Companies Act | NCLT Permits 'Change' In Utilization Of Share Capital Reduction Amount By Invoking Powers Under Rule 11 Of NCLT Rules

Previously, the NCLT had permitted the Company to reduce its share capital under Section 66 of the Companies Act, 2013 and the manner of utilization of reduced amount was also fixed. Thereafter, the Company filed an application under Rule 11 of NCLT rules, 2016 seeking change in the manner of utilization of the reduced amount and the same has been allowed.

Background Facts

Tenneco Clean Air India Pvt. Ltd. (“Company”) had filed an application before NCLT under Section 66 of the Companies Act, 2013 for reduction of its share capital. The total amount of reduction was Rs. 119.1 Crores (“Reduced Amount/Total Returnable Amount”).

The reduction was allowed by NCLT on 01.02.2023. As regards utilization of the Reduced Amount, the NCLT recorded in its order that Rs. 70.4 Crores would be adjusted towards Negative Capital Reserves which stands in the books of the Company as on 31.03.2022 and the balance amount of Rs. 48.7 Crores would be returned to the shareholders.

Thereafter, the Company filed an application under Rule 11 of the NCLT Rules, 2016, seeking modification in utilization of the Reduced Amount rather than asking for any change the Reduced Amount. The Company proposed altered the amount to be adjusted against Negative Capital Reserves to Rs. 34,21,86,743/- and allocated Rs. 84,96,38,749/- to be returned to the shareholders.

NCLT Verdict

The Bench perused the audited balance sheets and Board Resolutions, and opined that the Board Members through Special Resolution had assented to changes in reserves. Further, there was no significant objection received from either secured or unsecured creditors of the Company and the number of shares reduced has also not been altered in the application.

The Bench allowed the application filed under Rule 11 of NCLT Rules, 2016 and permitted the Company to change the utilization of the Reduced Amount of Rs. 119.1 Crores.

“Accordingly, the Applicant Company is permitted to utilize the reduced amount of INR 1,19,18,07,492/- in the following manner-

1. INR 34,21,68,743/- to be adjusted against the Negative Capital Reserves of the Applicant Company; and
2. INR 84,96,38,749/- to be returned to the Shareholders of the Applicant Company.”

The application has been disposed of.

Case Title: Tenneco Clean Air India Pvt. Ltd.

Case No.: CP/88 (CHE)/ 2022

Counsel for Applicant: Sr. Ad. Arvindh Pandia, Mr. Pawan Jabakh

Counsel for ROC: Mr. Avinash Krishnan Ravi

Click Here To Read/Download Order