In The Matter Of Reduction Of Share Capital Of Gmr Highways Limited vs Gmr Highways Limited

Chandra Bhan Singh, Member (Technical)

Heard the Learned Counsel for the Petitioner Company. No objector has come before the Tribunal to oppose the Petition nor any party has

controverted any averments made in the Petition.

The Counsel for the Petitioner Company submits that the Petitioner Company is engaged in the business of infrastructure development in the form

of Road/Highway projects through its various subsidiaries and to provide repairs, maintenance and Tolling related services to its various

subsidiaries/associate companies and otherwise also.

The Authorized Share Capital of the Company is Rs.23,40,00,00,000 divided in 2,34,00,00,000 Equity Shares of Rs.10 each and Rs. 16,10,00,00,000

divided in 16,10,00,000 Preference Shares of Rs.100/- each.

The Counsel for the Petitioner Company submits that Article 10 of the Articles of Association of the Petitioner Company empowers the Petitioner

Company to reduce its share capital in any manner for the time being authorized by law by passing a Special Resolution.

The Counsel for the Petitioner Company submits that the Board of Directors of the Petitioner Company, at their meeting held on October 26th,

2019 have deemed it appropriate, subject to approval of the shareholders to reduce the paid-up equity share capital of the Petitioner Company from

Rs. 20,52,92,97,490 divided into 2,05,29,29,749 fully paid up equity shares of Rs.10 each to Rs.7,75,44,05,100 divided into 77,54,40,510 fully paid up

equity shares of Rs.10 each and that such reduction be affected by cancelling and extinguishing 62.23% of the total issued, subscribed and paid up

equity shares capital of the Company.

The Counsel for the Petitioner Company further submits that the Board of Directors of the Petitioner Company, at their meeting held on October

26th, 2019 have resolved that the upon capital reduction being confirmed by the Hon'ble Tribunal and the registration of order and minute of reduction

of share capital by the Registrar of the Companies, the Company shall pay to the shareholders of the Company as on the record date, whose shares

have been reduced, a sum of 0.10 Paisa per equity share, as consideration of capital reduction. The Counsel for the Petitioner submits that payment of

Rs.12,77,48,923.90 will be paid to the shareholders from internal accruals.

The counsel for the Petitioner Company further submits that the shareholders of the Petitioner Company having passed a special resolution on

November 15, 2019 have unanimously approved the said reduction of capital of the Petitioner Company.

The accounting treatment as included in the Petition is as follows:

I. Upon reduction of the capital, the total subscribed, issued and paid up equity share capital of the company shall be reduced from INR

20,52,92,97,490 divided into 2,052,929,749 equity shares of INR 10 each to INR 7,75,44,05,100 divided into 77,54,40,510 equity shares of INR 10 each;

II. The amount as appearing in the Retained Earnings schedule of the audited financial statements of the Company as at opening hours of April 1,

2019, will be written off to the extent of amount the aforesaid reduction of share capital.

The above treatment is tabulated below:

Equity Share Capital Account Dr12,77,48,92,390.00

To Statement of Profit and Loss on cancellation of 1,27,74,89,239 equity shares) Cr 12,64,71,43,466.10

To Bank Account (Payment of sum of 0.10 Paisa per equity share as consideration of capital reduction) 12,77,48,923.90

Upon sanction of the capital reduction petition, the paid -up equity capital of the Petitioner Company will be Rs.7,75,44,05,100 comprising of

77,54,40,510 equity shares of Rs. 10 each.

The shareholding pattern of the Petitioner Company pre and post reduction is as follows:

Pre-reduction Post-reduction

Sr. No. Name of shareholder No of shares % No of shares %

GMR Infrastructure Limited 1,85,29,29,746 90.26 69,98,95,741 90.26

Dhruvi Securities Private Limited 20,00,00,003 9.74 7,55,44,769 9.74

TOTAL 2,05,29,29,749 100.00 77,54,40,510 100.00

Our attention is drawn to rationale for capital reduction provided in paragraph 10 of the Petition, wherein it has been stated as under:

“The Company has accumulated losses of INR 12,77,48,92,399/- as per audited financial statements dated March 31, 2019 which has substantially

wiped off the value represented by the share capital of the Company. The financial statements of the Company is not reflecting the true health and

position of the Company. Considering the existing financial position and the present business outlook, the Board of Directors of the Company considers

that the present financial position does not reflect the accurate fair value of the business of the Company due to the accumulated losses as are

appearing in the balance sheet of the Company. Therefore, it is imperative for the Company to re-organize its financial position.â€​

The Regional Director has filed a Report dated January 8, 2020 (the ‘Report’) stating therein the following in paragraph 7 of the Report:

a) Applicant to submit an Affidavit to the effect that the interest of the creditors and all stakeholders and Government Revenue are protected as well

as Statutory dues are paid off.

b) The Tax implication if any arising out of the proposal for reduction is subject to final decision of Income Tax authorities. The approval of the

Company Petition by this Hon'ble Court may not deter the Income Tax Authority to scrutinise the tax return filed by the Company after giving effect

to the proposal reduction. The decision of the Income Tax Authority is binding on the Petitioner Company.

In response to the Report of the Regional Director the Petitioner Company has filed affidavit in rejoinder dated January 16, 2020 and have clarified

as under.

In so far as observations made in paragraph 7(a) of the Report of Regional Director is concerned, the Petitioner Company has clarified that the

interest of the creditors and all stakeholders and Government Revenue will be protected as well as the outstanding statutory dues, if any, would be

paid off in the ordinary course of business.

In so far as observations made in paragraph 7(b) of the Report of Regional Director is concerned, the Petitioner Company confirms and

undertakes that the Petitioner Company is bound to comply with all provisions of the Income- tax Act 1961 and all tax issues arising out of the Scheme

of Reduction of Capital will be met and answered in accordance with law.

The Regional Director has filed his supplementary report dated 20th January 2020 and has stated that the reply of the Petitioner is satisfactory.

The Counsel for Petitioner further submits as required under section 133 read with section 66 of the Companies Act, 2013, the Petitioner Company

has obtained a certificate from the statutory auditor, certifying the proposed accounting treatment on reduction of capital. Copy of the certificate of the

auditor has been enclosed on page 183 of the Petition as Annexure J-1. This accounting treatment is in accordance with the Generally Accepted

Accounting Principles followed in India.

The Counsel appearing on behalf of the Petitioner Company submits that the Petitioner Company has complied with all the statutory requirements

as the directions of the Tribunal. Moreover, the Petitioner Company also undertakes to comply with statutory requirements, if any under the

Companies Act, 2013 and the Rules made thereunder, as may be applicable.

Since the requisite statutory procedure has been fulfilled, the Company Petition is made absolute in terms of the prayer clause of the Petition.

All concerned regulatory authorities to act on certified copy of the order and the form of minutes forming part of the Petition, duly certified by the

designated Registrar, National Company Law Tribunal. The Petitioner Company undertakes to file the same with the Registrar within 30 days from

the date of the receipt of the order.

The paid-up capital of GMR Highways Limited is henceforth INR 7,75,44,05,100/- divided into 77,54,40,510 equity shares of INR 10/- (Rupees

Ten only) each reduced from INR 20,52,92,97,490/- comprising 2,05,29,29,749 fully paid up equity shares of INR 10/- each.