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2024 Supreme(Online)(NCLT) 4202
NATIONAL COMPANY LAW TRIBUNAL
SMT. LAKSHMI GURUNG, SHRI. CHARANJEET SINGH GULATI, JJ
CUMMINS GENERATOR TECHNOLOGIES INDIAPRIVATE LIMITED VS
Companies Act, 2013 | Section 66 | Company Petition
For the Petitioner: Adv. Rohit Gupta a/w Adv. Dharmesh S Jain
For Regional Director: Mr. Gaurav Jaiswal
A company can reduce its share capital under Section 66 of the Companies Act, 2013, via a tribunal-approved scheme, distinct from buy-back provisions.
Headnote:(A) Companies Act, 2013 - Section 66 - Reduction of share capital - Petition for confirmation of reduction of equity share capital under the provisions of the Companies Act and the rules framed thereunder - Approval of Special Resolution by majority - Scheme involves cancelling 0.46% of total issued capital - Observations by Regional Director regarding unpaid creditors addressed legally. (Paras 2-34)
(B) Rationale - Reduction aimed at ensuring liquidity for individual shareholders; previous buy-back scheme noted - Tribunal to confirm compliance with statutory requirements - Conditions for consideration paid for capital reduction explained. (Paras 5-12)
(C) Compliance - Company to comply with provisions under the Income Tax Act and notify concerned authorities post reduction. (Paras 31-39)
Facts of the case:
The Petitioner Company sought confirmation for the selective reduction of its share capital, which was approved by the shareholders with a requisite majority during an Extraordinary General Meeting, held to facilitate individual shareholders’ liquidity upon the cancellation of nominal equity shares held by them.
Findings of Court:
The Tribunal confirmed the reduction of share capital excluding shares held by the Investor Education and Protection Fund (IEPF) while ensuring compliance with the law regarding creditor interests.
Issues: The core issue revolved around the legality and procedural correctness regarding the proposed reduction process under Section 66 as contrasted with buy-back provisions under Section 68.
Ratio Decidendi: The Tribunal held that the proposed reduction conforms with Section 66 and is separate from buy-back proceedings; regulatory compliance was affirmed, ensuring that interests of creditors were not negatively impacted.
Result: The Petition is allowed, confirming the proposed reduction of share capital, with the conditions outlined.
| Table of Content |
|---|
| 1. petition for reduction under companies act. (Para 1 , 2 , 3) |
| 2. approval process for capital reduction. (Para 4 , 6 , 7) |
| 3. clarification on the distinction between reduction and buy-back. (Para 19 , 20) |
| 4. affirmation of reduction conditioned on stakeholder interests. (Para 28 , 29) |
Per: CHARANJEET SINGH GULATI, MEMBER (TECHNICAL)
1. Heard Learned Counsel for the Petitioner Company and the representative from the Regional Director (Western Region)(‘RD’).
2. The present Petition has been filed by CUMMINS GENERATOR TECHNOLOGIES INDIA PRIVATE LIMITED (Petitioner Company) for confirmation of the reduction of equity share capital of the Petitioner Company under Section 66 of the Companies Act, 2013 and under the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016 and other applicable provisions.
3. The Petitioner Company was a public limited company incorporated on 01.05.1991 under the provisions of the Companies Act, 1956. It was converted into a private limited company in the year 2014. The registered office of the Petitioner Company is situated in Pune and therefore, this Bench has the jurisdiction to entertain the petition.
4. Article 11 of the Articles of Association of the Petitioner Company empowers the Petitioner Company to reduce its share capital in any manner for the time being authorized by law by passing a Special Resolution in a General Meeting. Article 11 of the Articles of Association of the Petitioner Company incorporated as under:
“The company may from time to time by special resolution reduce its share capital, capital redemption reserve account or share premium account in any way authorized by law and in particular may pay off any paid-up share capital upon the footing that it may be called up again or otherwise and may if and so far as is necessary alter its Memorandum by reducing the amount of its share capital and of its share accordingly.”
5. This Petition is inter alia for confirmation of Special Resolution passed by the equity shareholders of the Petitioner Company for Selective Reduction of capital by paying off, cancelling and extinguishing, in aggregate 0.46 % of the total issued, subscribed and paid-up equity share capital of the Petitioner Company, comprising of 7,443 (Seven Thousand Four Hundred Forty-Three) equity shares of Rs. 10/- each held by individual shareholders of the Petitioner Company including the equity shares already transferred to Investor Education and Protection Fund (“IEPF”) other than Cummins Generator Technologies Limited, UK and Cummins India Limited, India and their respective nominees. The said special resolution was approved by the requisite majority on 17.03.2022. The Petitioner Company has also sought exemption from adding “And Reduce” as a suffix to its name.
6. The Special Resolutions were approved by the Equity Shareholders of the Petitioner Company in its Extraordinary General Meeting in each of their class meetings held on 17.03.2022. Copy of special resolutions are annexed to the Petition.
7. The nature of business of the Petitioner Company is:
i) “To manufacture, fabricate, assemble, repair maintain purchase, sell, lease or otherwise deal in all types of electric motors, generators, regulators, transformers, conductors, alternators and other equipments apparatus, instruments, components, parts, systems required for or capable of being used in connection with the generation, distribution, supply, accumulation and employment of electricity.
ii) To manufacture fabricate, assemble repair, maintain, purchase, sell, lease or otherwise deal in Micro Process Based Systems, Computers, peripherals accessories, electrical components and electrical equipments, systems, communication equipment, software of every kind and description.”
8. Rationale:
The Ld. Counsel for the Petitioner Companies has submitted that by sanction of this reduction will be able to achieve the following benefits:
a. Initially, the equity share capital of the
