V.P. Singh, Member - (1.) Per Shri V.P. Singh, Member (judicial) This is a petition filed under section 66 of the Companies Act, 2013 read with the National Company Law Tribunal (Procedure for reduction of share capital of company) Rules, 2016. The petitioner company seeks approval of this Tribunal qua the special resolution passed through Postal Ballot results declared on 09.08.2016 wherein it was resolved that the issued subscribed and paid up equity share capital of Rs.lO,00,00,000/-(RupeesTen Crores only) consisting of Rs.1,00,00,000 equity shares of Rs.10/- (Rupees Ten) each fully paid-up to Rs.l,00,00,000/-(One Crore only) divided into 1,00,00,000 (One Crore) fully paid-up equity shares of Re.l/- each, by writing off the accumulated losses of the company. Section 66 of the Companies Act, 2013 came into force w.e.f. 01.06.2016 which corresponds to erstwhile section 100-104 of the Companies Act, 1956.
(2.) The broad facts in the background of such the present petition came to be filed are that the above named company, the applicant herein (hereinafter call the company') was registered on the 2nd day of September, 1988 under the provisions of the Companies Act, 1956 as a company limited by shares with a share capital. The authorised and paid-up capital of the company is Rs. 10,00,00,000/- (Ten Crore only) divided into 1,00,00,000 (One Crore) equity shares of Rs.10/- each of which 1,00,00,000 (One Crore) equity shares have been issued and have been fully paid-up. The equity shares of the company are listed at BSE Ltd. 2.1. Article(s) 2 and 48 of the Articles of Association of the Company provide that the company may, from time to time, by special resolution, reduce its capital in any manner permitted by law. 2.2. The company had accumulated loss of Rs.9,11,66,432/- (Nine crores eleven lakhs sixty-six thousand four hundred and thirty two only) as against the total paid up share capital of Rs. 10,00,00,000/- (Ten crores only) . Therefore, it was felt by the company that the paid-up share capital of the company did not really represent the available assets of the company and that the balance sheet of the company should reflect the true picture. The Board of Directors of the company therefore passed a resolution in the meeting held on April 21, 2016 resolving to reduce the paid-up capital from Rs. 10,00,00,000/- (Rupees Ten Crores only) divided into 1,00,00,000 (One crore) equity shares of Rs.10/- (Rupees Ten) each fully paid-up to Rs. 1,00,00,000/- (Rupees One Crore only) divided into 1,00,00,000 (One crore) equity shares of Re.l/- each fully paid-up which has lost oris unrepresented by available tangible assets. The resultant paid-up capital of the company will be Rs.1,00,00,000/- (Rupees One Crore only) divided into 1,00,00,000 (One crore) equity shares of Re.l/- each fully paid-up. The company has unsecured creditors of Rs.15,51,834 (rupees Fifteen lakhs fifty-one thousand eight hundred and thirty-four only) as on March 31, 2016 and the company does not have any secured creditors. The creditors have issued their No Objection Certificate for reduction in share capital of the company. No Objection Certificate from BSE taken by the company for reduction in share capital of the company, a copy of Fairness Opinion Certificate on valuation of shares of Regency Trust Ltd. and a copy of complaint status report are annexed to the petition as Exhibit 7, 8, 9 respectively. 2.3 The reasons for such reduction of share capital are : i. The company has accumulated loss of Rs.9,11,66,432/- (Rupees Nine crore eleven lakh sixty sixty thousand four hundred and thirty two only as on March 31,2016. The continued losses have substantially eroded the value of share capital thus the financial statements do not reflect the correct picture of the financial health of the company. ii. For ensuring that the financial statement of the company reflects the real picture and the capital which is lost is not continued to be shown on the face of balance sheet, it is necessary to carry our reduction of capital of the company. iii. Since writing off of losses has become inevitable for growth of the company and its members, the company is now proposing to undertake a scheme of capital reduction exercises whereby the company would write off the losses against the share capital. iv. The reduction of capital in the manner proposed would enable the company to have a rational structure which is commensurate with its remaining business and assets. v. The proposed reduction will be for the benefit of the company and its shareholders, creditors and all concerned as a whole. 2.4. The members of the company through Postal Ballot results declared on August 09, 2016,approved reduction in share capital of the company. A copy of the resolution approved by the members through Postal Ballot on August 09, 2016 is annexed to the petition as "Exhibit-12'. The number of members who voted in favour of the resolution for reduction of share capital and the number of shares or voting power held by them - 49 shareholders holding 39,92,837 (39.93%) equity shares. The number of members who voted against the resolution and the number of shares or voting power held by them - 8 shareholders holding 12,49,485 (12.49%) equity shares. 2.5 The proposed scheme of reduction in share capital does not involve either the diminution of any liability in respect of any unpaid capital or the payment to any shareholder of any paid-up capital nor is any call being waived. There is no actual cash out flow. Further, the proposed adjustment would not in any way adversely affect the ordinary operations of the company or the ability of the company to honor its commitments or to pay its debts in the ordinary course of business.
(3.) The matter was heard on different dates. The petitioner was directed by an order dated 06.03.2017 to serve a notice along with a copy of the petition on all regulatory authorities including SEBI, Central Government. The company filed an affidavit dated 21.04.2017 confirming the service of notice on the Regional Director, Eastern Region, the Registrar of Companies, West Bengal as also the Securities Exchange Board of India (SEBI) on 07.04.2017. The Central Government through the Regional Director, Eastern Region as well as SEBI were represented. Although no affidavit came to be filed from SEBI, Ld. Advocate representing SEBI submitted that since BSE had given no objection, there was nothing further to communicate from SEBI side and the communication dated 23.06.2016 from BSE is placed on record. The Regional Director, Eastern Region, filed his affidavit dated 16.08.2017. The observations of the Central Government on the petition, as stated in the said affidavit, are extracted below : That it is submitted that Para 7 to 10 of the petition speaks about that the scheme inter - alia provides for writing off part of the debit balance in profit & loss account to the extent of Rs.9,00,00,000/-(Rupees Nine Crores only) against reduction of paid-up capital from Rs.10,00,00,000/- (Rupees Ten Cores only) divided into 1,00,00,000/- (one crore) equity shares of Rs.10/- each fully paid-up to Rs.1,00,00,000/- (Rupees one crore) equity shares of Re.l/- each fully paid-up. Thus, the financial statements of the company reflects the real picture and the capital lost is not continued to be shown on the face of balance sheet, the scheme may be considered.;