9911796707
TMI Blog2016 (3) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... position which obtains as on 30.09.2014 and, which I am told, continues to hold, is as follows :- S. No. Name of Shareholders No. of Shares %age 1. Promoters & Propounders 42,06,530 94.53 2. Public Shareholders 2,43,470 05.47 Total 44,50,000 100.00 3.2 Thus, as prayed by the petitioner company, the cancellation of shares held by public shareholders if allowed, its paid-up share capital will get reduced to Rs. 42,06,530/- consisting of shares of face value of Rs. 10/- each. 4. In order to appreciate the rival contentions, which have been raised before me, the following broad facts need to be noticed :- 4.1 The petitioner company was first incorporated on 15.01.1971 as a public limited company under the provisions of the 1956Act under the name and style: Meena Steels Ltd., in the State of Uttar Pradesh. 4.2 The registered office of the petitioner company was, however, shifted to Delhi in 1972, whereupon, a certificate of incorporation dated 15.05.1972, was issued to it. 4.3 The petitioner company was thus, as per its Memorandum and Articles of Association, engaged in the business of manufacture and marketing of steel ingots and billets as also other relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posal vide order dated 05.08.2005. 5.2 Apparently, in this effort, Mr. N.K. Somani had sought the help of a strategic investor, namely one Mr. B.K. Agarwal. 5.3 Pertinently, Mr. B.K. Agarwal stands appointed as a Director on the board of the petitioner company. 5.4 As a result of the aforesaid, CA 1351/2012 was filed, whereby, recall of winding up order passed by this court was sought. This application was followed by another application, being: CA 43/2013, wherein, the petitioner company once again sought revocation of order dated 06.08.1991. The said application was filed after the OL had filed his report with regard to the affairs of the petitioner company. 6. Evidently, this court ordered convening of meeting of the shareholders, whereupon, after being satisfied as regards the affairs of the petitioner company, by an order dated 19.07.2013, recalled the winding up order. 7. On their part, the Board of Directors (BOD) of the petitioner company decided to convene an EGM of its shareholders on 06.12.2014 to seek approval for reduction of its (fully) paid-up share capital by a sum of Rs. 24,34,700/- consisting of 2,43,470 (fully) paid-up shares of a face value of Rs. 10/- each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akh equity shares were allotted on 26.05.2014, on preferential basis. As a result thereof, the equity stake of the persons in control in the petitioner company increased from 43.68% to 94.53%. Consequently, the equity stake of public shareholders, in the petitioner company, declined from 56.32% to 5.47%. 9. As indicated above, the sum of Rs. 4 Crores was raised by the petitioner company to pay off unsecured creditors as obtaining on 31.03.2014. The petitioner company, it appears, had raised an unsecured loan from B.K. Agarwal to the extent of Rs. 3.88 Crores. The petitioner company, it appears, has allotted 4,55,000 shares to Mr. B.K. Agarwal on preferential basis. 10. The aforementioned are the broad facts in the background of which the present peition came to be filed. 11. Notice in this petition was issued on 07.04.2015. On that date, notice was accepted on behalf of the Regional Director (RD). Since then a reply has been filed by the RD, based on inputs received from the Registrar of Companies (ROC). 12. The main objection of the RD is that the petition for reduction of capital is directed to benefit one class of shareholders i.e. persons in control. It is stated that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the petitioner company sought to rely upon paragraph 4 and 6 of the application. For the sake of convenience, the averments made therein, are extracted hereinbelow :- "..4. Mr. Bijendra Kumar Agarwal son of Late Shri Raghunath Parshad Agarwal, Proprietor of Tirubala Exports of Kanpur who is exporting Leather Footwear and whose group has turnover of Rs. 30 Crores per year has agreed to invest upto Rs. 5 Crores from his group for said purpose, subject to approval of scheme and terms by this Hon'ble Court. Mr. B.K Agarwal and Mr. N.K. Somani want to bring a joint venture between Mr. N.K. Somani, ex-Director and Mr. Brijendra Kumar Agarwal. The copy of the letter written by him confirming to this effect with his Chartered Accountant Certificate is filed as Annexure 'A'. 6. It is further respectfully submitted that to show his bonafide the applicant will deposit Rs. 10 Lakhs as security in favour of the Registrar General, High Court of Delhi, New Delhi by Demand Draft No.102935, Dated 27.07.2005. This amount has been raised from Shri. B.K. Agarwal, who is ready to finance, subject to approval by this Hon'ble Court. (i). The applicant will settle or pay to all creditors, secured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner company further avers, that shares on preferential basis were allotted not only to Mr. B.K. Aggarwal but to other persons and a company, which was part of his group. The details, with respect to those, who were allotted 40 Lakh shares on preferential basis as set out in the rejoinder are as follows :- NAME & ADDRESS NO. OF SHARES AMOUNT Mr. Brijendra Kumar Agarwal 4,55,000 45,50,000 Mr.Harsh Kumar Agarwal 5,15,000 51,50,000 Mr.Adarsh Kumar Agarwal 5,15,000 51,50,000 Mr.Anuj Kumar Agarwal 5,15,000 51,50,000 Real Light Estate Private Limited 20,00,000 2,00,00,000 Total 40,00,000 4,00,00,000 16. It is further avered that the petitioner company does not have any fixed assets except land which is also a leasehold property. It is submitted that the petitioner company is a going concern, and that, it is entitled in law, being a de-listed company, to seek reduction of capital, and thereby, provide exit opportunities to public shareholders. The petitioner company further avers that reduction in capital sought by it, is bonafide, since public shareholders, at present, do not play a significant role in the petitioner company and if, approval is given to red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticles of Association did permit the petitioner company to seek reduction of its share capital. 20. Having heard the submissions advanced on behalf of the parties before me and perused the record, in my view, what clearly emerges is as follows :- (i). The petitioner company went through significant business crisis between 1986-1987. Its problems were compounded by the fact that a winding up petition was filed against it, being: CP 114/1989, which finally culminated in this court directing the winding up of the petitioner company vide order dated 06.08.1991. (ii). As noticed above, in the interregnum, the petitioner company had filed a reference with the BIFR in consonance with the provisions of SICA. The AAIFR vide order dated 28.07.1989, recommended its winding up. (iii). Mr. N.K. Somani, ex-Director / shareholder of the petitioner company took steps for revival and for paying off the secured and unsecured creditors of the petitioner company. Permission in that behalf was given by this court vide order dated 05.08.2005. (iv). Consequent thereto, this court granted permission for filing a scheme of arrangement. This scheme of arrangement was subject matter of CA 1351/2012 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned, they stand to gain by return of capital. 24. This brings me to the aspect as to whether there is any impediment in law in seeking reduction of the equity stake held by Public Shareholders. 24.1 A similar question came up for consideration before the Division Bench of the Bombay High Court in Sandvik Asia. In the said case, the promoter group held 95.54% of the share capital, while the balance, 4.46% was held by the non-promoters. A special resolution was passed by a majority of 99.95% of those who were present and had voted in favour of the resolution moved for reduction in share capital. The court, like in this case, was confronted with the issue as to whether the majority shareholders could seek cancellation, and thereby, return share capital of the minority, which represented the non-promoter group. 24.2 The Division Bench of the Bombay High Court, inter alia, observed that as long as the non-promoter shareholders, were being paid a fair value for their shares, and such, a decision had been taken by an overwhelming majority of shareholders, the court would not be justified in withholding its sanction qua approval sought vis-à-vis such a resolution. 24.3 A sp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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