In Re: Religare Capital Markets Limited

Sudershan Kumar Misra, J.

This petition under Sections 100 to 105 of Companies Act, 1956 (hereinafter referred to as ''the Act'') has been filed by M/s. Religare Capital Markets Limited (hereinafter referred to as the ''petitioner company'') for confirming the reduction of its preference share capital.

The registered office of the petitioner company is situated at New Delhi, within the jurisdiction of this court.

The petitioner company was incorporated under the Companies Act, 1956 on 9th February, 2007 with the Registrar of Companies, NCT of Delhi and Haryana at New Delhi.

The authorized share capital of the petitioner company, as on 30th September, 2014, was Rs. 13,61,52,50,000/- divided into 8,15,50,000 equity shares of Rs. 15/- each aggregating to Rs. 1,22,32,50,000/-; 1,22,67,00,000 preference shares of Rs. 10/- each aggregating Rs. 12,26,70,00,000/-; and 12,50,00,000 preference shares of Rs. 1/- each aggregating to Rs. 12,50,00,000/-. The issued and subscribed share capital of the company was Rs. 13,52,73,50,000/- divided into 8,15,50,000 equity shares of Rs. 15/- each aggregating to Rs. 1,22,32,50,000/-; 3,72,00,000 1% compulsorily convertible preference shares of Rs. 10/- each aggregating Rs. 37,20,00,000/-; 2,00,00,000 11% non-convertible cumulative redeemable preference shares of Rs. 10/- each aggregating Rs. 20,00,00,000/-; 90,00,000 12% non-convertible cumulative redeemable preference shares of Rs. 10/- each aggregating Rs. 9,00,00,000/-; 52,50,00,000 0.001% non-convertible cumulative redeemable preference shares of Rs. 10/- each aggregating Rs. 5,25,00,00,000/-; 3,71,00,000 0.01% non-convertible non-cumulative redeemable preference shares of Rs. 1/- each aggregating Rs. 3,71,00,000/-; 1,55,00,000 0% non-convertible cumulative redeemable preference shares of Rs. 10/- each aggregating Rs. 15,50,00,000/-; and 62,00,00,000 0.002% cumulative non-convertible redeemable preference shares of Rs. 10/- each/Rs.6.30 paid up aggregating Rs. 6,20,00,00,000/-. The called and paid-up share capital of the company was Rs. 10,82,56,00,000/- divided into 8,15,50,000 equity shares of Rs. 15/- each/Rs.10/- each called up and paid up aggregating to Rs. 81,55,00,000/-; 3,72,00,000 1% compulsorily convertible preference shares of Rs. 10/- each fully paid up aggregating Rs. 37,20,00,000/-; 2,00,00,000 11% non-convertible cumulative redeemable preference shares of Rs. 10/- each fully paid up aggregating Rs. 20,00,00,000/-; 90,00,000 12% non-convertible cumulative redeemable preference shares of Rs. 10/- each fully paid up aggregating Rs. 9,00,00,000/-; 52,50,00,000 0.001% non-convertible cumulative redeemable preference shares of Rs. 10/- each fully paid up aggregating Rs. 5,25,00,00,000/-; 3,71,00,000 0.01% non-convertible non-cumulative redeemable preference shares of Rs. 1/- each fully paid up aggregating Rs. 3,71,00,000/-; 1,55,00,000 0% non-convertible cumulative redeemable preference shares of Rs. 10/- each fully paid up aggregating Rs. 15,50,00,000/-; and 62,00,00,000 0.002% cumulative non-convertible redeemable preference shares of Rs. 10/- each/Rs.6.30 each called up and paid up aggregating Rs. 3,90,60,00,000/-.

A copy of the Memorandum and Articles of Association of the petitioner company has been filed on record. The audited balance sheet, as on 31st March, 2014, of the petitioner company, along with the report of the auditors, has also been filed.

It has been submitted by the petitioner that in the year 2008, the petitioner company was incorporated as a wholly owned subsidiary in Mauritius i.e. Religare Capital Markets International (Mauritius) Limited. This subsidiary acquired an investment banking company in the United Kingdom, through an intermediary subsidiary, which is named Religare Capital Markets (Europe) Limited. This subsidiary further established subsidiaries and joint ventures in United Kingdom, United States of America, Hong Kong, Singapore, Japan, South Africa and Mauritius. Additionally, Religare Capital Markets International (Mauritius) Limited also acquired/set-up subsidiaries in Sri Lanka and Australia. It is further submitted that with economic slowdown and the resultant significant decline in the investment banking business, the operations of various companies in the Group did not take-off as expected. To cater to the financial requirements of the Group, the petitioner company had to infuse significant amount of capital into Religare Capital Markets International (Mauritius) Limited and its underlying subsidiaries. Religare Enterprises Limited, the holding company of the petitioner company, in turn had to infuse capital into the petitioner company. It is further submitted that the sub-optimal business performance of the group and the high people costs resulted in significant amount of cash losses. To stem such losses, the petitioner company has over a period of time shut the operations of the Group in United Kingdom, United States of America, Japan and Australia and restructured its businesses in United Kingdom and South Africa to hold minority stake. It is further submitted that despite these measures, there has been a significant erosion of net worth of Religare Capital Markets International (Mauritius) Limited, which was consequently impacted the balance sheet of the petitioner company. The petitioner company further submitted that the above mentioned factors clubbed with the slowdown in the Indian economy, weakness in domestic currency, concerns over current account deficit, high inflation, low growth projections and geo-political problems during the recent years have led to a significant decline in business opportunities and have consequently resulted in huge amount of cash loss in the petitioner company.

It is further submitted by the petitioner that the current accumulated losses are significant in relation to the total net-worth of the petitioner company. Consequently, the net-worth of the petitioner company has eroded considerably and any improvements in the performance of the petitioner company will not be appropriately represented unless past losses are written off. Accordingly, the petitioner submitted that a reduction of share capital against the accumulated losses will improve the financial position of the petitioner company and the petitioner company will be able to provide a better representation of its assets and liabilities in its books of accounts going forward. It will further enable the petitioner company to reflect its capital and financial position more appropriately and carry on its business with better operating parameters, including better capacity for servicing capital.

It is pleaded that the petitioner company is authorized by virtue of Article 24 of its Articles of Association to reduce its share capital, as per the provisions of the Companies Act, 1956.

The Board of Directors of the petitioner company in their meetings held on 17th September, 2014 granted in-principal approve to the proposed reduction and subsequently on 17th October, 2014 unanimously approved the proposed reduction of the share capital of the petitioner company. Copies of the resolutions passed at the meetings of the Board of Directors of the petitioner company are placed on record.

A special resolution has been passed at the Extra Ordinary General Meeting of the equity and preference shareholders of the petitioner company held on 22nd October, 2014 confirming the proposed reduction of the share capital. A copy of the minutes of the special resolution passed at the Extra Ordinary General Meeting is placed on record.

Learned counsel for the petitioner company has submitted that the proposed reduction does not involve either diminution of any liability in respect of unpaid share capital or payment to shareholders of any paid up share capital. It is further submitted that the proposed reduction in capital does not violate or circumscribe any provision of the 1956 Act or the 2013 Act, as applicable or any rules or regulations made thereunder.

Learned counsel also submitted that the petitioner company is registered with the Securities and Exchange Board of India as a Category-I Merchant Banker and has also been granted certificate as a Trading and Self Clearing Member of Capital Market and Future and Options Segment of NSE and Trading Member of Capital Market and Future and Options Segment of BSE. He further submitted that the petitioner company has received approval from the BSE and the NSE to the capital reduction, which are placed on record.

In the aforesaid background, this petition is filed seeking approval of the resolution passed at the Extra Ordinary General Meeting held on 22nd October, 2014. The Form of Minutes proposed to be registered under Section 103(1)(b) of the Act and annexed as Annexure-''L'' to the petition is reproduced as under:

"The paid up share capital of Religare Capital Markets Limited, is henceforth Rs. 5,57,56,00,000/- divided into 8,15,50,000 equity shares of Rs. 15/- each/Rs.10/- each called up and paid up, 3,72,00,000 1% compulsorily convertible preference shares of Rs. 10/- each; 2,00,00,000 11% non-convertible cumulative redeemable preference shares of Rs. 10/- each; 90,00,000 12% non-convertible cumulative redeemable preference shares of Rs. 10/- each; 3,71,00,000 0.01% non-convertible non-cumulative redeemable preference shares of Rs. 1/- each; 1,55,00,000 0% non-convertible cumulative redeemable preference shares of Rs. 10/- each; and 62,00,00,000 0.002% cumulative non-convertible redeemable preference shares of Rs. 10/- each/Rs.6.30 each called up and paid up, reduced from Rs. 10,82,56,00,000/- divided into 8,15,50,000 equity shares of Rs. 15/- each/Rs.10/- each called up and paid up; 3,72,00,000 1% compulsorily convertible preference shares of Rs. 10/- each; 2,00,00,000 11% non-convertible cumulative redeemable preference shares of Rs. 10/- each; 90,00,000 12% non-convertible cumulative redeemable preference shares of Rs. 10/- each; 52,50,00,000 0.001% non-convertible cumulative redeemable preference shares of Rs. 10/- each; 3,71,00,000 0.01% non-convertible non- cumulative redeemable preference shares of Rs. 1/- each; 1,55,00,000 0% non-convertible cumulative redeemable preference shares of Rs. 10/- each; and 62,00,00,0000.002% cumulative non-convertible redeemable preference shares of Rs. 10/- each/Rs.6.30 each called up and paid up.

By order dated 7th November, 2014, notice of this petition was directed to be issued to the Regional Director, Northern Region and citations were directed to be published in the newspapers ''Hindustan Times'' (English) and ''Hindustan'' (Hindi) in terms of the Companies (Court) Rules, 1959. The petitioner has filed an affidavit showing compliance regarding service on the Regional Director, Northern Region as also publication of citations in the aforesaid newspapers on 23rd January, 2015. Copies of the newspaper clippings containing the publications have been filed along with the affidavit.

In response to the notice issued, Mr. A.K. Chaturvedi, Regional Director, Northern Region, has filed his report dated 10th February, 2015 wherein in Para 6 he has stated that the petitioner company has obtained the approval of BSE and NSE to the proposed reduction but in its reply dated 24th December, 2014, it has not enclosed the said approval. He, therefore, prays that the petitioner company may be directed to furnish the copy of the approvals obtained from NSE and BSE. Further, relying on the report of the Registrar of Companies, he further prays that notice of this petition be issued to Reserve Bank of India, Income Tax Department and Enforcement Directorate before granting prayer of the petitioner or in the alternative, the petitioner company may be directed to give an undertaking that all compliances under Income Tax, FEMA and RBI shall be complied with.

In response to the above objection, the petitioner company has filed the affidavit dated 19th February, 2015 of Mr. Anil Saxena, Director of the petitioner company stating that the questionnaire provided by the Regional Director did not require that the NSE and BSE approvals be filed and, therefore, these approvals were not filed with the response dated 24th December, 2014. He further submitted that these approvals were part of the petition, a copy of which was served on the Regional Director on 18th November, 2014. Further, as required by the Regional Director, the petitioner company undertakes to comply with all the applicable provisions of the Income Tax Act, 1961, The Foreign Exchange Management Act, 1999, and applicable RBI regulations, notifications, and circulars with respect to its overseas investments. The petitioner company also undertakes to comply with the terms of the approvals granted by the BSE and NSE. In view of the above, the observations raised by the Regional Director, Northern Region, stand satisfied.

Despite publication of notice, no objection has been received from any creditor or any member of the public. The petitioner company has filed the affidavit of Sh. Anil Saxena, Director of the petitioner company, on 17th March, 2015 submitting that neither the petitioner company nor its counsel have received any objection pursuant to citations published on 23rd January, 2015. Thus, there appears to be no legal impediment in allowing the present petition.

In view of the averments made in the petition and there being no objection from any creditor or any member of the public, the petition is hereby allowed. The resolution passed by the petitioner company in its Extra Ordinary General Meeting held on 22nd October, 2014 for reduction of its share capital is approved. The ''Form of Minutes'' proposed to be registered under Section 103(1)(b), and annexed as Annexure -''L'' to the petition, is also approved.

A certified copy of this order be delivered to the Registrar of Companies within thirty days from today. The Registrar of Companies, on receipt of the certified copy of this order and minutes approved by this court, is directed to register the same and effect the necessary alteration with regard to the company.

The notice of registration of this order and the resolution of the company shall be published in the ''Hindustan Times'' (English) and ''Hindustan'' (Hindi) within 14 days of the registration aforesaid.

The petition stands allowed in the above terms.