TMI Blog2004 (7) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Meeting. 4. In order to appreciate as to whether the order under appeal suffers from any infirmities requiring our interference, a few relevant facts and circumstances leading to filing of this appeal are required to be noticed. 5. The appellant-company was incorporated under the provisions of the Act in the year 1956 as Hyderabad Asbestos Cement Products Limited. The name of the company was changed to Hyderabad Industries Limited with effect from 11-11-1985. The authorized capital of the company is Rs. 1,000 lakhs divided into Rs. 95,00,000 equity shares of Rs. 10 each and 50,000 preference shares of Rs. 100 each. 71,47,631 equity shares are fully paid, but no preference shares have been issued. Any further details in this regard are not required to be noticed. 6. The case of the appellant is that it made investment of Rs. 115.30 lakhs out of its reserve capital in NMCL, a company promoted by the appellant company in Nepal jointly with the Government of Nepal and others. For whatever reasons, the value of the investment made by the appellant company in NMCL is reduced to Nil . The Board of Directors of the company, with a view to set off the loss incurred by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those shares shall be transferred to an account, to be called the securities premium account and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the securities premium account were paid-up share capital of the company. (2) The securities premium account may, notwithstanding anything in sub-section (1) be applied by the company ( a )in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares; ( b )in writing off the preliminary expenses of the company; ( c )in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or ( d )in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company. (3) Where a company has, before the commencement of this Act, issued any shares at a premium, this section shall apply as if the shares had been issued after the commencement of this Act: Provided that any part of the premiums which has been so applied that it does not at the commencement of this Act form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 15. Article 15(2) of the Articles of Association of the appellant Company reads as follows : "By Special Resolution reduce in any manner and with, and subject to, any incident authorized and consent required by law. ( a )any Capital Redemption Reserve Fund; or ( b )any Share Premium Account." 16. Article 15 of the Articles of Association of the appellant-company is couched in wide language which enables the company by Special Resolution reduce in any manner any Capital Redemption Reserve Fund or any Share Premium Account. Hence, we are unable to subscribe to the view taken by the learned Company Judge in this regard. The redemption in the Capital Redemption Reserve Fund or Share Premium Account by way of a Special Resolution could be only for the purposes authorized under sections 78(2) and 100 of the Act. That as has been observed by the learned Company Judge there could be variety of situations where the company may be required to use Share Premium Account, Reserve or Reserve Fund for such lawful purposes as it may consider necessary. It is needless to observe that for utilization of the Share Premium Account for purposes mentioned in section 78(2) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company. 19. The purposes for which the Special Resolution was introduced and approved by the General body thus are stated in clear and specific terms. The course adopted, in our considered opinion, in no way causes any prejudice to the creditors of the Company nor the interest of the shareholders is effected in any manner whatsoever. It may be a prudent business decision about which we do not propose to express any opinion. 20. In OCL India Ltd. In re 1 , the Orissa High Court speaking through Sri A. Pasayat, J., as his lordship then was, while interpreting section 100 of the Act observed : "Section 100 of the Act deals with special resolution for reduction of share capital. In exercising its power the court will have due regard to the interests of the creditors, who may consent or object to the reduction. For a company to reduce its share capital in any manner set out in section 100, it must have power given to it under its articles to do so. Subject to confirmation by the court as required under section 101 of the Act, a company may, if authorized by its articles, effect a reduction of its share capital in any way which it may think fit by special resolution, includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispense with this procedure if there is strong cause. Thus, in Meux s Brewery Co. Ltd., In re (1918-19) 1 All ER 1192; (1919) 1 Ch 28, debenture-holders unsuccessfully objected that the proposed reduction would be prejudicial to their security by enabling the company to pay dividends out of profits instead of such profits being applied in making good the lost capital. No evidence was adduced, however, to show what part of the lost capital was attributable to circulating capital. The court can also correct immaterial errors in the resolution; Willaire Systems Plc., In re [1987] BCLC 67. Special circumstances which would justify a direction for dispensing with creditors objections must be such as would satisfy the court that so far as could be reasonably foreseen the relevant creditors would not be adversely affected by the proposed reduction. But if the creditors did actually appear and object, the court would dispense with a creditor s assent only if the company secured payment of his claim by appropriating a sufficient sum. Lucania Temperance Billiad Halls (London) Ltd., In re [1965] 3 All ER 879; [1966] 36 Comp. Cas. 356 ; (1966) 1 Comp. LJ 334 (Ch.D.). "The power unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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