Minority shareholders of Minosha India Ltd. are challenging a capital reduction scheme, alleging unfair expulsion by the company. They have approached the National Company Law Appellate Tribunal (NCLAT) in New Delhi, raising concerns over the scheme's impact on their investments.
Minority shareholders of Minosha India Ltd have escalated their dispute with the company to the New Delhi bench of the National Company Law Appellate Tribunal (NCLAT). They allege that Minosha is unjustly expelling them through a capital reduction scheme.
Minosha, previously known as Ricoh India, faced insolvency proceedings and was acquired by Kalpraj D Dharamshi and Rekha Jhunjhunwala in 2019 as part of a corporate insolvency resolution process. A key component of the resolution plan involved delisting equity shares and reorganizing share capital, which was successfully implemented.
Manisha Narang, a partner at Perfect Accounting representing the minority shareholders, stated that after delisting, there was no trading platform available for the shareholders. She suggested that the company could have offered an exit to public shareholders through a share buyback scheme, allowing those willing to exit to surrender their shares while others could continue as shareholders. However, Narang said the company pursued a tribunal-approved process of capital reduction.
Capital reduction involves a company reducing its share capital by making payments to shareholders or canceling shares. In Minosha's case, the company sought NCLT approval last October to reduce its capital from ₹47.9 crore to ₹45.3 crore, proposing a 5.38% dilution of its share capital.
Minosha argued before the NCLT that the capital reduction would provide an opportunity for public shareholders to exit at a fair valuation, as their equity shares were not tradeable after the 2019 delisting.
However, minority shareholders Narendra Singhania and Shubham Singhania, along with some creditors, opposed the capital reduction process. They requested the option to either exit the company or remain invested.
A Mumbai NCLT bench, led by Justices Kuldip Kumar Kareer and Anuradha Bhatia, ruled on May 19 that it was equitable to allow Minosha to reduce its capital and transfer part of the property as proposed.
Shareholders, dissatisfied with the NCLT order, appealed to the appellate court, claiming they were forced to exit by the promoter group, which holds 94.62% of the shares. They argue that the proposed reduction is discriminatory, unfair, and intended to eliminate the class of public shareholders.
The shareholders further asserted that a separate meeting of non-promoters and public shareholders should have been held, providing minority shareholders the opportunity to approve or reject the capital reduction scheme.
Narendra Singhania and Shubham Singhania stated that they invested ₹27 lakh and ₹74.33 lakh, respectively, but the capital reduction scheme forces them to exit their investments for ₹12.32 lakh and ₹24.64 lakh.
"The majority shareholders cannot squeeze out minority shareholders compulsorily and without having a say in the matter, and the company ought to have given an option to the unwilling dissenting shareholders of the company who chose to retain their shareholding in the company,” the shareholders said.
