Case Note & Summary
The judgment concerns a Company Petition filed by Wartsila India Limited (WIL) seeking confirmation of a special resolution passed on 10th November 2009 for reduction of its equity share capital under Section 100 of the Companies Act, 1956. WIL was engaged in manufacturing diesel engines and generating sets, and its shares were listed on NSE and BSE until delisting in June 2007 due to public shareholding falling below 10%. After delisting, minority shareholders faced liquidity issues. The promoters had made an open offer at Rs.622 per share under SEBI Delisting Guidelines, but many shareholders missed the exit opportunity. In May 2009, after a valuation report by M/s. SSP and Company valuing shares at Rs.162 per share, the promoters offered to purchase shares at Rs.622 per share until 31st July 2009 and at Rs.162 per share from 1st to 15th August 2009. WIL then proposed a reduction of share capital to provide a one-time exit to remaining minority shareholders at Rs.162 per share. The special resolution was passed with requisite majority. Intervenors (minority shareholders) opposed, alleging oppression and inadequate valuation. The Court examined the fairness of the reduction, noting that the promoters held 98.88% shares and the reduction was voluntary. The Court held that the reduction was bona fide, in the interest of the company, and not oppressive. It confirmed the reduction subject to compliance with conditions including payment to shareholders and compliance with statutory requirements. The Court rejected the intervenors' objections, finding no evidence of oppression or unfairness.
Headnote
A) Company Law - Reduction of Share Capital - Section 100 Companies Act, 1956 - Court Confirmation - The petition sought confirmation of reduction of equity share capital to provide a one-time exit to minority shareholders whose shares were locked in due to delisting. The Court held that the reduction was bona fide, in the interest of the company, and not oppressive, and confirmed the reduction subject to compliance with conditions. (Paras 1-30) B) Company Law - Minority Shareholders - Oppression - Section 397 Companies Act, 1956 - The intervenors alleged oppression, but the Court found no evidence of oppression as the reduction was voluntary and provided fair exit at a price determined by valuation. (Paras 20-25) C) Company Law - Valuation of Shares - Fair Value - The Court accepted the valuation report by M/s. SSP and Company, Chartered Accountants, valuing shares at Rs.162 per share, and noted that the promoters had earlier offered Rs.622 per share, which was higher. (Paras 5-10)
Issue of Consideration
Whether the reduction of equity share capital of Wartsila India Limited, as approved by a special resolution, should be confirmed by the Court under Section 100 of the Companies Act, 1956, and whether the reduction is fair and not oppressive to the minority shareholders.
Final Decision
The Court confirmed the reduction of equity share capital of Wartsila India Limited as per the special resolution passed on 10th November 2009, subject to compliance with conditions including payment to shareholders and statutory requirements. The petition was allowed.
Law Points
- Reduction of share capital
- Section 100 of Companies Act
- 1956
- Exit opportunity to minority shareholders
- Valuation of shares
- Oppression of minority
- Special resolution
- Court confirmation
