NCLT Mumbai Approves ₹38 Crore Capital Reduction of Mudaliar & Sons Hotels

The Mumbai Bench (Court–IV) of the National Company Law Tribunal has approved the reduction of equity share capital of Mudaliar & Sons Hotels Private Limited under Section 66 of the Companies Act, 2013.

Background

The company sought approval to reduce its paid-up equity share capital on the ground that it was holding capital in excess of its operational requirements. Pursuant to Article 38 of its Articles of Association, the Board of Directors passed a resolution on 8 February 2025, proposing a reduction of capital. Shareholders subsequently approved this through a special resolution dated 11 February 2025. Under the approved scheme, the company proposed to cancel and extinguish 3.80 crore equity shares of ₹10 each, amounting to ₹38 crore, representing 44.85% of its issued, subscribed and paid-up share capital. The reduction was aimed at repaying surplus cash and cash equivalents to shareholders. Post-reduction, the company’s paid-up equity share capital stands reduced from ₹84.71 crore (8.47 crore equity shares) to ₹46.71 crore (4.67 crore equity shares).

Findings and Order

The Regional Director (Western Region) raised certain observations, including issues relating to negative reserves, lack of recent operational revenue, valuation of investments, and compliance with beneficial ownership disclosures. The company filed a detailed rejoinder, clarifying that it continued to have a positive net worth, had no secured or unsecured creditors, and that the proposed reduction fell squarely within Section 66(1)(a)(ii) as payment of capital in excess of its wants.

The Tribunal noted that statutory requirements had been complied with, creditors’ interests were not prejudiced, and necessary undertakings regarding tax implications and regulatory compliance had been furnished.

Allowing the petition, the NCLT approved the capital reduction and directed the company to publish notices of registration of the order and approved minutes in Business Standard (English) and Navshakti (Marathi). The company was also directed to liquidate its preference share investments in Frontman Multitrade Private Limited and utilise the proceeds for shareholder payout in terms of the approved reduction scheme.