Narendra Singhania & Anr vs Minosha India Limited

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI COMPANY APPEAL (AT) NO.96 OF 2023 (Arising out of judgement and order dated 19.05.2023 passed by the National Company Law Tribunal, Court V, Mumbai Bench in Inv. Petition No.2/MB/2023 and CP No.239/MB/2022). In the matter of: 1. Narendra Singhania, R/o N-12, Green Park Extension, Green Park Market, Delhi

2. Shubham Singhania, R/o No.12, Green Park Extension, Green Park Market, Delhi. Appellants

Vs Minosha India Ltd, Quest, 1073, Rajabhau Desai Marg, Behind Beau Monde Towers, Prabhadevi, Mumbai 400025 Respondents

For Appellant: Mr NPS Chawla, Ms Nishtha Khurana and Ms Kinjal Goyal, Advocates. For Respondent:CS Ashish O Lalpuria for Respondents.

JUDGEMENT

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

The present appeal is filed against an order dated 19.05.2023 passed

by the National Company Law Tribunal, Mumbai Bench in CP

No.239/MB/2022 and in Intervention Petition No.2/2023. It is alleged the

Ld. NCLT had erroneously allowed the petition filed by the Respondent

Company and dismissed the Appellants' Intervention Petition on holding

reduction of share capital is just and equitable in view of the various decisions 2

and in terms of Section 66 of the Companies Act, 2013. The main grounds

for filing the appeal is

a) The minority shareholders holding 5.86% shareholding were given no option and were forced to leave the Company by a group of approximately 94.62% shareholders belonging to the promoter's group.

b) The proposed reduction is discriminatory, unfair and mala fide and is aimed towards extinguishment of the class of public shareholders.

c) It was necessary to hold a separate meeting of non- promoters public shareholders giving them a fair opportunity to assent or dissent to the reduction of the share capital.

2. The Learned counsel for the appellant argued the Respondent company

went into the Corporate Insolvency Resolution Process (CIRP) pursuant to the

admission of Insolvency Petition by the Ld. NCLT, Mumbai Bench vide its

order dated 14.05.2018. While the company was in CIRP, the current

promoters submitted a resolution plan, which got approved by the Ld.NCLT

vide its order dated 28.11.2019.

3. Admittedly one of the conditions of the Resolution Plan was delisting of

the equity shares and reorganisation of share capital which was implemented

and accordingly the equity shares of the Respondent company were delisted

from BSE Limited which was the only stock exchange where the equity shares

of the company were listed.

4. Admittedly the appellant No.1, a shareholder of the company, pursuant

to the implementation of the resolution plan his shareholding was reduced

from 10000 equity shares to 4000 equity shares. Similarly the appellant No.2

who had acquired 20000 shares, his shareholding was also reduced from

20000 equity shares to 8000 equity shares.

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5. The shareholders of the company approved the reduction of equity

share capital held by the public shareholders of the company in its Annual

General Meeting held on 29th September, 2022 and it was approved by the

Ld.NCLT Mumbai vide it order dated 03.11.2022.

6. During his arguments the learned counsel for the appellant had

referred to Agenda No.4 of the Notice of AGM which proposed a resolution for

the reduction of equity shares of the Company. The explanatory statement to

the said Notice provided There is no trading platform available to the

shareholders and the equity shares of the Company have lost its marketability.

In view of this, many pubic shareholders have expressed their desire to

tender/transfer their equity shares they hold in the Company as they are

unable to dispose of the same. It was for this reason the Respondent company

provided the public shareholders an exit opportunity so as to provide liquidity

to shareholders with a fair and just valuation of the company.

7. It is the case of the appellants they have raised objections on agenda

No.4 through emails dated 27.09.2022 and dated 28.09.2022 stating inter alia

they were compelled to sell shares in the company by way of reduction of

share capital and instead they wish to continue being shareholders as the

company is growing. However, vide the special resolution passed in the AGM

held on 29.11.2022 their shareholding was reduced to Nil. Again the

appellants through email dated 30.09.2022 had requested the company to

provide an option to those shareholders who wish to remain invested in the

company but of no avail and thus were forced to quit.

8. Heard.

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9. We have gone through the record of the case and the impugned

judgement. The reason for reduction of the share capital, admittedly, is

included in the explanatory statement forming part of the notice of AGM and

it contains a rational for its proposed reduction of share capital. All queries

put forth by the shareholders at the AGM held on 29.89.2022 were also

addressed to.

10. Admittedly, only the appellants have challenged the reduction in share

capital and both these appellants collectively hold only 0.025% of the total

number of shares, which is a miniscule and negligible holding as compared to

other public shareholders.

11. The Learned NCLT upon considering the provisions of Section 66 of the

Companies Act, 2013 had come to a conclusion that it is just and equitable

the company be allowed to reduce its capital and transfer part of the property

as envisaged in the proposed reduction. It relied upon Reckitt Benckiser (India)

Ltd reported in 2005 122 DLT 612 wherein it was held the question of reduction

of share capital is treated as a matter of domestic concern and the decision of

majority will prevail. The IA was thus dismissed.

12. We have also gone through various documents annexed with the appeal

viz. Notice of 29th AGM to be held on 29.09.2022 (Annexure A-6) at Page 84 of

the paper book contains the rational i.e. providing the public shareholding the

exit opportunity so as to provide liquidity to such shareholders with a fair and

just valuation of the company. We have also examined the percentage of

shareholding viz 94.62% shares held by the promoters group and 5.38%

shares held by the non-promoter group viz. public shareholders. The voting 5

was done on 29.09.2022 and per the voting 99.954% of the total valid votes

voted in favour of reduction of equity share capital and whereas only 0.046%

voted against such resolution.

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

66. Reduction of share capital.--(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 paidup; 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.

14. Further Section 114 (2) of the Companies Act, 2013 read as under:-

114. Ordinary and special resolutions.--(1) xxx (2) A resolution shall be a special resolution when--

(a) xxx

(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 against the resolution by members so entitled and voting.

15. Thus for a special resolution one needs 75% voting of those present.

Admittedly, the voting was 99.954% in favour of the resolution. 6

16. Though the learned counsel for the appellant referred to Jayshree

Damani V Atlas Copco (India) Ltd Company Appeal (AT) No.365 of 2019-

NCLAT New Delhi; and Sandvik Asia Ltd Vs Bharat Kumar Padamasi

Manu/MH/0237/2009 to press his point that the Ld. Tribunal should have

considered separate voting by the class of shareholders who were to be ousted.

17. No doubt the Courts in such cited cases have examined the voting by

two separate class of shareholders viz. promoters and non-promoters viz the

special class affected by the resolution but such judgements were given only

on the facts, peculiar to such cases. These judgements did not lay the law as

to if the special resolution ought to have been passed by such special class/

shareholders affected. Rather in Sandvik Asia Ltd (Supra) it was noted once

it is established that non-promoters shareholders are being paid fair value of

their shares and at no point of time it was suggested the amount paid nowhere

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

the Court will not be justified in withholding its sanction.

18. In the present case admittedly only 0.0461% voted against the

resolution and whereas 99.954% had voted in favour of the resolution, hence

there was no reason as to why the Ld.NCLT should have upset such

resolution. In Organon (India) Ltd Manu/MH/0927/2010, Company Scheme

Petition No.101/2010 the Court observed:-

"The learned Bench also referred to the judgement in Poole V. National Bank of China Ltd (1907) AC 229 (HL), the relevant portion of which is as follows (page 239) The dissentient shareholders do not demand, and never have demanded, better pecuniary terms, but they insist on retaining their holdings which in all reasonable probability can 7

never bring profit to any of them and may be detrimental to the company."

19. In Piyush Dilipbhai Shah Vs. Syngenta India Ltd, Company Appeal (AT)

No.208/2020 decided on 05.03.2021 the court held even though the public

shareholders/non-promoter shareholders had objected to the reduction of

share capital in the EGM but the majority shareholders i.e. promoter group

passed the resolution in favour of the reduction of share capital, hence the

Court did not upset the resolution in favour of reduction of share capital.

20. Before us too valuation of shares was never an issue raised. The only

argument is non-promoters should be treated as a separate class and they

only be allowed to vote on special resolution for reduction. We disagree. No

separate class is permitted under Section 66 of the Companies Act, 2013 or

in any other provision of the Companies Act, 2013. The argument of the

appellants needs to be rejected. The appeal thus has no merit and is

accordingly dismissed.

21. Pending applications, if any are disposed off.

(Justice Yogesh Khanna) Member (Judicial)

(Mr. Ajai Das Mehrotra) Member (Technical) Dated:23-04-2024 BM