Reduction of Share Capital allowed for Typographical Error – NCALT

Provision Involved

Section 66 of Companies Act, 2013 states a company limited by shares or limited by guarantee and having a share capital may, reduce the share capital by passing a special resolution, subject to the confirmation by the Tribunal (NCLT) and alter its memorandum by reducing the amount of its share capital and of its shares accordingly. The Tribunal has the absolute power to confirm or reject the scheme of reduction.

Facts of the case

• The Appellant Company had filed a petition under Section 66 of the Companies Act praying for confirming the reduction of share capital.
• In the extract of the minutes submitted to NCLT, it was written that the ‘unanimous ordinary resolution’ required for reduction has been obtained.
• The NCLT rejected the application for reduction.
• Hence the company has filed and appeal with NCLAT pleading that it was a mere typographical error in the minutes characterising the ‘special resolution’ as ‘unanimous ordinary resolution’ and the Appellant had filed the special resolution with ROC and fulfilled all the statutory requirements prescribed in the Companies Act, 2013, hence the order of the Tribunal is liable to set aside.

Decision

Merely a ‘typographical error’ in the extract of ‘Minutes’, characterising the ‘special resolution’ as
‘unanimous ordinary resolution’ will not render a special resolution as invalid. The special
resolution passed is very well valid. NCLAT has allowed the reduction.

Reason

• NCLAT observed that ‘Reduction of Capital’ under Section 66 of the Companies Act, 2013 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.
• As the Appellant has admitted its typographical error in the extract of the Minutes of the Meeting characterizing the ‘special resolution’ as ‘unanimous ordinary resolution’ and also taking into consideration of the fact that the Appellant had filed the special resolution with ROC, which satisfies the requirement of Section 66 of the Companies Act, 2013.
• NCLAT allowed the Appeal, thereby confirming the reduction of share capital of the Appellant Company.

Sahil Goyal, Audit Associate, SW India