JUDGMENT :

BALVINDER SINGH, MEMBER (TECHNICAL)

1. The present appeal has been preferred by the appellant against the order passed in C.P. No.35/59/HDB/2017 by the National Company Law Tribunal, Hyderabad Bench, Hyderabad (hereinafter referred to as the “Tribunal”) dated 5th October, 2017 under Section 59 of the Companies Act, 2013.

2. The brief facts of the case are that the Appellant company was incorporated as Private Limited Company on 13th October, 1997 under the provisions of Companies Act,1956. The main object of the appellant company is to establish, engage, in carry on and run or to carry on business as provided in India or elsewhere diagnostic centres, hospitals, nursing homes, convalescent homes, blood banks, medicinal and allied training research centres, laboratories, mobile diagnostics centres and dispensaries, run libraries hold health centres and such other facilities that may be required for the purpose of providing medical services of all kinds and also to provide relief to the poor and needy by free/concessional services. 1st respondent, non-resident individual, was the shareholder of the appellant company. The appellant company had issued 1,92,441 Compulsory Convertible Debentures (CCDs) of Rs.10 each at a premium of Rs.60 each to 1st respondent on 1.12.2011. At the time of issue of CCDs the fair market value of the shares of the appellant company was Rs.64.22. Thereafter on 6.8.2013, the appellant company converted 1,92,441 CCDs into 4,29,419 equity shares of Rs.10/- each at a premium of Rs.21.37 each and allotted the shares to 1st respondent, lower than fair value of equity shares (Rs.64.22) determined upfront. The fair value of shares of the company as on 6th June, 2013 was Rs.31.37. As the company had contravened the provisions of FEMA, 1999 while issuing said shares, the company submitted a compounding application vide its letter dated 9th September, 2016 for contravening para 9(1)B of Schedule 1 to Notification No.FEMA 20/2000-RB dated 3rd May, 2000. In pursuance to the said letter of appellant the Reserve Bank of India vide their letter dated 1st March, 2017 advised the appellant as under;

(I) Unwind the excess shares allotted; or

(II) Bring in additional funds equivalent to the shares allotted and thereafter apply for compounding for the contraventions stated.

3. On receipt of letter from the Reserve Bank of India the company sought no objection from 1st respondent for rectification of register in the form of cancellation of 219658 equity shares of Rs.10 each excess allotted to him. The appellant company, therefore, filed company petition under Section 59 of the Companies Act, 2013 thereby contending that the violation in question has taken place due to the circumstances beyond the control of the company and there is no malafide intention on their part and approaching the Tribunal voluntarily.

4. After hearing the parties, the Tribunal passed the order dated 5th October, 2017, relevant portion of which is as under:-

“14. While the case is pending adjudication before the Tribunal, the Registrar of Companies at Hyderabad for the State of Andhra Pradesh and Telangana, is directed to furnish his comments o the subject issue vide letter No.NCLT-Hyd/CP/35/59/HDB/2017/2301 dated 25.7.2017. Accordingly, the ROC has filed his report vide Reference No.ROCH/Legal/Sec59/28153/Relisys/Stack/2017 dated 25.7.2017 by inter alia stating that the petitioner company has allotted 429419 equity shares on 6.8.2013 and subsequently filed its Balance Sheet for the years 2014-2016, which reflects the paid up capital including the allotment of shares in question. Therefore, he submitted that rectification of register of members by cancelling the excess allotment of shares leads to reduction of paid up capital. And there is a prescribed procedure for reduction of share capital in Memorandum of association and Articles of Association of the company and the Companies Act, 2013.

15. The above facts clearly shows that the petitioner compan