NCLT Approves ₹203 Cr Preference Share Capital Reduction Under Companies Act

In re DEXIT Global Limited (NCLT Mumbai)

SEO Title: Reduction of Preference Share Capital Approved Under Section 66: NCLT Mumbai

Material Facts

The petitioner company filed a petition under Section 66 of the Companies Act, 2013 read with the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016 seeking confirmation of a special resolution for reduction of its preference share capital. The proposed reduction covered up to 2,03,00,000 preference shares, comprising 1,00,00,000 7% cumulative redeemable preference shares and 1,03,00,000 Series A, 7%, cumulative, non-participating and optionally convertible redeemable preference shares, amounting to ₹203 crore, by paying consideration up to the same amount to the preference shareholders.

The Tribunal noted that notices had been issued to secured and unsecured creditors and published in newspapers in Form RSC-4. No objections were received from any creditor. The petitioner had complied with the Tribunal’s first motion order dated 07.04.2025 and filed the required service affidavit.

Procedural History

The Board of Directors approved the proposed reduction on 01.03.2025, and the shareholders unanimously passed a special resolution at the Extraordinary General Meeting held on 03.03.2025. The petition was filed under Section 66 of the Companies Act, 2013. The Regional Director (Western Region) filed a report raising various observations, to which the petitioner submitted an Affidavit-in-Reply dated 31.07.2025. The Tribunal also sought clarifications, following which the petitioner filed an additional affidavit dated 20.04.2026.

Legal Issue(s)

• Whether the proposed reduction of preference share capital should be sanctioned under Section 66 of the Companies Act, 2013.
• Whether the objections and observations raised by the Regional Director required rejection of the petition.

Relevant Statutory Provisions

• Section 66 of the Companies Act, 2013.
• Section 68 of the Companies Act, 2013.
• Section 55 of the Companies Act, 2013.
• Section 90 of the Companies Act, 2013.
• Section 133 of the Companies Act, 2013.
• National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016.

Petitioner’s Submissions

The petitioner submitted that:

• The company was authorised by its Articles of Association to reduce its share capital.
• The reduction was proposed after the company had exited its investments and technology business, while retaining significant cash balances, and the current management did not have immediate plans for deploying excess cash.
• All statutory requirements had been complied with, including filing auditor’s certificates regarding deposits, creditors and accounting treatment. The company had no secured creditors and had furnished the certified list of unsecured creditors.
• Reduction of capital under Section 66 and buy-back under Section 68 were independent and mutually exclusive mechanisms. The petition was solely under Section 66 and did not circumvent Section 68.
• The proposed reduction did not involve any compromise or arrangement with creditors, whose interests would remain protected, and statutory dues would continue to be paid in the ordinary course.
• It responded to the Regional Director’s observations regarding notices to creditors, availability of funds, tax implications, Section 55, Section 68 and Section 90 compliance, and furnished undertakings where necessary.

Regional Director’s Observations

The Regional Director raised observations relating to:

• proof of service of notices upon creditors;
• adequacy of funds for payment to preference shareholders;
• protection of creditors, stakeholders and Government revenue;
• tax implications;
• applicability of Sections 55 and 68 of the Companies Act;
• compliance with Section 90 and the Significant Beneficial Owners Rules.

Tribunal’s Findings and Reasoning

The Tribunal accepted the clarifications and undertakings furnished by the petitioner in response to the Regional Director’s observations.

Upon considering the facts, documents and materials on record, the Tribunal allowed the company petition. It held that the proposed reduction of share capital was just and equitable, in accordance with Section 66 of the Companies Act, 2013, did not violate any provision of law and was not contrary to public policy.

The Tribunal clarified that its order should not be construed as granting exemption from payment of stamp duty, taxes, including withholding tax, or any other statutory charges or compliances required under the Income-tax Act, 1961 or other applicable laws.

Directions

The Tribunal directed the petitioner to:

• file the certified copy of the order and approved minutes with the Registrar of Companies within 30 days (or within an extended timeline with applicable additional fees);
• publish notice of registration of the order and minutes in Business Standard (English) and Loksatta (Marathi) within 30 days of registration; and
• comply with the approved form of minutes reflecting the reduced share capital.

Final Ruling

The NCLT Mumbai allowed the company petition, approved the reduction of preference share capital under Section 66 of the Companies Act, 2013, accepted the petitioner’s clarifications and undertakings, approved the revised capital structure and disposed of the petition accordingly.

Cases Discussed

• Shrish Vinod Shah (HUF) vs Bharti Telecom Limited and Others. (NCLAT), Company Appeal (AT) No. 273 of 2019
• Panama Wind Energy Godawari Private Limited (NCLT Mumbai), C.P. 144 (MB)/C-III/2023 (Order dated 18.01.2024)
• Sarjan Realities Private Limited (NCLT Mumbai), C.P.303/(MB)/C-III/2023 (Order dated 07.10.2024)
• Max India Limited (NCLT Mumbai), CP No. 344 of 2021 (Order dated 08.06.2022)
• Supreme Petrochemical Limited (NCLT Mumbai), C.P. No. 330 of 2021 (Order dated 10.03.2022)
• Fairfield Atlas Limited (NCLT Mumbai), CP No. 207 of 2021 (Order dated 09.03.2022)
• Sai Service Private Limited (NCLT Mumbai), CP No. 195 of 2022 (Order dated 31.07.2023)
• Birla Global Finance Ltd. (Bombay High Court), (2004) 58 CLA 154 (Bom)

FULL TEXT OF THE NCLT JUDGMENT/ORDER

1. This C.P No. 70/MB/2025 (hereinafter referred to as “the Petition) has been filed for obtaining sanction of this Tribunal under Section 66 of the Companies Act, 2013 (hereinafter referred to as “the Act”) by way of confirmation of a Special Resolution passed by the Petitioner Company to reduce its preference share capital upto 2,03,00,000 (Two crores and Three lakhs) shares comprising of 1,00,00,000 7% cumulative redeemable preference shares of Rs. 100/- (Hundred Rupees) each, fully paid-up, and 1,03,00,000 Series A, 7%, seven years, cumulative, non-participating and optionally convertible redeemable preference shares of Rs. 100/- (Hundred Rupees) each, fully paid-up, collectively amounting to Rs. 203,00,00,000/- (Two Hundred and Three Crore Rupees) (together referred to as “Preference Share Capital”) by paying an aggregate consideration of upto and not exceeding Rs. 203,00,00,000/- (Two Hundred and Three Crore Rupees) to the preference shareholders of the Petitioner Company.

2. Heard the Ld. Counsel for the Petitioner Company and representative of the

3. Pursuant to issuance of notices to the secured and unsecured creditors of the Petitioner Company and newspapers publication of notice in Form No.RSC-4 of the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016 no objector has come forward to oppose the Application. The Petitioner Company has complied with all the requirements as per the directions of this Tribunal contained in the first motion order dated 07.04.2025 and it has filed Service Affidavit dated 09.05.2025 before this Tribunal. As no representation has been received from any of the creditors, it is presumed that they have no objection to the proposed reduction of share capital.

4. The Petitioner Company is authorized by Article 72 of its Articles of Association to undertake reduction of share capital of the Petitioner Company. The relevant extract of Article 72 of the Articles of Association, is as follows:

“Reduction of capital

72. Subject to the provision of Section 66 of the Act; the Company may from time to time, by special resolution, reduce its share capital in any way authorised by law and in particular may pay off any paid up share capital upon the footing that it may be called up again or otherwise and may and if and so far as is necessary alter its Memorandum of Association by reducing the amount of its share capital and of its share accordingly.”

5. The Board of Directors of the Petitioner Company vide its Board Resolution dated 01.03.2025 has approved the reduction of share capital. The Petitioner Company has also placed on record the Special Resolution for Reduction of Share Capital unanimously approved by the Equity Shareholders and Preference Shareholders of the Petitioner Company in the Extra Ordinary General Meeting (hereinafter referred to as “EOGM”) held on 03.03.2025. It is submitted that the share capital was to be reduced up to 2,03,00,000 (Two crores and Three lakhs) shares at face value of Rs. 100 (One Hundred Rupees) per share of the Petitioner Company by paying an aggregate consideration of up to and not exceeding Rs. 203,00,00,000 (Two Hundred and Three Crores Rupees) to preference shareholders of the Petitioner Company.

6. The Petitioner Company submits that the rationale for the proposed reduction of share capital is as below:

“(i) The Petitioner Company had raised capital by issue of the Preference Share Capital for the purpose of funding various strategic acquisitions over a period of time and incidental costs thereto. The funds so deployed by the Petitioner Company generated sizable returns, post which the Petitioner Company has exited from all its investments along with the Technology Business. The amount realized by the Petitioner Company upon sale of its investments and the Technology Business is significantly higher than reserves of the Petitioner Company. The Petitioner Company presently does not have sufficient reserves. However, there is still a significant cash balance in the books of the Petitioner Company as recorded in interim financial statements of the Petitioner Company as of 31st January 2025.

(ii) There has been a recent change in the ownership and management of the Petitioner Company from NSE Investments Limited to CL Educate Limited. The current management does not have any immediate plans to effectively deploy the excess cash for its business operations or any other investment purpose in the foreseeable future for the benefit of the Petitioner Company. Accordingly, the management of the Petitioner Company has proposed a capital reduction of the Preference Share Capital in order to enable repatriation of funds in excess of wants of the Petitioner Company.”

7. As required under Section 66 of the Act read with National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016, the Petitioner Company has also attached to the Company Petition, auditor certificate confirming that there are no arrears of deposit or interest thereon, auditor certificate confirming the certified list of creditors and certificate regarding Accounting Treatment as required under Section 133 of the Act.

8. The Application has been filed in consonance with Section 66 of the Act along with the order dated 07.04.2025 passed in C.P No. 70/(MB)/2025 (First Motion) of this Tribunal.

9. The Petitioner Company submits that it has not availed any deposits and therefore, there has been no default in repayment of any deposits or interest thereon. A declaration by a director of the Petitioner Company along with a certificate from the statutory auditors of the Petitioner Company certifying the same is placed on record.

10. As on 28.02.2025, the Petitioner Company does not have any secured creditors. As on 28.02.2025, there are 1673 unsecured creditors having an outstanding amount of Rs. 46,02,96,285/- in the Petitioner Company which is confirmed by the List of Unsecured Creditors dated 11.03.2025 as filed on record in the Company Petition. The said list was duly certified by two directors of the Petitioner Company and a certificate from the statutory auditors of the Petitioner Company certifying the same is annexed to the Company Petition.

11. On account of certain queries raised by this Tribunal, the matter was listed for clarification vide order dated 07.04.2026. Pursuant to the said order, the Ld. Counsel for the Petitioner Company filed the Additional Affidavit dated 20.04.2026 wherein it placed the copy of Share Purchase Agreement dated 31.01.2025 between the NSE Investment Limited, CL Educate Limited & the Petitioner Company on record. The Ld. Counsel for the Petitioner Company also clarified the distinction between the reduction of Share Capital under Section 66 of the Act and buyback of shares under Section 68 of the Act and contended that the mechanism of both the provisions are mutually exclusive and are not applicable in the same transaction. To substantiate its contention, the Ld. Counsel for the Petitioner Company relied upon the decision of Hon’ble NCLAT, Principal Bench in Shrish Vinod Shah (HUF) vs Bharti Telecom Limited and Others., [Company Appeal (AT) No. 273 of 2019].

12. The Petitioner Company has also attached the copy of the pre-capital reduction and post capital reduction net worth certificate of the Petitioner Company issued by a Chartered Accountant. The pre capital reduction and post capital reduction net worth of the Petitioner Company has been reproduced below:

13. The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai, has filed its Report dated 25.07.2025 inter-alia making the following representations in Paragraph 6 (a) to (c) and Paragraph 7(A) to (D) to which the Petitioner Company has filed an Affidavit-in-Reply dated 31.07.2025 to the representations of the Regional Director, Western Region. The representations by the Regional Director (Western Region) and the responses of the Petitioner Company to the same are reproduced hereunder:

14. The representations made by the Regional Director, Western Region on behalf of the Central Government are enlisted herein in the aforesaid paragraph along with the response of the Petitioner Company on the representations of the Regional Director,Western Region which was e-filed vide Affidavit of the Petitioner Company with this Hon’ble Tribunal on 31.07.2025 and physical copy was filed with the office of the Regional Director, Western Region on 01.08.2025. The clarifications and undertakings given by the Petitioner Company in Paragraph 13 are accepted by this Tribunal.

15. Considering the entire facts and circumstances of the case along with perusal of the documents and materials placed on record, the Company Petition is allowed.

16. In light of the aforesaid, this Bench is of the considered view that reduction of share capital is just and equitable in terms of Section 66 of the Act and does not violate any provisions of law and is not contrary to public policy. However, it is clarified that this order should not be construed as an order granting exemption from payment of stamp duty, taxes including any withholding tax or any other charges arising out of the proposed reduction of share capital which may be specifically required under any other law or from undertaking any compliances required to be made by the Petitioner Company under the Income-tax Act,1961 and other applicable laws and regulations.

17. The Petitioner Company undertakes to file the certified copy of the Order and Form of Minutes duly certified by the Designated Registrar of this Tribunal with the Registrar of Companies within 30 days or an extended timeline with payment of additional fees, as may be applicable, from the date of receipt of the certified Order from the Registry of this Tribunal.

18. The Petitioner Company is directed to publish notice about registration of order and minutes by the concerned Registrar of Companies in two newspapers, namely, ‘Business Standard’ in English language and translation thereof in `Loksatta’ in Marathi language both having circulation in the State of Maharashtra within 30 days of registration. The Petitioner Company undertakes to file the certified copy of the order and form of minutes duly certified by the Designated Registrar of this Tribunal with the Registrar of Companies within 30 days or an extended timeline with payment of additional fees, as may be applicable, from the date of receipt of the certified Order from the Registry of this Tribunal.

19. The minutes set forth hereto is hereby approved: –

FORM OF MINUTES

“The issued, subscribed and paid-up share capital of DEXIT Global Limited is INR 2,11,96,85,110 (Indian Rupees Two hundred and eleven crores ninety six lakhs eighty five thousand one hundred and ten only) divided into 89,68,511 (Eighty nine lakhs sixty eight thousand five hundred and eleven) equity shares of INR 10 each, and 1,00,00,000 7%, seven years, cumulative redeemable preference shares of INR 100/- (Indian Rupees Hundred) each, fully paid-up, and 1,03,00,000 Series A, 7%, seven years, cumulative, non participating and optionally convertible redeemable preference shares of INR 100/- (Indian Rupees Hundred) each, fully paid-up, which shall now be reduced to INR 8,96,85,110 (Indian Rupees Eight crores Ninety Six Lakhs Eighty Five Thousand One Hundred and Ten only) comprising of 89,68,511 (Eighty nine lakhs sixty eight thousand five hundred and eleven) equity shares of INR 10 each, by reducing up to INR 203,00,00,000 crores of the paid-up preference share capital.

20. In the result, CP No. 70/MB/2025 is allowed and disposed of accordingly.