THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985

Sections 18 & 19

Preparation and sanction of scheme - Suit for declaration of reduction of shares - Non-implementation of rehabilitation scheme regarding reduction of share capital - Whether scheme becomes binding on an individual shareholder before implementation

Company received a letter from a legal heir requesting transfer of the 500 shares of 10 each and issuance of the duplicate share certificate and accordingly company issued the duplicate certificates of 50 shares of face value of Re. 1 each in lieu of 500 shares as per its rehabilitation scheme. The legal heir refused to accept the certificates. The company filed a suit claiming a declaration that the paid-up share capital of the company was reduced and the legal heir was entitled only to 50 equity shares of face value of Re.1 each i.e., Rs. 50 only. Held: The reduction of share capital in the plaintiff-company was taken place not by specific process under the Companies Act, 2013, but as a part of a rehabilitation scheme sanctioned by AAIFR in the process of reviving the plaintiff-company. The scheme becomes binding on an individual shareholder for the purpose of reviving the company till the scheme is successfully worked out or implemented, until then reduction of share capital under such scheme is a contingent act by the company. The Rehabilitation Scheme which permitted reduction of share capital was in operation at the time when the suit was instituted and therefore, the right as to reduction of share capital in favour of the plaintiff-company did not crystallize. Hence, the suit failed and accordingly dismissed.

REFERRED :

FAVOUR : Against the plaintiff

A.Y. :

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