ETA POWER GEN PRIVATE LIMITED Vs. STATE

JUDGEMENT

(1.) This Company Petition is filed under Sections 100 to 104 of the Companies Act, 1956, read with Rules 11(a)(3), 46 and 47 of the Companies (Court) Rules, 1959, for confirming the reduction of the share capital of the Petitioner by setting off the accumulated losses as approved in terms of special resolution passed by the shareholders of the Petitioner on 30th December 2014 be confirmed; all enquiries and directions necessary and proper be issued; the proposed minute set out in paragraph 22 be approved; to dispense with the words "And Reduced" pursuant to the adjustment in the share capital be ordered and that the action taken may be approved.

(2.) Heard Mr.P.H.Aravind Pandian, learned Senior counsel appearing for the petitioner and Mr.M.Gopi Krishnan, learned Additional Central Government Standing Counsel appearing for the Regional Director, Southern Region, Ministry of Corporate Affairs, Chennai.

(3.) The petitioner Company was incorporated on 30.09.1999 as a Private Limited Company with the Registrar of Companies, Chennai. According to the petitioner Company, it is presently engaged in the business of generation and sale of power from bio-mass. While so, over the last four years, the petitioner has been incurring losses resulting in accumulation of substantial losses. The petitioner company made a profit of Rs.1,48,62,163/- as per Profit and Loss Account for the financial year ended 31st March 2014; the financial statements reflect an accumulated loss of Rs.8,12,70,429/- due to carry forward of accumulated losses from previous financial years; on account of its accumulated losses, the net worth of the petitioner has been partially eroded, and the share capital of the petitioner is not adequately represented by its assets. The petitioner company in order to give true representation of the available assets of the Company obtain further investments in the company and to enhance and maximize the shareholders and other stakeholders value in the Company, the Board of Directors of the petitioner company, at their Boarding Meeting held on 20th December 2014, approved to reduce and adjust a significant portion of the losses for the Financial Year 2013-2014 against the equity share capital of the petitioner company which is unrepresented by the available assets. After the proposed adjustment / set off of the Equity Share Capital Account with that of the accumulated losses to the extent of Rs.8,11,39,170/- out of the total accumulated losses of Rs.8,12,70,429/-, the equity share capital account of the petitioner company will stand cancelled and reduced to Rs.8,68,50,830/- divided into 86,85,083 equity shares of Rs.10/- each from Rs.16,79,90,000 divided into 1,67,99,000 equity shares of Rs.10/- each. Further the paid up equity share capital will be reduced proportionally from all the equity shareholders by cancelling 483 equity shares for every 1,000 fully paid equity shares held by them in the petitioner company; the paid up equity share capital of the petitioner will stand reduced to Rs.8,68,50,830/- divided into 86,85,083 equity shares of Rs.10/- each. According to the petitioner company, the above proposal will not have any adverse effect on the creditors of the company; the equity shares proposed to be reduced are fully paid equity shares; the proposal does not involve either the diminution of any liability in respect of unpaid share capital or payment to any shareholder of any paid up share capital; the proposal does not involve any cash outflow and therefore would not affect the ability or liquidity of the petitioner to meet its obligations/commitments in the normal course of business and the proposed reduction will rationalize the capital structure and give a more accurate reflection of the capital assets of the petitioner. Article 57 of the Articles of Association of the petitioner company permits reduction of share capital by the petitioner. Having regard to the substantial amount of accumulated losses amounting to Rs.8,12,70,429/- standing to the debit balance of the Profit and Loss Account as on 31st March 2014 and in accordance with the provisions of Section 100 of the Companies Act, 1956, approval of the shareholders was sought by the Board of Directors of the petitioner for the reduction of equity share capital by adjusting and setting off an extent of Rs.8,11,39,170/- out of the total accumulated losses at an extra-ordinary general meeting convened for the purpose. A notice dated 20th December 2014 was issued to the shareholders of the petitioner in this regard.