By Pooja Punjabi Oberai | Pramod S. Prabhudesai
Chartered Accountants
4. Economy Hotels India Services (P) Ltd. vs. Registrar of Companies
[2020] 119 taxmann.com 271 (NCLAT) Date of order: 24th August, 2020
There was an ‘inadvertent typographical error’ figuring in extract of
‘Minutes of Meeting’ characterising ‘special resolution’ as ‘unanimous ordinary
resolution’. Appellant company had tacitly admitted typographical error in
extract of minutes. Registrar of Companies had noted that appellant / company
had filed special resolution with it which satisfied requirements of section 66
of the Companies Act, 2013. The petition, filed by company u/s 66(1)(b)
rejected by NCLT on ground that there was no special resolution for reduction
of share capital as prescribed u/s 66 and as required in article 9 of the
Articles of Association of company, was set aside
FACTS
E Private Limited (E) is a closely-held private company, limited by
shares, incorporated under the provisions of the Companies Act, 1956. In fact,
Article 9 of the ‘Articles of Association’ of the appellant company specifies
that the company may, from time to time by a special resolution, reduce its
share capital in any manner permitted by law.
E had filed a petition u/s 66(1)(b) of the Companies Act praying for
passing of an order for confirming the reduction of share capital wherein it
had averred as under:
‘That annual general meeting of E was held on 19th August,
2019 and was attended by both the equity shareholders holding 100% of the issued,
subscribed and paid-up equity share capital of E. The said equity shareholders
present at the said meeting have cast their votes in favour of the aforesaid
resolution, etc.’
More specifically, E in the Company Petition had sought relief to
confirm the reduction of the issued, subscribed and paid-up equity share
capital of E as resolved by the members in the AGM held on 19th
August, 2019 by passing the special resolution. Further in the said petition, E
had prayed to approve the form of minutes under sub-section 5 of section 66 of
the Act.
E contended that it had placed on record sufficient documents to prove
that ‘special resolution’ as required u/s 66 of the Companies Act, 2013 as well
as in terms of the requirements under Article 9 of the ‘Articles of
Association’ of E was passed.
The National Company Law Tribunal, New Delhi, Bench V while passing the
order on 27th May, 2020 had observed as under:
‘We have perused the minutes of the Annual General Meeting of the
company held on 19th August, 2019. On page 124 of the paper book, it
is recorded that the meeting has passed the resolution for reduction of capital
“as an ordinary resolution.” The minutes of the meeting have been
signed by the Chairman of the meeting.
Thus, we observe that the company has not met the specific requirement
of section 66 of the Companies Act by passing “Special Resolution” for
reduction of share capital. The company has also not complied with the
requirements of its own Articles of Association.
We are left with no choice but to reject the application in view of the
fact that there is no special resolution for reduction of share capital as
prescribed u/s 66 of the Companies Act, 2013 and as required in Article 9 of
the Articles of Association of the company. Section 66 of the Companies Act
also requires this Tribunal to approve the minutes of the resolution passed by
the Company which has been passed as ordinary resolution as against the
requirement of special resolution; the Tribunal is not in a position to
approve such minutes in this case.’
HELD
The Appellate Tribunal observed / noted as under:
E had made a plea that the National Company Law Tribunal had failed to
appreciate the creeping in of an ‘inadvertent typographical error’ figuring in
the extract of the ‘Minutes of the Meeting’ characterising the ‘special
resolution’ as ‘unanimous ordinary resolution’. Moreover, E had fulfilled all
the statutory requirements prescribed u/s 114 of the Companies Act and as such
the order of the Tribunal is liable to be set aside.
It transpires
that the ‘Special Resolution’ passed in the ‘Annual General Meeting’ as filed
with the e-form MGT-14 reflects that the resolution passed by the shareholders
u/s 67 of the Companies Act, 2013 on 19th August, 2019 is a ‘Special
Resolution’ which is taken on record in the MCA21 Registry.
Further, the Resolution passed in the ‘Annual General Meeting’ of the
appellant’s company u/s 66 of the Companies Act was found to be in order by the
ROC. Even the report of the Registrar of Companies, Delhi found that E had
filed the said resolution keeping in tune with the ingredients of section 66 of
the Companies Act, 2013.
The Appellate
Tribunal noted that ‘Reduction of Capital’ is a ‘Domestic Affair’
of a particular company in which, ordinarily, a Tribunal will not interfere
because of the reason that it is a ‘majority decision’ which prevails. The term
‘Share Capital’ is a ‘genus’ of which ‘Equity and Preference share capital’ are
‘species’.
It is further
pointed out that section 114(2) of the Companies Act, 2013 enjoins that
‘Special Resolution’ means a resolution where a decision is reached by a
special majority of more than 75% of the members of a company voting in person
or proxy.
On a careful
consideration of the respective contentions, this Tribunal after subjectively
satisfying itself that E has tacitly admitted the creeping in of a
typographical error in the extract of the minutes and also taking into
consideration the stand of the ROC that E had filed the special resolution with
it, which satisfies the requirement of section 66 of the Companies Act, 2013,
allows the appeal by setting aside the order passed by the National Company Law
Tribunal, Bench V.
The Appellate
Tribunal thus confirmed the reduction of share capital of E as resolved by the
‘Members’ in their ‘Annual General Meeting’ that took place on 19th
August, 2019 and the Tribunal further approved the form of minutes required to
be filed by E with the Registrar of Companies, Delhi u/s 66(5) of the Companies
Act, 2013.
