NCLT Chandigarh Approves ₹8,000 Crore Share Capital Reduction Plan Of General Motors India

The Chandigarh bench of the National Company Law Tribunal (NCLT) has approved General Motors India Private Limited's application for reduction of its share capital by ₹8,000 crore.

The reduction will allow the company to set off accumulated losses of ₹7,560 crore and pay ₹440 crore to its equity shareholders.

The order was passed on June 4 by Judicial Member Khetrabasi Biswal and Technical Member Kaushalendra Kumar Singh.

Directing the company to protect the interests of tax authorities and comply with foreign exchange regulations before making the payment, the bench held:

“The Applicant Company shall ensure the payment of outstanding Income tax dues or shall make adequate arrangements in terms of Bank Guarantee, etc., to the satisfaction of Income Tax Authorities, and shall make compliances under FEMA before paying the proposed amount of Rs 440 Cr to its foreign shareholder ( Parent Company ) in the process of reduction of its share Capital.”

General Motors India had moved the tribunal seeking confirmation of a reduction in its issued, subscribed and paid-up equity share capital. The company was incorporated in 1994 and is engaged in automobile manufacturing, assembly and related activities.

The company stated that it had incurred substantial operating losses over several financial years. It attributed the losses to a prolonged decline in demand for its products, rising steel prices, elevated vehicle financing rates, a limited supplier base and increasing competition.

The company informed the tribunal that accumulated commercial losses recorded under "Other Equity" stood at ₹87,951.84 million as of March 31, 2025. It stated that these losses had substantially eroded its net worth.

To realign its capital structure, the company proposed reducing its share capital by extinguishing 7,99,06,35,002 equity shares and 93,64,998 Class A equity shares. The total reduction amounted to ₹8,000 crore.

Under the proposal, ₹7,560 crore would be adjusted against accumulated losses. A further ₹440 crore would be paid to equity shareholders at ₹0.55 per share.

A valuation report prepared by registered valuer Harish Chander Dhamija on September 26, 2025, pegged the value of each share at ₹0.55. The company told the tribunal that the valuation had been arrived at in line with FEMA pricing guidelines.

The proposal first received the approval of the Board of Directors at its meeting on September 29, 2025. Shareholders then endorsed it through a special resolution passed at an Extraordinary General Meeting held on October 3, 2025.

The company informed the tribunal that it had no secured creditors. It had 14 unsecured creditors with aggregate outstanding dues of ₹73.50 crore.

One of the unsecured creditors, which accounted for 99.59% of the company's total outstanding unsecured debt, gave its consent to the proposed reduction.

Pursuant to the tribunal's directions, notices were served on statutory authorities and creditors. In response, the Regional Director and the Registrar of Companies flagged issues relating to service of notices, FEMA compliance, the basis of the valuation, exclusions from the creditors' list and pending statutory dues.

The company addressed those concerns through affidavits filed before the tribunal.

The Income Tax Department informed the tribunal that it had no objection to the proceedings. It requested that the interests of the department be protected.

The bench observed that after the proposed reduction, accumulated losses would remain at ₹1,235 crore. Outstanding dues to unsecured creditors would stand at ₹73.50 crore against equity share capital of ₹1,707 crore.

Observing that the proposed payment would not affect the company's ability to meet its liabilities, the bench noted,

“It's also noted that following the proposed reduction, the balance accumulated losses remain at Rs 1235 cr; and the outstanding dues to unsecured creditors at Rs 73.50 Cr against the equity share capital of Rs 1707 cr, as such, the proposed payment of Rs. 440 cr to the Shareholders would have no adverse impact on its capacity to discharge the balance liabilities.”

Holding that the reduction of share capital would not have any adverse effect, the bench approved the reduction as resolved in the Extraordinary General Meeting. The application was accordingly allowed.