COMP/97/2008 1/9 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY PETITION No. 97 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE RAVI R.TRIPATHI ========================================= = 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= = PARITEJ MOLECULES PRIVATE LIMITED Versus . - Respondent(s) ========================================= = Appearance : MR SAURABH SOPARKAR FOR MRS SWATI SOPARKAR for Petitioner:1 MR HARIN P RAVAL ADDITIONAL SOLICITOR GENERAL for Respondent:1 ========================================= = CORAM : HONOURABLE MR.JUSTICE RAVI R.TRIPATHI Date : 09/07/2008 ORAL JUDGMENT 1. The name of Mr.Harin P. Raval, Additional Solicitor General of COMP/97/2008 2/9 JUDGMENT India, is wrongly notified as this matter pertains to reduction of capital. The notice to ROC is also not required to issue. 2. This is a petition filed under sections 78 & 100 to 103 and 106 of the Companies Act, 1956 seeking confirmation to the scheme of 'capital reduction' of the Company. 3. The petitioner company herein was promoted in the year 1995. It also its business in the same year 1995. The company was engaged in the manufacturing and marketing of chemicals knows as Tri-Cloro Acetyl Chloride (TCAC) and Tri- Chlora Aceraldehyde (Chloral). However, as pointed out in greater detail in the Petition, the company has started making loss for last few years. The accumulated loss as on 31.3.2007 is more than Rs.5.56 crores. The company sold its major manufacturing undertaking as a going concern during August 2007. The company does not wish to continue its operations. The company has paid of all its liabilities of Secured and Unsecured Loans and other creditors during August to December 2007. In order to substantiate the said contention, the company has placed on record the detailed statements and documents on record alongwith the certificate from a Chartered Accountant confirming the status of creditors of the company. The management of the company has now proposed to use the credit balance of Share Premium Account for two purposes. Viz.(i) to adjust its accumulated losses against the said Share Premium Account and (ii) to redeem the Preference Share Capital. 4. However, having regard to its liability to redeem the said Preference Share Capital (including share premium) amounting to Rs.12,77,76,000, the amount standing to the credit of the Share Premium Account after the proposed COMP/97/2008 3/9 JUDGMENT adjustment of the accumulated losses, is not sufficient to fulfill the said liability, the company has proposed to alter the terms/rights of the Preference Shareholders. It has proposed to reduce the Premium of Rs.900/- per share to Rs.510/- per share and thus proposed the redemption at a lower value of Rs.7,79,43, 360 in place of Rs.12,77,76,000/-. 5. By a special resolution of the company, duly passed in accordance with the provisions of Sec.106 read with Sections 78 and 100 to 103 of the Companies Act, 1956, at the general meeting of the Preference Shareholders duly convened on 15th February, 2008, wherein it is resolved that; “RESOLVED THAT pursuant to the provision of section 78, 100 and other applicable provisions, if any, of the Companies Act, 1956, and Article 11 of the Article of Association of the Company and subject to obtaining such approvals, permissions and sanctions as may be required and subject to confirmation of Hon'ble High Court of Gujarat, the share premium on 60% Non Cumulative Non Convertible Redeemable Preference shares (NCNCRPS) share be reduced from Rs.900/ each to Rs.510/- each and accordingly share premium account balance be reduced from existing Rs.11,49,98,400 to Rs.6,51,65,760 and reduce Company's liability to 60% Non Cumulative Non Convertible Redeemable Preference shares (NCNCRPS) from Rs.12,77,76,000 to Rs.7,79,43,360 and share premium to the extent of Rs.4,98,32,640 shall be written off against the debit balance of Profit and Loss Account in the books of accounts and reorganized on and from the date of confirmation of Hon'ble High Court of Gujarat. RESOLVED FURTHER THAT pursuant to the provision COMP/97/2008 4/9 JUDGMENT of section 78, 100 and 106 and any other applicable provisions, if any, of the Companies Act, 1956 and Article of Association of the Company, Board of Directors of the Company be and are hereby authorized to redeem, subject to approval of the Hon'ble High Court of Gujarat but not before the confirmation of Hon'ble High Court of Gujarat for reduction of share premium on 60% Non Cumulative Non Convertible Redeemable Preference shares (NCNCRPS) from Rs.900/ each to Rs.510/- each, 60% Non Cumulative Non Convertible Redeemable Preference shares (NCNCRPS) of Rs.100 each with a premium of Rs.510/- each, out of the capital and reserves (balance of the share premium account) and modify terms and conditions of, if necessary, 60% Non Cumulative Non Convertible Redeemable Preference shares (NCNCRPS) with the consent of preference share holders. RESOLVED FURTHER THAT the Board of Directors of the Company (herein after referred to as “the Board”, which term shall be deemed to include any Committee or any person which Board have nominated/constituted or hereafter may constitute for exercising its power, including the power confirmed under this resolution) be and is hereby authorized to do all such acts, deeds, matters and things, including but not limited to finalizing share premium account and to execute all such documents, deeds and writings as may be required for all the aforesaid purpose as it may, in its absolute discretion, deem necessary, expedient, usual or proper to give effect to the above resolution to carry out such modifications/directions as may be ordered by the Hon'ble High court and all other appropriate and/or relevant/concerned authorities but without requiring the COMP/97/2008 5/9 JUDGMENT approval or consent of the share holders to implement the aforesaid resolution.” 6. In view of the aforesaid resolution passed by the Preference Shareholders, for alteration of the terms of Preference Shares, the Equity Shareholders also, passed a special resolution under Section 78 and 100 to 103 of the Companies Act, at the separate Annual General Meeting of the Equity Shareholders, held in accordance with Section 189 of the Companies Act, 1956, after due notice, on 15th February 2008. and it is resolved: “RESOLVED THAT pursuant to the provision of section 78, 100 and other applicable provisions, if any, of the Companies Act, 1956, and Article 11 of the Article of Association of the Company and subject to obtaining such approvals, permissions and sanctions as may be required and subject to confirmation of Hon'ble High Court of Gujarat, the share premium on 60% Non Cumulative Non Convertible Redeemable Preference shares (NCNCRPS) share be reduced from Rs.900/- each to Rs.510/- each and accordingly share premium account balance be reduced from existing Rs.11,49,98,400 to Rs.6,51,65,760 and reduce Company's liability to 60% Non Cumulative Non Convertible Redeemable Preference shares (NCNCRPS) from Rs.12,77,76,000 to Rs.7,79,43,360 and share premium to the extent of Rs.4,98,32,640 shall be written off against the debit balance of Profit and Loss Account in the books of accounts and reorganized on and from the date of confirmation of Hon'ble High Court of Gujarat. RESOLVED FURTHER THAT pursuant to the provision of section 78, 100 and 106 and any other applicable provisions, if any, of the Companies Act, 1956 and Article of Association of the Company, Board of Directors of the Company be and are COMP/97/2008 6/9 JUDGMENT hereby authorized to redeem, subject to approval of the Hon'ble High Court of Gujarat but not before the confirmation of Hon'ble High Court of Gujarat for reduction of share premium on 60% Non Cumulative Non Convertible Redeemable Preference shares (NCNCRPS) from Rs.900/ each to Rs.510/- each, 60% Non Cumulative Non Convertible Redeemable Preference shares (NCNCRPS) of Rs.100 each with a premium of Rs.510/- each, out of the capital and reserves (balance of the share premium account) and modify terms and conditions of, if necessary, 60% Non Cumulative Non Convertible Redeemable Preference shares (NCNCRPS) with the consent of preference share holders. RESOLVED FURTHER THAT the Board of Directors of the Company (herein after referred to as “the Board”, which term shall be deemed to include any Committee or any person which Board have nominated/constituted or hereafter may constitute for exercising its power, including the power confirmed under this resolution) be and is hereby authorized to do all such acts, deeds, matters and things, including but not limited to finalizing share premium account and to execute all such documents, deeds and writings as may be required for all the aforesaid purpose as it may, in its absolute discretion, deem necessary, expedient, usual or proper to give effect to the above resolution or to carry out such modifications/directions as may be ordered by the Hon'ble High Court and all other appropriate and/or relevant/concerned authorities but without requiring the approval or consent of the share holders to implement the aforesaid resolution.” 7. The Petition was admitted by this Court on 7th May 2008 and the same was ordered to be advertised in Vadodara edition of “Indian Express”, English daily and “Loksatta- Jansatta”, COMP/97/2008 7/9 JUDGMENT Gujarati daily. The same direction is complied with by the company and the notice of the petition has been duly advertised in Vadodara edition of “Indian Express”, English daily on 20th May 2008. The same is confirmed by affidavit dated 28th day of May 2008 filed by the clerk of the learned advocate for the Petitioner. Even after publication of the said advertisement no one has come forward to raise any objection opposing the sanction to the proposed capital reduction. 8. 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 with regard to the Equity Shareholders. However, the proposed reduction does involve redemption of the Preference Share Capital and hence payment to its Preference Shareholders. The procedure prescribed under section 101(2) of the Act would therefore be applicable and the company would have been required to call a meeting of its creditors. However, as referred earlier, it has been pointed out that there are no Secured or Unsecured Creditors of the Company as on date as stated in Para 13 of the Petition, and as indicated in the Audited Balance Sheet of the Company as on 31st December 2007. The said fact is further substantiated by the certificate of the Chartered Accountant. In view of the same, it is contended that the procedure prescribed in section 101(2) be not insisted upon and hence, the compliance of the same along with the procedure prescribed under rule 48 to 65 of the Companies (Court) Rules, 1959, is dispensed with order dated 7th May 2008. 9. Having heard Mrs.Swati Soparkar, learned advocate for the petitioner, having perused the Petition and more particularly the reasons given in support of the proposed reduction in the COMP/97/2008 8/9 JUDGMENT opinion of this Court there is no reason not to confirm the proposed action of the Petitioner to reduce its capital. Accordingly the resolutions dated 15th February 2008 passed by both Preference and Equity Shareholders are confirmed. 10. The form of the minute proposed to be registered under Sec.103 (1)(b) is as follows: MINUTE UNDER SEC.103(1) The Share Premium Account of Paritej Molecules Private Limited is by virtue of a Special Resolution of the company dt.15th February 2008 and by virtue of the sanction granted by the High Court of Gujarat on 9 th day of July 2008, reduced from Rs.11,49,98,400/- to Rs.6,51,65,760/- and the said amount of Rs.4,98,32,640/- be utilized in order to write off a part of the debit balance of Profit and Loss account of the company. The Preference Share Capital of the Company having face value of Rs.1,27,77,600/- together with premium of Rs.6,51,65,760/- amounting to Rs.7,79,43,360/- be redeemed by payment of Rs.7,79,43,360/- to the Preference Shareholders.” 11. Thus, the prayers made in terms of Para 15(A), 15(B) and 15 (C) are granted. 12. The petitioner is directed to publish the Notice of Confirmation of Reduction of Capital and approving of Minutes in the Vadodara edition of India Express- English daily and Loksatta- Jansatta Gujarati daily, within 14 days of the registration of the order with the Registrar of Companies. 13. The Petition is accordingly disposed off with no order as to costs. COMP/97/2008 9/9 JUDGMENT (RAVI R.TRIPATHI, J.) Amit/-