-: 1 :- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO.258 OF 2008 CONNECTED WITH COMPANY APPLICATION NO.395 OF 2008 In the matter of the Companies Act, 1956 (1 of 1956) And In the matter of Section 78 and Section 100 to 104 of the Companies Act, 1956. And In the matter of reduction of share capital of M/s.KJMC Financial Services Limited M/s KJMC Financial Services Limited : Petitioner Mr.Sanjay Chaturvedi i/b. Malvi Ranchoddas & Co., for the Petitioner. Mr.C.J.Joy i/b. S.K. Mohapatra for Regional Director. CORAM : S.A.Bobde, J. Dated : 25th July 2008. P.C.: 1. Heard learned Counsel for the Parties. -: 2 :- 2. The Sanction of the Court has been sought for reduction of Share Capital as approved in a Special Resolution passed at the Extra Ordinary General Meeting of the Equity Shareholders of the Petitioner Company held on 8th December 2007 in terms of the Minutes:- "1) "RESOLVED THAT pursuant to Section 31 and all other applicable provisions, if any, of the Companies Act, 1956, the Articles of Association of the Company be altered as follows: In Article 10(c), Article 13, Article 22 and Article 193(b)(1) for the word "Share Premium Account" the word "Securities Premium Account" be substituted." In Article 13 the following new proviso may be added: "Provided further that any amount standing to the credit of Securities Premium Account may also be utilized/applied from time to time by Special Resolution and in accordance with the provision of the law." -: 3 :- 2) "RESOLVED THAT pursuant to Sections 78, 100 and other applicable provisions if any, of the Companies Act, 1956, Articles 13 and 22 of the Articles of Association of the Company and subject to the confirmation of the Hon’ble High Court of Judicature at Bombay, an amount of Rs.8,55,13,830/- (Rupees Eight Crores Fifty Five Lacs Thirteen Thousand Eight Hundred and Thirty only) out of the balance standing in the Securities Premium Account of the Company be adjusted/utilized as stated below: Sr. No. Particulars Rs. ------ -------------------------- ----------- Assets/Liabilities/Losses to be written off against Securities Premium Account: -------------------------------------------------- 1. Write off the Net fixed Assets given on Lease at WDV (after 5,42,354 adjusting Security Deposits) 2. Reversal of accumulated Lease Equalization Account adjust- 11,38,72,279 ment in respect of the Leased assets stated at item no.1 3. Reversal of Deferred Tax Liability in respect of the (7,15,76,360) Leased assets stated at item no.1 4. Profit & Loss Account Debit 4,26,75,557 Balance Amount to be written off against Securities Premium 8,55,13,830 Account -: 4 :- "RESOLVED FURTHER THAT for the purpose of giving effect to the above resolution and for the removal of any difficulties/doubts, the Board of Directors of the Company (hereinafter referred to as ‘The Board’ which term shall be deemed to include any Committee or any person which the Board may nominate/constitute to exercise the powers conferred to the Board under this resolution) be and is hereby authorized to do all such acts, deeds, matters and things as it may in its absolute discretion, deem necessary, expedient usual or proper and to settle any question or difficulty that may arise with regard to utilization/adjustment of. 3. The reasons for passing aforesaid Special Resolution is that the Petitioner Company intends to adjust its books, without any reduction of capital, by way of writing back the deferred tax liability of Rs.7,15,76,360 (Rupees Seven Crore Fifteen Lakhs Seventy Six Thousand Three Hundred and Sixty only) against the net fixed assets amounting to Rs.5,42,354/- (Rupees Five Lacs Forty Two Thousand Three Hundred and Fifty Four only) and accumulated amount of Rs.11,38,72,279/- (Rupees Eleven Crore Thirty Eight Lakhs Seventy Two Thousand Two Hundred -: 5 :- and Seventy Nine only) lying in Lease equalization account of the said leasing division created in accordance with the recommendations of the Institute of Chartered Accountants of India, as set out in Guidance Note on Accounting for Leases. The adjusted net assets would be as under: Particulars Rs. --------------------------------------------------- A Net fixed Assets 5,42,354/- B Accumulated Amount lying in lease equalization Amount created in accordance with the recommen- 11,38,72,279/- dations of the Institute of Chartered Accountants of India as set out in Guidance Note on Accounting for Leases ------------- Total (A + B) 11,44,14,633/- Less Deferred tax liability 7,15,76,360/- Adjusted net assets 4,28,38,273/- The Adjusted net assets of Rs.4,28,38,273/- (Rupees Four Crores Twenty-Eight lakhs Thirty-Eight Thousand two Hundred and Seventy-Three only) have been either eroded or are unrepresented by the available asset, hence it is proposed that the same be reduced against the Securities Premium Account. In addition to the adjustment as aforesaid, the carried forward loss in the profit and loss account as on 31st March 2007 aggregating to Rs.4,26,75,557/- (Rupees Four Crores Twenty Six Lakhs Seventy Five Thousand Five Hundred and Fifty Seven only) -: 6 :- is proposed to be adjusted against the securities premium account. Thus the Applicant Company will be required to adjust Rs.8,55,13,830/- (Rupees Eight Crores Fifty Five Lacs Thirteen Thousand Eight Hundred and Thirty only) in its books of accounts against security premium account. The effect of the above adjustment will be that all accounts relating to leasing division upon discontinuance of the said division will get extinguished. 4. An Order of dispensation was passed by this Court in respect of the procedure under Section 101(2) of the Companies Act, 1956 on 28th March 2008 in the Company Application No.395 of 2008. 5. None of the parties concerned have come forward to support or oppose the Petition. 6. In pursuance to the direction of the court an Affidavit dated 23rd July 2008 has been filed by the Regional Director stating that the proposed utilization of Securities Premium Account is not prejudiced to the interest of creditors, Shareholders and public. 7. In these circumstances, the requisite statutory procedure has been fulfilled. The Petition is made absolute in terms of prayer clause (a) and (b). -: 7 :- 8. All concerned parties to act on ordinary copy of the order and the from of minutes annexed to this Petition. The Petitioner to publish notice in the same Newspaper i.e. Maharashtra Times (Marathi) and the Free Press Journal (English), circulated in Mumbai and in the Government Gazette about registration of Order and minutes of reduction by the concerned Registrar of Companies, Mumbai. S.A. Bobde, J.