In Re: R. Systems International Limited Vs

Mohd. Sharief Tariq, J

Under consideration is CP-139/66/ND/2019, filed on 13.09.2019 under Section 66 of the Companies Act, 2013 (Act, 2013) r/w National Company Law Tribunal (Procedure for reduction of share capital of company) Rules, 2016 (NCLT Rules, 2016), for extinguishment, cancellation and confirming the reduction of issued, subscribed and paid-up equity share capital (Capital Reduction).

The Applicant Company has made prayers as follows:

a) That the reduction of capital resolved on by the special resolution set out in paragraph 8 be confirmed.

b) Appropriate orders/directions for serving a notice to the Regional Director, Registrar of companies.

c) Dispensing with the requirement of sending a copy of notice of meeting to stock exchanges and SEBI, since the Petitioner Company has already obtained the approval of the stock exchanges and SEBI.

d) Dispense with the requirement of issuance of notice to the secured creditors.

e) Dispense with the requirement of issuance of notice to unsecured creditors.

f) Appropriate Orders/directions for issuance of directions to publish a notice for the proposed reduction of Share Capital in the newspapers namely "Business Standard" in English Language and Hindi Language.

g) Dispense with the use of words the words 'AND REDUCED' in the name of the Petitioner Company.

h) Approve the Form of Minute and under Section 66(5) of the Companies Act 2013 as se out in the paragraph 12, proposed to be filed with the Registrar of Companies.

i) Pass such other and further Orders or directions in the matter as this Hon'ble Tribunal may deem fit and proper in the circumstances of the case.

It has been stated that the Applicant is a company limited by shares originally incorporated and registered on 14.05.1993 under the provisions of Companies Act, 1956 (Act, 1956) in the name and style viz., 'R Systems (India) Private Limited'. Thereafter, on 13.04.2000, the company was converted into a public limited company and consequently its name was changed to 'R Systems (India) Limited'. Further, on 07.08.2000, the name of the company 'R Systems (India) Limited' was changed to 'R Systems (International) Limited' (hereinafter referred as Petitioner Company). The Registered Office of the Petitioner Company is situated at GF-1-A,6, Devika Tower, Nehru Place, New Delhi - 110019. The Petitioner Company's Identification Number (CIN) is L74899DL1993PLC053579. The Petitioner Company is listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

The main object of the company is to carry on the business of sale, purchase, assemble, hire purchase, import, export, stockists, distributors, designers, agents traders, exchanges and jobbers in all kinds of computer, computer software development, conversion, data entry, software implementation, system study, software documentation and related components, computer systems, Computer peripherals, integrated circuits, process controllers, computer printers, transformers, monitors, uninterrupted power supply systems, computer components, computer based systems, to deal in other office automation machines, printers, computer stationary, computer furniture, ribbons, diskettes, magnetic tapes, and other related items in India and abroad etc.

The Authorised Capital of the Petitioner Company is Rs. 206,000,000 (comprising of 206,000,000 Equity Shares of Re. 1/- each) and the Issued, Subscribed and Paid up Capital is Rs. 120,337,925 (comprising of 120,337,925 Equity shares of Re. 1/- each).

Clause 71 of the Articles of Association authorises the Petitioner Company to reduce share capital which the reads as under:

"The Company may, subject to the provisions of the Section 78, 80 and 100 to 105 inclusive of the Act and the Articles, from time to time by special resolution reduce its share capital and any Capital Redemption Reserve Account of Share Premium Account in any way authorize by law and in particular may pay off any paid up share capital upon the footing that it may be called up again or otherwise and may, if and so far as is necessary, alter its Memorandum by reducing the amount of its share capital and of its shares accordingly".

It is stated that the Petitioner Company has an Employee Welfare Trust named "R systems Employee Welfare Trust' (Trust), wherein certain employees had been specified as eligible to get the shares of the Petitioner Company on vesting and exercise of options granted. The Trust holds 738,980 shares of Re. 1/- each in the Petitioner Company. Further, it is stated that there are no ascertained employees/beneficiaries of the Trust who are eligible to get the Trust Fund, including the shares in Petitioner Company as held by the Trust. The Trustees of the Trust vide Resolution dated 01.05.2019 have expressed their desire and recommended to Petitioner Company to evaluate the possible option to utilize or extinguish the Trust Fund including the Winding up of the Trust and initiate necessary actions. The extinguishment of Trust Fund would result into cancellation of share of the Petitioner Company held by the Trust.

The Board of Directors (BOD) of the Petitioner Company in the meeting held on 02.05.2019 resolved to reduce 738,980 number of equity shares under section 66 of the Act, 2013 subject to confirmation by the Shareholders of the Petitioner Company and approval of the Scheme of Capital Reduction (the Scheme). The BoD of the Petitioner Company convened Annual General Meeting (AGM) of the equity shareholders on 28.05.2019, for which a Notice along with Explanatory Statement was sent. The Resolution passed in the Annual General Meeting (AGM) is as under:

"the consent of the equity shareholders of the company be and is hereby accorded to the proposed reduction of the paid up share capital of the company from Rs. 120337925/- (Rupees Twelve Crore Three Lakh thirty Seven Thousand Nine Hundred Twenty Five Only), comprising of 120337925 fully paid equity shares of Re. 1/- (Rupee One Only) each to Rs. 119,598,945/-(Rupees Eleven Crore Ninety Five Lakh Ninety Eight Thousand Nine Hundred Forty Five Only), comprising of 119,598,945 equity shares of Re. 1/- (Rupee One Only) each, by cancelling and extinguishing 738,980 issued, subscribed and fully paid up equity shares of Re. 1/- (Rupee One Only)(0.61% of the total issued, subscribed and paid up equity share capital of the Petitioner Company) as held by the R Systems Employees Welfare Trust (Capital Reduction)."

It is averred that the reduction of the Capital of the Petitioner Company does not involve extinction or reduction of any liability in respect of unpaid share capital or cancellation of paid-up share capital, which is lost or is unrepresented by the available assets or the payment to the shareholder of any paid-up share capital. Further, the Accounts of the Petitioner Company as on 31.12.2018, have been duly audited, no qualification, reservation or adverse remark or disclaimer has been made by the auditor in his report for the Audited Financials of the Petitioner Company. It is also stated in the Application that the Petitioner Company has maintained proper books of account as required by law and the certificate issued by the Statutory Auditor and declaration by the Directors provide that there has been no default in repayment of any deposits or interest thereon, as on the date of filing the instant Application.

The Petitioner Company has received No-Objection Certificate from NSE in terms of Regulation 94 of SEBI (LODR) Regulations, 2015 and BSE on 16.08.2019 and 21.08.2019 respectively, which is placed on record. Therefore, in the view of the above, the requirement to send notice for representation to the stock exchanges is dispensed with.

The Valuation Report of the shares of the Petitioner Company is issued by the Chartered Accountant i.e. Jain Gandharv 8B Associates, Chartered Accountants (Firm Registration No. 026028N), which is placed on record. The Fairness Opinion on Valuation Report is placed on record. There are forty eight Unsecured Creditors and one Secured creditor. The one Secured Creditor has consented and forty one of the Unsecured Creditors comprising of 78.41 % in value and 85.42 % in number has consented for the proposed Reduction of Capital of the Petitioner Company.

The accounting treatment proposed by the Petitioner Company for the Capital reduction is in conformity with the accounting standards specified in Section 133 or any other provisions of the Act, 2013. A certificate issued by Deloitte Haskin & Sells LLP to that effect is placed on record.

The Applicant Company has filed the proof of paper publication both in English and in vernacular containing the proposed reduction of share capital. The Applicant Company has also sent the private notice to the Registrar of Companies (RoC).

The RoC has not filed any objection. The Ld. Counsel has orally consented for the reduction of the share capital and has stated that the Petitioner Company has complied with Rule 3(1) (iii) (notice to creditors) and rule 3(1) (i) and (ii) (notice to Registrar of Companies) by filing Form RSC-3 Form RSC - 2.

The Petitioner Company's has placed on record the form of the minutes proposed to be registered under Section 66 (5) of the Act, 2013 which is as under:

The paid up share capital of R Systems International Limited is henceforth Rs. 119,598,945/- (Rupees Eleven Crore Ninety Five Lakh Ninety Eight Thousand Nine Hundred Forty Five Only) divided into 119,598,945 (Eleven Crore Ninety Five Lakh Ninety Eight Thousand Nine Hundred Forty Five)"

Heard the Ld. Counsel for the Petitioner Company and the Counsel for RoC, perused the Application along with the documents placed on the case file. The Petitioner Company has made out a case for capital reduction. Thus, the order follows under:-

This Tribunal confirms the reduction of share capital of the Petitioner Company as proposed, by approving the minutes of the AGM convened on 28.05.2019.

In terms of the above, the necessary alteration shall be made in the Memorandum of Association by the Petitioner Company for reduction of the amount of its share capital and of its shares. The copy of the altered Memorandum of Association and minutes approved along with the Order shall be delivered to the RoC by filing E-form INC-28, within thirty days of the receipt of copy of the Order. Accordingly, the Registry shall prepare an Order in FORM No. RSC-6 as per the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016 and issue to the Applicant.

This Order is pronounced in open court.

This order of the Bench consisting of above-mentioned Members was pronounced in open court on behalf of the Bench under Rule 151.