1. This is a petition filed under Sections 100 to 103 of the Companies Act, 1956 seeking confirmation to the scheme of capital reduction of the Company.
2. It has been contended that the Petitioner Company is a private limited company, which was engaged in the business of Manufacturing and Dealing of Heat Exchangers. The Company was doing business till the year 2002. However due to slowdown in the industries from the year 1999 to 2002-03 and because of other adverse industry factors, the Company was forced to give up its business and suffered losses, which got accumulated every year thereafter. In the year 2009, the Company started a Broking business. The Company then applied to various stock exchanges like Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) as a Trading Member. The Company has fully operationalized its broking business after April 2010. At present, the Company is a Trading Member of BSE (Cash & Derivative Segment) and NSE (Cash, Derivative & Currency Derivative Segment).
3. It has been submitted that the management of the Petitioner Company desires to strengthen its Balance Sheet as it is planning to obtain the approval from BSE and NSE for other facilities like Margin Trading, Internet Based Trading, etc. and for the said facilities the Company should have sufficient Net worth. But due to losses in the Balance Sheet, its Net worth has reduced and therefore it does not reflect the true financial position of the Company. Therefore, the management thought it appropriate to restructure the Balance Sheet of the Company so as to bring its values down to a realistic level by reduction of its capital. It is therefore proposed that the issued, subscribed and paid up capital of the Company be reduced by 33.33% and the said amount of reduced capital be transferred to Capital Reduction Reserve Account and the same may be utilized to adjust the amounts required to be written off.
4. By a special resolution of the Company, duly passed in accordance with Section 189 of the Companies Act, 1956, at the General Meeting thereof, held after due notice as provided in the Act, on the 13th day of December 2010, it was resolved as follows:-
"RESOLVED THAT pursuant to the provisions of section 78, 100 to 104 and all other applicable provisions, if any, of the Companies Act, 1956 and enabling provisions in the Memorandum and Articles of Association (including Article 9A proposed as above) and subject to the confirmation of the High Court of Gujarat at Ahmedabad/ National Company Law Tribunal (NCLT) and Securities Exchange Board of India (SEBI), National Stock Exchange of India Ltd. (NSE), Bombay Stock Exchange of India Ltd. (BSE) and any other regulatory authority as may be prescribed under the Companies Act, 1956 or under any other Statute and approval of the Financial Institutions and other concerned authorities, if any, and such other approvals, permissions and sanction, as may be necessary and subject to such conditions, modifications, as may be prescribed or imposed by any of the aforementioned authorities, while granting such approvals, permissions and sanctions, which may be agreed to by the Board of Directors of the Company, the paid up share capital of the Company be reduced from Rs. 6,00,00,000/- (Rupees Six Crores only) divided into 60,00,000 Equity Shares of Rs.10 (Rupees Ten Only) each to Rs. 4,00,00,000/- (Rupees Four Crores Only) divided into 60,00,000 Equity Shares of Rs. 6.67/- each and that such reduction be effected by cancelling capital to the extent of Rs. 3.33/- per Equity Shares i.e. Rs.2,00,00,000/- in respect of 60,00,000 fully paid up Equity shares of Rs. 10/- each and by reducing the nominal amount of all the shares in the Company's capital from Rs. 10/- each to Rs. 6.67/- per Equity Share."
"RESOLVED FURTHER THAT simultaneously with such reduction becoming effective, the resulting 60,00,000 fully paid up Equity Shares of Rs. 6.67/- each be consolidated into 40,00,000 Equity Shares of Rs. 10 each fully paid up by issue of Two new shares of Rs. 10/- each against Three shares of Rs. 6.67/- each so reduced as aforesaid."
"RESOLVED FURTHER THAT the fractions arising due to the above Reduction shall be treated as under:
No fractional entitlements shall be issued by the Company in respect of the fractional entitlements, if any, to which the members of the Company may be entitled on reduction and consolidation of the shares by the Company as aforesaid. The Directors of the Company shall instead consolidate all such fractional entitlements and allot shares in lieu thereof to a Director or an Authorized Officer of the Company with the express understanding that such Directors or the Officers shall sell the same at the best available prices in one or more lots and by private sale/placement or by auction as deemed fit (the decision of such directors or the officers as the case may be as to the timing and method of the sale and the price at which such sale has been given effect to shall be final and binding on the members) and pay the sale proceeds to the Company. The net sale proceeds thereupon, shall be distributed among the respective members of the Company in proportion of their fractional entitlements."
"RESOLVED FURTHER THAT the said amount of Reduced Capital shall be transferred to Capital Reduction Reserve Account. The same shall be utilized to write off the accumulated losses of the Company to the extent of Rs. 2,00,00,000/- standing as the profit and loss account for the year ended on 31.03.2010."
"RESOLVED FURTHER THAT all consequential amendments be made in the capital clause of the Memorandum of Association of the Company after such reduction and consolidation become operative and effective."
"RESOLVED FURTHER THAT for the purpose of giving effect to the above resolution, to exercise its power, including the powers conferred under this resolution any one of its Directors viz. Shri Dhawal J. Dave, and/or Shri Malay R. Bhow, Directors of the company, be and are hereby authorized jointly and severally to do all such acts, deeds, matters and things as it may, in its absolute discretion, deem necessary, expedient, usual or proper including passing of such accounting entries and /or making such other adjustments in the books of accounts as considered necessary to give effect to the above Resolution or to carry out such modifications/directions as may be ordered by the Hon'ble High Court of Gujarat and/or Securities & Exchange Board Of India Ltd. (SEBI) and/or National Stock Exchange of India Ltd. (NSE)/Bombay Stock Exchange Ltd. (BSE), to implement the aforesaid Resolution and to settle any question or difficulty that may arise with regard to the above resolutions or to carry out such modification/directions as may be ordered by the Honorable High Court of Gujarat to implement the aforesaid Resolutions".
5. The Petition was admitted by this Court on 11.03.2011 and vide an order dated 31.03.2011 passed in OJMCA No. 71 of 2011, the same was ordered to be advertised in Ahmedabad Edition of "The Indian Express", English Daily and Rajkot Edition of "Phool Chhab", Gujarati Daily. The said direction has been complied with by the Company and the notice of the petition has been duly advertised in the aforesaid dailies on 14.04.2011. The same is confirmed by the affidavit dated 19.04.2011 filed by the clerk of the learned advocate for the Petitioner. Pursuant to the said advertisement no one has come forward to raise any objections opposing the sanction to the proposed capital reduction. It is also submitted that the Company has obtained approval of SEBI/Stock Exchange for the reduction of capital proposed in the present petition.
6. It is further pointed out in the petition that the proposed reduction does not involve diminution of any liability or repayment of paid up capital. The proposed reduction will not in any way adversely affect the rights and interests of any of its creditors. In view of this, while admitting the petition this Court granted dispensation of the procedure as required under Section 101(2) and under Rules 48 to 65 of the Companies (Court) Rules, 1959.
7. I have heard Ms. Vaibhavi Parikh, learned advocate for the petitioner. Having perused the petition and more particularly the reasons given in support of the proposed reduction in my view there is no reason not to confirm the proposed action of the petitioner to reduce its capital. The said proposal does not prejudicially affect any one as it does not involve extinguishment or diminution of the capital of the Company nor does it involve pay off of any capital received by the Company. Accordingly the resolution dated 13th December 2010 is hereby confirmed.
8. The form of the minute proposed to be registered under Section 103(1)(b) is as follows:
MINUTE UNDER SECTION 103(1)(b) " The issued, subscribed and paid up capital of Sunflower Broking Private Limited was by virtue of a Special Resolution of the Company dated 13th December 2010 and by virtue of the sanction granted by the High Court of Gujarat on 27th April, 2011, reduced from Rs. 6,00,00,000/- (Rupees Six Crores Only) divided into 60,00,000 Equity Shares of Rs.10/- (Rupees Ten Only) each to Rs. 4,00,00,000/- (Rupees Four Crores Only) divided into 60,00,000 Equity Shares of Rs. 6.67/- each. A Special Resolution of the Company has been passed to the effect that upon the said reduction of the capital taking effect, the said 60,00,000 fully paid up Equity Shares of Rs. 6.67/- (Rupees Six and Paisa Sixty Seven Only) each shall be consolidated into 40,00,000 Equity Shares of Rs. 10/- (Rupees Ten Only) each fully paid up by issue of 2 (Two) New Shares of Rs. 10/- (Rupees Ten Only) each against 3 (Three) Shares of Rs.6.67 (Rupees Six and Paisa Sixty Seven Only) each so reduced as aforesaid; and the sum total of the amount so reduced being Rs.2,00,00,000/- (Rupees Two Crores Only) be applied for adjustment to write off the accumulated losses of the Company to the extent of Rs. 2,00,00,000/- standing in the profit and loss account as on 31.12.2010. "
9. Thus, the prayers made in terms of Para 13(A) to 13(C) are hereby granted.
10. The Petitioner is directed to publish the Notice of Confirmation of Reduction of Capital and approving of Minutes in the Ahmedabad Edition of "The Indian Express" - English Daily and Rajkot Edition of "Phool Chhab" - Gujarati Daily, within 14 days of the registration of the order with the Registrar of Companies.
11. The petition is accordingly disposed off with no orders as to costs.
[ANANT S. DAVE, J.] //smita// Top