66. Reduction of share capital
(1) Subject to confirmation by the Tribunal on an application by the company, a
company limited by shares or limited by guarantee and having a share capital may, by a
special resolution, reduce the share capital in any manner and in particular, may—
(a) extinguish or reduce the liability on any of its shares in respect of the share
capital not paid-up; or
(b) either with or without extinguishing or reducing liability on any of its
shares,—
(i) cancel any paid-up share capital which is lost or is unrepresented by
available assets; or
(ii) pay off any paid-up share capital which is in excess of the wants of the
company,
alter its memorandum by reducing the amount of its share capital and of its shares
accordingly:
Provided that no such reduction shall be made if the company is in arrears in the
repayment of any deposits accepted by it, either before or after the commencement of this
Act, or the interest payable thereon.
(2) The Tribunal shall give notice of every application made to it under sub-section
(1) to the Central Government, Registrar and to the Securities and Exchange Board, in the
case of listed companies, and the creditors of the company and shall take into consideration
the representations, if any, made to it by that Government, Registrar, the Securities and
Exchange Board and the creditors within a period of three months from the date of receipt
of the notice:
Provided that where no representation has been received from the Central Government,
Registrar, the Securities and Exchange Board or the creditors within the said period, it shall
be presumed that they have no objection to the reduction.
(3) The Tribunal may, if it is satisfied that the debt or claim of every creditor of the
company has been discharged or determined or has been secured or his consent is obtained,
make an order confirming the reduction of share capital on such terms and conditions as it
deems fit:
Provided that no application for reduction of share capital shall be sanctioned by the
Tribunal unless the accounting treatment, proposed by the company for such reduction is in
conformity with the accounting standards specified in section 133 or any other provision of
this Act and a certificate to that effect by the company’s auditor has been filed with the
Tribunal.
(4) The order of confirmation of the reduction of share capital by the Tribunal under
sub-section (3) shall be published by the company in such manner as the Tribunal may
direct.
(5) The company shall deliver a certified copy of the order of the Tribunal under subsection
(3) and of a minute approved by the Tribunal showing—
(a) the amount of share capital;
(b) the number of shares into which it is to be divided;
(c) the amount of each share; and
(d) the amount, if any, at the date of registration deemed to be paid-up on each
share,
to the Registrar within thirty days of the receipt of the copy of the order, who shall register
the same and issue a certificate to that effect.
(6) Nothing in this section shall apply to buy-back of its own securities by a company
under section 68.
(7) A member of the company, past or present, shall not be liable to any call or
contribution in respect of any share held by him exceeding the amount of difference, if any,
between the amount paid on the share, or reduced amount, if any, which is to be deemed to
have been paid thereon, as the case may be, and the amount of the share as fixed by the order
of reduction.
(8) Where the name of any creditor entitled to object to the reduction of share capital
under this section is, by reason of his ignorance of the proceedings for reduction or of their
nature and effect with respect to his debt or claim, not entered on the list of creditors, and
after such reduction, the company is unable, within the meaning of sub-section (2) of section
271, to pay the amount of his debt or claim,—
(a) every person, who was a member of the company on the date of the registration
of the order for reduction by the Registrar, shall be liable to contribute to the payment
of that debt or claim, an amount not exceeding the amount which he would have been
liable to contribute if the company had commenced winding up on the day immediately
before the said date; and
(b) if the company is wound up, the Tribunal may, on the application of any such
creditor and proof of his ignorance as aforesaid, if it thinks fit, settle a list of persons so
liable to contribute, and make and enforce calls and orders on the contributories
settled on the list, as if they were ordinary contributories in a winding up.
(9) Nothing in sub-section (8) shall affect the rights of the contributories among
themselves.
(10) If any officer of the company—
(a) knowingly conceals the name of any creditor entitled to object to the reduction;
(b) knowingly misrepresents the nature or amount of the debt or claim of any
creditor; or
(c) abets or is privy to any such concealment or misrepresentation as aforesaid,
he shall be liable under section 447.
(11) If a company fails to comply with the provisions of sub-section (4), it shall
be punishable with fine which shall not be less than five lakh rupees but which may extend
to twenty-five lakh rupees.