hi, can u sugest the answer for following case law ( a quation from cs proffesional programme june 2012 exam)
Que-BM (India) Ltd. (BMIL) is a company registered in India. 99% of shareholding of BMIL
is controlled by three companies namely, Van India Ltd. (VAN) (45%), Man India Ltd. (MAN)
(45%) and Ran India Ltd. (RAN) (9%) which are the promoters of BMIL. The remaining
1% shareholding is in the control of 10 individual shareholders.
BMIL has filed a petition before the court for reduction of its share capital under sections
100 to 105 and stated that “only the shares of minority shareholding which at present is 1%
of the total paid capital will be extinguished and reduced.” The articles of association of
BMIL contain provisions for the reduction of capital. 99.99% shareholders have approved
the special resolution except one shareholder Gaurav who has 0.01% of shares of the company.
Gaurav has raised objection on the proposed scheme of reduction of capital on the following
grounds :
— Proposed reduction of share capital by BMIL amounts to ‘forcible acquisition’ of shares
of public shareholders as only their shares are being extinguished, whereas the shares
of promoter group, i.e., VAN, MAN and RAN remain unaffected. According to Gaurav,
the actual intent and reason for reduction of share capital is only to eliminate the minority
shareholders as members of the company and is thus wholly unfair, discriminatory and
malafide. Gaurav submits that reduction, if any, should be spread equally over all the
different classes of shareholders of BMIL.
— Gaurav submits that the reduction of share capital proposed by BMIL is in fact a buyback of the shares under section 77A and accordingly reduction of share capital has
to be done on proportionate basis as mentioned in section 77A(5).
Keeping in view the provisions of section 77A, sections 100 to 105 and also the objections
of Gaurav, you, being the Company Secretary and Legal Advisor of BMIL, are asked to
give your opinion on the following :
(i) Reduction of capital under section 100 gives liberty to the company to reduce its capital
in ‘any manner’ other than what is illustrated in clause (a), (b) and (c) of section 100(1).
(ii) Section 77A should not be applicable in case where petition for reduction of capital
is moved to the court pursuant to sections 100 to 105.
Cite relevant case law in support of your answer.
Plzzzz share answer.....
regards
CAclubindia
