Rajasthan High Court - Jaipur
India Steamship Ltd vs -------------------------------- on 28 November, 2013
Author: Ajay Rastogi
Bench: Ajay Rastogi
S.B.Company Petition No.17/2013. In the matter of India Steamship Limited u/S.100 to 105 of Companies Act,1956 for confirming reduction of share capital. 28.11.2013. HON'BLE MR.JUSTICE AJAY RASTOGI Mr.Anuroop Singhi, for petitioner.
***** Instant company petition has been filed u/S.100 to 105 of the Companies Act, 1956 read with Rules 46 & 47 of the Companies (Court) Rules, 1959 seeking confirmation of reduction of share capital of petitioner-Company.
As alleged in the petition, the petitioner-Company was incorporated under the name of India Steamship Limited vide certificate of incorporation on 01.04.2011 having its registered office at Gadepan, District Kota. The objects of petitioner-Company as provided in Memorandum of Association was incorporated in para-4 of the petition and Memorandum & Articles of Association has been annexed with the petition as Ann.-A. As alleged, the petitioner company's authorized share capital is Rs.55,00,00,000/- comprising of 4,50,00,000 equity shares of Rs.10/- each and 1,00,00,000 non-cumulative redeemable preference shares of Rs.10/- each. The details of the authorized, issued, subscribed and paid up share capital of the petitioner-Company as on 31.01.2013 has been incorporated in para-6 of the petition and true copy of the audited accounts of the petitioner-Company as on 31.03.2012 has been annexed as Ann.-B. The share capital of the petitioner-Company was increased in July, 2011 to enable the hiving off and transfer of the shipping business of Chambal Fertilizers & Chemicals Limited to the petitioner-Company pursuant to the scheme of de-merger u/S.391-394 of the Companies Act, 1956 but implementation of the scheme of de-merger was subsequently withdrawn by the petitioner-Company & Chambal Fertilizers & Chemicals Limited on 18.10.2011 and in the light of the withdrawal of scheme of de-merger, as the petitioner-Company has no operations, it is in possession of excess capital and, therefore, the petitioner-Company evaluated various options and determination for reduction in share capital was necessitated and the proposal for reduction in the share capital of petitioner-Company was approved by the Board of Directors of petitioner-Company in its meeting held on 06.11.2012. The board resolution has been annexed as Ann.-C. The terms of resolution stood approved by the Board of Directors, it is proposed that issued and subscribed share capital of the petitioner-Company be reduced from Rs.51,05,00,000/-, consisting of 50,000 equity shares of Rs.10/- each fully paid up 4,10,00,000 partly paid up equity shares of Rs.10/- each (Rs.0.50 per share paid up) and 1,00,00,000 non-cumulative redeemable partly paid up preference shares of Rs.10/- each (Re.1/- per share paid up) to Rs.4,05,00,000/-, consisting of 50,000 equity shares of Rs.10/- each fully paid up and 40,00,000 partly paid up equity shares. The amount by which the equity capital is to be reduced being in excess of the requirements of the petitioner-Company and such reduction was proposed to be effected upon in the manner, as provided in para-8 of the petition.
Counsel submits that as per the resolution of Board of Directors of petitioner-Company, after reduction of share capital of petitioner-Company, it shall be Rs.25,00,000/- divided into 2,50,000 equity shares of Rs.10/- each and u/Art.9 of Articles of Association, it is provided that petitioner-Company may from time to time by resolution can take decision to reduce its capital in any manner which is permitted under the law.
Counsel submits that under scheme of Section 100 of the Act, special resolution has been authorized by Articles of Association for reduction of its share capital and such decision can be approved with permission of the Court, as provided u/S.100 of the Act. Counsel submits that all steps were taken regarding publication and proposal for reduction of share capital notice was issued on 07.11.2012 and pursuant thereto extra-ordinary general meeting of the petitioner-Company, as proposed in the notice dt.07.11.2012, was held on 3rd day of December, 2012 at their registered office and the special resolution of the petitioner-Company dt.03.12.2012 was passed in accordance with Sections 189 & 100 of the Act in the extra-ordinary general meeting and the special resolution is also indicated in para-13 of the petition and a true copy of the special resolution passed at the extra-ordinary general meeting of equity & preference shareholders is annexed as Ann.-E. Counsel submits that in terms of S.189 of the Act, the resolution for reduction of share capital was passed unanimously by the equity and preference shareholders of the petitioner-Company.
It has further been informed to this court that there is no secured creditor and that has been certified by the Chartered Accountant and one unsecured creditor (the holding company of petitioner-Company) to whom a sum of Rs.12,39,856/- owed as on 31.01.2013, has given its no objection to the present proposal for reduction and return of capital by the petitioner-Company and that too has been certified by the Chartered Accountant and annexed as Ann.-G. After the present petition came to be filed, notices were issued by this court on 03.05.2013 and by a further order dt.10.05.2013, on a separate misc. application u/S.101(3) of the Companies Act, 1956, this Court granted permission for dispensing with the procedure provided u/S.101(2) of the Act and to get the notices issued & published in Rajasthan Patrika (Jaipur Edition) and Indian Express (Delhi Edition).
Accordingly, pursuant to the order of the court, the notices were duly published in the respective newspapers, copy whereof is on record. However, there is no objection filed either with the special resolution was passed by the Board of Directors of the petitioner-Company or before this court after sufficient opportunity being afforded to the stakeholders who in any manner, if aggrieved, by reduction of share capital of petitioner-Company as prayed for in the instant petition.
Counsel submits that after de-merger was withdrawn, the petitioner-Company was left with excess capital and reduction of share capital was needed and that was the reason for which reduction of share capital was proposed and approved by way of special resolution by the Board of Directors of petitioner-Company on 03.12.2012. After the de-merger was withdrawn 3,70,00,000 equity shares of Re.0.50/- per share was received and 1,00,00,000 preference shares of Re.1/- per share was received and total amount of Rs.1,85,00,000/- & Rs.1,00,00,000/- respectively towards cancellation money was refunded and balance amount of Rs.9.50/- per share against equity shares and Rs.9/- per share against preference shares stood resultantly extinguished and capital of petitioner-Company was reduced from Rs.51.05 crores (comprising of 4,10,50,000 equity shares of Rs.10/- each and 1,00,00,000 non-cumulative redeemable preference share of Rs.10/- each) to Rs.25,00,000/- (comprising of 2,50,000 fully paid up equity shares of Rs.10/- each) and on consolidation every 20 residual partly paid up share gets consolidated in one fully paid up equity share i.e. 40,00,000 residual partly paid up share gets consolidated into 2,00,000 fully paid up equity share.
Counsel for petitioner submits that petitioner-Company has complied with the provisions of S.100 of the Companies Act and of its Articles of Association for proposed reduction of its share capital and in that process, special resolution was passed on 03.12.2012 by overwhelming majority of equity shareholders who in their collective commercial wisdom and in a democratic manner have duly resolved for reduction of share capital of petitioner-Company. It is also true that question of reduction of capital is a matter of domestic concern for the decision of majority of shareholders of the Company and since the decision for reduction is based on commercial considerations undertaken by the businessmen who are in the position to know of the niceties and interest of the company concerned and in absence of allegations as regards the bonafides of proposed scheme, the courts shall remain hesitant in interfering with the majority view. However, it is open for the court to examine as to whether interest of members of the Company who may be induced to take shares in the company are secured and whether the reduction is fair and equitable as between different classes of shareholders.
After taking note of the submissions and the material which has come on record, this court is satisfied that the reduction of share capital being a commercial and business verdict approved by majority of shareholders and there is no objection filed either while the special resolution approved by the Board of Directors of petitioner-Company in its meeting dt.03.12.2012 or before this court after the notices were published giving wide publicity. There appears no valid reason before this court for not accepting the proposed scheme of reduction of share capital of petitioner-Company.
Accordingly, the instant company petitioner No.17/2013 is allowed. The special resolution dt.03.12.2012 and the form of minutes proposed in Ann.-H to be registered u/S.103(1) of the Companies Act for reduction of share capital of petitioner-Company are approved and the petitioner is permitted to publish the approved minutes in two newspapers namely; Rajasthan Patrika (Jaipur Edition) & Indian Express (New Delhi Edition) and may proceed to the Registrar of Companies in compliance of thereof, as provided under the law.
(AJAY RASTOGI),J.
All corrections made in judgment/order have been incorporated in the judgment/order being emailed.
Solanki DS, P.A