ORDER
1. Heard the Learned Counsel for the Petitioner Company and the Deputy Director, RD (WR). No objector has come before the Tribunal to oppose the Petition and nor has any party controverted any averments made in the Petition.
2. The Learned Counsel for the Petitioner Company submits that this Petition is for confirmation of a special resolution approving the reduction of preference share capital of the Company passed unanimously by the Equity and Preference Shareholders of the Petitioner Company at the Extraordinary General Meeting which
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was convened on August 03, 2022. The said special resolution is reproduced hereinbelow:
"RESOLVED THAT pursuant to the provisions of Section 66 of the Companies Act, 2013 ("the Act") and the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016 and other applicable rules, if any, of the Act, and/ or any modification(s) or re-enactment thereof, if any, and as provided under Article 37 in the Articles of Association of the Company and subject to sanction of the Hon'ble National Company Law Tribunal, Mumbai ("NCLT") and any other statutory authorities, as the case may be, the approval of the Members be and is hereby accorded to reduce in total the preference share capital of the Company from INR 9,84,10,600/- (Rupees Nine Crores Eighty Four Lakhs Ten Thousand Six Hundred only) divided into 9,84,106 ( Nine Lakhs Eighty Four Thousand One Hundred and Six) fully paid up preference shares of face value INR. 100/- (Rupees Hundred Only) each, and the same shall be accounted by the Company as per the applicable Accounting Standards…."
3. The Learned Counsel for the Petitioner Company submits that Article 37 of the Articles of Association of the Company empowers the Petitioner Company to reduce its share capital from time to time by passing a special resolution. The relevant extracts of the said article is produced as under:
"37. The company may, by special resolution, reduce in any manner and with, and subject to, any incident authorized and consent required by law-
(a) its share capital
(b) any capital redemption reserve account; or
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(c) any share premium account."
4. The Learned Counsel for the Petitioner Company states that the rationale for reduction of equity share capital of the Petitioner Company is:
a. In February 2002, the Company had issued 9,84,106 1 % Non- Cumulative Redeemable Preference Shares of Rs.100/- ['Preference Shares'] each to one UnitedHealthcare International Mauritius Limited ['UHI Mauritius']. Thereafter, the Preference Shares were transferred in the following manner:
| Date of Transfer |
Name of the Transferor |
Name of the Transferee |
| October 24, 2008 |
UHI Mauritius |
UnitedHealthcare Group International B.V. |
| December 03, 2012 |
UnitedHealthcare Group International B.V. |
UnitedHealthcare International II B.V. |
| August 21, 2018 |
UnitedHealthcare International II B.V. |
OptumHealth International B.V. (“Optum”) |
b. Currently, Optum is the registered holder of the said Preference
Shares. Such Preference Shares are redeemable at the option
of the Company, and not in any case beyond 20 years from the
date of issue. The Company and Optum inter alia have entered
into a Letter Agreement dated 1st April 2021, wherein the
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Company has agreed to cancel the said Preference Shares held by Optum, by filing an application for cancellation of the said Preference Shares by way of reduction of share capital ("Letter Agreement").
c. In the meantime, however, in February 2022, the said Preference Shares became due for redemption. Since the Petitioner Company did not have funds to redeem the said Preference Shares, the Petitioner Company defaulted in the redemption of shares. Pursuant to Section 55 of the Companies Act, 2013, the Petitioner Company could only redeem the said Preference Shares only out of the profits. As stated above, the Petitioner Company, however, has no profits from which the said Preference Shares could have been redeemed. d. The capital reduction proposal therefore aims to cancel the existing Preference Shares held by Optum."
5. The Learned Counsel for 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 annexed to the Company Petition.
6. The issued, subscribed, and paid-up share capital of the Petitioner Company as on March 31, 2023 is as under:
Particulars Amount in Rupees
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| Authorized Share Capital |
| 2,00,00,000 Equity Shares of Rs.10/- each |
20,00,00,000 |
| 13,00,000 1% Cumulative Preference Shares of Rs.100/- each |
13,00,00,000 |
| TOTAL |
33,00,00,000 |
| Issued, subscribed and paid-up |
| 1,20,22,750 Equity Shares of Rs.10/- each |
12,02,27,500 |
| 9,84,106 1% Preference Shares of Rs.100/- each |
9,84,10,600 |
| TOTAL |
21,86,38,100 |
Subsequent to March 31, 2023, there has been no change in the
issued, subscribed and fully paid-up share capital of the Petitioner
Company.
7. The proposed reduction is not likely to cause any prejudice to the creditors of the Petitioner Company. The creditors of the Petitioner Company are not adversely affected by the proposed reduction of preference share capital, as there is no reduction in the amount payable to the creditors and no compromise or arrangement is contemplated with the creditors and they will be paid off in the ordinary course of business.
8. As on July 31, 2022, the Company had 763 of creditors, both secured and unsecured, and the total amount due and payable by the Company to the aforementioned creditors is Rs. 3,56,99,877-.
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The list of Creditors duly certified by two directors of the Petitioner Company is annexed to the Company Petition as Annexure L.
9. The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai on behalf of the Central Government, has filed its report dated March 20, 2023 ("Report") inter alia, making the following observations which are reproduced hereunder to which the Petitioner Company has filed its responses by way of an Affidavit in Reply dated April 19, 2023 and served upon the Regional Director on April 20, 2023:
| Para No. |
Observation of the report of the Regional Director dated March 20, 2023 |
Response/ Undertaking/ Submission of the Petitioner Company |
| 6 |
ROC, Mumbai in his Report No. ROC/JTA/100102/U/s.66/2023 dated 16.03.2023 inter-alia mentioned that there is no inspection, investigation, inquiry, complaints, prosecution pending against the company. Further the ROC, Mumbai has made his observation in para no. 23 of his report and stated that, Interest of the creditors should be protected. May be decided on its merits. |
The interest of all creditors is protected as there is no payout to the preference shareholders in the present reduction and thus no right or interest of the creditors is likely to be affected. Moreover, pursuant this Hon’ble Tribunal’s order dated 16th December 2022, the Petitioner has issued notices to all creditors. No such creditor has raised any |
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objection to the proposed reduction of the Preference Share Capital. (Paragraph 3) |
| 7A |
The observations of the Regional Director on the proposed Scheme of Reduction of Capital are as under: - Applicant to submit an Affidavit to the effect that the interest of the creditors and all stakeholders and Government Revenue are protected as well as statutory dues are paid off. |
The captioned Company Petition seeks this Hon’ble Tribunal’s approval for reduction of preference share capital of the Petitioner by cancellation without any consideration. It is submitted that the interest of all creditors, stakeholders as well as the Government Revenue are protected, and all the statutory dues are paid off by the Petitioner Company. (Paragraph 4) |
| 7B(i) |
The Directorate has referred Para 11.3 of the Petition in which petitioner company has stated that it was unable to redeem the 9,84,106 preference shares of Rs. 100/- each aggregating to Rs. |
Section 55 of the Companies Act, 2013 (“the Act”) provides for the mechanics for issuance and redemption of preference |
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9,84,10,600/- since issue of shares. The said shares in February 2002 due to provision does not deal insufficient funds available with with reduction of petitioner company to redeem. In preference share capital, this connection it is stated that: - which is provided for in Section 66 of the Act.
The petitioner company has not Thus, Section 66 of the complied with section 55(3) for Act would be applicable making new application before for the purpose of the the Hon'ble NCLT. proposed reduction of the Preference Share
Capital and Section 55 of
the Act has no
applicability to the
instant matter,
whatsoever. Section
55(2) of the Act provides
for redemption of
preference shares and
lists out certain methods
through which
preference shares could
be "redeemed" and the
consideration to be paid
to the preference
shareholders. Section
55(3) of the Act provides
that where a company is
not in a position to
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redeem preference shares then it may, with the consent of the holders of three-fourth in value of such
preference shares, and approval of Tribunal, issue further redeemable preference shares. Section 55(3), therefore, provides for a situation where a company does not have funds and that the preference
shareholders are willing to continue to hold such preference shares
without the same being redeemed. In such a situation, the obligation to redeem such
preference shares
persists as it is only deferred to a future date. Section 55 does not provide for cancellation of any shares,
particularly, preference shares without
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consideration/ pay-out. Whereas, in the present case, the shareholders, including the preference shareholders have specifically resolved to cancel the preference shares by surrender of shares without any consideration. Thus, the procedure as provided for under Section 66 of the Act, is applicable and is required to be
followed.
Further, the opening para of sub-section (1) of Section 66 permits a company to reduce its capital "in any manner"
by a special resolution, subject to confirmation of the same by this Hon'ble Tribunal. Hence, this Tribunal is
empowered to consider an application for reduction of capital, as
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approved by the members by a special resolution in compliance with Section 66. (Paragraphs 5 and 6) |
| 7B(ii) |
The reason for non-redemption of preference shares that petitioner company was not having fund to redeem is not correct as the net worth of the Company is positive and during the F.Y. 2021-22, it has net profit after tax was Rs. 45,66,980/- (Previous F.Y. 14,33,820/-). Further, the cancellation of the preference shares/redemption of preference shares at Zero (o) value will amount to income in hands of company u/s 56 or other provisions of the Income Tax Act, 1961. Therefore, the company shall undertake to pay Income Tax liability arising out of cancellation of shares. |
The Petitioner’s profit after tax for F.Y. 2020-21 was Rs.0.14 Crore, where as the profit after tax for F.Y. 2021-2022 was Rs.0.46 Crore and therefore not enough for repayment of a liability of Rs. 9,84,10,600/- (Rupees Nine Crore Eighty-Four Lakh Ten Thousand and Six Hundred only). In fact, the decision to cancel the preference shares was taken on 1st April 2021, much before the redemption due in February 2022. As regards the income tax liability, the Petitioner undertakes to pay income tax liability, |
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if any, in accordance with law. |
| 7C |
The tax implication if any arising out of the proposal for reduction is subject to final decision of Income Tax Authorities. The approval of the Company Petition by this Hon'ble Court may not deter the Income Tax Authority to scrutinize the tax return filed by the Company after giving effect to the proposed reduction. The decision of the Income Tax Authority is binding on the petitioner Company. |
The Petitioner shall comply with the directions, if any, issued by the Income Tax Authority, in accordance with law. |
| 7D |
The provisions of Section 55 specifically provides for Redemption of Preference Share Capital. The present Scheme is nothing, but redemption of Preference Share by way of Nil payment against each preference shares. The Petitioner Company to place on record as to why the company has not filed application in compliance of Section 55 (3) of the Companies Act, 2013 on arising of situation as mentioned of Para 11.3 of the Petition. |
The observations made in the paragraph under reference have been sufficiently dealt with in response to 7(B) above. |
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7E It is respectfully submitted that, The Petitioner's the petitioner Company is Extraordinary General proposing to reduce and cancel in Meeting held on 3rd total preference share capital of August, 2022 had the Company from Rs. participation of the 9,84,10,600/- divided into Equity Shareholders and 9,84,106 fully paid-up preference the sole Preference shares of face value Rs. 100/-. In Shareholder of the this regard it is submitted that the preference shares which Preference shareholders should are proposed to be have passed the resolution by cancelled in the 3/4 value of such reduction of captioned Company preference shares, and it has not Petition. I say that the filed separate resolution of resolution passed on 3rd Preference Shareholders before August 2022 is in Registrar of Companies. compliance with Section 66 of the Act and the
applicable rules.
10. The observations made by the Regional Director on behalf of the Central Government have been explained by the Petitioner Company in Para 9 above. Further heard, Mr. Wagh, Deputy Director, RD (WR) Mumbai, is present at the time of final hearing and reported no objections for approving the scheme by this Tribunal.
11. The Learned Counsel for the Petitioner Company further submits that the Petitioner Company has complied with all statutory requirements as per directions of the Tribunal and they have filed the necessary affidavit of service. Moreover, the Petitioner Company
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also undertakes to comply with statutory requirements, if any, under the Companies Act, 2013 and the Rules made thereunder, as may be applicable. Further, the Petitioner Company undertakes that the payment to the non-resident shareholder, whose shares are being reduced is in compliance with the provisions of the Foreign Exchange Management Act, 1999 read with Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, as amended from time to time ("FEMA"). with the FEMA Regulations, wherever applicable.
12. Considering the entire facts and circumstances of the case, report filed by Regional Director, Affidavit in Reply filed by the Petitioner Company in response to Regional Director's observations and on perusal of the documents produced on record, this Bench is of the considered view that reduction of share capital is just an equitable in terms of the Section 66 of the Companies Act, 2013 and therefore the Company Petition is allowed.
13. The Petitioner Company undertakes to file the certified copy of the order and form of minutes duly certified by the Deputy Registrar/ Assistant Registrar of this Tribunal with the Registrar of Companies within 30 days from the date of receipt of the certified Order from the Registry of this Tribunal.
14. The Petitioner Company shall publish notices about registration of order and minutes by the concerned Registrar of Companies, Mumbai, Maharashtra in two newspapers namely "Business Standard" in English Language and translation thereof in
"Navshakti" in Marathi Language both having circulation in Mumbai, within 30 days of registration of the Order.
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15. All concerned regulatory authorities to act on production of certified copy of the order duly signed by designated Registrar of this Tribunal.
16. In the light of the above and in the circumstances of the case, C.P. No.214 of 2022 filed u/s 66 of the Companies Act, 2013 is hereby allowed and approved in the following terms:
"The total Preference Share Capital of Alinea Healthcare India Private Limited, of Rs.9,84,10,600 (Rupees Nine Crores Eighty-Four Lakhs Ten Thousand Six Hundred only) fully paid-up preference shares of face value INR 100/- (Rupees Hundred Only) each shall stand cancelled and the said paid-up preference shares are to be deemed to be unissued at the date of registration of this minute."
17. All concerned regulatory authorities to act on production of certified copy of the order to be issued on demand by the Deputy Registrar/ Assistant Registrar of this Tribunal.
18. Ordered Accordingly. CP No. 214/MB/2022 is allowed
Sd/- Sd/-
MADHU SINHA REETA KOHLI
Member (Technical) Member (Judicial)
/Priyanka/
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