Capital of the Company to the extent of ₹ 9,20,00,000. Accordingly, impairment provision was made in the Financial Statements for the FY 2018-19. f) It is also submitted that the Company has furnished an undertaking to the effect that the tax dues will be remitted to the Statutory Authorities as and when demanded and such undertaking i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the repayment of any deposits accepted by it, either before or after the commencement of this Act, or the interest payable thereon. 24. The present position of law, while dealing with provisions of Section 66 is that if none of the shareholders are objecting for the proposed reduction, then after considering the merits of the case as also connected facts and circumstances such petition generally deserves to be admitted. i) In the case of Elpro International Limited (Company Petition No. 288 of 2007) order dated 22.06.2007 reported in [2009] 149 CompCas 646 (Bom), Hon'ble Bombay High Court has expressed that the question of reduction of share capital is the matter of domestic concern. Further observed that decision for reduction is based on commercial consideration undertaken by the businessmen who are in the best position to know of the necessities and interest of the company concerned, in the absence of serious allegations as regards the bona fides of the proposed scheme, the courts are of the view that no interference in such decisions is required. It has also been observed that considering the commercial aspect of the decision it is not permissible for the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly apply to the present case. In our opinion once it is established that non-promoter shareholders are being paid fair value of their shares, at no point of time it is even suggested by them that the amount that is being paid is any way less and that even overwhelming majority of the non-promoters shareholders having voted in favour of the resolution shows that the court will not be justified in withholding its sanction to the resolution. As the Supreme Court has recognized that the judgment of the House of Lords in the case of British American Trustee and Finance Corporate Limited is a leading judgment on the subject, we are justified in considering ourselves bound by the law laid down in that judgment. As we find that there is similarity in the facts in which the observations were made in the judgment in the case of British and American Trustee and Finance Corporation, we will be well advised to follow the law laid down in that case. In our opinion, therefore the learned single judge was in error in declining to grant sanction to the special resolution. 25. In the circumstances, it is hereby ordered to confirm the reduction of paid up share capital of the Petitioner Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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