JUDGMENT :

K.A. Puj, J.

This is a petition filed under Sections 78 and 100 to 103 of the Companies Act, 1956, seeking confirmation to the proposal of capital reduction of the company in the form of utilising its securities premium account as well as general reserve.

2. The petitioner-company herein is a listed public limited company and is engaged in the business of production and marketing of pharmaceutical products. The company generated a turnover of Rs. 721.83 crores during the financial year ending on March 31, 2007. It is a profit making company with substantial reserves. The company's growth efforts included acquisition of various intangible assets, such as trademarks, copyright, designs, technical know how, licenses, franchises, etc., aggregating to Rs. 176.83 crores. The management of the petitioner-company thought it appropriate to restructure the balance-sheet of the company so as to streamline its financial structure through elimination of intangible assets. The company has, therefore, proposed to adjust the debit balance of its intangible accounts against the credit balance of its share premium account and general reserve account under the provisions of the Companies Act. It is submitted that the restructuring will have no impact on the tangible net worth and tangible book value of the company's shares, while the apparent net worth and apparent book value will come down.

3. By a special resolution of the company, duly passed in accordance with Section 189 of the Companies Act, 1956, at a general meeting thereof, held after due notice as provided in the Act on August 30, 2007, it was resolved as follows:

"Resolved that pursuant to the provisions of Section 78 read with Section 100 of the Companies Act, 1956 (hereinafter referred to as 'the Act') and other applicable provisions, if any, of the Act, pursuant to article 59 of the articles of association of the company and subject to sanction of Hon'ble High Court of Gujarat or National Company Law Tribunal and also subject to such other consents, approvals, permissions and sanctions as may be required, an amount not exceeding Rs. 29.17 crores out of the balance standing in the share premium account and an amount not exceeding Rs. 102.58 crores out of the standing in general reserve both aggregating to an amount not exceeding Rs. 131.75 crores be reduced by transfer to the credit of profit and loss account of the company for the year ending on March 31, 2008, to be utilised against debit to the profit and loss account for the year ending March 31, 2008, of an amount not exceeding Rs. 176.83 crores out of the balance in the following asset accounts, namely, trademarks, copyrights, business and commercial rights and other intangibles (hereinafter called 'intangible assets'), after making due adjustment for deferred tax, which deferred tax adjustment will be reversed in the subsequent years by corresponding debit to the general reserve account.

Resolved further that the board of directors of the company (hereinafter called 'the Board' which term shall be deemed to include any committee of Board constituted to exercise its powers including the power conferred by this resolution or any person which the Board may nominate/constitute to exercise its power, including the powers by this resolution) be and is hereby authorized:

"1. to give effect to such modifications, changes, variations, alterations, deletions, additions as may be suggested by the hon'ble High Court of Gujarat and other authorities.

2. to settle any doubt, question or difficulty that may arise including but not limited to that with regard to computation, utilisation or adjustment of share premium account, general reserves, intangible assets of deferred tax, including passing such accounting entries and/or making such other adjustments in the books of account as may be required.

3. to do all such other acts, deeds, matters and things as may be required to give effect to this resolution.

4. to delegate all or any of the p