Economy Hotels India Services Pvt Ltd vs Registrar Of Companies & Anr

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Company Appeal (AT) No. 97 of 2020 [Arising out of Order dated 27.05.2020 passed by the National Company Law Tribunal, New Delhi Bench V in C.P. No./149/66/ND/2019].

IN THE MATTER OF: Economy Hotels India Services Private Limited ...Appellant

Versus Registrar of Companies & Anr. ...Respondents

Present:

For Appellant: Mr. Sujoy Dutta, Mr. Satvinder Singh, Mr. NPS Chawla and Mr. Surek Kant Baxy, Advocates

For Respondent: Mr. P S Singh, Advocate for ROC, Ms. Chetna Kandtal, Company Prosecutor for R1 and R2

Venugopal M. J

The Appellant / Petitioner has focused the instant Company Appeal (AT) No. 97 of 2020 being dissatisfied with the order dated 27.05.2020 passed by the

'National Company Law Tribunal', Bench V in Company Petition No.

149/66/ND/2019 in rejecting the petition filed under Section 66(1)(b) of the Companies Act, 2013 and granting liberty to file fresh application after

complying with all the requirements of Section 66 of the Companies Act.

2. The 'National Company Law Tribunal', New Delhi, Bench V in C.P.

No./149/66/ND/2019 while passing the impugned order on 27.05.2020 at

paragraph 15 to 16 had observed the following: -

"15. Section 66 of the

Companies Act, 2013 states that

"Subject to confirmation by the Tribunal

on an application by the company, a

company limited by shares or limited

by guarantee and having a share

capital may, by a special resolution,

reduce the share capital in any

manner....."

Article 9 of the Articles of Association of

the company (page 81) of Paper book)

allows it to reduce share capital by passing

a special resolution. Board resolution

dated 29.7.19 recommended reduction in

capital as per Article 9 of Articles of

Association and subject to consent of

Company Appeal (AT) No. 97 of 2020 2 members by a special resolution (page

111).

We have perused the minutes of the Annual

General Meeting of the company held on

19.08.2019 (page 123 to 126 of the paper

book). Page 123 of the Paper book records

that "With the consent of the Members

present, Mr. Balvinder Sahrawat was

elected to chair the meeting." On Page 124

of the paper book, it is recorded that the

meeting has passed the resolution for

reduction of capital "as an ordinary

resolution." The minutes of the meeting

have been signed by the Chairman of the

meeting on pg 126 of the paper book.

Thus, we observe that the company has not

met the specific requirement of Section 66 of

the Companies Act by passing 'Special

Resolution' for reduction of share capital.

The Company has also not complied with

the requirements of its own Articles of

Association.

Company Appeal (AT) No. 97 of 2020 3

16. We are left with no choice but to reject

the present application in view of the fact that

there is no special resolution for reduction of

share capital as prescribed under Section 66

of the Companies Act 2013 and as required

in Article 9 of Articles of Association of the

company. Section 66 of Companies Act also

requires this Tribunal to approve the minutes

of resolution passed by the Company which

has been passed as ordinary resolution as

against the requirement of special resolution

[mentioned in Para 2(ii) above also as part of

prayer]; the Tribunal is not in a position to

approve such minutes in this case."

and consequently, rejected the petition by granting liberty to the Appellant /

Petitioner to file fresh application after complying with all the requirements of

Section 66 of the Companies Act.

3. The Learned Counsel for the Appellant submits that the Appellant /

Company is a closely held private Company, limited by shares, incorporated on

08.08.2012 under the provisions of Companies Act, 1956 and that the instant

Appeal is filed through Mr. Rajat Rai, Authorised representative of the Appellant,

authorized as per Board Resolution dated 03.07.2020.

Company Appeal (AT) No. 97 of 2020 4

4. It is represented on behalf of the Appellant that the Appellant/Pvt.

Company, is a wholly owned subsidiary of AAPC Singapore Pte. Ltd., a company

incorporated under the laws of Singapore and the shareholding pattern as on

30.06.2019 of the Appellant runs as follows: -

Name of Shareholder No. of shares held % of shareholding

AAPC Singapore Pte. Ltd. 67,478,999 equity share 100

of Rs. 10 each

Abhishek Goyal as a 1 equity share of Rs. 10

Nominee of AAPC each

Singapore Pte. Ltd.

Total 67,479,000 equity share

of Rs. 10 each

5. The Learned Counsel for the Appellant points out that the authorized

share capital of the Company as on March 31st, 2018 was Rs. 90 lakhs only

divided into 9 lakhs equity shares of Rs. 10/- each and that the issued,

subscribed and paid up share capital of the Company as on 31.03.2019 was Rs.

30 lakhs divided into 3 lakhs equity shares of Rs. 10/- each. Further, the

Company had 67,17,900 unsecured fully compulsory convertible debentures of

Rs. 100/- each as on 31.03.2019.

6. The Learned Counsel for the Appellant brings it to the notice of this

Tribunal that as on 30.06.2019, the issued, subscribed and paid up share

Company Appeal (AT) No. 97 of 2020 5 capital of the Appellant was increased from Rs. 30 lakhs divided into 3 lakhs

equity shares of Rs. 10/- each to Rs. 67,47,90,000/- divided into 6,74,79,000

equity shares of Rs. 10/- each.

7. As a matter of fact, Article 9 of the 'Articles of Association' of the Appellant

/ Company specifies that the Company may, from time to time by a special

resolution reduce its share capital in any manner permitted by law.

8. The Appellant / Company had filed C.P. No. 149/66/ND/2019 under

Section 66(1)(b) of the Companies Act praying for passing of an order for

confirming the reduction of share capital wherein at paragraph 14 it had averred

as under: -

"14 That annual general

meeting of the Petitioner Company held

on August 19,2019 was attended by

both the equity shareholders holding

100% of the issued, subscribed and paid

up equity share capital of the Petitioner

Company. The said equity shareholders

present at the said meeting have cast

their votes in favour of the aforesaid

resolution etc."

9. More specifically, the Appellant/Company in the aforesaid Company Petition

at S.No. 6 had sought a relief to confirm the reduction of issued, subscribed and

Company Appeal (AT) No. 97 of 2020 6 paid up equity share capital of the petitioner company(Appellant) as resolved by

the Members in the Annual General Meeting held on August 19th, 2019 by passing

the special resolution as set out in para 14. In S.No. 7 of the aforesaid petition,

the Appellant/Company had prayed to approve the form of minutes under sub-

section 5 of Section 66 of the Act etc.

10. The Learned Counsel for the Appellant contends that the Appellant /

Company had placed on record sufficient documents to prove that (a) 'special

resolution' as required under Section 66 of the Companies Act, 2013 as well as in

terms of the requirement under Article 9 of the 'Articles of Association' of the

Appellant Company.

11. The other submission of the Learned Counsel for the Appellant that only due

to a 'typographical error' in the extract of 'Minutes', a resolution passed

unanimously by the shareholders will not ceased to be a 'special resolution'.

12. The Learned Counsel for the Appellant/Company proceeds to point out that

the Tribunal failed to appreciate that the unanimous resolution passed on

19.08.2019 was a 'Special Resolution' passed unanimously by the 'shareholders'

of the Appellant.

13. The Learned Counsel for the Appellant submits that the resolution passed

on 19.08.2019 was in complete compliance of the all the three requisites of the

Section 114(2) of the Companies Act, 2013 and since the Tribunal treated the

aforesaid 'resolution' as an 'ordinary' resolution the impugned order is liable to be

set aside in the interests of justice.

Company Appeal (AT) No. 97 of 2020 7

14. The Learned Counsel for the Appellant to lend support to his contention that

the resolution passed on 19.08.2019 by the Appellant Company is a special

resolution' adverts to the ingredients of Section 114 of the Companies Act, 2013

which reads as under:-

"2) A resolution shall be special

resolution when:

a. With the intention

propose the resolution as a special

resolution has been duly specified in the

notice calling the general meeting or

other intimation given to the members of

the resolution;

b. The notice required

under this Act has been duly given; and

c. The votes cast in

favour of the resolution, whether on a

show of hands, or electronically or on a

poll, as the case may be, by members

who, being entitled so to do, vote in person

or by proxy or by postal ballot, are

required to be not less than three times

the number of the votes, if any, cast

Company Appeal (AT) No. 97 of 2020 8 against the resolution by members so

entitled and voting."

15. The Learned Counsel for the Appellant refers to paragraph 23 of the

Company Petition No. 149/66/ND/2019 filed by the Appellant/Petitioner which is

as follows: -

"23. The form of minute proposed to be

registered under section 66(5) of the Act is

as follows:

The issued, subscribed and paid up

equity share capital of the Company is

henceforth Rs. 4,90,00,000/- (Rupees

Four Crore Ninety Thirteen Thousand and

Three Hundred Only) comprising of

49,00,000 (Forty Nine) equity shares of

Rs. 10/- (Rupees Ten only) each, reduced

from Rs. 67,47,90,000/- (Rupees Sixty-

Seven Crore Forty-Seven Lakh Ninety

Thousand only) to 49,00,000 (Forty-Nine

Lakh) equity shares of Rs. 10/- (Rupees

Ten only) each."

16. The pre-mordial plea of the Appellant is that the 'National Company Law

Tribunal' had failed to appreciate the creeping in of an 'inadvertent typographical

Company Appeal (AT) No. 97 of 2020 9 error' figuring in the extract of the 'Minutes of the Meeting' characterising the

'special resolution' as 'unanimous ordinary resolution'. Moreover, the

Appellant/Petitioner had fulfilled all the statutory requirements prescribed u/s 114

of the Companies Act and as such the impugned order of the Tribunal is liable to

set aside.

17. The Learned Counsel for the Appellant takes a stand that the Tribunal had

erred in observing that the Appellant / Company had also not complied with the

requirements of its own 'Articles of Association' which had resulted in dismissal

of the petition seeking approval of 'Reduction of Share Capital'.

18. On behalf of the Respondents it is represented that the members of the

Appellant/Company at the 'Annual General Meeting' that took place on 19.08.2019

among other things resolved that pursuant to Section 66 of the Companies Act,

2013 and subject to other requisite approvals, the paid-up share capital of the

Company would reduce from its present level of Rs. 67,47,90,000/- to Rs.

4,90,00,000/-.

19. It transpires that the 'Special Resolution' passed in the 'Annual General

Meeting' as filed with the e-form MGT-14 reflects that the resolution passed by the

shareholders u/s 67 of the Companies Act, 2013 on 19.08.2019 is a 'Special

Resolution' which is taken on record in MCA21 Registry.

20. Continuing further, the Resolution passed in the 'Annual General Meeting'

of the Appellant's Company u/s 66 of the Companies Act was found to be in order

by the Respondents. Even the report of Registrar of Companies, Delhi found that

Company Appeal (AT) No. 97 of 2020 10 the Appellant/Company had filed the said resolution keeping in tune with the

ingredients of Section 66 of the Companies Act, 2013.

21. Be it noted, that 'Reduction Of Capital' is a 'Domestic Affair' of a particular

Company in which, ordinarily, a Tribunal will not interfere because of the reason

that it is a 'majority decision' which prevails. The term 'Share Capital' is a 'genus'

of which 'Equity and Preference share capital' are 'species'.

22. Section 66 of the Companies Act, 2013 mentions the term 'reduction Of

Share Capital'. For a valid resolution, it must satisfy the relevant provisions

contained under the Companies Act. A 'special resolution' is required to determine

those matters for which the Act requires a 'special resolution' and except these

matters in all other situations an 'Ordinary Resolution' is to be passed.

23. It is pertinently pointed out that Section 114(2) of the Companies Act, 2013

enjoins that 'Special Resolution' means a resolution where decision is reached by

a special majority of more than 75% of members of a Company voting in person

or proxy. In reality, Section 114(2) of the Act applies to all Companies.

24. On a careful consideration of respective contentions and this Tribunal, after

subjectively satisfying itself that the Appellant/Company has tacitly admitted its

creeping in of typographical error in the extract of the minutes and also taking

into consideration of the 1st Respondent's stand that the Appellant/Company had

filed the special resolution with it, which satisfies the requirement of Section 66

of the Companies Act, 2013, allows the Appeal by setting aside the impugned

order passed by the 'National Company Law Tribunal, Bench V in the Company

Company Appeal (AT) No. 97 of 2020 11 Petition 149/66/ND/2019, thereby confirming the reduction of share capital of

the Appellant Company as resolved by the 'Members' in their 'Annual General

Meeting' that took place on 19.08.2019 and further this Tribunal approves the

form of Minutes required to be filed with Registrar of Companies, Delhi u/s 66(5)

of the Companies Act, 2013, by the Appellant/Company. No costs. I.A. No. 1575

and I.A.No. 1576/2020 are closed.

[Justice Venugopal. M] Member (Judicial)

[Kanthi Narahari] Member (Technical)

NEW DELHI

24th August, 2020

ss

Company Appeal (AT) No. 97 of 2020 12