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2012 (12) TMI 621 - HC - Companies LawScheme of arrangement - reduction of capital or a scheme of arrangement or both - provisions of Article of Association - Utilizing a part of the share premium for payment of Dividend, does it amount to payment of paid up capital to the shareholders - conditions stipulated in section 390 to 394A - held that:- The court ought not, usually, to require that a reserve be set aside indefinitely to safeguard the interests of future creditors and shareholders. Anyone who gives credit to or acquires shares in the company after the reduction takes effect is, prima facie, adequately protected by existing statutory safeguards. (Grosvenor Press Plc. In Re (supra)). It is unnecessary, therefore, to set apart any further sums in the "special reserve". Instead of directing publication, of the causes and the reasons for reduction of capital, in the newspapers I consider it appropriate to direct the petitioner to add to its name, as its last words, the words "and reduced" for the period upto and until the end of the financial year 2012-13, and in the balance sheet, the profit and loss account, and the annexures thereto for the said year. Such usage would suffice to protect the interests of prospective investors and would safeguard public interest. All that this Court is required to do, in an application seeking its sanction for a scheme of arrangement involving reduction of capital, is to ensure that the statutory provisions have been complied with, and the scheme as a whole is fair and reasonable. The wisdom or otherwise of the scheme is for the shareholders to decide and, since all the shareholders, all the secured creditors, and around 80% of the unsecured creditors, who attended the respective meetings, have supported the scheme, it is not for this Court to go into the merits of the scheme or to sit in judgment over the wisdom of the shareholders of the company in seeking reduction of capital. Scheme of arragment involving reduction of capital allowed. Subject to conditions.
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