2015 (3) TMI 1429 - HC - Companies Law

Reduction of its preference share capital - Sections 100 to 105 of Companies Act 1956 - HELD THAT - Despite publication of notice no objection has been received from any creditor or any member of the public. The petitioner company has filed the affidavit of Sh. Anil Saxena Director of the petitioner company on 17th March 2015 submitting that neither the petitioner company nor its counsel have received any objection pursuant to citations published on 23rd January 2015. Thus there appears to be no legal impediment in allowing the present petition. In view of the averments made in the petition and there being no objection from any creditor or any member of the public the petition is hereby allowed. The resolution passed by the petitioner company in its Extra Ordinary General Meeting held on 22nd October 2014 for reduction of its share capital is approved. The Form of Minutes proposed to be registered under Section 103(1)(b) and annexed as Annexure L to the petition is also approved. Petition allowed.

Summary

Issues:
Petition under Sections 100 to 105 of Companies Act, 1956 for confirming the reduction of preference share capital.

Detailed Analysis:
1. Background and Company Information: The petitioner company, incorporated under the Companies Act, 1956, sought approval for reducing its preference share capital due to accumulated losses and eroded net worth. The company's authorized, issued, and paid-up share capital details were provided in the petition.

2. Reasons for Reduction: The petitioner company faced financial challenges due to economic slowdown, resulting in significant losses and the need for capital infusion into its subsidiaries. The decline in business opportunities, coupled with cash losses, necessitated the reduction of share capital to reflect a better financial position and improve operational parameters.

3. Legal Compliance: The petitioner company was authorized to reduce its share capital under Article 24 of its Articles of Association, complying with the provisions of the Companies Act, 1956. Resolutions passed by the Board of Directors and shareholders confirmed the reduction, ensuring no violation of relevant laws.

4. Approvals and Compliance: The petitioner company, a registered Category-I Merchant Banker, obtained approvals from BSE and NSE for the capital reduction. It undertook to comply with all legal requirements under the Income Tax Act, FEMA, and RBI regulations concerning overseas investments.

5. Objections and Responses: The Regional Director raised concerns regarding approvals from BSE and NSE, seeking undertakings for compliance with income tax, FEMA, and RBI regulations. The petitioner clarified that approvals were part of the petition and committed to fulfilling all regulatory obligations.

6. Publication and Objections: Despite publication of notices, no objections were received from creditors or the public. The petitioner confirmed the absence of objections, indicating no legal impediment to the petition.

7. Judgment: Considering the submissions, lack of objections, and compliance with legal requirements, the court allowed the petition. The resolution for reducing share capital, approved in the Extra Ordinary General Meeting, was sanctioned. The court directed the Registrar of Companies to register the order and effect necessary alterations, with publication in specified newspapers.

8. Operative Directions: A certified copy of the order was to be delivered to the Registrar of Companies for registration within thirty days. The order and company resolution were to be published in designated newspapers within 14 days of registration. The petition was allowed as per the terms outlined in the judgment.