KAMPAR S. U. , J.

( 1 ) THE present application is placed before me for directions inter alia seeking direction that the provisions of section 101 (2) and procedure set out therein should not applied to the reduction of the capital due to adjustment of share premium account and Capital Redemption Reserve account of the applicant with the accumulated losses of the company. The applicant company has passed a special resolution in terms aforestated on 20-12-2004 and in terms of section 100 and section 101 of the Act seeks confirmation thereof from this Court.

( 2 ) THIS application raises a very interesting question of law as to the interpretation of the provisions of sub-section (2) of section 101 of the Companies act, 1 of 1956.

( 3 ) SOME of the few facts which are necessary for determination of the aforesaid question of law. I have briefly enumerated as under :

( 4 ) RALLIS India Limited was incorporated on 13-8-1998 under the provisions of the Indian Companies Act, 1930 as a public limited company limited by shares. The authorised share capital of the company is Rs. 200,00,00,000/- (Rupees two Hundred crores) divided into 5,00,00,0000 Equity shares of rs. 10/- each and 15,00,00,000 preference shares of Rs. 10/- each. The paid up share capital of the company is Rs. 99,98,45,930/- representing 1,19,84,593 equity shares of Rs. 10/- each and 8,80,00,000 preference shares of Rs. 10/- each. Sometime in or about 2003-2004 four wholly owned subsidiaries of the applicant company were merged with the applicant, thus, due to the said merger losses of all these four companies were included in the books of account of the applicant company and therefore substantial loss was indicated in the financial year 2002-03 in the accounts of the company. It was then decided by the company that the share premium account and the Capital redemption Reserve of the company should be reduced to adjust the debit balance in the profit and loss account. Thus in the aforesaid manner it was decided that a debit balance of Rs. 75. 58 crores in the profit and loss account of the company as on 31-3-2004 should be wiped off. The said adjustment of outstanding in the Capital Redemption Reserve account and share premium account reduces the share capital which has already been lost, or is unrepresented by available assets. The company is thus proposing to utilize and apply the balance in respect of the said accounts for the adjustment and writing off of the debit balances under the profit and loss account of the company.

( 5 ) ON 28-10-2004, the board of directors of the applicant company held a meeting and approved the said proposal of the reduction of share capital by the aforesaid adjustment and an extraordinary general meeting was convened on 20-12-2004 for passing a necessary resolution as required under the provisions of the Companies Act. According to the company under the provisions of the sections 78 and 80 read with section 100 of the said Act of 1956 it is permissible to adjust the share premium account and the Capital Redemption reserve Account for the purpose of writing off of the debit balances in the profit and loss account of the company. In view of the sub-section (2) of section 78 of the Act the reduction in the share premium account would amount to reduction in the share capital of the company and thus the procedure prescribed for the purpose of reduction in the share capital from section 100 to section 105 of the act is required to be complied with. According to the company the company is empowered under the provisions of articles of association to carry out such an exercise. In the meeting of the shareholders held on 20-12-2004 being an extraordinary general meeting of the company the shareholders of the company accorded their consent to the reduction of the share premium account and the Capital Redemption Reserve Account and the necessary resolution as contemplated under the provisions of the Act was passed.

( 6 ) IT is thus in the afore