In a recent ruling, the Ahmedabad bench of National Company Law Tribunal (NCLT) approved a Section 66 application of Companies Act, 2013 filed by the Mahan Industries, seeking confirmation in the reduction of its share capital.
The application for the reduction of the share capital filed by the Mahan Industries under Section 66 of the Companies Act, 2013. The main objectives of the company as set out in its MOA is to carry on business of trading investment, and business of financial company. The authorised capital of the company was Rs 37.3 crores as on December 20, 2022 and the issue, subscribed and paid-up share capital stood at Rs 36 crores.
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The company through its application has proposed to eliminate accumulated losses which are amounting to Rs 33.61 crores and to restructure its financial health. The new restructure decision was passed by a special resolution by the board in the EGM as held on September 21, 2021.
The objective behind the application is to clean the company’s balance sheet and enable it to attract future investments. It also helps the company ensure accurate representation of its financial position. The Regional Director, Registrar of Companies or the Income Tax Department has no objection with the reduction and the same will have no affect on the creditors as the company has sufficient assets to discharge liabilities.
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While allowing the application, the bench comprising of Dr V.G Venkata Chalapathy (Member Technical) and Chitra Hankare (Member Judicial) found the proposed capital reduction to be following the applicable laws and stated that no objections have been raised by the Regional Director, Registrar of Companies, or the Income Tax Department.
The tribunal held that the sanction of reduction does not exempt the company from fulfilling other statutory obligations such as payment of taxes, stamp duties or compliance with SEBI, FEMA and Income Tax Laws.
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