In Re: Capsugel Healthcare Ltd.

Surya Kant, J.—This petition under Sections 100, 101 and 102 of the Companies Act, 1956 read with Rule 9 of the Companies (Court) Rules, 1959 seeks sanction of reduction of the Equity Share Capital of the petitioner Company. The petitioner Company was originally incorporated on 13.12.1982 as United Pharma International Limited under the provisions of the Companies Act, 1956 as a Company limited in the Union Territory of Chandigarh, and thereafter the name of the Company was changed to Bharti Healthcare Limited w.e.f. 07.11.1994 which was further changed to its present name Capsugel Healthcare Limited on 21.07.2006.

The Registered office of the company was also shifted from Union Territory, Chandigarh to the State of Haryana w.e.f. 15.12.1985.

The main objects of the petitioner Company to carry on its business are set out in their Memorandum and Articles of Association annexed at Annexure P-1.

The present Authorised Share Capital of the Company is Rs. 2,22,00,00,000/-(Rupees two hundred twenty two Crores only) divided into Rs. 21,20,00,000/- (Twenty one crores and 20 lacs) equity shares of Rs. 10/- each and 10,00,000 (Ten lacs) cumulative non-convertible redeemable preference shares of Rs. 100/- each. The issued, subscribed and paid-up share capital of the company is Rs. 202,70,62,140/- (Rupees Two Hundred Two Crores Seventy lacs sixty Two Thousand One Hundred and Forty Only) divided into 20,27,06,214 Equity Shares of Rs. 10/- each. The Capsugel Belgium NV are holding 20,22,12,435 number of shares constituting 99.76% of the paid up equity share capital of the Company and non-promoters (Public) are holding 4,93,779 number of shares constituting the balance 0.24% of paid up equity share capital of the Company.

It is averred that Article 44 of the Articles of Association of the Company specifically authorizes it to reduce the Capital from time to time as per the provisions of law.

The petitioner-Company in para 7 of the petition has stated reasons for reduction of its paid-up share capital, including the following reasons:

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To service such a large number of minority shareholders who hold barely 0.24% of the total share capital of the Company is an arduous task. Further these shareholders do not have any exit route to encash their shares since the company was de-listed in the year 2005. The Company has been into continuous losses and has also not made any dividend payouts to these shareholders in the past few years. The management has considered it prudent that it would be in the best interest of the Company and its shareholders particularly the public shareholders if they are paid off the true and fair value of the shares.

The Board of Directors vide resolution dated 27.09.2012 have approved the reduction of share capital of the petitioner-company. Copy of the afore-said resolution has been brought on record as Annexure P-7. A copy of the Special Resolution dated 30.11.2012 is also annexed at Annexure P-8.

In its Annual General Meeting held on 30.11.2012 the company is said to have resolved as follows:

Resolved That pursuant to Section 100 and other applicable provisions of the companies Act, 1956 and subject to the confirmation by the Hon''ble High Court of Punjab & Haryana, the paid up Equity Share capital of the Company of Rs. 202,70,62,140/- (Rupees Two Hundred Two Crores Seventy lacs sixty Two Thousand One Hundred and Forty Only) divided into 20,27,06,214 Equity Shares of Rs. 10/- each be reduced to Rs. 2,02,21,24,350/- (Rupees Two Hundred Two Crores Twenty One Lacs Twenty Four Thousand Three Hundred and fifty only) divided into 20,22,12,435/- equity shares of Rs. 10/- each by canceling 4,93,779 (four lakh ninety three thousand seven hundred seventy nine) equity shares of Rs. 10/- each by paying off the said equity shares @ Rs. 10/- per share, being the fair value of the equity shares.

Resolved Further That the Board of Directors be and is hereby authorized to accept since modification of the aforesaid terms or carry out such directions as may be required by the said High Court to implement the aforesaid resolution.

On presentation of this petition, notice was issued to the Regional Director, Norther Regions, Ministry of Corporate Affairs and the Official Liquidator and it was also directed to be publised in the newspapers, namely, ''Indian Express (English) & ''Dainik Bhaskar (Hindi)'' (Chandigarh and Delhi Editions respectively) as well in the Official Gazette of Government of Haryana.

Mr. Narendra Nath Batabyal, Company Secretary has filed an affidavit dated 27.02.2013 to prove the publication of the notice in "Indian Express (English) " dated 09.02.2013, ''Dainik Bhaskar (Hindi)'' dated 09.02.2013 and official Gazette of Government of Haryana dated 19.02.2013.

Mr. Rakesh Chandra, Regional Director, Northern Region, Ministry of Corporate Affairs has submitted his report-cum-affidavit dated 08.03.2013 observing as follows:

4.1 In this regard it is submitted that the Petitioner Company may be asked to justify the fixing the valuation of shares of Rs. 10/- before the Hon''ble Court, as interest of minor shareholders is involved.

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6.1 It is submitted that in terms of Section 23 of the Sick Industrial Companies Special Provisions Act, 1985" SICA", the Company is required to file Form-C with the Board of Industrial and Financial Reconstruction "BIFR" within 60 days from the date of Annual General Meeting. The Petitioner company may be asked to comply with the requirement of the above Act.

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That the Deponent craves leave to submit that Registrar of Companies, Delhi has also reported that the petitioner Company has not filed Balance Sheet Financial Statements and Annual Return for the Financial Year ending 31st March, 2012. Thus there is prima facie violation u/s 220 & 159 of the Companies Act, 1956.

In response to the query raised in para 4.1 Regional Director, petitioner-Company has filed a reply, inter alia, stating that Ernst & Young - the Accounting Firm of the Big Four in India was engaged to carry out valuation of equity shares and not a single shareholder out of 10,529 shareholders, who were sent notices for the meeting has objected to the valuation. It is also claimed that "this is a purely benevolent act of the promoters who have brought in fresh share capital @ Rs. 10/- per share i.e. a face value, (although the Company is a potentially sick company) to pay off the minority shareholders"

As regard the query raised in para 6.1 by the Regional Director, it is stated in the affidavit that company has filed form No. C u/s. 23 of the SICA for each financial year from the years 2009-2012 when it was potentially a sick company and the same is duly acknowledged by the BIFR.

With regard to query raised in para 7, it is stated that the Balance Sheets and the Annual Returns of the Financial Year ending on 31.03.2012 have been duly filed and copy of the Form and Challan for the Returns are appended as Annexure-''C''.

A report to this effect was obtained from the Registrar of Companies. The Joint Director, vide his letter dated 27.05.2013 has conveyed that the Company has filed its Balance Sheet on 14.02.2013 with the office of the Registrar of Companies, Delhi.

The Official Liquidator has also given his report on the proposed reduction, in which he has raised almost identical objections as are raised by the Regional Director.

It is revealed that there are two categories of Shareholders in the Petitioner Company, one is Promoter Group (Capsugel Belgium NV) holding 99.76% of the Equity Share Capital and the other one is non-promoter group (approx. 10529 number of Shareholders) constituting only 0.24% of Equity Share Capital. By way of this petition the Company has resolved to pay-off the non-promoter group constituting 0.24% Equity Share Capital.

I have considered the resolution passed by the company at its Annual General Meeting held on 30.11.2012 giving effect to the above proposals. The form of Minute (Annexure P-11) of reduction of share capital as proposed to be registered pursuant to Section 103(1)(b) of the Companies Act, 1956 is as follows:

The paid up Equity Share capital of the Capsugel Healthcare Ltd. is henceforth Rs. 2,02,21,24,350/-(Rupees Two Hundred Two Crores Twenty One Lacs Twenty Four Thousand Three Hundred and fifty only) divided into 20,22,12,435/- equity shares of Rs. 10/- each reduced from Rs. 2,02,70,62,140/- (Rupees Two Hundred Two Crores Seventy Lacs Sixty Two Thousand One Hundred and Forty Only) divided into 20,27,06,214 equity shares of Rs. 10/- each. At the date of registration of this minute 4,93,779 (Four lakh ninety three thousand seven hundred seventy nine) equity shares of Rs. 10/- each shall deemed to be cancelled by paying off the 10,529 minority shareholders @ Rs. 10/- per share, being the fair value of the equity shares.

It is averred that the reduction of issued, subscribed and paid up share capital of the company will cause no prejudice to right of any of the creditors of the company since the promoter company has brought in additional capital of Rs. 49,37,790/- on 03.12.2012 to payout the minority Shareholders and the same will not involve either any diminution of liability in respect of unpaid share capital of the company or any payment being made to shareholder, of any paid up capital. The existing actual assets and liabilities of the company as they exist now, remain unaffected by the proposed reduction and there shall be no outflow of funds. A certificate to this effect from C.K. Hans & Co., Chartered Accountants has also been appended as Annexure P-9.

For the afore-stated reasons, the reduction of share capital of the petitioner-company as resolved vide resolution passed in the Annual General Meeting held on 30.11.2012 is confirmed and form of minutes u/s 103(i)(b) of the Act set out in the Annexure-P/11 annexed with the petition, is hererby approved.

The petitioner company shall deliver to the Registrar of Companies a certified copy of this order including the minutes as approved within a period of four weeks from the date of obtaining the certified copy.

The notice of registration of this order and the minutes as approved by this Court shall be published in the ''Indian Express (English) & ''Dainik Bhaskar (Hindi)'' (Chandigarh & Delhi Editions respectively) within two weeks from the date of receipt of certified copy of the registration from the Registrar of Companies. The petition stands disposed of in the above terms.