NCLT Bengaluru Slaps ₹5 Lakh Penalty On Lifestyle International For Non-Disclosure In Capital Reduction Plea
Sangeetha Prathap
The National Company Law Tribunal (NCLT), Bengaluru Bench, has approved a ₹6.08 crore selective reduction of share capital proposed by Lifestyle International Private Limited, a fashion and lifestyle retail company belonging to the Dubai-based Landmark Group, but imposed a penalty of ₹5 lakh for what it described as a “casual approach” and serious non-disclosure in the proceedings. The Tribunal held that the company failed to make full and frank disclosure of its secured creditors while seeking approval under Section 66 of the Companies Act, 2013.
The order was passed on December 15, 2025, by a Bench comprising Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada, while allowing a petition filed by Lifestyle International Private Limited seeking confirmation of a capital reduction approved by its shareholders.
The company had approached the Tribunal to seek approval for reduction of its paid-up share capital by ₹6.08 crore through cancellation and extinguishment of 60,83,093 equity shares of ₹10 each, representing about 4.96% of its paid-up capital. The reduction related to shares held by 25 non-promoter, non-management shareholders, with the promoters and management group continuing to hold the remaining equity. The company proposed to pay ₹1,195 per share to the exiting shareholders, resulting in a total payout of approximately ₹727 crore.
Lifestyle International submitted that the capital reduction was intended to return surplus funds not required for its business operations and to provide an exit opportunity to minority shareholders. The Board of Directors approved the proposal in September 2023, and the shareholders passed a special resolution at an Extraordinary General Meeting held on October 31, 2023. The Tribunal noted that the company’s net worth exceeded ₹4,800 crore and that the reduction would not adversely affect its ability to meet liabilities or continue operations.
However, during the proceedings, serious deficiencies were noticed in the disclosures made by the company. While initially claiming that it had no secured creditors, it emerged from records placed by the Registrar of Companies and the Regional Director that the company had seven open secured charges amounting to about ₹770 crore as on November 30, 2023. Even after revised disclosures were filed, five secured creditors with charges totalling about ₹550 crore remained undisclosed. The omission came to light only after the Tribunal intervened during a hearing held on June 13, 2024.
The company attempted to explain the lapse by stating that the non-disclosure was inadvertent and later placed on record affidavits along with no-objection certificates obtained from all secured creditors. It also furnished revised certificates from its managing director and statutory auditors and clarified that it had adequate surplus funds and investments to meet the payout obligations under the capital reduction scheme.
Rejecting the explanation offered by the company, the Tribunal observed that the failure to disclose secured creditors at the outset reflected a lack of seriousness in proceedings before a judicial forum. The Bench remarked, “We do not approve of such Casual approach on part of the Company and its Auditor and are of the Opinion that the Proceedings before this authority deserve and should be accorded due seriousness.” It further noted that only after pointed queries by the Tribunal were the correct details placed on record, and even then, inconsistencies persisted in the disclosures.
As a punitive measure, the Tribunal imposed a penalty of ₹5 lakh on the company. It directed Lifestyle International to deposit ₹3 lakh in the Prime Minister’s National Relief Fund and ₹2 lakh in the Chief Minister’s Relief Fund, Karnataka, within four weeks from the date of the order, and to file proof of compliance before the Tribunal.
On merits, however, the Tribunal found that the substantive requirements under Section 66 of the Companies Act, 2013 were ultimately satisfied. It recorded that the Articles of Association permitted capital reduction, shareholder approval was duly obtained by special resolution, creditors’ interests were safeguarded through notices and no-objection certificates, and statutory authorities’ concerns were addressed through subsequent filings. The Tribunal also took note of the company’s undertakings regarding compliance with FEMA, RBI guidelines, and applicable tax laws in relation to the payout.
Accordingly, while censuring the company for non-disclosure and imposing monetary penalty, the NCLT approved the proposed reduction of share capital and confirmed the minutes of the Extraordinary General Meeting. With these directions, the petition was allowed and the proceedings were disposed of.
Appearance
For Petitioner: Advocates Uday Shankar with Anirdudh
For ROC: Advocate Anuparna Bordoloi
Cause Title: Lifestyle International Private Limited
Case No: C.P. No. 17/BB/2024
Coram: Judicial Member Sunil Kumar Aggarwal , Technical Member Radhakrishna Sreepada
