NCLT Ahmedabad Approves Niyogi Enterprise's ₹35.9 Crore Capital Reduction

The National Company Law Tribunal (NCLT), Ahmedabad has approved a Rs 35.9 crore capital reduction by Niyogi Enterprise, holding that the scheme does not prejudice any stakeholder and that objections raised by the Income Tax Department can be examined independently under applicable law.

A bench of Judicial Member Chitra Hankare and Technical Member Dr. V.G. Venkata Chalapathy was dealing with a petition under Section 66 of the Companies Act, 2013, seeking confirmation of the reduction of the company's issued, subscribed, and paid-up 9% redeemable non-cumulative non-convertible preference share capital to nil.

The company submitted that the reduction followed the exit of its sole preference shareholder, resulting in extinguishment of the preference shares.

The bench observed:

“The petitioner is observed to have followed the due process of law and the Income tax department may look in to the merits of the matter separately if there are any violations or deviations as per its Act provisions. Further the petitioner is not a listed company and does not affect the legitimate interest of any other stake holder, and complies with the accounting and legal provisions as applicable. It is apparently one to one transaction agreed upon between the petitioner and its only preference share holder and we do not have any grounds to deny the proposal.”

The tribunal noted that the scheme had been approved by shareholders through a special resolution and that the proposed accounting treatment was in compliance with applicable accounting standards, supported by auditors' certification.

On creditors, the bench recorded that the company had no secured creditors and only two unsecured creditors, whose interests were adequately addressed, with no objections received.

While the Income Tax Department raised concerns that the scheme could result in potential revenue loss, the Tribunal accepted the company's submission that tax issues fall within the department's domain and clarified that it remains free to proceed in accordance with law.

Finding that the scheme complied with statutory requirements and did not adversely affect stakeholders, the tribunal approved the capital reduction subject to necessary compliances.