OCL INDIA LIMITED Vs. STATE

JUDGEMENT

(1.) In this application purported to be under Sections 78,100, 101, 102 and 103 of the Companies Act, 1956 (in short, the 'Act') M/s. OCL India Limited (hereinafter referred to as the 'Company/Petitioner') has prayed for an order directing reduction of capital on the basis of special resolution passed in terms of Section 189 of the Act at a general meeting held on 29th September, 1997, and approve the minutes as shall be dealt with infra. The said resolution reads as follows :

(2.) Reasons seeking for reduction are stated to be as follows :(a) By a letter of offer dated September 18, 1996 the company issued, on rights basis to its shareholders, 18,00,000 Zero Coupon Convertible Debentures of Rs. 140/- each (hereinafter referred to as 'ZCCDs') along with detachable warrants to part finance the expansion and/or modernisation projects undertaken by the company in its cement and Refractory Plants situated at Rajgangpur in the District of Sundargarh, Orissa.(b) As per the terms of the issue of the said ZCCDs, each ZCCD was to be converted into one ordinary share of Rs. 10/- each at a premium of Rs. 130/- per share. Further, as per the terms of the said issue, the amounts to be appropriated towards share capital and share premium on receipt of application and call moneys payable were as follows : @@ Amount in Rs. Amount payableAmountAppropriation on/after Conversion of ZCCDsShare capitalShare premium On application35.002.5032.50On First Call35.002.5032.50On Second Call35.002.5032.50On Third and Final Call 35.00 2.50 32.50Total 140.00 10.00 130.00(c) Pursuant to the aforesaid 18,00,000 ZCCDs were duly allotted by the Company on December 12, 1996 and July 21, 1997. On January 1, 1997, 16,37,366 ZCCDs held by Indian Residents out of the said 18,00,000 ZCCDs were duly converted into 16,37,366 ordinary shares of Rs. 10/- each at a premium of Rs. 120/- per share. Further on July 21, 1997, the balance 1,62,634 ZCCDs held by non-residents were also duly converted into 1,62,634 ordinary shares of Rs. 10/- each at a premium of Rs. 130/- per share after receipt of approval from the Reserve Bank of India in respect thereof. As per the terms of the said issue, Rs. 2.50 out of the application money of Rs. 35/- received by the company for each ZCCD was appropriated and credited to share capital account and the balance Rs. 32.50 was appropriated and credited to the share premium account of the Company. Further, the first call of Rs. 35/- on the said converted ordinary shares issued to Indian Residents was made on June 25, 1997 and the call money was to be paid by August 7, 1997. The second call also of Rs. 35/- on such converted ordinary shares was made on June 25, 1997 and the call money was to be paid by October 7, 1997. The 1st and 2nd calls were made on 1-9-1997 in respect of the aforesaid 1,62,634 converted ordinary shares issued to non-resident shareholders. The first call money was to be paid by October 7, 1997 and the second call money was to be paid by December 8, 1997.(d) The issue price of the said ZCCDs was fixed at Rs. 140/- each during June, 1996, when the fully paid up ordinary shares of the company was quoted on the Mumbai Stock Exchange at Rs. 205/- per share. On 22nd July, 1996 when the ordinary share quotation of the Company became ex-right, the price per share was quoted at Rs. 185/- which gradually came down and ranged between Rs. 160/- and Rs. 134/- during October/November, 1996, i.e., the time when the issue was open for subscription. Since the close of the issue, the price of existing fully paid ordinary shares of the Company further declined to the range of Rs. 100/- and Rs. 120/- per share.(e) The said object of the Company for the part financing of which the aforesaid rights issue was made has already been completed and the expanded plant commenced commercial production with effect from 19th May, 1997. Apart from the amounts received from the Industrial Finance Corporation of India Limited and the amounts received on the said ZCCDs, the company was able to meet and generate the balance funds required for the said project from internal accruals.(f) In view, inter alia of the above the Board of Diectors of the Company recommended to the shareholders that the share premium on the aforesaid shares be reduced from Rs. 130/- to Rs. 95/- per share by extinguishing the liability for payment of third and final call of Rs. 35/- per share to be received on 2nd call, a sum of Rs. 5/- may be appropriated towards capital and the balance sum of Rs. 30/- be appropriated towards share premium, thus making the share fully paid up. Such decision and opinion of the Board of Directors of the Company was taken and formed at its Board meeting held on 14th August, 1997 and September 1, 1997.(g) The said reduction will have beneficial results for the Company, its shareholders and all concerned.@@

(3.) Section 100 of the Act deals with special resolution for reduction of share capital. In exercising its power the Court will have due regard to the interests of creditors, who may consent or object to the reduction. For a company to reduce its share capital in any manner set out in Section 100, it must have power given to it under its articles to do so. Subject to confirmation by the Court as required under Section 101 of the Act, a Company may, if authorised by its articles, effect a reduction of its share capital in any way which it may think fit by special resolution, including in particular any of the following ways :