PARRYS CONFECTIONERY LTD. Vs. STATE

JUDGEMENT

(1.) IN this Petition, the Petitioner Company seeks an order of this Court for confirming the reduction of share premium account under Sections 78 and 101(1) of the Companies Act, 1956 read with Rules 46 and 47 of the Companies (Court) Rules.

(2.) THE case of the Petitioner is that the Petitioner has as on 31 -3 -2002, a sum of Rs. 3319.51 lakhs standing to the credit of its Securities Premium Account. The Petitioner had made large investments in setting up their factory at Manappakkam. However, as the factory operations proved unviable due to several reasons, the Petitioner took a business decision to close the said factory in August, 2002, after following the requisite procedures. The Petitioner has also identified the surplus assets relatable to such Manappakkam Unit and has taken a decision to sell such assets for which purpose they have obtained the valuation of an independent valuer. On this basis, the Petitioner estimates, that as on 31 -3 -2003, they would suffer a loss not exceeding Rs. 700 lakhs in the process.

(3.) THE Notice for the meeting was accompanied by an Explanatory Statement as contemplated by Section 173(2) giving full details of the proposed reasons thereof. The meeting was attended by 60 shareholders in person and by 166 Shareholders by Proxy and both Resolutions namely for the amendment of the Articles and for the reduction of the Securities Premium Account, were put to vote and approved unanimously by the Shareholders. The following is the text of the resolution so carried and relating to the Petitioner's Securities Premium Account: 'Resolved that pursuant to the provisions Sections 78, 100 and other applicable provisions if any, of the Companies Act, 1956 and Article 45 of the Articles of Association of the Company and subject to the confirmation of the Hon'ble High Court of judicature at Madras and/or other Tribunal or Authority empowered for this purpose under the Companies Act, an amount not exceeding Rs. 2500 lakh standing to the credit of the Securities Premium Account of the Company be utilized for adjustment against an estimated loss not exceeding Rs. 700 lakh as on 31 -3 -2003 by reason of the diminution in value of the Plant and machinery held for disposal at the Company's Manappakkam location (being an extraordinary item on Capital Account), as also a sum of Rs. 73 lakh being the balance of the deferred voluntary retirement/separation expenditure as on 31 -03 -2003 incurred at Manappakkam, and the Accumulated loss of the Company of Rs. 1642.20 lakh as on 31 -3 -2003. Further Resolved that for the purpose of giving effect to the above Resolution and for removal of any difficulties or doubts, the Board of Directors of the Company, (hereinafter referred to as 'the Board' which term shall be deemed to include any person or committee which the Board would have authorized/may authorize or nominated/may nominate to exercise its powers, including the powers conferred under this Resolution) be and is hereby authorised to do all such acts, deeds, matters and things as it may, in its absolute discretion, deem necessary, expedient, usual or proper and to settle any question or difficulty that may arise with regard to utilization/adjustment of the Securities Premium Account including passing of such accounting entries and/or making such other adjustments in the books of account as considered necessary to give effect to the above Resolution, finalizing the amounts involved or to carry out such modifications/directions as may be ordered by the Hon'ble High Court of Judicature at Madras to implement the aforesaid Resolution.'