Seeds Intimate Apparel India Private Limited v. -

THE HON'BLE SRI JUSTICE S.V. BHATT COMPANY PETITION No.25 OF 2016 ORDER:

The instant company petition is filed under Sections 100 to 104 of the Companies Act, 1956 (for short, 'the Act') by Seeds Intimate Apparel India Private Limited (for short referred as 'petitioner company') for approving reduction of share capital, as resolved on 20.10.2015 by special resolution of the general body of the Company. The ancillary prayers are to give all enquiries and directions necessary and proper; to approve the form of minutes under Section 103(1)(b) of the Act as set out in paragraph 23; and to dispense with the requirement of settling the list of creditors. The resolution dated 20.10.2015 for which approval of this Court is sought reads as follows: "Resolved that superceding the Resolution No.

1 passed by the shareholders at the EGM held on 19th October, 2015 and pursuant to the provisions of Sections 100 to 104 of the Companies Act, 1956 and other applicable provisions of the Companies Act, 2013, and enabling provisions in the Articles of Association under Article No.

26 of the Company and subject to the requisite approvals and subject to sanction of the High Court of Judicature at Hyderabad for the States of Telangana and Andhra Pradesh (hereinafter referred as 'Hon'ble High Court'), and subject to such terms, conditions or modifications if any, as may be prescribed by such authorities while granting such approvals, consents or permissions and which may be agreed to by the Board of Directors of the Company (hereinafter referred to as 'the Board' which expression shall be deemed to include any Committee of Directors constituted by the Board), consent of the members of the Company is accorded to reduce the Company's issued and subscribed equity share capital from Rs.

455,126,890 (Rupees four hundred fifty five million one hundred twenty six thousand eight hundred ninety) comprising 45,512,689 (Forty five million five hundred twelve thousand six eighty nine) equity shares of Rs.10 (Rupees ten only) each fully paid up to Rs.204,807,100.50 (Rupees two hundred four million five eight hundred seven thousand one hundred and fifty paisa only) consisting of 4,55,12,689 (forty five million five hundred twelve thousand six hundred eighty nine) issued, subscribed and paid up equity shares of Rs.4.50/- each fully paid up, the amount by which the equity capital is so reduced being in excess of the requirements of the Company and that such reduction be effected by cancelling and returning Rs.5.50/- (Rupees five and fifty paisa only) paid up amount for every fully paid up equity share of Rs.10/- each of the Company.

Resolved further that upon the reduction being confirmed by the High Court of Judicature at Hyderabad for the States of Telangana and Andhra Pradesh, the shareholders holding paid up equity shares of the Company as on the date as determined by the Board, be returned a sum of Rs.5.50/- per equity share for the reduction of face value of the equity shares held by them." The petitioner company was incorporated on 05.02.2008 under the Act. The main objects of petitioner company, as set out in the Memorandum of Association, are extracted in the petition and the same are not reiterated herein for the sake of brevity. The authorized capital of petitioner company is Rs.550,000,000/-, divided into 55,000,000 equity shares of Rs.10/- each. The issued, subscribed and paid up capital of petitioner company as on 30.06.2015 is Rs.514,786,090, divided into 51,478,609 equity shares of Rs.10/- each. The Memorandum and Articles of Association of petitioner company are annexed as Annexure-B to this petition. Article 26 of the Articles of Association of petitioner Company provides for reduction

of share capital or share premium account in the manner permitted by law. The details of share pattern are set out in paragraph 6 of the company petition and after perusing the accompanying annexures, this Court is of the view that those details need not be adverted to. The petitioner company for the following reasons proposed to reduce the share capital: "The Company has turned operationally profitable in past years and is expecting to have reasonable profitability and cash surplus in future, which could sufficiently meet requirements of the business. In view of this, the Company intends to return excess capital to its shareholders. Thus from a financial perspective, it is proposed to reduce the paid up equity share capital through reducing the amount paid up on each equity share with nominal value of Rs.10/- (Rupees ten only) each to one Equity Share with nominal value of Rs.4.50 (Rupees four and fifty paisa only) each. The reduction in paid up value from Rs.10 per share to Rs.4.50 per share is sought to be paid out in cash to the shareholders."

On 19.10.2015, the Board of Directors of petitioner company approved the proposed reduction of share capital and the resolution of Board of Directors is placed as Annexure E. On 20.10.2015, the extraordinary general body meeting of shareholders was convened. Special resolution accepting the proposed reduction of share capital was passed as Special Resolution No.C-71533012.

The petitioner company further averred that the proposed reduction of share capital and utilization of the share premium account will in no manner prejudice the creditors of the petitioner company, for the creditors are being paid respective dues on time without either default or delay. The list of creditors as on 20.10.2015 is filed as Annexures J1 & J2 and while considering reduction of share capital, it is stated that sufficient provision for the debts shown in Annexure J1 is made. It is further stated that the petitioner company having regard to the available surplus cash balance intends to reduce the share capital and accordingly resolved in the meeting held on 20.10.2015. The reduction is not going to adversely affect the liability or obligation of the petitioner company in any manner.

The learned counsel appearing for the petitioner has drawn the attention of the Court to all the resolutions, details of creditors and the provision made to meet the claims of these creditors and submits that the proposed reduction of share capital is treated equitably to all the share holders. The shareholders in the general body meeting have not only appreciated the proposed scheme of reduction of share capital but also have taken a well informed judgment accepting the proposal and the interests of creditors are properly safeguarded. This Court by order dated 18.02.2016 ordered publication of notice in two newspapers viz., Business Standard and Eenadu of Vigaz Edition. In pursuance thereof, the petitioner has carried out publication and filed proof of publications.

Learned counsel for the petitioner submits that he has not received any claims or objections in response to the publication.

Special resolution for reduction of share capital.

(1) Subject to confirmation by the Court, a company limited by shares or a company limited by guarantee and having a share capital, may, if so authorised by its articles, by special resolution, reduce its share capital in any way; and in particular and without prejudice to the generality' of the foregoing power, may-- (a) extinguish or reduce the liability on any of its shares in respect of share

capital not paid up;

(b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid- up share capital which is lost, or is unrepresented by available assets; or (c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid- up share capital which is in excess of the wants of the company; and may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.

(2) A special resolution under this section is in this Act referred to as" a resolution for reducing share capital".

The attention of the Court is drawn to the reported decisions in In Re: Hyderabad Industries Limited[1], In Re: OCL India Ltd.[2] & In Re: Comtec Components Ltd.[3] The propositions of law for which reliance is placed upon are well established, more particularly having regard to the totality of circumstances of the case and also the facts as evidenced by various annexures and Special Resolution No. C-71533012, the scheme for reduction of share capital is approved along with incidental prayers made in this company petition. The form of minutes under Section 103 of the Act as set out in para 23 of the petition be approved and registered. The petitioner is directed to conform to all the statutory requirements in accordance with law.

The company petition is, accordingly, allowed. ____________ S.V.BHATT, J Date:06.06.2016 Lrkm [1] 2004(4) ALT 757 [2] AIR 1998 ORI 153 [3] (2014) 186 COMP CAS 311 (MAD).