In re Sarjan Realities Private Limited (NCLT Mumbai)
The National Company Law Tribunal (NCLT), Mumbai Bench, in In re Sarjan Realities Private Limited, allowed the company’s petition under Section 66 of the Companies Act, 2013 for confirmation of reduction of its equity and preference share capital. The company proposed the reduction to simplify its capital structure, provide an exit to certain shareholders, realign ownership, improve key financial ratios, and utilize its available cash balance. The proposal involved cancellation of the entire preference share capital comprising Series P2, P3, P4, and P5 preference shares, which were to be redeemed at a 15% premium on face value, and cancellation of 7,01,80,000 equity shares held by Shubh Realty (South) Private Limited at nil value.
The Tribunal noted that the special resolutions approving the reduction had been passed unanimously by the relevant equity and preference shareholders. The Articles of Association authorized reduction of share capital by special resolution. Notices had been served on all creditors, no objections were received, and the statutory auditor certified the creditors’ position. The Regional Director raised observations regarding selective reduction, applicability of Sections 55 and 68 of the Companies Act, payment of premium on preference shares, valuation, protection of creditors, tax implications, and compliance with significant beneficial ownership provisions. The company responded to each observation, contending that the petition was under Section 66, that reduction of capital and redemption under Section 55 are independent statutory mechanisms, that Section 68 relating to buy-back was not applicable, and that creditors’ interests and statutory dues would remain protected. The company also relied upon judicial precedents supporting reduction of preference share capital under Section 66.
