M/S. Religare Capital Markets ... vs ...
2015 Latest Caselaw 2454 Del

                      IN THE HIGH COURT OF DELHI
                    COMPANY PETITION NO. 680/2014

                                            Reserved on 16th March, 2015
                                Date of pronouncement: 23rd March, 2015
In the matter of
The Companies Act, 1956 & the Companies Act, 2013 (to the extent
applicable):
And
Petition under Sections 100 to 105 of the
Companies Act, 1956 read with Rule 46
of the Companies (Court) Rules, 1959
And
M/s. Religare Capital Markets Limited
                                                     .. Petitioner Company
                                 Through Mr. Arun Kathpalia, Mr.Anirudh
                                 Das and Mr. Kamaljeet Singh, Advocates
                                 for the petitioner
                                 Ms. Aparna Mudiam, Assistant Registrar
                                 of Companies for the Regional Director

SUDERSHAN KUMAR MISRA, J.

1. This petition under Sections 100 to 105 of Companies Act, 1956

(hereinafter referred to as 'the Act') has been filed by M/s. Religare

Capital Markets Limited (hereinafter referred to as the 'petitioner

company') for confirming the reduction of its preference share capital.

2. The registered office of the petitioner company is situated at New

Delhi, within the jurisdiction of this court.

3. The petitioner company was incorporated under the Companies

Act, 1956 on 9th February, 2007 with the Registrar of Companies, NCT of

Delhi & Haryana at New Delhi.

4. The authorized share capital of the petitioner company, as on 30th

September, 2014, was Rs.13,61,52,50,000/- divided into 8,15,50,000

equity shares of Rs.15/- each aggregating to Rs.1,22,32,50,000/-;

1,22,67,00,000 preference shares of Rs.10/- each aggregating

Rs.12,26,70,00,000/-; and 12,50,00,000 preference shares of Rs.1/- each

aggregating to Rs.12,50,00,000/-. The issued and subscribed share

capital of the company was Rs.13,52,73,50,000/- divided into

8,15,50,000 equity shares of Rs.15/- each aggregating to

Rs.1,22,32,50,000/-; 3,72,00,000 1% compulsorily convertible preference

shares of Rs.10/- each aggregating Rs.37,20,00,000/-; 2,00,00,000 11%

non-convertible cumulative redeemable preference shares of Rs.10/-

each aggregating Rs.20,00,00,000/-; 90,00,000 12% non-convertible

cumulative redeemable preference shares of Rs.10/- each aggregating

Rs.9,00,00,000/-; 52,50,00,000 0.001% non-convertible cumulative

redeemable preference shares of Rs.10/- each aggregating

Rs.5,25,00,00,000/-; 3,71,00,000 0.01% non-convertible non-cumulative

redeemable preference shares of Rs.1/- each aggregating

Rs.3,71,00,000/-; 1,55,00,000 0% non-convertible cumulative

redeemable preference shares of Rs.10/- each aggregating

Rs.15,50,00,000/-; and 62,00,00,000 0.002% cumulative non-convertible

redeemable preference shares of Rs.10/- each/Rs.6.30 paid up

aggregating Rs.6,20,00,00,000/-. The called and paid-up share capital of

the company was Rs.10,82,56,00,000/- divided into 8,15,50,000 equity

shares of Rs.15/- each/Rs.10/- each called up and paid up aggregating to

Rs.81,55,00,000/-; 3,72,00,000 1% compulsorily convertible preference

shares of Rs.10/- each fully paid up aggregating Rs.37,20,00,000/-;

2,00,00,000 11% non-convertible cumulative redeemable preference

shares of Rs.10/- each fully paid up aggregating Rs.20,00,00,000/-;

90,00,000 12% non-convertible cumulative redeemable preference

shares of Rs.10/- each fully paid up aggregating Rs.9,00,00,000/-;

52,50,00,000 0.001% non-convertible cumulative redeemable preference

shares of Rs.10/- each fully paid up aggregating Rs.5,25,00,00,000/-;

3,71,00,000 0.01% non-convertible non-cumulative redeemable

preference shares of Rs.1/- each fully paid up aggregating

Rs.3,71,00,000/-; 1,55,00,000 0% non-convertible cumulative

redeemable preference shares of Rs.10/- each fully paid up aggregating

Rs.15,50,00,000/-; and 62,00,00,000 0.002% cumulative non-convertible

redeemable preference shares of Rs.10/- each/Rs.6.30 each called up

and paid up aggregating Rs.3,90,60,00,000/-.

5. A copy of the Memorandum and Articles of Association of the

petitioner company has been filed on record. The audited balance sheet,

as on 31st March, 2014, of the petitioner company, along with the report

of the auditors, has also been filed.

6. It has been submitted by the petitioner that in the year 2008, the

petitioner company was incorporated as a wholly owned subsidiary in

Mauritius i.e. Religare Capital Markets International (Mauritius) Limited.

This subsidiary acquired an investment banking company in the United

Kingdom, through an intermediary subsidiary, which is named Religare

Capital Markets (Europe) Limited. This subsidiary further established

subsidiaries and joint ventures in United Kingdom, United States of

America, Hong Kong, Singapore, Japan, South Africa and Mauritius.

Additionally, Religare Capital Markets International (Mauritius) Limited

also acquired/set-up subsidiaries in Sri Lanka and Australia. It is further

submitted that with economic slowdown and the resultant significant

decline in the investment banking business, the operations of various

companies in the Group did not take-off as expected. To cater to the

financial requirements of the Group, the petitioner company had to infuse

significant amount of capital into Religare Capital Markets International

(Mauritius) Limited and its underlying subsidiaries. Religare Enterprises

Limited, the holding company of the petitioner company, in turn had to

infuse capital into the petitioner company. It is further submitted that the

sub-optimal business performance of the group and the high people

costs resulted in significant amount of cash losses. To stem such losses,

the petitioner company has over a period of time shut the operations of

the Group in United Kingdom, United States of America, Japan and

Australia and restructured its businesses in United Kingdom and South

Africa to hold minority stake. It is further submitted that despite these

measures, there has been a significant erosion of net worth of Religare

Capital Markets International (Mauritius) Limited, which was

consequently impacted the balance sheet of the petitioner company. The

petitioner company further submitted that the above mentioned factors

clubbed with the slowdown in the Indian economy, weakness in domestic

currency, concerns over current account deficit, high inflation, low growth

projections and geo-political problems during the recent years have led to

a significant decline in business opportunities and have consequently

resulted in huge amount of cash loss in the petitioner company.

7. It is further submitted by the petitioner that the current accumulated

losses are significant in relation to the total net-worth of the petitioner

company. Consequently, the net-worth of the petitioner company has

eroded considerably and any improvements in the performance of the

petitioner company will not be appropriately represented unless past

losses are written off. Accordingly, the petitioner submitted that a

reduction of share capital against the accumulated losses will improve

the financial position of the petitioner company and the petitioner

company will be able to provide a better representation of its assets and

liabilities in its books of accounts going forward. It will further enable the

petitioner company to reflect its capital and financial position more

appropriately and carry on its business with better operating parameters,

including better capacity for servicing capital.

8. It is pleaded that the petitioner company is authorized by virtue of

Article 24 of its Articles of Association to reduce its share capital, as per

the provisions of the Companies Act, 1956.

9. The Board of Directors of the petitioner company in their meetings

held on 17th September, 2014 granted in-principal approve to the

proposed reduction and subsequently on 17th October, 2014 unanimously

approved the proposed reduction of the share capital of the petitioner

company. Copies of the resolutions passed at the meetings of the Board

of Directors of the petitioner company are placed on record.

10. A special resolution has been passed at the Extra Ordinary

General Meeting of the equity and preference shareholders of the

petitioner company held on 22nd October, 2014 confirming the proposed

reduction of the share capital. A copy of the minutes of the special

resolution passed at the Extra Ordinary General Meeting is placed on

record.

11. Learned counsel for the petitioner company has submitted that the

proposed reduction does not involve either diminution of any liability in

respect of unpaid share capital or payment to shareholders of any paid

up share capital. It is further submitted that the proposed reduction in

capital does not violate or circumscribe any provision of the 1956 Act or

the 2013 Act, as applicable or any rules or regulations made thereunder.

12. Learned counsel also submitted that the petitioner company is

registered with the Securities and Exchange Board of India as a

Category-I Merchant Banker and has also been granted certificate as a

Trading and Self Clearing Member of Capital Market and Future and

Options Segment of NSE and Trading Member of Capital Market and

Future and Options Segment of BSE. He further submitted that the

petitioner company has received approval from the BSE and the NSE to

the capital reduction, which are placed on record.

13. In the aforesaid background, this petition is filed seeking approval

of the resolution passed at the Extra Ordinary General Meeting held on

22nd October, 2014. The Form of Minutes proposed to be registered

under Section 103(1)(b) of the Act and annexed as Annexure-'L' to the

petition is reproduced as under:

"The paid up share capital of Religare Capital Markets Limited, is henceforth Rs.5,57,56,00,000/- divided into 8,15,50,000 equity shares of Rs.15/- each/Rs.10/- each called up and paid up, 3,72,00,000 1% compulsorily convertible preference shares of Rs.10/- each; 2,00,00,000 11% non-convertible cumulative redeemable preference shares of Rs.10/- each; 90,00,000 12% non-convertible cumulative redeemable preference shares of Rs.10/- each; 3,71,00,000 0.01% non-convertible non-cumulative redeemable preference shares of Rs.1/- each; 1,55,00,000 0% non-convertible cumulative redeemable preference shares of Rs.10/- each; and 62,00,00,000 0.002% cumulative non-convertible redeemable preference shares of Rs.10/- each/Rs.6.30 each called up and paid up, reduced from Rs.10,82,56,00,000/- divided into 8,15,50,000 equity shares of Rs.15/- each/Rs.10/- each called up and paid up; 3,72,00,000 1% compulsorily convertible preference shares

of Rs.10/- each; 2,00,00,000 11% non-convertible cumulative redeemable preference shares of Rs.10/- each; 90,00,000 12% non-convertible cumulative redeemable preference shares of Rs.10/- each; 52,50,00,000 0.001% non-convertible cumulative redeemable preference shares of Rs.10/- each; 3,71,00,000 0.01% non-convertible non- cumulative redeemable preference shares of Rs.1/- each; 1,55,00,000 0% non-convertible cumulative redeemable preference shares of Rs.10/- each; and 62,00,00,000 0.002% cumulative non-convertible redeemable preference shares of Rs.10/- each/Rs.6.30 each called up and paid up.

14. By order dated 7th November, 2014, notice of this petition was

directed to be issued to the Regional Director, Northern Region and

citations were directed to be published in the newspapers 'Hindustan

Times' (English) and 'Hindustan' (Hindi) in terms of the Companies

(Court) Rules, 1959. The petitioner has filed an affidavit showing

compliance regarding service on the Regional Director, Northern Region

as also publication of citations in the aforesaid newspapers on 23rd

January, 2015. Copies of the newspaper clippings containing the

publications have been filed along with the affidavit.

15. In response to the notice issued, Mr. A. K. Chaturvedi, Regional

Director, Northern Region, has filed his report dated 10th February, 2015

wherein in Para 6 he has stated that the petitioner company has obtained

the approval of BSE and NSE to the proposed reduction but in its reply

dated 24th December, 2014, it has not enclosed the said approval. He,

therefore, prays that the petitioner company may be directed to furnish

the copy of the approvals obtained from NSE and BSE. Further, relying

on the report of the Registrar of Companies, he further prays that notice

of this petition be issued to Reserve Bank of India, Income Tax

Department and Enforcement Directorate before granting prayer of the

petitioner or in the alternative, the petitioner company may be directed to

give an undertaking that all compliances under Income Tax, FEMA and

RBI shall be complied with.

16. In response to the above objection, the petitioner company has

filed the affidavit dated 19th February, 2015 of Mr. Anil Saxena, Director

of the petitioner company stating that the questionnaire provided by the

Regional Director did not require that the NSE and BSE approvals be

filed and, therefore, these approvals were not filed with the response

dated 24th December, 2014. He further submitted that these approvals

were part of the petition, a copy of which was served on the Regional

Director on 18th November, 2014. Further, as required by the Regional

Director, the petitioner company undertakes to comply with all the

applicable provisions of the Income Tax Act, 1961, The Foreign

Exchange Management Act, 1999, and applicable RBI regulations,

notifications, and circulars with respect to its overseas investments. The

petitioner company also undertakes to comply with the terms of the

approvals granted by the BSE and NSE. In view of the above, the

observations raised by the Regional Director, Northern Region, stand

satisfied.

17. Despite publication of notice, no objection has been received from

any creditor or any member of the public. The petitioner company has

filed the affidavit of Sh. Anil Saxena, Director of the petitioner company,

on 17th March, 2015 submitting that neither the petitioner company nor its

counsel have received any objection pursuant to citations published on

23rd January, 2015. Thus, there appears to be no legal impediment in

allowing the present petition.

18. In view of the averments made in the petition and there being no

objection from any creditor or any member of the public, the petition is

hereby allowed. The resolution passed by the petitioner company in its

Extra Ordinary General Meeting held on 22nd October, 2014 for reduction

of its share capital is approved. The 'Form of Minutes' proposed to be

registered under Section 103(1)(b), and annexed as Annexure -'L' to the

petition, is also approved.

19. A certified copy of this order be delivered to the Registrar of

Companies within thirty days from today. The Registrar of Companies, on

receipt of the certified copy of this order and minutes approved by this

court, is directed to register the same and effect the necessary alteration

with regard to the company.

20. The notice of registration of this order and the resolution of the

company shall be published in the 'Hindustan Times' (English) and

'Hindustan' (Hindi) within 14 days of the registration aforesaid.

21. The petition stands allowed in the above terms.

Dasti

SUDERSHAN KUMAR MISRA, J.

March 23, 2015