A company must redeem preference shares within 20 years unless permitted by a Tribunal, and shareholders have no locus to oppose if consent is provided.

COMMON ORDER

PER: BENCH

1. This Company Petition bearing CP No. 08/ND/2022 has been filed under section 55 (3) of the Companies Act 2013 read with Rule 11 & 69 of the National Company Law Tribunal Rules, 2016.

2. The Petitioner-company is a Public Company incorporated on 23.08.2001 under the provisions of erstwhile Companies Act, 1956. The Petitioner company is limited by shares. The present total authorized Capital of the Petitioner is Rs. 65,00,00,000. Out of the said total the Authorized Capital for Preference Shares is Rs. 30,00,00,000, while the actual paid up capital representing Preference Shares is Rs. 28,29,29,000 divided into 28,29,290 Preference Shares of Rs. 100 each. The remaining Authorized Capital for Equity Shares is Rs. 35,00,00,000 of which Paid Up Capital is Rs. 10,90,41,700 divided into 1,09,04, 170 equity shares of Rs. 10 each.

3. It is submitted that the Petitioner Company has been incorporated with the objective to carry on business of hotels and restaurants. In the year 2003, the Petitioner Company, issued 28,29,290 Redeemable Preference Shares (hereinafter to be referred as 'the said redeemable preference shares') to Hillcrest Realty SDN. BDH (hereinafter to be referred as 'the Preference Shareholder') presently having its registered office at Wisma Goshen, 2nd Floor, 60,62 & 64 Jalan SS 22/21 Damansarc Jaya, 47400 Petaling Jaya, Selangor DarulEhsan, Malaysia. It is stated that on 05.05.2003 Preference Shares amounting to Rs. 23,65,00,000 were allotted and on 19.07.2003 Preference Shares amounting to Rs. 4,64,29,000 were allotted to the said Preference Shareholder. The said redeemable preference shares were issued on the following terms:

(i) The dividend payable on the said redeemable preference shares is 8.5% p.a.; and

(ii) The said redeemable preference shares were redeemable in 20 years i.e. in the year 2023;

4. It is pertinent to note that the Petitioner has no other Preference Shareholder apart from Hillcrest Realty SDN. BDH.

5. The Petitioner Company is engaged in business of hotels and hospitality and its business has been severely hit during the Covid-19 Pandemic. The hotel owned by the Petitioner was not in operation since the month of March, 2020, when a nationwide lockdown was imposed by the Government of India. Thereafter it has now opened from 1.9.2021, but had not been able to do adequate business and the occupancy figures of the hotel are abysmally low at about 8%. Further the Hotel Industry in the NCR generally has a lean period of business between the months of April till September every year. Therefore, the Petitioner requires its capital reserves for the investment in capital assets of the Petitioner which is required to be extensively re-done and repaired due to closure for such a long period of time. Also, such capital reserves is required for working capital requirement of the petitioner to sustain and revive the business of the Petitioner.

6. It is submitted that during the aforementioned period of lockdown from the month of March, 2020 till date, fixed costs and expenses in relation to electricity, water, gas, the rent, taxes including Corporation taxes, maintenance of buildings, gardens, fountains and salary and expenses towards staff of the Hotel are being made by the Company. The aforementioned costs and expenses borne by the Company, in light of the hotel being closed for business since the month of March 2020, it is expected that the hotel business of the Company would become stable in about 5 to 6 years from today. Under such circumstances the petitioner submits that it will not be able to pay the dividend to the Preference Shareholder at present.

7. It is further submitted that the Petitioner has