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2015 Supreme(Mad) 2610
IN THE HIGH COURT OF JUDICATURE AT MADRAS
PUSHPA SATHYANARAYANA, J.
Prashanth Textiles Private Limited – Petitioner
C.P.No.279 of 2015
Decided On : 06.08.2015
For Petitioner: M/s.Ramakrishnan Viraraghavan
For Regional Director : Mr.G.Venkatesan Central Government Counsel
The court's decision was influenced by the majority shareholder approval and the lack of adverse impact on the company's financial position or ability to meet its obligations.
Headnote:
Companies Act - Reduction of Share Capital - Sections 100, 101, 52 - Rule 11(a)(3), Rule 46 - The court approved the reduction of paid-up share capital under Sections 100 and 101 of the Companies Act, 1956, and Section 52 of the Companies Act, 2013, along with relevant rules.
Fact of the Case:
The petitioner company sought approval for the reduction of paid-up share capital, share premium, and capital reserves, which was approved by the shareholders in an Extraordinary General Meeting.
Finding of the Court:
The court found that the reduction was a commercial decision approved by the majority of shareholders and did not affect the company's ability to honor its commitments or pay its debts.
Issues: Approval for reduction of share capital, share premium, and capital reserves under the Companies Act.
Ratio Decidendi: The reduction did not involve diminution of any liability or outflow of funds, and the majority shareholder approval supported the court's decision to grant the reliefs prayed for.
Final Decision: The court granted the prayers sought for in the petition and allowed the reduction of share capital, share premium, and capital reserves.
This petition is filed under Sections 100 and 101 of the Companies Act, 1956, Section 52 of the Companies Act, 2013 read with Rule 11(a)(3) and Rule 46 of the Companies Court Rules, 1959, for confirming the reduction of paid up share capital; and that to this end, all enquiries and directions necessary and proper be made and given, and for approving the proposed minute to the effect that,
“The paid-up share capital of the company be reduced to Rs.70,00,000/-(Rupees Seventy Lakhs Only) comprising of 50,00,000 (Fifty lakhs) equity shares of Rs.1/-(Rupee one only) each and 20,00,000 (Twenty lakhs) 1% Redeemable Preference shares of Rs.1/-(Rupee one only) each, the securities premium account and the capital reserve of the petitioner be reduced by Rs.3,75,00,000/-and Rs.2,50,000/-respectively.”
2. The petitioner company is presently carrying on the business of conversion of cotton into yarn. The nature of business carried on and the object of the petitioner company is detailed in the Memorandum of Association. Certified copy of the Certificate of incorporation and the Memorandum and Articles of Association is filed as Annexure -1. A copy of the Audited Accounts for the year ending 31st March 2014 is filed as Annexure-2. A copy of the Audited Accounts for the year ending 31st March 2015 is filed as Annexure-3.
3. On 29.05.2015, the Members of the petitioner company convened an Extraordinary General Meeting and resolved to reduce the share capital, share premium and capital reserves. A copy of the notice convening the Extraordinary General Meeting on 29.05.2015 is filed as Annexure-4. The certified copy of the extracts of minutes of the Extraordinary General Meeting of the Company held on 29.05.2015 is marked as Annexure -5. In the Extraordinary General Meeting held on 29.05.2015, the shareholders of the petitioner company unanimously passed the special resolution approving the reduction of share capital, share premium and capital reserves. Special resolution passed in the Extraordinary General Meeting held on 29.05.2015, reads as follows:-
“RESOLVED THAT pursuant to Sections 100 to 104 and other applicable provisions of the Companies Act, 1956 and other applicable provisions, if any, of Companies Act, 1956 and the Companies Act, 2013, Article 7 of the Articles of Association (amended as aforesaid) and subject to other necessary consents, approvals, permissions and sanctions as may be necessary and subject further to the confirmation by the Hon'ble High Court of Judicature at Madras, consent of the members be and is hereby accorded for the reduction of the paid-up share capital of the company from Rs.7,00,00,000/-(Rupees Seven Crores only) comprising of 50,00,000 (Fifty Lakh) equity shares of Rs.10/-(Rupees ten only) each and 20,00,000 (Twenty lakhs) Preference shares of Rs.10/-(Rupee ten only) each to Rs.70,00,000/-(Rupees Seventy Lakhs only) comprising of 50,00,000 (Fifty Lakh) equity shares of Rs.1/-(Rupees one only) each and 20,00,000 (Twenty Lakh) Preference shares of Rs.1/-(Rupees one only) each by reducing the face value of both the equity shres and the preference shares from Rs.10/-each to Rs.1/-each.
RESOLVED FURTHER THAT subject to provisions of Sections 100 to 104 of the Companies Act, 1956, Section 52 of the Companies Act, 2013 and other applicable provisions, if any, of the Companies Act, 1956 and Companies Act, 2013, Article 7 of the Articles of Association (as amended) and subject to other necessary consents, approvals, permissions and sanctions as may be necessary and subject to confirmation by the Hon'ble High Court of Judicature at Madras, the securities premium account of the company amounting to Rs.3,75,00,000/-and capital reserve amounting to Rs.2,50,000 be and hereby is reduced in full.
RESOLVED FURTHER THAT the above reduction be utilized for writing off the deficit to the extent of Rs.10,07,50,000/-(Rupees Ten Crore Seven Lakhs and Fifty Thousand only) in the Profit and Loss Account (accumulated losses)”.
