GLOBAL TRUST BANK LTD Vs. STATE

JUDGEMENT

(1.) This petition is filed under Section 100 read with Section 78 of the COMPANIES (TRANSFER OF PROFITS TO RESERVES) RULES, 1975 (for short, the Act). The petitioner herein, namely, Global Trust Bank Limited (hereafter referred to as 'GTBL'), seeks the following prayers.

(2.) In a nutshell it is the case of petitioner that during the financial year 2001- 2002 it was compelled to write off bad loans to the tune of Rs.285.38 crores. During that year GTBL utilized general reserve to a tune of Rs. 181.95 crores and contingency reserves of Rs.20 crores for the financial year ended 31.3.2002. Again during the subsequent financial year GTBL had to write off irrecoverable bad loans to the tune of Rs.225 crores, which it met partially from accrued profits and partially from statutory reserves which according to them stood at Rs,467.05 crores, including the share premium account of Rs. 130.19 crores. GTBL seeks imprimature of this Court for its strategy adopted to write off the loans.

(3.) GTBL is a Public Limited Company registered under the Companies Act on 29.10.1993, having its Registered Office at Secunderabad. It is a Banking Company governed by - in addition to the provisions of the Companies Act; the provisions of the Banking Companies Regulations Act, 1949 (BR Act) and Reserve Bank of India established under Reserve Bank of India Act, 1934 (RBI Act), has the power to regulate the affairs and banking operations of GTBL. It has authorized share capital of Rs.650 crores divided into 65,00,00,000 of equity share of Rs.10/- each out of which the paid up capital is Rs.121,35,90,000.00 divided into 12,13,59,000 of equity shares of Rs.10.00 each. The shares of the company are listed on various stock exchanges, namely, Ahmedabad, Coimbatore, Madras, Mumbai and National Stock Exchanges. As stated in the petition during the financial years 2001-2002 and 2002-2003 GTBL fully utilised the free reserves and statutory reserves amounting to Rs.346.71 crores for making provisions towards Non-Performing Assets (NPAs) and for writing off allegedly irrecoverable bad debts. The company states that it has balance in the share premium account amounting to Rs. 1,29,44,25,000/- as on 31.3.2003. Having exhausted all the free and statutory reserves, GTBL proposed to utilise this balance in the share premium account for making provisions towards bad and doubtful debts/writing off irrecoverable debts as of 31.3.2004.