HIGH COURT OF GUJARAT
Radhe Developers (India) Ltd. In re
COMPANY PETITION NO. 117 OF 2011
SEPTEMBER 12, 2012
1. The petitioner Company has filed the present petition under sections 100 and 101 of the Companies Act, 1956 (“the Act” for short), seeking confirmation and sanction of this Court to the reduction of the equity share capital of the Company as approved by the Shareholders of the Company in their meeting held on 27.08.2010.
2. The petitioner submits that Article 8 of the Articles of Association of the Company permits the reduction of its share capital.
3. The petitioner submits that on 19.01.2001 the Shareholders of the petitioner Company passed a resolution to allot 1,50,03,000 equity shares of Rs.10/- each on swap basis to the Shareholders of M/s. Patel Agro Farms Private Limited. As the allotment was made on swap basis, there was no outlay of funds.
4. The petitioner further submits that after allotment of the shares, the petitioner submitted an application to the Bombay Stock Exchange for listing of the said shares. The said application, however, came to be rejected by the Bombay Stock Exchange (BSE) on 04.09.2003. The appeal filed before the Security Appellate Tribunal also came to be disposed of on 24.09.2003 without permitting listing of the said shares.
5. In view of the above, the petitioner convened the Extra General Meeting of the members of the Company on 14.03.2005. The members of the Company passed a unanimous resolution approving the rectification and amendment to the balance sheet of the petitioner-Company for the concerned years by incorporating the change. It is the case of the petitioner that the petitioner took these steps in pursuance to the Circular No.1 of 2003 issued by the Department of Company Affairs, dated 13.01.2003. A copy of the said Circular is produced at Page 148-149.
6. The petitioner submits that it later came to be advised that the petitioner is also required to follow the procedure as contemplated under Sections 100 and 101 of the Act and give effect to the cancellation of shares .
7. The petitioner submits that accordingly, the Shareholders of the petitioner passed a Special Resolution in the General meeting of the Shareholders held on 27.08.2010 under Section 100 thereby approving the reduction of capital of the Company by Rs. 15,00,30,000/- divided into 1,50,03,000 equity shares of Rs.10/- each by way of cancellation of allotment. A copy of this Resolution is produced at Page 158.
8. The petitioner has, thereafter, filed the present petition seeking sanction of this Court to the proposed reduction of capital under Sections 100 and 101 of the Act. The petitioner has also sought an order for dispensation of the procedure as contemplated under Section 101(2) of the Act on the ground that since there are no outlay funds, the creditors of the petitioner-Company are not affected or put to any prejudice.
9. The petitioner submits that on the bonafide belief that this Court permitted the petitioner to publish the notice of petition, the petitioner published the notice of petition in local daily (1) Indian Express (English Daily Newspaper) and the (2) Lok-Satta- Jan Satta (Gujarati Daily Newspaper), both Ahmedabad Editions and an affidavit is also filed in support thereof.
10. The petitioner, thereafter, filed Company Application No.462 of 2011 seeking an order to the effect that the procedure as contemplated under Section 101(2) of the Act is dispensed and the publication of the advertisement dated 19.08.2011 are deemed to be made as if made under the orders of this Court.
11. This Court, by order dated 12.10.2011 passed in Company Application No.462 of 2011, ordered that the advertisements dated 19.08.2011 are published by the petitioner as if they are published under the orders of this Court subject, however, to the compliance of the directions passed by this Court in a separate order made of even date in Company Petition No. 117 of 2011. The petitioner submits that by a separate order of even date made in Company Petition No. 117 of 2011, this Court ordered that the petition be admitted subject to the petitioner placing on record the consent letters/no objections from all the creditors. The Court further ordered that the petitioner should publish a corrigendum intimating the next date of hearing of the present petition to all concerned including the creditors and shareholders. The Court also directed the petitioner to forward a copy of the present order as well as the order passed in Company Application No. 462 of 2011 to the Registrar of Companies.
12. The petitioner submits that the petitioner thereafter filed O.J. Civil Application No.69 of 2012 reporting that the petitioner has substantially complied with the directions issued by this Court vide order dated 12.10.2011 passed in Company Petition No. 117 of 2011 read with the order dated 12.10.2011 passed in Company Application No.462 of 2011. The petitioner produced the consent of the sole Secured Creditor, consents of Unsecured Creditors having value of debt of 80.83% of the total value of debts and the consents of the deposit holders with value of deposit amounts of 89.31% of the total value of deposit amounts with the petitioner Company. The petitioner also produced a certificate dated 27.02.2012 given by R. Chaudhary and Associates, Chartered Accountants certifying this aspect. This Court, by order dated 02.03.2012 passed in O.J. Civil Application No.69 of 2012, allowed the petitioner to place on the record of the present petition, the consent letters of the sole Secured Creditor, Unsecured Creditors and deposit holders, along with the order dated 02.03.2012 and other orders referred to hereinabove.
13. In view of the above, the petitioner has produced the consent letter of the sole Secured Creditor and the consent letters of the Unsecured Creditors including deposit holders of value much more than the statutory majority of 75% with the petition. The petitioner also produced the Certificate of a Chartered Accountant dated 27.02.2012 and all necessary orders as required to be placed on record.
14. The Registrar of Companies has filed an affidavit dated 16.01.2012. The petitioner has filed the rejoinder to the said affidavit on 29.02.2012, and a further affidavit in support of the rejoinder on 19.03.2012 .
15. Heard Mr. Navin K. Pahwa, learned advocate for the petitioner and Mr. Y.V. Vaghela, learned Central Government Standing Counsel for the Registrar of Companies. The Court has perused the records which include various orders made by this Court. The Court has also perused the affidavit of the Registrar of Companies and the rejoinder affidavit filed on behalf of the petitioner. The Court has also gone through the contents of the further affidavit filed on behalf of the petitioner.
16. Having perused the above documents and having heard the learned counsel for the parties, this Court finds that the petitioner has followed the required procedure as contemplated under Sections 100 and 101 of the Act for the proposed reduction of capital. The Court also finds that Article 8 of the Articles of Association of the petitioner-Company permits reduction of capital. It also appears that as there was no outlay of funds, the interest of the creditors is not adversely affected, therefore, the procedure as contemplated under Section 101(2) of the Act is not required to be followed. Without prejudice to the above and without prejudice to the order dated 02.03.2012 made by this Court in Civil Application No.69 of 2012, the petitioner has already obtained and produced on record, the requisite consent letters of the creditors. The Court has perused the affidavit filed on behalf of the Registrar of Companies and upon perusal of the same it is found that the petitioner has effectively met with the observations made on behalf of the Registrar of Companies in its affidavit-in-rejoinder and further affidavit.
17. In view of the above, there does not appear to be any impediment in granting sanction to the proposed reduction of share capital. No adverse material has been pointed out by the Registrar of Companies against sanction of the reduction of share capital. Accordingly, the reduction of the paid up share capital proposed by the petitioner is hereby sanctioned.
18. The Minutes as mentioned in paragraph 17 are confirmed and be recorded as per the provisions of the Companies Act. The publication of the order for reduction of the share capital and the Registration thereof be published in the (1) Indian Express (English Daily Newspaper) and the (2) Lok-Satta- Jan Satta (Gujarati Daily Newspaper), both Ahmedabad Editions, within two weeks after registration of the order is made with the office of Registrar of Companies. No further publication in the Government Gazette is required.
19. Accordingly, the petition is allowed, in the above terms.
The petitioner Company is directed to pay Rs.7500/- to Mr. Y.V. Vaghela, learned Central Government Standing Counsel, appearing on behalf of the Regional Director.