Chattisgarh High Court
Nova Iron & Steel Limited vs None on 18 September, 2012
HIGH COURT OF CHATTISGARH AT BILASPUR
COMPANY PETITION NO 18 of 2012
Nova Iron & Steel Limited
...Petitioners
V E R S U S
None
...Respondents
! Shri U K Choudhary Senior Advocate with Shri B D Guru Advocate for the petitioner
^ Shri Vivek Shrivastava Standing Counsel for the Union of India
CORAM: Honble Shri Satish K Agnihotri J
Dated: 18/09/2012
: Judgement
O R D E R
(Delivered on 18th day of September, 2012) IN THE MATTER OF THE COMPANIES ACT, 1956 AND IN THE MATTER OF Section 78 and 100 To 104 of the Companies Act, 1956
1. This petition has been filed under Sections 78 and 100 to 104 of the Companies Act, 1956 (for short `the Companies Act') by Nova Iron and Steel Limited, (Petitioner company) seeking approval of this Court to the proposed reduction of share capital as resolved by its resolution dated 17.03.2012 (Annexure K).
2. The registered office of the Petitioner Company is situated at village Dagori, Tahsil Belha, District Bilaspur, within the jurisdiction of this Court.
3. The Petitioner Company was incorporated on 01.05.1989 (Annexure A), its authorized, issued, subscribed and paid up capital, as on 31.12.2011, is as under:
Authorised Share : 160,00,00,000/-
Capital
16,00,00,000 Equity
Shares of Rs. 10/- each
Total : 160,00,00,000/-
Issued and Subscribed : 155,00,00,000/-
15,50,00,000 Equity
Shares of Rs. 10/- each
Total : 155,00,00,000/-
Paid-up Share Capital : 150,58,12,000/-
15,05,81,200 Equity
Shares of Rs. 10/- each
Total : 150,58,12,000/-
4. The financial position of the petitioner Company as per the latest audited accounts as on 31.12.2011 is as under:
Particulars Amount in Rupees
Share Capital
15,05,81,200 Equity 150,58,12,000
Shares of Rs. 10-/ each
fully paid up
Forfeited Shares 1,38,00.000
Account (amount
originally paid up)
Reserves and surplus
Share Premium Account 22,97,73,000
Loan Funds
Unsecured Loan 34,00,000
GRAND TOTAL 175,27,85,000
Fixed Assets (Net) 33,50,84,764
(inclusive of Capital
work in progress and
capital advances).
Deferred Tax (Net) 1,02,75,722
Current Assets, Loans 71,59,08,809
and Advances
Current Liabilities and 72,39,29,552
Provisions
Net Current Assets -80,20,743
Misc. Expenditure 2,35,35,068
Profit & Loss Account 139,19,10,190
Balance (accumulated
loss)
GRAND TOTAL 175,27,85,000
5. A copy of the Memorandum and Articles of Association of the Petitioner Company (Annexure B) as well as the last audited balance sheet of the Petitioner Company for the year ended 31.12.2011 (Annexure C) have also been enclosed with the petition.
6. A copy of the resolution passed by the Board of Directors of the Petitioner Company on 13.02.2012 (Annexure-I) proposing the Reduction of Share Capital has been placed on record.
7. By this petition, the Petitioner Company proposed as under:
a) Paid-up equity share capital of the Company be reduced from Rs. 150,58,12,000/- (Rs. One Hundred Fifty Crore Fifty Eight Lacs Twelve Thousands) divided into 15,05,81,200 equity shares of Rs. 10/-
each fully paid up to Rs. 36,13,94,880/- (Rs. Thirty Six Crore Thirteen Lacs Ninety Four Thousand Eight Hundred and Eighty) divided into 15,05,81,200 equity shares of Rs. 2.40 each paid-up and that such reduction be effected by canceling the paid-up equity share capital of Rs. 114,44,17,120 which have been lost or is unrepresented by available assets, to the extent of Rs. 7.60 per share upon each of Rs. 15,05,81,200 shares by reducing the paid-up value of all the shares in the Company's paid-up share capital from Rs. 10/- to Rs. 2.40/- per share, and the same be utilized together with;
b) The amount standing to the credit of Share Premium Account of Rs. 22,97,73,000/- as on Dec. 31, 2011; and
c) The amount standing to the credit of Forfeited Shares Account of Rs. 1,38,00,000 as on Dec. 31, 2011;
To set off the accumulated losses of the company to the tune of Rs. 138,79,90,120 (Rupees One Hundred Thirty Eight Crore Seventy Nine Lacs Ninety Thousand One Hundred and Twenty) out of the total accumulated losses of Rs. 139,19,10,190 (Rupees One Hundred Thirty Nine Crore Nineteen Lacs Ten Thousand One Hundred and Ninety), appearing in the Assets side of the Balance Sheet, as on Dec.
31, 2011"
Upon reduction of the paid up capital the issued, subscribed and paid up equity share capital shall be Rs. 36,13,94,880/- (Rupees Thirty Six Crores Thirteen Lacs Ninety Four Thousands Eight Hundred Eighty) consisting of 3,61,39,488/- (Three Crores Sixty One Lacs Thirty Nine Thousands Four Hundred Eighty Eight) equity shares of Rs. 10/- each fully paid up.
No part of the aforesaid reduction in the Equity Capital, Share Premium Account and Forfeited Shares Account as mentioned above shall be refunded/returned/paid to any of the shareholders of any other person in cash or in kind (except shareholders entitled to fractional entitlement) nor will there be any diminution of liability in respect of unpaid capital, if any."
8. According to the petitioner Company, reasons for reduction of Share Capital are that the petitioner Company remained in losses from the very inception due to various impediments like high rate of interest, shortage of power, working capital facilities, increased price of raw materials etc. The net worth of the company as on 30.06.1997 eroded by more than 100% as a result of which the Company was declared sick on 23.06.1998 under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 by the Board for Industrial and Financial Reconstruction (for short `the BIFR'). After the Securitization & Reconstruction of Financial Assets of Security Interest Act, 2002 (for short, `the SARFASI') came into force, IFCI took over the possession of the Company's property under Section 13(4) of the SARFASI Act, on 09.02.2007. Thereafter, Ambey Steel & Power Pvt. Ltd. agreed to make investment in the petitioner Company and became the joint promoter. With the contribution of the investor, one time settlement was made with financial institutions, banks and non-convertible debenture holders. Further, to improve the networth of the petitioner, allotment of 5,73,00,000 equity shares of Rs. 10/- each at a premium of Rs. 4.01 was made on 28.06.2010 to promoters and strategic investors.
However, the company continued to incur further losses due to rise in price of iron ore, steep increase in the price of coal, substantial increase in power and transportation cost, shortage of working capital, unforeseen market conditions resulting in lower sales realization. The networth of the petitioner company decreased from as on 31.12.2011, 31.12.2010, 31.12.2009, 31.12.2008, 13.12.2007 and 31.12.2006 are 80.90%, 74.85%, 74.90%, 74.78%, 89.42% and 107.89% respectively. Upto 31.12.2011, the petitioner Company has claimed to have suffered significant losses amounting to Rs. 139,19,10,190/-
and the capital of the petitioner Company is not adequately represented by available assets. Thus, it was felt that the operational and financial constraints of the petitioner company can be minimized by writing off the past losses. It is also stated that reduction of Share Capital shall, in no way, adversely affect the petitioner Company, its share holders or its creditors.
9. A copy of the special resolution of the petitioner Company passed in accordance with the provisions of Section 189 of the Companies Act at the Extraordinary General Meeting of the petitioner Company held on 17.12.2012 (Annexure K) has been placed before this Court.
10. The petitioner Company, in response to the affidavit dated 07.08.2012, filed by the Regional Director, North Western Region, Ministry of Corporate Affairs, Ahmedabad, vide its affidavit dated 03.09.2012 would submit that reduction of the Share Capital does not involve either diminution of liability in respect of the unpaid share capital or payment to any share holder of any paid up Share Capital. The creditors of the petitioner Company would also not be affected in any way by the proposed restructuring as there is no reduction in the amount payable to any of the creditors and also no compromise or arrangement is contemplated to be made with the creditors.
11. This Court, by order dated 22.09.2012, directed the petitioner-Company to publish the notice of hearing of this petition in newspapers namely Jansata (in Hindi) and Times of India (in English, Delhi Edition). Copy of the same have been filed by the petitioner company.
12. The Regional Director, North Western Region, Ministry of Corporate Affairs, Ahmedabad, has filed his affidavit dated 07.08.2012. It is submitted by the Regional Director that the company having 1,68,455 equity share holders in the Company as on the date of passing of resolution out of which 14 share holders were present in the general meeting of the share holders when the special resolution under section 100 - 104 of the Companies Act, was passed. Further, since this being a case of reduction of capital under section 78 read with section 100 to 104 of the Companies Act, the petitioner company may be directed to add the words "And Reduced" as suffix to its name as required under section 102 (3) of the Companies Act. It is also submitted that as per the report of the Registrar of Companies, Gwalior, State of Madhya Pradesh & Chhattisgarh, no complaint and/or representation have been received against the petitioner company in respect of the proposed reduction in the paid up capital of the petitioner Company. Lastly, the Regional Director has no other objection to the proposed reduction in paid up capital and the reduction in the share capital does not, prima facie appears to be prejudicial to the interest of the share holders, creditors and public at large.
13. No objection has been received to the proposed reduction of Share Capital from any other party. Shri Chaudhary, learned Senior Advocate appearing with Shri Guru, learned Advocate for the petitioner Company, relying on affidavit dated 03.09.2012 would submit that no notice either to support or oppose the aforesaid petition has been filed by any person in the aforesaid manner and/or received by the Company directly. It would further be submitted that adding suffix "And Reduced" to the name of the petitioner company would adversely affect the future growth of the Company.
14. In view of the facts and circumstances of the present case, the reduction of the Share Capital as resolved by the share holders of the petitioner Company by passing a special resolution dated 17.03.2012 (Annexure K) is hereby confirmed. Thus, the accumulated losses shall be reduced accordingly. The form of the Minute as proposed to be registered under section 103(1)(b) of the Companies Act, as given in Annexure-L, is also approved.
15. The order passed today and the minute approved by this Court shall be registered in accordance with Section 103 of the Act by the Registrar of Companies and shall be published in terms of sub-section (3) of Section 103 of the Companies Act, in the Jan Satta (Hindi) and Times of India (In English, Delhi Edition) by the petitioner Company.
16. The formality of adding the words "AND REDUCED"
to the name of the Company be dispensed with.
17. Learned counsel for the petitioner Company states that the petitioner company would voluntarily deposit a sum of Rs.1,00,000/- with the Common Pool Fund of the Official Liquidator within three weeks from today. The said statement is accepted.
18. The petition is allowed in the above terms.
JUDGE