In the case of Brillio Technologies Pvt. Ltd. VS Registrar of Companies & Anr. The National Company Law Appellate Tribunal ("NCLAT") reversed the National Company Law Tribunal ("NCLT" decision)'s. This was done via Company Appeal (AT) No. 293 of 2019 on April 19, 2021.
In the instant case titled Brillio Technologies Pvt. Ltd. v. Registrar of Companies & Anr, the issue raised for clarification before the NCLAT was:
Whether it is permissible to reduce share capital selectively?
With regard to this issue, according to the appellant, demands from non-promoter owners who lack cash have led to the proposed reduction in share capital. Only the Holding firm, which holds 95.88 per cent of the shares and has clearly approved the reduction, are non-promoter shareholders. According to Section 66, the Company may lower the share capital in "any manner" by special resolution, subject to approval by the Tribunal on an application. The methods described in Section 66(1)(a) and (b) are merely examples and not the only ways share capital may be decreased. The non-promoter shareholders are the sole class of shareholders who will be eliminated by the share capital reduction plan, according to NCLAT, and this is unfair and inequitable, in the objector's opinion.
It was decided to rely on the Hon'ble Bombay High Court's judgement in the case of Sandvik Asia Ltd. vs. Bharat Kumar Padamsi & Ors. (2009) SCC Online Bom. 541, where it was stated that "a corporation can lower its share capital in any method" after reading Section 100 of the Companies Act. According to NCLAT, it is safe to assume that selective reduction is acceptable provided non-promoter owners are compensated at fair market value for their shares in light of the aforementioned legal theory.
The NCLAT categorically stated that,
"With the aforesaid we are of the view that the Tribunal has erroneously held that the Application for reduction of share is not maintainable under Section 66 of the Act, consent affidavits from the creditors is mandatory for reduction of share capital, SPA cannot be utilised for making payment to non-promoter shareholders, consent from 171 non-promoter shareholders who are not traceable is required, selective reduction of shareholders of non-promoter shareholders is not permissible. The Tribunal has dismissed the Application on untenable grounds”.
According to NCLAT, NCLT incorrectly rejected the application for a share reduction by claiming that it was ineligible for consideration under Section 66 of the Act. As a result, NCLAT invalidated the NCLT's contested order.