NCLT Allows Reduction Of Paid Up Share Capital Structure Of Josco Jewellers Pvt. Ltd. From Rs. 120 Crores To 1 Crore At Its Request

The National Company Law Tribunal, Kochi Bench allowed a company petition filed by Josco Jewellers Pvt. Ltd. for reduction of its share capital from Rs. 120 crores to Rs. 1 crore after an agreement was entered into by the petitioner company for selling and transferring business to one of its flagship companies, Josco Bullion Traders Pvt. Ltd. The decision came in the wake of a special resolution passed by the Board of Directors of petitioner company wherein it had reviewed that it was necessary to reduce the paid up capital structure as it was more than the required amount to facilitate the business agreement. BACKGROUND Josco Jewellers Pvt. Ltd. is a company engaged in doing business of manufacturing, trading, selling, importing, exporting and dealing in all kinds of gold ornaments, gold bars, sovereign, jewels made out of white gold, silver, diamond and other similar products. The company had filed a petition under Sec. 66 of Companeis Act, 2013 against the Registrar of Companies, Kerela seeking reduction of its authorized share capital which presently was estimated as being Rs. 120,00,00,000 (Rs. 120 crores). A business agreement was entered into by Josco Jewellers Pvt. Ltd. with one of its flagship companies i.e. Josco Group (Josco Bullion Traders Pvt. Ltd.) for selling and transferring the jewellery business to the said flagship company. The need for reduction in share capital of the Josco Jewellers Pvt. Ltd. was felt after the Board of Directors of the company had reviewed that its paid up capital structure was more than the required amount commensurate and that it will be beneficial if it would remit back the excess capital by way of reduction of share capital. In view of this, a resolution was passed by the Board of Directors dated 02.12.2019 wherein it approved the proposal of reducing the share capital and subsequently, a special resolution was also passed on 31st December 2019 in compliance of Sec. 66(1) of the Act. According to the petitioner company, it had approached the NCLT seeking relief of reduction of its share capital as approved by the company Board, to waive off the requirement of issuing notice to creditors and publishing the same in newspapers. OBSERVATION OF THE BENCH Adv. Nebil Nizar, appearing on behalf of Josco Jewellers Pvt. Ltd submitted that that according to its Articles of Association, the company is empowered to reduce its share capital and to divide its shares in accordance with the requirements of Companies Act, 2013. The bench while analyzing the petitioner company's AoA observed that the authorized share capital of the company was Rs. 120 crores divided into Rs. 1,20,00,000 equity shares of Rs. 100 each which were issued and fully paid. It was also submitted by the petitioner company that the proposed reduction was necessary for the benefit of shareholders and stakeholders concerned and that the company has not accepted any deposits or has any unsecured creditors as on 31st October 2019. After looking at the necessary statutory requirements, the NCLT while observing that all the procedures have been met, held that: "Since all the requisite statutory procedures have been fulfilled and no objections received from any shareholders before this Tribunal, the Company Petition is made absolute in terms of the prayer clause of the Petition, which are hereby allowed." According to the minutes of share capital reduction, "The Paid-up share capital of the Company is henceforth Rs. 1 Crore (One Crore Only) consisting of 1,00,000 (One Lakh) equity shares of Rs.100/- (Rupees One Hundred Only) each by cancelling and extinguishing a sum of Rs. 119 Crores (Rupees One Hundred and Nineteen Crores Only) from Rs. 120 Crores (Rupees One Hundred and Twenty Crores Only) consisting of 1,20,00,000 (One Crore Twenty Lakh) equity shares of RS. 100/- (Rupees One Hundred Only) each." In view of this, it was also directed that the petitioner must public notices and minutes of reduction in two newspapers namely "Indian Express" and "Mathruboomi" in English and Malayalam respectively.Click Here To Download Order[Read Order]

NCLT Allows Reduction Of Paid Up Share Capital Structure Of Josco Jewellers Pvt. Ltd. From Rs. 120 Crores To 1 Crore At Its Request

Nupur Thapliyal

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