TMI Blog2022 (1) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... EOGM commenced on 23rd January 2021 and concluded on 21st February 2021, wherein the members of the Petitioner Company resolved for the reduction of share capital of the Company, as prescribed U/s. 66 of the Companies Act, 2013 - the necessary alteration shall be made in the Memorandum of Association by the Petitioner Company for reduction of the amount of its share capital and of its shares, the copy of the altered Memorandum of Association and the minutes approved along with the order shall be delivered to the ROC by filing the E form INC, within 30 days of the receipt of copy of the Order. - CP No. 38/Chd/Hry/2021 - - - Dated:- 23-12-2021 - Harnam Singh Thakur, Member (J) And Subrata Kumar Dash, Member (T) For Appearing Parties : Munisha Gandhi, Senior Advocate, Vaibhav Sharma, Salina Chalana, Advocates and Yogesh Putney, Senior Standing Counsel JUDGMENT Subrata Kumar Dash, Member (T) 1. The Petitioner Company was incorporated on October 17, 1944, in Lahore under the provisions of the Companies Act, 1913, under the name 'Escorts (Agents) Limited'. Further, consequent to the fresh Certificate of Incorporation dated January 18, 1960, issued upon change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any is as under (Annexure-Q of the petition):- i. The proposed reduction of the equity share capital of Company is being undertaken in accordance with the provisions of Section 66 read with Section 52 of the Act and the rules made thereunder and specifically the Rules, which permit a company to undertake a reduction of its share capital in any manner, read with the Listing Regulations (as defined hereinafter) and the SEBI Circular (as defined hereinafter). ii. Pursuant to the orders dated August 9, 2012 and September 5, 2012 issued by the High Court of Punjab and Haryana ( High Court ), the High Court had approved the scheme of arrangement and amalgamation of Escorts Construction Equipment Limited, Escotrac Finance and Investment Private Limited, Escorts Finance Investments and Leasing Private Limited with the Company ( 2012 Scheme ). iii. Upon effectiveness of the 2012 Scheme, inter alia, 3,73,00,031 (three crore seventy three lakh and thirty one) equity shares of the Company were issued/vested with EBWT (as defined hereinafter) for the sole benefit of the Company and its successors in interest. As on the date of the approval of this Scheme by the Board of Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thousand six hundred and eighty eight) equity shares held by EBWT, without payment of any consideration to the EBWT. viii. The preferential allotment of equity shares to the Investor has already been approved by the equity shareholders of the Company on April 22, 2020 with requisite majority and the approval of Competition Commission of India has been received by Investor on July 10, 2020. In terms of the understanding agreed to between the Investor and the Company, the Board of Directors of the Company in its meeting held on July 15, 2020 has now approved the cancellation of 1,22,57,688 (one crore twenty two lakh fifty seven thousand six hundred and eighty eight) equity shares of INR 10 (Indian Rupees Ten) each of the Company held by EBWT without payment of any consideration to EBWT, subject to the allotment of the equity shares to the Investor. ix. The proposed reduction of equity share capital of the Company would not have any adverse effect on the creditors of the Company or the Company's ability to fulfil its commitments or meet its obligations in the ordinary course of business as there is no payout resulting from the proposed capital reduction. x. The redu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and conditions, as may be prescribed while granting such approvals, consents, permissions and sanctions by the NCLT and/or any other appropriate Governmental authorities, departments, offices, institutions, bodies, agencies and/or third parties and which may be agreed to by the Board of Directors of the Company ( Board ) (which term shall be deemed to mean and include one or more committee(s) constituted/to be constituted by the Board), the approval of the shareholders of the Company ( Members ) be and is hereby accorded to the Scheme as submitted to the BSE Limited, designated stock exchange, and National Stock Exchange of India Limited for observations ( Scheme ) and to reduce the issued, subscribed and paid-up equity share capital of the Company from INR 1,34,83,45,660 (Indian Rupees One Hundred Thirty Four Crores Eighty Three Lakhs Forty Five Thousand Six Hundred and Sixty only) (divided into 13,48,34,566 (Thirteen Crore Forty Eight Lakhs Thirty Four Thousand Five Hundred and Sixty Six) equity shares of INR 10 (Indian Rupees Ten only) each) to INR 1,22,57,68,780 (One Hundred Twenty Two Crores Fifty Seven Lakhs Sixty Eight Thousand Seven Hundred Eighty only) (divided into 12,25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttle any matter, question, difficulty or doubt that may arise in regard to the Scheme as it may deem necessary, proper, desirable or expedient without requiring any further approval of the Members and that the Members shall be deemed to have given their approval thereto expressly by the authority of this Resolution and acts and things done or caused to be done shall be conclusive evidence of the authority of the Company in so doing and any such acts and things done or caused to be done prior to the date hereof are hereby ratified, confirmed and approved as the acts and deeds of the Company, as the case may be. RESOLVED FURTHER THAT the Board be and is hereby authorized, in its absolute discretion, to bring into effect the abovementioned resolution on such other terms and conditions as it may consider appropriate and to accept such other conditions and modifications as may be prescribed by the NCLT and other appropriate bodies/authorities while according their sanction or consent to the Capital Reduction or to suspend, withdraw or revive the proposal for Capital Reduction from time to time as may be specified by any statutory authority or as the Board may suo-moto decide in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the laws of Japan ( Investor ) and certain specified promoters of the Petitioner Company (as confirming parties), whereby the Investor agreed to subscribe to 1,22,57,688 (One Crore Twenty-Two Lakhs Fifty-Seven Thousand Six Hundred and Eighty-Eight) equity shares of face value ₹ 10/- (Rupees Ten) each ( Subscription Shares ). 14. The Petitioner Company does not have any deposit as covered under the provisions of Sections 73 to 76 of the Companies Act, 2013 and the Rules made thereunder. Hence the Petitioner Company has no arrears in the repayment of any deposits, either before or after the commencement of the Companies Act, 2013, or the interest payable thereon, as on the date of filing of this Petition before this Hon'ble Tribunal. The certificate of Statutory Auditors of the company further confirms that there are no deposits issued by the Company and is attached in the main petition and marked as ANNEXURE P . 15. The Petitioner Company submits that is has 2 (Two) secured creditors and 7,546 (Seven Thousand Five Hundred and Forty Six) unsecured creditors as on February 28, 2021 with the total outstanding amount of INR 15,00,30,785/- and INR 10,03,29,02,336.48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has reported inter-alia that the following dues are outstanding in respect of income-tax, sales-tax, service-tax duty of customs duty of excise and value added tax account to any dispute: Petitioner Company submitted that it is an operating listed company on the stock exchanges in India. Dues which have been observed in the report of Regional Director are on account of routine business operation of the Petitioner Company and pending at various authorities level. Petitioner Company also submitted that it is a solvent company with net-worth of INR 4,413.08 crore as on March 31, 2020. Further, proposed capital reduction doesn't envisage any payment from the Company to shareholders and hence there is no adverse impact on the creditors of the Petitioner Company. Petitioner Company submitted that post effectiveness of the Scheme, it shall continue as going concern, and undertook that all statutory dues shall be paid in full as and when due and finalized by the Statutory authorities in compliance of the applicable Law. b) Since the Petition is silent about giving effect of reduction of share capital and security premium account against corresponding adjustment of asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,13,21,25,002 (Indian Rupees One Hundred and Thirteen Crore Twenty One Lakh Twenty Five Thousand and Two) shall be cancelled, with corresponding adjustment by way of debit to: (i) the outstanding paid-up equity share capital for INR 12,25,76,880 (Indian Rupees Twelve Crores Twenty Five Lakhs Seventy Six Thousand Eight Hundred and Eighty); and (ii) the securities premium account of the Company for INR 1,00,95,48,122 (Indian Rupees One 12 Hundred Crore Ninety Five Lakhs Forty Eight Thousand One Hundred and Twenty Two) Petitioner Company also submitted that the above mentioned proposed accounting had also been confirmed and certified by the Statutory Auditors of the Company. 21. The Hon'ble Tribunal vide its order dated 24.11.2021 made the below observations against which the Company filed its affidavit on 01.12.2021 as under- b) In the affidavit filed by the RD, it is mentioned that the petition is silent about the details of the accounting treatment of the company's asses/liabilities to give the corresponding effect of the reduction of share capital and security premium, both amounting to ₹ 113.21 crores. The RD has also prayed that the petitioner compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any for INR 1,00,95,48,122 (Indian Rupees One 12 Hundred Crore Ninety Five Lakhs Forty Eight Thousand One Hundred and Twenty Two). The Petitioner Company also submitted that the above mentioned proposed accounting treatment had also been confirmed and certified by the Statutory Auditors of the Company. c) The Petitioner is silent on the issue of whether they have obtained the no objection/consent from both the secured and unsecured creditors. In this regard, the Petitioner Company gave reference to the provisions of Section 66(2) of the Companies Act, 2013 wherein it is provided that Tribunal, amongst others, shall give notice to of every application made under Section 66 of the Companies Act, 2013 to creditors of the Company and shall take into consideration the representations, if any, made to it by the Creditors within a period of three months from the date of receipt of the notice. It further states that where no representation has been received from the creditors within the said period, it shall be presumed that they have no objection to the reduction. Petitioner Company submitted that in compliance with the directions of the Hon'ble Tribunal vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies since its submission dated 29.03.2018. Further, the Petitioner Company undertook that any further enquiry/notice received by the Company shall be responded by the Petitioner Company in compliance with the provisions of Companies Act, 2013. e) The JD MCA states that the letter of BSEs Ltd. and NSE Ltd. dated 05.01.2021 has a bearing on the present application. The applicant may be requested to place on record said letter dated 05.01.2021. In this regard, Petitioner Company submitted that BSE Limited and NSE Ltd. vide their letter dated 05.01.2021 had provided their observation on the proposed scheme of capital reduction and have indicated their no objection to the filing of the Scheme before Hon'ble NCLT. Copies of the observation letter dated 05.01.2021 had already been submitted with Hon'ble Tribunal. 22. The present position of law, while dealing with the provisions of Section 66 is that if none of the shareholders are objecting for the proposed reduction, then after considering the merits of the case as also connected facts and circumstances such petition normally deserves to be admitted. In the case of Elpro International Limited (Company Petition No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrently held by Escorts Benefit and Welfare Trust ( EBWT or the Trust ), and having a value of investment aggregating to INR 1,13,21,25,002 (Indian Rupees One Hundred and Thirteen Crores Twenty One Lakhs Twenty Five Thousand and Two), without payment of any consideration to the aforesaid Trust ( Capital Reduction ) and making corresponding adjustments by way of debit to: (i) the outstanding paid-up equity share capital for INR 12,25,76,880 (Indian Rupees Twelve Crores Twenty Five Lakhs Seventy Six Thousand Eight Hundred and Eighty); and (ii) the securities premium account of the Company for INR 1,00,95,48,122 (Indian Rupees One Hundred Crore Ninety Five Lakhs Forty Eight Thousand One Hundred and Twenty Two), on the terms and conditions as contained in the Scheme. 24. In terms of the above, the necessary alteration shall be made in the Memorandum of Association by the Petitioner Company for reduction of the amount of its share capital and of its shares, the copy of the altered Memorandum of Association and the minutes approved along with the order shall be delivered to the ROC by filing the E form INC, within 30 days of the receipt of copy of the Order. Accordingly, the Regist ..... X X X X Extracts X X X X X X X X Extracts X X X X
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