Naman Gurumurthi Joshi vs Reliance Retail Limited

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI COMPANY APPEAL (AT) NO.155 OF 2025 & I.A. No. 3839 of 2025 (Arising out of judgement and order dated 05.01.2024 passed by National Company Law Tribunal, Mumbai Bench, in Comp Appl No.491/MB/2023 in CP No.207/MB/2023) In the matter of: Naman Gurumurthi Joshi Shareholder of M/S Reliance Retail Ltd Prakruthi Crystal 4144, 4th Phase, 4th Floor, Near Seetha Circle, Opp Vinayaka Hospital, Girinagar, Bangalore 560085 Appellant

Vs M/s Reliance Retail Ltd 3rd Floor, Court House, Lokmanya Tilak Marg, Dhobi Talao, Mumbai City, Mumbai Maharashtra India 400002 Respondent

For Appellant:Mr Naman G Joshi, PCS

For Respondent:Mr Krishnendu Dutta, Sr Advocate, Mr KR Sasiprabhu, Mr Aditya Swarup, Mr Vishnu Sharma, Ms Reena Singhal, Mr Ribhav Pande, Ms Kriti Gupta, Mr Yash Tandon, Ms Namrata Saragi, Advocates.

JUDGEMENT

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

This appeal is filed against an impugned order dated 5th January, 2024

passed in CP No.207/MB/2023 under Section 66 of the Companies Act, 2013. 2

2. The appellant is a shareholder of Reliance Retail Ltd. viz the Respondent

and held 129 shares, constituting 0.0000014% of the authorized and issued paid

up capital of the Company. He as an intervenor had objected to the reduction of

share capital alleging interalia such reduction is against the minority interest

and is not permitted under Section 66 of the Companies Act, 2013 since the

Respondent company is forcefully removing its shareholders and that the

promoters are increasing their stakes by using this process.

3. It is argued on 04.07.2023 the Board of Directors of RRL, by a special

resolution had approved the proposal to reduce and cancel 78,65,423 equity

shares of Respondent company, being the shares held by the shareholders, other

than the promoters/holding company of the Respondent company. Such shares

constitute only 0.09% of the total shareholding.

4. The special resolution for reduction of the share capital was passed with

99.99% approval. The summary of the voting is set out in para 6 of the impugned

order itself which says the percentage of identified shareholders voting in favour

of the reduction was to an extent of 84.65%.

5. Admittedly under the Scheme, the Respondent is paying a consideration

of Rs.1380/- per share, which is at a premium of 56% to its fair value as is

determined by two independent valuers. Admittedly, the Ld. NCLT while

approving the scheme categorically held the scheme to be fair and reasonable

and in the interest of minority shareholders.

6. We have also gone through the impugned order. Admittedly Article 56 of

the Article of Association of the Respondent company permits the company to 3

reduce its capital in the manner and in accordance with the provisions of Act

and the rules. The impugned order notes the rational for capital reduction as

under:-

5. Rationale for Capital Reduction:

(a) The equity shares of the Petitioner Company are not listed on any stock exchanges and there is no recognised market available to the shareholders of the Petitioner Company to buy and sell the shares held by them in the Petitioner Company.

The Petitioner Company submits that its equity shares are being traded privately at random prices quoted by some brokers/ intermediaries on their websites without any fair price discovery and that, the number of equity shares traded are increasing month-on month viz. 2,45,229 equity shares in June 2023 as against 43,740 equity shares traded in January 2023 , with new investors becoming shareholders of the Applicant Company month-on-month by purchasing equity shares of the Applicant Company. The Petitioner Company therefore contends that such trading, without fair price discovery, is not in the interest of the investors in securities market and is thus detrimental to their interests.

(b) The Petitioner Company does not have any plan to list its equity shares on the stock exchanges. The Petitioner Company thereby contends that, at a certain stage the said equity shares will lose their marketability and liquidity pursuant to which the Identified Shareholders, majority of whom are small shareholders holding less than 100 equity shares, will not be able to monetize their investment(s) effectively.

(c) Further the Petitioner company contends that the proposed capital reduction will help structure the Petitioner Company's business in compliance with the requirements under the Act, it becomes a 100% subsidiary of RRVL.

7. Admittedly the Regional Director and ROC have not objected to the

reduction of share capital, though it was remarked by the Regional Director, the

proposed reduction is a selective reduction. The Ld. NCLT found the selective

capital reduction allowable under Section 66 of the Act and held the

shareholders are getting consideration of Rs.1380/- per share i.e. at a premium 4

of 56% of the fair value, hence determined the reduction appears to be fair and

reasonable and in the interest of minority shareholders.

8. In appeal too, the appellant had raised an objection, the reduction is not

in the manner as suggested in Section 66(1) of the Companies Act, 2013 and it

has not been proved by the Respondent company that it had the paid up share

capital in excess of wants of the company.

9. Section 66 (1) of the Companies Act, 2013 read as under: -

Section 66(1) in The Companies Act, 2013 (1) 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 and in particular, may--

(a) extinguish or reduce the liability on any of its shares in respect of the share capital not paid-up; or

(b) either with or without extinguishing or reducing liability on any of its shares,--

(i)cancel any paid-up share capital which is lost or is unrepresented by available assets; or

(ii)pay off any paid-up share capital which is in excess of the wants of the company, alter its memorandum by reducing the amount of its share capital and of its shares accordingly:

Provided that no such reduction shall be made if the company is in arrears in the repayment of any deposits accepted by it, either before or after the commencement of this Act, or the interest payable thereon.

10. The crux of the argument of the appellant is since there is no proof on

record that the paid up capital is in excess of the want of the company, hence

there cannot be a selective reduction. However, a bare reading of clauses (a) and

(b) of sub-section (1) of Section 66, we find there are merely few instances of

reduction of shares. Rather the section itself suggests the company may reduce 5

its share capital in any manner though in particular, as suggested by Clauses (a)

and (b) of sub-section (1) of Section 66 (Supra).

11. Moreso, admittedly the appellant held mere 129 shares, constituting

0.0000014% of the shareholding of the Respondent company. Admittedly no

other shareholder has filed any appeal against the impugned order. Admittedly

the argument that reduction is against the minority interest, has since been

rejected by the Ld. NCLT, in para 13 of its impugned order. Further, admittedly

the appellant has raised no grievance to the value given viz an amount of

Rs.1380/- per share, being offered is either unfair or unreasonable. The only

ground alleged by him is the reduction is against the purpose envisaged under

Section 66 of the Companies Act. This argument has been dealt with above by

us and we say the list given in clauses (a) and (b) of sub-section 1 of section 66

of the Companies Act, 2013 is not exhaustive.

12. Further, it is settled law the question of reduction of share capital is

treated as a matter of domestic concern, i.e. it is the decision of the majority

which prevails. In considering a petition for reduction of share capital, the

Tribunal has to be satisfied the transaction is fair and reasonable. In any case

the selective reduction is permissible if objecting shareholders are paid a fair

value of their shares, as held in Reckitt Benckiser (India) Ltd, (2005) 122 DLT

612, Brillio Technologies P Ltd Registrar of Companies and Anr, 2021 SCC

OnLine NCLAT 508 and Elpro International Ltd. In Re: 2007 SCC OnLine Bom

1268 6

13. Thus once it is established that non-promoter shareholders are being paid

a fair value of their shares and at no point of time it was suggested the amount

paid was less and where an overwhelming majority voted in favour of resolution,

we find no reason to upset a reasoned order passed by the Ld. NCLT.

14. In view of the above there is no ground to accept this appeal and

accordingly it is dismissed.

15. Pending applications, if any, are closed.

(Justice Yogesh Khanna) Member (Judicial)

(Mr. Ajai Das Mehrotra) Member (Technical) Dated:26-09-2025

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