NCLT Indore Approves Cistro Telelink's Capital Reduction To Write Off Pandemic Losses

The National Company Law Tribunal (NCLT) at Indore has approved a 40 percent reduction in the share capital of Cistro Telelink Limited, a Madhya Pradesh-based company engaged in software production and cable network distribution, holding that the proposal causes no prejudice to any stakeholder.

A coram of Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta noted that the reduction complied with Section 66 of the Companies Act and had overwhelming shareholder approval.

“The reduction is in the interest of the company and does not prejudice any party,” the tribunal said.

Cistro Telelink was incorporated in February 1992 and is engaged in software production, cable network distribution and satellite communication services. The company told the tribunal that its operations were severely disrupted during the COVID-19 pandemic and remained affected for several years thereafter.

This resulted in accumulated losses of Rs 2.16 crore as of March 31, 2024. The management proposed the reduction to adjust these losses and clean up the balance sheet to facilitate future restructuring and investment.

Under the approved scheme, the company reduced its paid-up equity share capital from Rs 5.13 crore to Rs 3.08 crore by adjusting accumulated losses of Rs 2.05 crore. The reduction was carried out without any payment to shareholders.

The company confirmed that it has no secured creditors and only one unsecured creditor, who gave written consent to the proposal. The statutory auditor certified that the accounting treatment complied with Section 133 of the Companies Act.

The tribunal noted that capital reduction is essentially a matter of internal management once statutory requirements are met. It recorded that 99.93 percent of the shareholders present voted in favour of the proposal and that no objections were raised by regulatory authorities.

The bench also noted that the reduction would not affect the company's ability to honour its debts. While approving the scheme, the tribunal directed the company to pay Rs 20 thousand as costs to the Regional Director and to address compliance issues flagged by the Registrar of Companies relating to secretarial audit filings.

For Applicant: PCS Pratik Tripathi

For Income Tax Department: Proxy Advocate Yashika Bondwal