Dronte India Private Ltd, is a subsidiary company of its Dronte Global Ventures Inc, which holds 95.99% shares of the Company. The company had received requests from the non-promoter shareholders to provide them with an

The facts of the given case were similar to the case decided in Brillio Technologies Private Limited (Appellant) vs. Registrar of Companies & Anr (Respondent), in this case the Board of Directors of the Company resolved to reduce the equity share capital, by reducing 89,52,637/-equity shares of Re. 1/- each from non- promoter equity shareholders for a consideration of ₹5,61,33,034/- being 89,52,637/- equity shares of Re. 1/- each with premium of ₹5.27/- per share paid out of the Securities Premium Account. The Security Premium Account of ₹15,24,81,955/- shall accordingly be reduced to ₹10,53,01,558/-. Thereafter, an Extraordinary General Meeting was held on 04.02.2019, wherein by special resolution duly passed in accordance Section 66 (1) read with Section 114 of the Act, the 100% members present, voted in favour of the resolution for reduction of share capital of the Company. NCLT observed that no objections have been received from creditors and consent affidavits on their behalf has not been produced. Ld. Tribunal held that as per Section 52 (2) of the Act, Security Premium Account may be used only for the purpose specifically provided under Section 52 (2) of the Act. Selective reduction in equity share capital to a particular group involving non-promoter shareholders and bringing the company as a wholly owned subsidiary of its current holding company and also return excess of capital to them. This is an arrangement between the company and shareholders or a class of them and hence, it is not covered under Section 66 of the Act. However, the case may be covered under Sections 230-232 of the Act. Wherein compromise or arrangement between the Company and its creditors or any class of them or between a Company and its members or any class of them is permissible. Therefore, the Company failed to make out any case under Section 66 of the Act and thus, the petition is dismissed with the liberty to file appropriate application as per extant provisions of the Act. The brief grounds of dismissal of the Petition and issues raised by the Respondents were answered by the Appellate Tribunal as under: No proper genuine reason has been given for reduction of share capital. Consent affidavit from creditors has not been obtained. Security Premium Account cannot be utilized for making payment to the non- promoter shareholders. Selective reduction of shareholders is not permissible. The Petition for reduction of capital under Section 66 of the Act, is not maintainable. However, it may be filed under Section 230-232 of the Act. With the aforesaid we are of the view that the Tribunal has erroneously held that the Application for reduction of share is not maintainable under Section 66 of the Act, consent affidavits from the creditors is mandatory for reduction of share capital, SPA cannot be utilized for making payment to non- promoter shareholders, consent from 171 non- promoter shareholders who are not traceable is required, selective reduction of shareholders of non-promoter shareholders is not permissible. The Tribunal has dismissed the Application on untenable grounds. Therefore, we hereby set aside the impugned order passed by the Tribunal and the reduction of equity share capital resolved by the special resolution set out in Paragraph 11 of the Petition is hereby confirmed. Appeal allowed. In the light of aforesaid proposition of law, we can safely hold that selective reduction is permissible if the non-promoter shareholders are being paid fair value of their shares. In the present case, none of the non-promoter shareholders of the Company have raised objection about the valuation of their shares. It is nobody's case that the proposed reduction is unfair or inequitable. It is also made clear that the proposed reduction is for whole non-promoter shareholders of the company.