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TMI Blog2024 (8) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... ,044 equity shares of Rs. 10/- each held by the non-promoter shareholders of the Petitioner Company representing in aggregate approximately 0.00083% (zero point zero zero zero eight three percent) of the total issued, subscribed and paid-up equity share capital of the Petitioner Company from the non-promoter equity shareholders being the Remaining Identified Shareholders more particularly set out herein below, for an aggregate consideration of Rs. 66,88,776/- being determined for 4,044 (Four Thousand Forty-Four) equity shares at 1,654/-per Equity share to be paid out of the free reserves of the Petitioner Company as per the latest audited financial statements. The copy of the Minutes approved along with the order shall be delivered to the ROC by filing the e-Form INC 28, within 30 days of the receipt of the copy of the order. Accordingly, the Registry shall prepare an order in Form No. RSC-6 as per the National Company Law Tribunal (Procedure for Reduction of Share Capital of the Company) Rules, 2016 and issue to the Applicant/Petitioner Company. The Petitioner Company shall publish this order of confirmation in The Hindu , English daily, Bengaluru edition and Udayavani Kannada dai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle is given hereunder: "68. The Company may, by special resolution, reduce in any manner and with and subject to, any incident authorised and consent required by law- (a) Its share capital; (b) Any capital redemption reserve account; (c) Any share premium account". 5. The Petitioner Company has made the following prayers: a. Allow and confirm the reduction of the issued, subscribed and paid-up equity share capital of the Petitioner company approved by the special resolution set out in paragraph 10 above read with modification in nonpromoter shareholding approved by way of board resolution set out in paragraph 12 above; b. For the purpose of the above, allow all directions necessary and proper be made and given; c. Allow the proposed minutes at Annexure-K; d. Dispense with the formality of the words, and reduced while describing the capital structure of the Petitioner Company and e. Pass such further order or orders be made in the premises as to the Tribunal shall deem fit in the interest of justice and equity. 6. The authorised, issued and paid-up Share Capital of the Petitioner Company as on 30.09.2023, is as follows; Authorized Capital Amount ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholders shall stand updated to the extent of any transfers made by the non-promoter shareholders to the promoter group and any transfer made by the non-promoters shareholders to promoter group shall not be part of the capital reduction. The Board of Directors of the Company by way of a circular resolution dated 8th November 2023 approved the updated list of the non-promoter shareholders consequent to the Share Transfers, for the purpose of capital reduction. 10. It is submitted that pursuant to the authority granted by the shareholders of the Petitioner company by way of a special resolution of the Petitioner Company duly passed at the Annual General Meeting held on 10.08.2023, the Board of Directors of the Petitioner company by way of a circular resolution dated 08.11.2023 approved the modification in the list of the non-promoter shareholders as a result of the Share Transfer. The Circular Resolution dated 08.11.2023 passed by the Board of Directors of the Petitioner Company is as follows: "RESOLVED THAT pursuant to Section 66 of the Companies Act, 2013 and other applicable provisions, if any, of the Companies Act, 2013, including any statutory amendments or re-enactment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Hemanshu Lalitbhai Kapadia Neelima Hemanshu Kapadia 5 3 Aravind VS 300 4 Devendra Amarnath Sharma 166 5 Sanjay Bhoite Mayuri Bhoite 8 6 Shankara Narayan Panigrahi 66 7 Janak Mathuradas Meena Janak 4 8 Punam Shashikant Suryawanshi 2 9 Pushpa Fulchand Pahade Ashish Fulchand Pahade 2,830 RESOLVED FURTHER THAT subject to the confirmation of the capital reduction by the NCLT and such capital reduction becoming effective and operative, and/or the receipt of such other approvals as may be required, the Remaining Identified Shareholders of the Company, as on the 'Record Date' (to be determined by the Board for the purposes of determining the names of the registered holders of the equity shares of the Company) shall be paid, for the equity shares held by them and which are extinguished, a sum of Rs.1,654/-(Rupees One Thousand Six Hundred and Fifty Four only) per Equity share of Rs. 10/- each, so cancelled and extinguished. RESOLVED FURTHER THAT other than the modification made to the list of the non-promoter shareholders of the Company whose equity shares are to be reduced subject to approval by the NCLT, Bengaluru Bench, no change is made to the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertifying the same are annexed as Annexure- N and P of the Petition. 14. The Petitioner Company further submitted that the reduction of the capital does not involve diminution of any liability in respect of unpaid capital. Such reduction will not cause any prejudice to the creditors, shareholders or any other stakeholders of the Petitioner Company. Further the proposed reduction of the share capital would not in any way adversely affect the ordinary operations of the Petitioner Company or the ability of the Petitioner Company to honour its commitments or to pay its debts in the ordinary course of its business. 15. Vide Certificate dated 08.11.2023 issued by Deloitte Haskins and Sells LLP, Chartered Accountants, it is confirmed that the accounting treatment for reduction of share capital contained in Annexure to the certificate is in compliance with and in accordance with the Indian Accounting Standards notified under Section 133 of the Act, as applicable read with the rules made there under, and other generally accepted accounting principles in India, as applicable. 16. There is no pending inspection, inquiry or investigation against the Petitioner Company under the Act and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aka, Bengaluru and the Regional Director, South Eastern Region, Hyderabad have filed a Common Report vide Diary No. 1984 dated 27.03.2024 by inter alia observing as under: (a) Para 2: That the company was originally incorporated in the State of Karnataka, Bangalore on 17.08.2010 with the name 'Azim Premji Custodial Services Private Limited". Later, the Petitioner Company was converted to public limited company with effect from 28.03.2013, and further the name of the Petitioner Company has been changed to Wipro Enterprises Limited with effect from 19.04.2013. The Petitioner Company was again reconverted into a private company with effect from 22.05.2015. Presently the registered office is situated at WIPRO HOUSE, NO. 8, 7TH MAIN. 80 FEET ROAD, KORAMANGALA 1ST BLOCK, BENGALURU, KARNATAKA 560 034, INDIA under the jurisdiction of this office. The Petitioner Company has filed the statutory returns for the financial year ending up to 2022-2023 and the said forms were taken on record. (b) Para 3: The present paid-up capital as per Master data is Rs. 4,83,66,20,000/-. (c) Para 4: That the Board (in its meeting held on June 19, 2023) and the Shareholders (in the annual genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on the 'Record Date"." (d) Para 5: That Subsequent to the Board and the Shareholders meetings approving the reduction of the share capital of the Petitioner Company, a majority of the non-promoter shareholders approached the promoters of the Company requesting them to purchase their entire shareholding in the Company by way of a secondary sale. As a result of such transfer, as of the date of this petition, the public non-promoter shareholding in the Petitioner Company aggregates to 4,044 (Four Thousand Forty-four) Equity shares held by 9 (nine) non- promoter shareholders which represents approximately 0.00083% of the paid-up equity share capital of the Company. (e) Para 6: That post the transfer of shares as mentioned in para-supra, subsequent to passing of resolution, the reduction of the equity share capital is from Rs. 483,66,21,630/- (Rupees Four Hundred Eighty-Three Crores Sixty-Six Lakhs Twenty-One Thousand Six Hundred and Thirty Only) consisting of 48,36,62,163 (Forty-Eight Crores Thirty-Six Lakhs Sixty-Two Thousand One Hundred and Sixty-Three Only) equity shares of Rs. 10/- each to Rs. 483,65,81,190/-(Rupees Four Hundred Eighty-Three Crores Sixty-Five L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the Company stated that it does not have any Secured Creditors. (l) Para 13: As per requirements under rule 2(b) of NCLT (Reduction of share capital) rules, a certificate from the Auditor Deloitte Haskins & Sells, Chartered Accountants dated 08/11/2023 is submitted to the effect that the list of Creditors is correct as per the seconds of the company provided by the petitioner. (m) Para 14: That the Petitioner Company has submitted Certificate from, Auditor, Deloitte Haskins & Sells, Chartered Accountants, dated 08/11/2023 certifying that the Petitioner company is not in arrears in the repayment of the deposits or interest thereon as on date of filing of the application. Rule 2(c) NCLT (Reduction of share capital) Rules is complied by the petitioner. (n) Para 15: That the Petitioner Company has submitted Certificate from, Deloitte Haskins & Sells. Chartered Accountants dated 08/11/2023 certifying that the accounting treatment proposed for the reduction of share capital of the Petitioner Company is in conformity with the Accounting Standards specified in Section 133 or any other provisions of Act. It is pertinent to state that the provisions of section 133 of the Act does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide exit route. In this regard, the Petitioner Company may be directed to furnish the details accounting entries to be made postmerger upon approval of the scheme. (u) Para 22: It is seen from the latest balance sheet for the financial year ended 31-03-2023, the Petitioner Company has to pay statutory dues towards Income Tax, Service Tax etc. Hence, the Petitioner Company may be directed to furnish an undertaking with regard to the payment of statutory dues. (v) Para 23: No Prosecutions, Complaints, Technical Scrutiny, and Inspection are pending with this office. 20. The Petitioner Company in response to the Common Report of RD and ROC has filed a Reply affidavit vide Diary No. 2013 on 28.03.2024 has inter alia stated as under: 1. Regarding the observations at Para 1 to 6 of the Report: it is submitted that the said observations are true and are not required to be traversed. 2. Regarding the observations at Para 7 of the Report: it is submitted that the said observation is a matter of record. The company is seeking confirmation of this Hon'ble Tribunal of proposed reduction of 4,044 shares which constitute approximately 0.00083% of the issued, subscribed and paid u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fairness Opinion produced at ANNEXURE I and J of the Petition. 9. Regarding the observations at Para 19 of the Report: it is submitted that the Publication in Form RSC-4 was published in "The Hindu" English daily and "Udayavani" on Kannada Daily on 27/12/2023. In this regard Compliance Affidavit in RSC-5 was already filed vide Diary Number 2903111017202023/1 on 03.01.2024. 10. Regarding the observations at Para 20 of the Report it is submitted that all the Related Party Transactions are entered in the ordinary course of business and are on arm's length basis. Further the same have been disclosed in the Financial Statements of the Company for FY 2021-22 and FY 2022-23 and also in FORM AOC-2 of the respective financial years which is forming part of the Annual Report. 11. Regarding the observations at Para 21 of the Report it is submitted that post- Reduction the Pay-out to Shareholders shall be accounted to the Bank/Cash in the Asset side of the Balance Sheet. Proposed accounting entry subsequent to approval of capital reduction: Account Description Amt in Rs-Dr Amt in Rs-Cr Share Capital 40,440 Reserves and Surplus 66,48,336 Bank 66,88,776 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erim application and also claim statement in which the Petitioner Company has clearly stated that they do not have to pay any amount to the Respondent Company in spite of the facts the documents annexed to the petition itself reveal amounts due and payable to the Respondent Company. (c) Further the Respondent Company is an MSME registered with the Government of India. The Petitioner Company has not complied with the provisions of the MSME Development Act, 2006 and has thus adopted a false balance sheet, which it has made the basis by which the present petition is preferred. The requisite accounting treatment is not made and thus accounting standards provided for the same are not complied with. Thus, there is a clear breach of the proviso to the mandate of Sec.66 (3) of the Companies Act. 24. Ld. Counsel for the Petitioner Company had received an advance copy of the Statement of Objections and hence they had filed the Rejoinder on 19.04.2024 vide Diary No. 2412 stating as under: a) The amounts purportedly claimed by the Zenith are false and without any basis. As per the books of the Petitioner Company, the total outstanding balance amount towards Zenith is only Rs.28,18,076/- w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her before or after the commencement of this Act, or the interest payable thereon. 27. 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. Some of the case laws are discussed below : (a) In the case of Elpro International Limited (Company Petition No. 288 of 2007) order dated 22.06.2007 reported in (2009) 149 CompCas646 (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 bonafides 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 to come to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjected to the reduction of the capital. Section 66 (1) (b) of the Act enables a Company to reduce its share capital in any manner' provided it is approved by the majority of Shareholders through a special resolution." (d) Further, in the matter of Economy Hotels India Services Private Limited v. Registrar of Companies in Company Appeal (AT) No. 97 of 2020 passed by Hon'ble NCLAT, it was observed that "Be it noted, that 'Reduction of Capital' is a 'Domestic Affair' of a particular Company in which, ordinarily, a Tribunal will not interfere because of the reason that it is a 'majority decision' which prevails. . .'. 28. It is noticed, as per the discussions above that the necessary compliance of the requirements of Section 66(1) along with its proviso; Section 66(2) & Section 66(3) proviso has been made/satisfied by the Petitioner Company. In the circumstances, it is hereby ordered to confirm the reduction of share capital of the Petitioner Company by approving the Special Resolution dated 10.08.2023 read with the subsequent Circular Board Resolution dated 08.11.2023 where in it was resolved to reduce the issued, subscribed and paid-u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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