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TMI Blog2021 (9) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... w Board, Kolkata, the registered office of the Company was shifted from the State of West Bengal to the State of Assam. Copies of the Certificate of Incorporation, change of name, Memorandum of Association and the amended Articles of the Association of the Company are attached herewith and marked as Annexure-A, Annexure-B, Annexure-C and Annexure-D respectively. 5. It is submitted that the object for which the Company was established was to, inter alia, acquire land, tea gardens and plantation and to carry on tea plantation business and other allied activities. Upon commencement of its business, the Company acquired tea gardens and carried on the business of tea plantation. The Company, subsequently, acquired two (2) tea gardens viz., Dhullie Tea Estate and Tinkharia Tea Estate both in the State of Assam, however due to several intervening factors, the Company has since sold the said assets and have taken steps to diversify its portfolio in other ventures as approved under its Memorandum of Articles. 6. It is further submitted that at present the authorized share capital of the Company is Rs. 18,50,00,000/- (Rupees Eighteen Crores and Fifty Lacs) divided into 1,85,00,000 equity s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness and continued to incur losses till date. ii. In view of mounting losses, vide separate Deed dated 31st March 2015 and 24th September 2014 respectively, the Company was constrained to sell all the assets and liabilities of the Company of the Tinkharia Tea Estate and the Dhullie tea Estate respectively. The Company has since received the full purchase consideration relating to sale of the said two tea estates. The Company presently does not have any secured creditor as duly reported in the audited financial statement of the Company. True copy of the Deed of Sale dated 31st March, 2015 and 24th September, 2014 are annexed herewith and marked as Annexure-H and Annexure-I respectively. iii. The latest audited Financial Statement of the Company has been prepared up to 31st March, 2019 and the same had been duly approved by the shareholders of the Company at the Annual General Meeting of the Company held on 4th September, 2019. True copy of the minutes of meeting is annexed herewith and marked as Annexure-J. iv. That the Petitioner Company, by way of abundant caution, submits that the Company has a paid up share capital of approx. Rs. 1566 lacs and a security premium reserve of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sand Two Hundred Forty two) equity shares of Rs. 10 (Rupees Ten) each all fully paid up to Rs. 10,00,000 (Rupees Ten lacs) divided into 10000 (Ten Thousand) equity shares of Rs. 100 (Rupees One hundred) each all fully paid up by cancelling and extinguishing, an amount of Rs. 15,56,12,420 (Rupees Fifteen Crore Fifty six lacs twelve Thousand four hundred twenty only) which capital has been lost or is unrepresented by available assets (the "Capital Reduction")." "RESOLVED FURTHER THAT immediately upon the Capital Reduction becoming effective and operative the authorized share capital of the Company shall stand consolidated and sub divided into 18,50,000 equity shares of Rs. 100/- each and consequential amendment be made in the capital clause of the Memorandum of Association of the Company." "RESOLVED FURTHER THAT upon the Capital Reduction being confirmed by the NCLT and becoming effective and operative the reduction will be carried out for the Shareholders of the Company, as on the 'Record Date' to be determined by the Board for the purposes of determining the names of the registered holders of the equity shares of the Company." "RESOLVED FURTHER THAT consequent upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment to any shareholders or members of the Company or in reduction of any unpaid calls. In other words, the proposed reduction in share capital does not involve outgo of any cash and consequently does not affect the rights of the creditors of the Company in any manner whatsoever. 15. It is again submitted that presently the Company does not have any secured creditors. The petitioner further states that the total claim of the unsecured creditors of the Company as on 25th January, 2020 was only Rs. 24,77,205.12/-. True copy of the list of the creditors of Company, duly verified by two Directors of the Company and the certificate of the Auditors of the Company are annexed hereto and collectively marked as Annexure-M. 16. It is again submitted that reduction of the Share Capital of the Company will involve the following accounting treatment in the Books of Accounts of the company: a. The issued, subscribed and paid up share capital of the Company shall be reduced from Rs. 15,66,12,420/- to Rs. 10,00,000/- by cancelling and extinguishing an amount of Rs. 15,56,12,420/- as aforesaid; and b. The accumulated losses of the Company which is reflected in the form of debit balance i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s instead of adjusting the share premium held in the Books of the Company. g. Whether the Company is in operation? If so, what is the sales figures and the number of employees are on roll. h. Details of the movable and immovable Assets of the Company and its worth as on 31.03.2019, if valued, as per valuer's report. If not valued within last three years, Desk Top valuation can be done by the Company itself and the same valuation Report is to be submitted. 19. The Petitioner pursuant to the order dated 25th November, 2020, filed its reply in the form of an affidavit dated 12.01.2021 submits point-wise clarifications to the queries as follows: a. That in response to the query No. (a), the deponent states that the Company has continued to incur losses even after the sale of the two tea estates, namely Tinkharia Tea Estate and Dhullie Tea Estate in the financial year 2014-15. The Petitioner craves leave to reproduce the details of year wise losses incurred by the Petitioner Company after the sale of the aforementioned tea estates in the table below for the convenience of this Hon'ble Tribunal. Financial Year Profit/ (Loss) after tax (Rs. In 100) 2014-15 (207950) 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42,50,000 shares held by the Allahabad Bank and the 12,00,000 shares held by the Bank of India were issued and allotted upon conversion of loans given by the respective banks to the Petitioner Company. The shares were issued to Bank of India at Rs. 25 including a premium of Rs. 15 per share on 29.05.2015 and the shares were issued to Allahabad Bank at par on 30.05.2016. g. That in response to query No. (e), the deponent most humbly states that by a registered deed of sale dated 24.05.2014, Dhullie Tea Estate was sold by the Petitioner Company to Dhullie Tea Plantations Private Limited. This deed of sale has been attached and marked as Annexure-I of the main petition filed by the Petitioner Company for reduction of share capital before this Hon'ble Tribunal. h. That in response to the query No. (f), the Deponent humbly states that it is a recognized position of law that a company is free or open to choose the mode or extent of reduction of its share capital. It is also a well-settled principle that the court must not sit in judgment over the commercial wisdom of the Directors of a Company. In the instant petition, the proposed mode of reduction of capital is by cancelling a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int-wise clarifications to the queries as follows: a. That in response to the query, the Deponent humbly states that the Annual General Meeting held on 04.09.2019 was attended by thirty-four (34) shareholders and all shareholders, present and voting, voted unanimously in favour of the special resolution approving the reduction of the share capital of the Petitioner Company. The Petitioner begs to state that the notice for the aforesaid AGM was duly given, as per law, on 07.08.2019. That in support of the instant petition and to answer the Hon'ble Tribunal's query No. (b) in a comprehensive manner, a certified copy of the list of shareholders and their respective shareholding in the Petitioner Company who were present and voting in the AGM dated 04.09.2019 has been annexed herewith and marked as Annexure-A. b. That the Deponent further, in response to the query (b) of the Orders dated 22.02.2021, states that Stressed Assets Fund ("SASF") has been restrained from exercising any voting rights pending adjudication of a dispute regarding its ownership over its shares in the Petitioner Company by the Ld. City Civil Court at Calcutta vide the court's interim order dated 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is application has prayed before this Hon'ble Tribunal to allow the below mentioned prayers: a. To allow the Petitioner Company to reduce its share capital by confirming the resolution passed by way of a special resolution as submitted hereinabove; b. To issue all directions necessary and proper be made and given to effect the reduction of Share Capital as prayed for; c. To approve the proposed Minutes set out in paragraph 19 of the application; d. To give necessary directions for service of notice of this application upon the Central Government through the Regional Director, Ministry of Corporate Affairs, North Eastern Region, Guwahati; the Registrar of Companies, Assam; and to all the creditors of the Company; e. And to pass any such order(s) or further order(s) that this Hon'ble Tribunal be may deem fit and proper in the interest of justice. ORDER 24. Heard the submissions of the learned Advocate appearing for the Petitioner at length and perused the documents, written submissions made available. 24.1. In our considered opinion, the prayer made by the Applicant for confirming its resolution passed for reduction of share capital by cancelling the shares to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses Resolution to cancel the shares including the shares of the Financial Creditors almost 100% with an intention to mobilize fresh funds/investment from new Financial Creditors/Investors showing a Rosy Balance Sheet to the Public. It clearly shows the intention of the Company behind passing the resolution, when it is not able to do anything for last 18 years. 25. The Balance Sheet shows that the Company is having Reserve/Security Premium Reserve of Rs. 16.78 crores but the Company intends not to touch the Reserve/Security Premium Reserve but to wipe out almost the entire value of shares, when the company knows very well that the entire value of shares and the reserve lying are not sufficient to come out the mounting/increasing loss of Rs. 32.20 crores. It clearly shows that the company intends to do window dressing the balance sheet showing the balance sheet of share value of 10.00 lacs (only 10,000 shares of Rs. 100/- each) with Reserve amount of Rs. 16.78 lacs so that new lenders and investors are attracted to lend and invest when the existing Lenders and Shareholders are losing almost entire 100% amount invested. This decision cannot be considered as Commercial Decision to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Window Dressing Balance Sheet to sanction loan or invest. This is a company is of 73 years old and it may earn some amount by way of sale/transfer of Brand Value of Brook Bond Estates India Ltd./Assambrook Ltd. on winding up or Resolution and distribute the proceeds among the Creditors and Shareholder. 31. Considering the points mentioned above and in the interest of Stakeholders, Lenders, Investors, Public, the Compliance of the guidelines of Companies Act & Corporate Management Practices, We hereby reject the prayer made by the Applicant to confirm the resolution passed. 32. However, the liberty is available with the Petitioner to pass a fresh resolution, if at all felt necessary, in compliances of the guidelines of the Companies Act giving clear 21 days' notice to the shareholders by way of E-mail, Speed post, WhatsApp. The company must ensure that notice of the meeting of the shareholders reaches the shareholders especially the five entities holding 79.39% shares, well in time and proof of delivery of the notice of the Meeting is to be enclosed along with the Petition, if at all filed before the NCLT. 33. The Petitioner is hereby directed to send the copy of this Order t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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