TMI Blog2010 (9) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 - - - Dated:- 17-9-2010 - HEMANT GUPTA, J. Ms. Munisha Gandhi for the Petitioner. JUDGMENT 1. The present is a petition under sections 391 to 394 of the Companies Act, 1956 ( the Act ) for seeking approval of the scheme of arrangement. 2. The petitioner-Company is incorporated and registered under the Act as "DSM Anti Infectives India Limited" on 19-11-1999. The petitioner-Company has the authorized share capital of Rs. 1,70,00,00,000 divided into 17,00,00,000 equity shares of Rs.10 each and issued, subscribed and paid up capital of Rs.1,56,26,71,440 divided into 15,62,67,144 equity shares of Rs.10 each. 3. The objective of the petitioner-Company as contained in clause (3) of the Memorandum of Association, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of the report of competent independent valuer appointed by the Company and would be at the discretion of the Board of the Company. Any such revaluation adjustment in full or part, as may be determined by the Board, shall also be credited to the Business Reconstruction Reserve Account. This would help the Company to show its assets at their true inherent strength. ( c )The amounts credited to the BRR shall be utilized by DSM to adjust accumulated losses as appearing in the books of account of DSM as on 31st March, 2009 and as prescribed in other parts of the scheme on an ongoing basis from 1st April, 2009 and thereafter for the subsequent financial years. This adjustment of losses against the BRR would enable the Company to write o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the scheme, has pointed out that the securities premium account as envisaged under section 78 of the Act, can be applied by a Company in terms of sub-section (2) of section 78 of the Act for the purposes specified therein. The said securities premium account can be applied for creation of business reserve account after following the procedure relating to reduction of securities capital of the Company. To appreciate the said argument, it would be necessary to extract section 78 of the Act hereunder: "78. Application of premium received on issue of securities. - (1) Where a company issues securities at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those securities shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Company limited by guarantee and having a share capital, may, if so authorized, by articles or special resolution reduce its share capital in any way. Clause (3) of the Article of Association of the Company authorizes the petitioner to increase, reduce or sub-divide its share capital subject to the provisions of section 106 of the Act. The provisions of section 100 of the Act read as under: "100. Special Resolution for reduction of share capital. - (1) Subject to confirmation by the Tribunal, a company limited by shares or a company limited by guarantee and having a share capital, may, if so authorized by its articles, by special resolution, reduce its share capital in any way; and in particular and without prejudice to the generalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consented for utilization of the securities premium account towards the Business Reconstruction Reserve Account, therefore, the securities premium account, which is the account of the shareholders alone, can be applied for a purpose other than those specified in sub-section (2) of section 78 of the Act with the permission of the Company Court. Such is the view of the Kolkata High Court in the case of Ushacomm India (P.) Ltd. s [2006] 2 CHN 473. Therefore, the scheme to seek transfer of Securities Premium Account to the Business Reconstruction Amount is approved. 11. In respect of revaluation of the assets of the company, the learned counsel for the petitioner-Company referred to para 4.1 and para 4.2 of the scheme and argued that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he financial status of the Company is expected with creation of Business Reconstruction Reserve Account, to which the funds from the Securities Premium Account and by revaluation of the assets will be transferred. It is argued that in terms of the Accounting Standards framed by the Institute of Chartered Accountants, the increase in the net book value arising on revaluation of the fixed assets, is normally credited directly to owner s interests under the heading of revaluation reserves and is regarded as not available for distribution. The amount added over the net book value should be credited directly to the owners interests under a separate heading Revaluation Reserve and thus, the Revaluation Reserve can be included in shareholders fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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