An established company maintaining power projects in India, raised ₹ 11,000 crores from Indian Stock market with an issue price of ₹ 450 (FV of ₹ 10 per share) on 15th January, 2008. Anticipating a huge returns on the sh

Conditions for issue of Bonus Shares (as per Section 63 of the Companies Act, 2013 and Rules): Authorization by Articles: In terms of section 63(2) of the Companies Act, 2013, no company shall capitalize its profits or reserves for the purpose of issuing fully paid-up bonus shares, unless it is authorised by its articles. Shareholder Approval: It has been authorized by the shareholders in a general meeting of the company, on the recommendation of the Board of Directors. No Default in Debt Payments: It has not defaulted in the payment of interest or principal in respect of fixed deposits or debt securities, if any issued by it. No Default in Employee Dues: It has not defaulted in respect of the payment of statutory dues of the employees, such as contribution to provident fund, gratuity and bonus. Fully Paid-up Shares: The partly paid up shares, if any outstanding on the date of allotment have been made fully paid up. No Bonus shares in lieu of dividend: The bonus shares shall not be issued in lieu of dividend. [Section 63(3) of the Companies Act, 2013]. According to Rule 14 of Companies (Share Capital and Debentures) Rules, 2014, the company which has once announced the decision of its Board recommending a bonus issue shall not subsequently withdraw the same. Merits of the Case: The Public Interest Litigation challenged the issuance of bonus shares without any revenue income. However, the Companies Act, 2013, and relevant rules do not stipulate that a company must have revenue income to issue bonus shares. The primary conditions relate to the availability of distributable profits or reserves, authorization by articles, shareholder approval, and no defaults in statutory payments or debt obligations. Since the company complied with all the conditions required to be satisfied for issuing bonus shares, the court was correct in awarding the judgment in favour of the company and dismissing the PIL. The absence of revenue income at the time of listing or subsequent market performance does not invalidate a bonus issue if the statutory conditions are met.