TMI Blog2007 (7) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... pital of the company, on the date of the filing of the company petition, was Rs. 13,00,00,000 divided into 1,30,00,000 shares of Rs. 10 each and its issued, subscribed and paid-up capital was Rs. 10,50,43,000 divided into 1,05,04,300 shares of Rs. 10 each. Its accumulated losses for the year ended 31-3-2006, was Rs. 9,68,79,188 resulting in almost complete erosion of its net worth which on that date stood at Rs. 48,07,000. 3. The board of directors of the petitioner-company, in its meeting held on 2-9-2006, resolved to reduce the paid-up capital of the company subject to approval of the shareholders of the company, by way of a special resolution in the annual general meeting to be convened for the purpose, and subject to confirmation of the High Court. A notice, along with the explanatory statement, was sent to the shareholders of the company informing them that the eighth annual general meeting was being convened on 28-6-2006. The explanatory note, annexed to the notice calling for the eighth annual general meeting of the company, states that the company has been incurring losses continuously since the last few years, that its accumulated losses as per the audited balance-shee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and eight hundred only) of Rs. 6 per equity share. Resolved further that the board of directors of the company be and are hereby authorised to call for cancellation of the already issued shares certificates pursuant to the Companies (Issue of Share Certificates) Rules, 1960, and to do all such acts, deeds, matters and things, as may be necessary, proper or expedient, to give effect to this resolution including appointment of advocates, file and verify petition, affirm affidavits, appear in the High Court and do all acts, deeds, matters and things, connected with or incidental to giving effect to this resolution." 5. Pursuant thereto, this company petition is filed. 6. In the company petition it is stated that, as on 31-3-2006, the company did not have any secured creditors, that both the unsecured creditors, for Rs. 2,61,51,770.50 had given their affidavits of consent to the reduction of share capital, that the shareholders in the annual general meeting had resolved to reduce the share capital reducing the fully paid shares of Rs. 10 each to Rs. 4 each, and as the reduction did not involve either diminution of liability in respect of unpaid capital, or payment to any sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount or its share capital in accordance with the provisions of section 78 read with section 100 of the Act. ( ii )to reduce any capital redemption reserve account in accordance with section 80 read with section 100 of the Act. 10. The articles of association of the petitioner enables it to reduce its share capital in accordance with the provisions of section 100 of the Companies Act. As noted above, the shareholders of the petitioner-company, in their eighth annual general meeting held on 28-9-2006, unanimously resolved to reduce the paid-up capital from Rs. 10,50,43,000 to Rs. 4,20,17,200 as fully paid cancelling equity share capital of Rs. 6,36,25,800 which was lost and was unrepresented by the available assets, to the extent of Rs. 6 per equity share, in each and every share of the company. The twin requirements under section 100(1)( b ) of the Companies Act, of the reduction being authorised by the articles, and a special resolution of the shareholders being passed in the general meeting held in this regard, are satisfied. 11. Section 101(1) enables the company, where it has passed a resolution for reducing its share capital, to apply, by petition, to the court for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the petitioner, would refer to section 103 of the Companies Act to submit that sub-section (5) thereof is a deeming provision whereunder registration of the minute approved by the court would, in effect, amount to substitution of the corresponding part of the memorandum of association and no steps are, therefore, required to be taken by the petitioner for alteration of its memorandum of association prior to the order of confirmation of reduction in share capital being passed by this court. Learned counsel would submit that, even otherwise, it is only after this court confirms the order of reduction of share capital would the need to alter the memorandum of association giving effect to the reduction in share capital, arise and that the requirements of making necessary amendments/alterations to the memorandum of association, if need be, can always be effected prior to registration of the order and the minute by the Registrar of Companies. 14. I find considerable force in this submission of learned counsel. The requirement under section 100(1) of alteration of the memorandum of association, by reducing the value of each share of the company, is only to the extent it is conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te publication. Learned counsel would submit that, since the notice in Form I was already published in the newspapers on 23-5-2007, inviting claims from creditors who were opposed to the proposed reduction of capital, as the notice specifically refers to the petition for confirmation of reduction of capital having been presented to this court, and the public at large were already made aware of the reduction of capital, the requirements of a fresh publication giving reasons for such reduction is wholly unnecessary. Learned counsel would submit that the consistent view of different High Courts has been not to insist on any such publication or for adding of the words and reduced after the name of the company. Learned counsel would, place reliance on Essar Steel Ltd., In re [2005] 59 SCL 457 (Guj.); Novopan India Ltd., In re [1997] 14 SCL 233 (AP) and Parrys Confectionery Ltd., In re [2004] 56 SCL 34 (Mad.). Learned counsel would also place reliance on certain passages from Palmer s Company Law in support of his submission that, in practice, the courts have not used the power to add the words and reduced for many years and only occasionally have they directed publication of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons for reduction. The court may attach conditions to its sanctions of the reduction [section 68(1)] and, if for any special reason it thinks fit to do so, order that the words and reduced be added to the company s name and used for a longer or shorter period [section 68(2)( a )], but in practice this power has not been used by the court for many years. Occasionally the court directs the publication of the reasons for the reduction [section 68(2) ( b )] : Truman, Hanbury, Buxton Co. Ltd., In re [1910] 2 Ch. D 498". 21. It is true that in the aforesaid judgments of the Gujarat, Andhra Pradesh and Madras High Courts, the requirement of adding the words and reduced as the last words of the name of the company has been dispensed with. As has been observed in Palmer s Company Law , in practice courts have seldom exercised this power of requiring the company to add the words and reduced to its name and it is only, occasionally, have courts directed publication of the reasons for reduction. 22. But then, adherence to the statutory prescription, under section 102(2) of the Companies Act, would necessitate examination by the court whether there are special reasons requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are safeguarded, that the interests of the shareholders are secured and that such reduction is in public interest. In exercising its discretion in this regard courts would also examine whether the loss, arising out of such reduction, is borne by those who would bear it if the company were to be wound up, i.e., the shareholders of the company. 26. A copy of the audited balance-sheet, which is among the documents enclosed to the company petition, would reflect that the accumulated losses of the petitioner-company, as on 31-3-2006, was Rs. 9,68,79,188. Reduction of capital, in the present case, is with a view to write off the accumulated losses of the company. Since the petitioner has specifically pleaded that the company does not have any secured creditors, and as both the unsecured creditors have filed their affidavits of consent to the reduction of capital, it would follow that the interests of the creditors have been safeguarded. The reduction in capital involves reduction in the value of each share from Rs. 10 to Rs. 4 and the differential amount of Rs. 6 per share, which represents the accumulated losses, is now being written off. The reduction in capital is uniform to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in support thereof, and the affidavits of Shri B. Chandrasen Reddy, counsel for the petitioner, dated 11-6-2007 and 18-6-2007, and the exhibits therein referred to, and the court being satisfied with respect to both the unsecured creditors that their consent to the reduction has been obtained, this court both order : (1) That the reduction of the share capital of the above company resolved on and effected by the special resolution passed at a general meeting of the said company held on September 28, 2007, which resolution was in the words and figures following, viz., Resolved that pursuant to the provisions of section 100 of the Companies Act, 1956 (including any statutory modification or re-enactment thereof, for the time being in force) and subject to the confirmation by the Hon ble High Court of Andhra Pradesh, Hyderabad, the paid-up capital of the company be reduced from Rs. 10,50,43,000 (rupees ten crores fifty lakhs forty three thousand only) divided into 1,05,04,300 equity shares of Rs. 10 each as Rs. 4,20,17,200 (rupees four crores twenty lakhs seventeen thousand and two hundred only) (divided into 1,05,04,300 equity shares of Rs. 4 each) as fully paid up and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2007 On Line Media Solutions Ltd., .... Petitioner Minute The authorised capital of On Line Media Solutions Ltd., is henceforth Rs. 6,69,74,200 (rupees six crores sixty nine lakhs seventy four thousand and two hundred only) divided into Rs. 24,95,700 (twenty four lakhs ninety five thousand and seven hundred) shares of Rs. 10 (rupees ten only) each and 1,05,04,300 (one crore five lakh four thousand and three hundred) shares of Rs. 4 (rupees four only) each reduced from Rs. 13,00,00,000 (rupees thirteen crores only) divided into Rs. 1,30,00,000 (rupees one crore and thirty lakhs only) shares of Rs. 10 (rupees ten only) each. The issued and paid-up capital of the company is henceforth Rs. 4,20,17,200 (rupees four crores twenty lakhs seventeen thousand and two hundred only) divided into 1,05,04,300 equity shares of Rs. 4 each reduced from Rs. 10,50,43,000 (rupees ten crores fifty lakhs forty three thousand only) divided into 1,05,04,300 equity shares of Rs. 10 each. At the date of the registration of this minute 1,05,04,300 shares of Rs. 4 each have been issued and are deemed to be fully paid up. The name of the company shall henceforth be On Line Media Solutions Ltd. (a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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