1. This petition under Sections 101 of the Companies Act, 1956 seeks confirmation of the scheme of capital reduction of the Company.
2. I have heard Mr. S. N. Soparkar, learned Sr. advocate with Mr. R.S.Sanjanwala for the petitioner and also perused the record.
3. From the record of the petition it appears that the main objects of the company are to carry on the business of manufacturers, assemblers, processors, repairers, buyers, sellers, importers, exporters and/or Commission Agents of all industrial batteries, Stationary batteries, Starting batteries, traction batteries, Stationery batteries, Starting batteries, traction batteries. Dry Cells, Alkaline batteries, and all other types of batteries and Cells, Electrical Motors, Generators, Accumulators, Battery Chargers, Relays, Transformers, Auto transformers, Electrical Switches, Plugs Sockets, circuits, Brakers, Actuators, Connectors, Solenoids Meters, Measuring Instruments, Multimeters and Multi-testers, Electrical Connectors and other objects as set forth in the memorandum of association thereof.
3.1 It further emerges that the authorized share capital of the Company is Rs. 35,00,00,000/- (Rupees Thirty Five Crores only) divided into 3,50,00,000 (Three Crore Fifty Lakhs) Equity Shares of Rs. 10/- (Rupees Ten only) each, of which 24,616,765 (Two Crore Forty Six Lakhs Sixteen Thousand Seven Hundred and Sixty Five) equity shares of Rs. 10/- (Rupees Ten only) each, are issued and fully paid up.
3.2 It is also noticed from the record that shortly after its incorporation, the Company commenced business on April 17, 1986 and it has since been and is still carrying on business and that by Article 59 of the Articles of Association of the Company, it is provided that the Company may, from time to time, by special resolution reduce its capital in any manner permitted by law.
3.3 The said Article 59 of the Articles of Association of the Company reads as follows:
"The Company, may by Special resolution, reduce in any manner and with, and subject to, any incident authorized and consent required by law:its share capital;any capital redemption reserve account; or any share premium account"
3.4 The Company's equity shares were delisted from the Bombay Stock Exchange with effect from May 08, 2009, pursuant to a Delisting Offer to the Public Shareholders by CMP Batteries Ltd, the holding company of the Company. CMP Batteries Limited now holds 97.38% of the issued and paid up share capital of the company. The Public shareholding is now to the extent of 2.62% of the issued and paid up capital constituting 644,645 shares, held by approximately 3500 shareholders. The shares thus cannot be freely traded. It is claimed that the company, therefore, proposed to provide a valuable and reasonable mode of exit to non promoter equity shareholders by way of proposed reduction of equity share capital at a price of INR 70 per share.
3.5 Therefore, the Board of Directors of the Company passed a Board resolution dated August 31, 2010 to convene Twenty Fourth (24th) Annual General Meeting of the Company to adopt the resolution proposing the reduction of the equity share capital of the Company.
3.6 The petitioner has averred in the petition that on September 01, 2010, the Company forwarded the notice of the Twenty Fourth (24th) Annual General Meeting of the Company to the shareholders of the Company which informed the shareholders of the need to transact a Special Business at the Annual General Meeting and to consider and if thought fit to pass with or without modification, the following resolution as a Special Resolution:
"RESOLVED THAT pursuant to the provisions of Section 100 and other applicable provisions, if any, of the Companies Act, 1956 and subject to the approval of the Hon'bie Gujarat High Court and other appropriate authorities in this regard, the issued and paid-up equity share capital of the Company be, and is hereby, reduced from Rs. 24,61,67,650 (Rupees Twenty Four Crores Sixty One Lakhs Sixty Seven Thousand Six Hundred and Fifty Only) divided into 2,46,16,765 equity shares of Rs. 10 (Rupees Ten Only) each to Rs. 23,97,21,200 (Rupees Twenty Three Crores Ninety Seven Lakhs Twenty One thousand Two Hundred Only) divided into 2,39,72,120 equity shares of Rs. 10 (Rupees Ten Only) each and that such reduction be effected by paying the shareholders INR Seventy per share for the relevant equity shares thereby in effect refunding the amount already paid-up on the relevant equity share(s) along with the premium of INR Sixty per share."
3.7 The Explanatory Statement as sent out by the Company to the shareholders (pursuant to Section 173(2)of the Act)along with the notice for the Annual General Meeting, offered following explanation for passing of the said resolution in relation to the proposed reduction of equity share capital of the Company:
"The Company's shares were delisted from the Stock Exchange with effect from May 8, 2009, pursuant to a Delisting Offer to the Public Shareholders by CMP Batteries Ltd, the holding Company. CMP Batteries Limited now holds 97.38% of the issued and paid up share capital of the company. The Public shareholding is now to the extent of 2.62% of the issued and paid up capital constituting 644,645 shares, held by approximately 3500 shareholders. The shares thus cannot be freely traded. It is proposed to provide a valuable and reasonable mode of exit to non promoter equity shareholders by way of proposed reduction of equity share capital at a price of INR 70 per share. Hence the resolution."
The Board recommends the resolution for approval.
None of the Directors is in any way concerned in the proposed motion."
3.8 It emerges from the record that the Twenty Fourth (24th) Annual General Meeting of the Company was held at the Conference Hall of Fortune Inn Haveli, Plot No. 235, Sector 11, CH-Road, Gandhinagar 382 Oil, Gujarat on Tuesday, September 28, 2010 at 11:00 A.M. to transact the business as stated in the notice for the Twenty Fourth (24th) Annual General Meeting of the Company and the Explanatory Statement sent to the shareholders of the Company. It is also averred in the petition that a special resolution of the company, was duly passed in accordance with section 189 of the Companies Act, 1956, at the said Twenty Fourth (24th) Annual General Meeting of the Company on September 28, 2010, whereby it was resolved as follows:
"RESOLVED that pursuant to the provisions of Section 100 and other applicable provisions, if any, of the Companies Act, 1956 and subject to approval of the Hon'ble Gujarat High Court, the paid up equity share capital of the Company be reduced from INR 24,61,67,250 (Rupees Twenty Four Crores Sixty One Lakhs Sixty Seven Thousand and Two Fifty Only) divided into 2,46,16,725 equity shares of Rs. 10 each to INR 23,97,21,200 (Rupees Twenty Three Crores Ninety Seven Lakhs Twenty One Thousand and Two hundred Only) divided into 2,39,72,120 equity shares of Rs. 10 each, by paying the shareholders INR 70/- per share along with the premium."
3.9 It is also asserted by the petitioner that the aforesaid resolution passed at the Twenty Fourth (24th) Annual General Meeting of the Company was electronically filed by the Company in Form No. 23 with the Ministry of Corporate Affairs.
3.10 Now, on perusal of the record, including the petition, and the submissions on behalf of the petitioner it also appears that the form of the minute proposed to be registered under section 103(l)(b) is as follows:
"That the fully paid up equity share capital of the Company, is henceforth Rs. 23,97,21,200 (Rupees Twenty Three Crores Ninety Seven Lakhs Twenty One Thousand Two Hundred Only) divided into 2,39,72,120 equity shares of Rs. 10 each, reduced from Rs. 24,61,67,250 (Rupees Twenty Four Crores Sixty One Lakhs Sixty Seven Thousand Two Hundred and Fifty Only) divided into 2,46,16,725 equity shares of Rs. 10 each. Ail the shares of the Company, other than the ones issued to the Holding Company and its nominees bearing 20619143 physical shares and D.P.A/c No. 10054803 and 40234833 having 2276784 and 1076193 shares respectively, stands reduced by the payment of Rs. 70/- per share. At the date of registration of the minutes 2,39,72,120 equity shares of Rs. 10 each have been issued and are fully paid-up and 1,10,27,880 equity shares of Rs. 10 each are unissued."
3.11 The Petition was admitted by this Court on 13/04/2011 and vide an order dated 13/04/2011, the same was ordered to be advertised in "The Indian Express" English Daily and "Janasatta", Gujarat! Daily. By filing an affidavit dated 09.05.2011 filed by the General Manager (Finance & Company Secretary) of the petitioner company it is confirmed that 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 19.04.2011.
4. According to the affidavit the objection, if any, or supporting application, if any, in response to the petition were to be presented two days before 10.5.2011 i.e. the date scheduled for hearing of the petition. The record (intimation from the registry and declaration by petitioner's advocate) give out that in pursuance of the said advertisement no one has come forward to raise any objections opposing the sanction to the proposed capital reduction.
4.1 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 and that the proposed reduction will not in any way adversely affect the rights and interests of any of its creditors. So far as creditors and their interest are concerned, the petitioner company has produced a statement containing details of creditors as on the date of meeting (28.9.2010) and on the date of petition an then it has stated in para 16 that:
"All the creditors of the company, as stated above, have consented to the proposed reduction of the share capital of the company. The no-objection certificates and the consent of each of the creditors of the company are hereto...."
4.2 The letters of consent are thus placed at pages 106 to 185 of the petition. Thus, all creditors have expressed their no-objection which demonstrates that their interests are also not likely to be adversely affected. On previous occasion, dispensation of the procedure as required under Section 101(2) and under Rules 48 to 65 of the Companies (Court) Rules, 1959 was permitted - granted.
5. Having perused the petition and upon considering the submissions and more particularly the reasons given in support of the proposed reduction and in light of the consent and no-objection given by shareholders and creditors and that Article 59 of Articles of Association as well as the Special Resolution passed by the company and the fact that Bombay Stock Exchange has delisted the shares 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 28th September, 2010 is hereby confirmed.
6. Thus, the prayers made in terms of Para 19(1), (3), (4) and (5) deserve to be and are hereby granted.
7. The Petitioner is directed to take steps for registration of the order with the Registrar and to publish the Notice of Confirmation of Reduction of Capital and approving of Minutes in the Edition of "The Indian Express" - English Daily and "Jansata" - Gujarati Daily, within 14 days of the registration of the order with the Registrar of Companies.
8. The petition is accordingly disposed off with no orders as to costs.
(K.M.THAKER,J.) Suresh* Top