In Re: India Infoline Ltd. vs Unknown
2004 Latest Caselaw 562 Bom

ORDER

Anoop V. Mohta, J.

1. This petition has been filed by the Company namely India Infoline Ltd. (for short 'Petitioner Company'), having its registered office at Building No. 24, Nirlon Complex, Off Western Express Highway, Goregaon (E), Mumbai-400 063, under Sections 78 and 100 to 104 of the Companies Act read with 46 to 65 Companies Rules, 1959 for 'Short Rules' (for short 'Companies Act'), for the utilisation of the Securities Premium Account for writing off accumulated losses and reduction of equity shares capital of India Infoline Ltd.

2. The shares of the petitioner-company are not listed on any stock exchange. The petitioner company have three subsidiary companies; India Infoline Securities Private Ltd., India Infoline.com Distribution Company Ltd. and India Infoline Insurance Services Ltd. The petitioner-company is a member of National Stock Exchange of India and has its SEBI Registration No. INB 231097537. The company are Depository Participant/Member of the National Securities Depository Limited. The petitioner-company provides facilities to retail investors for being and selling of shares listed on the NSE, as well as, the BSE on the petitioners' website; www. 5paise.com. The Company have offices in over 50 locations in India and employed over 500 employees.

3. The financial position of the Company, as on 1st April, 2003, based on the audited account, unaudited balance sheet and profit and loss account for the year ended 30th September, 2003 is on record.

The authorised share capital of the petitioner-company, as on 31st March, 2003 is Rs. 35,00,00,000 comprising of 3,50,00,000 equity shares of Rs. 10 each. The issued, subscribed and paid up equity share capital of the petitioner-company is Rs. 26,42,18,620 comprising of 2,64,21,862 shares of Rs. 10 (Rupees ten only) each. As on date there is no change in capital structure of the petitioner-company.

4. The petitioners company has proposed to write off accumulated losses by utilising the share premium account and to reduce the face value of the its shares from Rs. 10 per share to Rs. 5 per share for the reasons recorded in para 13 of the petition. Basically due to 'dotcom' bubble bursting during the year 2001-2003, the value of the shares of the company had eroded considerably and therefore, suffered losses in the past two years to the extent of Rs. 241,670,525. The shareholders provided consent to the said proposed reduction in the EGM dated 30th December, 2003. Section 78(1) read with Section 100 of the Act and Article 3 of the Articles of Association of the petitioner-company authorise the petitioner-company to reduce the share capital in any way. After proposed reduction of the share capital, the financial position will be improved and therefore, the interest of the petitioner's creditors will not be adversely affected and company would be in an ideal position to capitalise on the present bullish trends and 'feel good' factor existing in the Indian economy. As the shares of the petitioner-company are not listed in stock exchange, by the proposed reduction of the share capital, the interest of the said shareholders of the petitioner-company would be best served.

5. In view of the above object and purpose, the notice of EGM in a prescribed explanatory statements were sent to all the members and the auditors of the company, as required under Companies Act and Rules. The meeting was accordingly, fixed on December 30, 2003. After due deliberation and discussion in the said meeting, the special resolution was passed unanimously without any manner. The certified copy of the Board of Directors of meeting dated 4th November, 2003, and Minutes of EGM held on 30th December, 2003 a Special Resolution in question, is part of the record.

6. The petitioner submit that the special resolution approved by the members did not involve diminution of any liability in respect of unpaid capital or the payment of any paid up capital, not is any call being waived or payments to any shareholder of the petitioner-company and will not affect or prejudice to the interest of the members, company, its creditors or the general public at large. The petitioners have no secured creditors. Unsecured creditors have given their written consent to the petitioner-company for the proposal for utilisation of the entire security premium account of Rs. 206,255,007 for writing off the accumulated losses on account of adverse market condition and reduction of face value of the shares of the petitioner-company from Rs. 10 per share to Rs. 5 per share. The financial position of the petitioner-company is sound and healthy. Even, as per the unaudited account dated 30th September, 2003 and therefore, Company will be in a position to meet its debts and other financial obligations. Secured and unsecured creditors will not be affected in any way by the said resolution. The petitioners therefore, in view of para 18 also requested to dispense with the procedure under Section 101(2) of the Act.

7. No investigating proceedings are pending against the present company under Sections 235 to 251 of the Act or under any other provisions.

8. On 12th March, 2004 the petition was admitted and fixed for hearing on 22nd April, 2004, the Notice of hearing, as directed was issued and published accordingly. Affidavit of service, dated 2nd of April, 2004 is placed on record and additional affidavit 22nd of April, 2004 filed by the petitioner. The publication and notice, and further that the petitioner-company and their advocates have not received any objection from the shareholders, creditors, employees or any other persons.

9. The matter was called out and heard. The petitioner-company's Counsel made again a positive statement that they have not received any objection, neither officers of the Court pointed out any objection on record. Considering, the averments, made in the affidavit and the object and purpose of utilization of securities premium account for writing off of accumulated losses and for reduction of equity shares, and as a special resolution have been passed and accepted by shareholders unanimously and as there is no secured creditors and as unsecured creditors have given their written consent, in this background and undisputed position, and in view of the settled principle that commercial wisdom and need of the Company the interference of the Court should be minimum, and there is nothing illegal or against the public policy pointed out or found on record company petition deserved to be allowed. It need not be mentioned that the Company required to follow all the procedures of other laws. The petitioner, as averred, as explained the purpose and object of such reduction, the creditors, sub-creditors and shareholders interest are safeguarded, as this will not affect the creditors or unsecured creditors. The need and purpose of reduction have been duly explained and discussed in the general body meeting of the company and it was unanimously passed and, therefore, there is full compliance of procedure, as prescribed under the Companies Act. The reduction made in question is not contrary or against principle of law. The scheme in question expressed all points of reduction, as referred above, which are within legal framework also. Therefore, the decision of reduction, as taken by the company and its shareholders, creditors and unsecured creditors and as the same is just, fair and reasonable. It is difficult for the Court to interference with such decisions, specially when no case for interference in such decisions, have been made out or pointed out.

10. In view of the above circumstances, the petition is allowed in terms of prayer Clauses (a) to (c) with liberty.