H.K.Bose, J. - (1.) This is an application for confirmation of a reduction of capital. The petitioner is a public limited company which was incorporated in June 1945 under the Indian Companies Act, 1913. Its registered office is at 12, India Exchange Place, Calcutta. It carries on business of manufacturers, importers and exporters of radios, radiograms, gramophones, refrigerators, cables, electric switches, switch gears and other electrical goods and equipments. The authorised capital of the company is Rs. 50,00,000/- divided into 3,75,000 ordinary shares of Rs. 10/- each, 10,000 five per tent, cumulative participating preference shares of Rs. 100/- each and 50,000 deferred shares of Rs. 5/-each. The total paid up capital of the company is Rs. 29,20,300/- made up as follows: JUDGEMENT_672_AIR(CAL)_1959Html1.htm
(2.) The company's factory is at Karampura in the State of Bihar. Since October 1947 the Company has entered into technical collaboration arrangement with foreign firms of repute for carrying on its business and although it has received liberal financial assistance by way of loan from its Managing Agents, Karamchand Thappar and Bros, to the extent of about Rs. 75,00,000/- and from Industrial Finance Corporation to the extent of about Rs. 12,00,000/-. the Company has unfortunately failed to turn itself into a profitable concern so tar. On the other hand, its balance sheet for the year 1956 discloses that it has suffered a loss of about Rs. 36,00,000/-. At present the company is under technical collaboration arrangement with well-known firms of Saba of West Germany and Messrs. Simplex Electric Co., Ltd. of Birmingham and its expectation is that it will be able to capture the market by its products if it is put on a sound financial basis by writing off the loss which it has sustained so far and if it succeeds in obtaining further finance for its business to the extent of about Rupees 15,00,000/-. It is alleged in the petition that the whole of the paid up share capital of the company is lost and is not represented by any available assets. In the circumstances the Directors proposed reduction of the share capital by cancellation of the paid up capital and a scheme of arrangement for reorganisation and consolidation of the share capital of the company. It may be noted that a nominee of the Industrial Finance Corporation, one Mr. Khanna, is a member of the Board of Directors of this Company and he is there obviously to look after the interests of the Industrial Finance Corporation to whom more than 10 lakhs of rupees is still due and owing by the company on account of the loan advanced by the said Corporation It appears that on 14-2-1957, there were held three separate meetings of ordinary, preference and deferred share-holders for approving the reduction and the scheme of reorganisation and consolidation of share capital and on the same day an extraordinary general meeting of the shareholders was also held at which the following special resolution concerning the reduction of capital was passed. "In terms of the said arrangement all the existing preference, ordinary and deferred subscribed and paid up shares of the company be and are hereby reduced as follows: (a) by cancellation of the paid up capital to the extent of Rs. 70/- for every 8452 preference shares of Rs. 100/- each which have been issued and are now outstanding: (b) by cancellation of the paid up capital to the extent of Rs. 8/- for every 1,89,985 ordinary shares of Rs. 10/- each which have been issued and are now outstanding; (c) by cancellation of the paid up capital to the extent of Rs. 4/- for every 35,050 deferred shares of Rs. 5/- each which have been issued and are now outstanding."
(3.) It appears that along with the notice issued convening the general meeting held on 14-2-1957, an explanatory note was sent to each shareholder setting out the circumstances under which it became necessary to reduce the capital and to formulate the scheme of reorganisation and consolidation of the share capital. The company has made a separate application for sanction of the scheme which has also been heard along with this application. It is alleged in the petition that the Company has no debenture-holders but besides the creditors Karamchand Thappar and Bros., who are the Managing Agents, and the Industrial Finance Corporation, it has sundry creditors to the extent of Rs. 5,36,286/-. Although Muilick J. dispensed with the list of creditors, mis Court directed individual notice to be served on the Industrial Finance Corporation and it also directed advertisement to be issued in order to enable any creditor to oppose this application, if any creditor might be advised to do so. But none of the creditors have appeared to oppose this application and the Industrial Finance Corporation has also intimated in writing that they have no objection to the reduction of capital being confirmed or the scheme being sanctioned by this Court. Only one preference shareholder, Hindusthan Commercial Bank Ltd., which holds 2000 preference shares has opposed this application. It may be pointed out that the representative of this Hindusthan Commercial Bank Ltd. had taken part in the general meeting of the share-holders which was held on 14-2-1957 and this shareholder along with another preference shareholder, one Mr. Abdulla, who held 100 Preference shares in the company recorded their objection to some of the resolutions which had been passed at such meeting.;