Pranav B Prem

The National Company Law Tribunal (NCLT), Kochi Bench, comprising Shri Vinay Goel (Judicial Member) and Smt. Madhu Sinha (Technical Member), has allowed a petition filed by M/s. Cochin Aircraft Maintenance Company Limited under Section 66 of the Companies Act, 2013, approving the company’s proposal to reduce its paid-up share ca pital. The Tribunal held that the reduction was duly approved by the shareholders, that no creditors or employees were affected, and that the move was a commercially sound decision within the meaning of Section 66 of the Act. “The proposed reduction of paid-up capital is justified on commercial grounds, duly approved by the shareholders, and does not adversely affect any creditors, employees, or other stakeholders. The reduction is proportionate and lawful under Section 66 of the Companies Act, 2013,” the Bench observed.

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Background

The petition was filed by Cochin Aircraft Maintenance Company Limited, seeking the Tribunal’s sanction for reduction of its paid-up share capital from ₹1,13,58,450 to ₹25,83,450 by returning ₹87,75,000 to its shareholders. The company, initially engaged in aircraft maintenance and aviation training, decided to discontinue its aviation-related operations due to increased competition from Cochin International Aviation Services Limited (CIASL), a subsidiary of Cochin International Airport Limited (CIAL). Subsequently, the shareholders resolved to shift the company’s focus toward general engineering consultancy, which required lesser capital.

It was submitted that most shareholders were senior citizens who decided to confine business activities to consultancy under Clause III(C)(1) of the Memorandum of Association. The company had no secured or unsecured creditors and no employees, as certified by its statutory auditor. A special resolution approving the capital reduction was passed unanimously at an Extraordinary General Meeting (EGM) held on April 5, 2025. The company asserted that the reduction aimed only to return idle surplus capital to shareholders and did not involve any unpaid share capital.

Tribunal’s Observations

The Tribunal noted that the proposed reduction complied with Section 66 of the Companies Act, 2013, and all procedural requirements under the NCLT (Procedure for Reduction of Share Capital of Company) Rules, 2016. It observed that the company had produced a certificate from its statutory auditor confirming that it had no creditors and employees who could be affected. The Bench also took into account the Registrar of Companies’ report, which raised no objections to the proposal, and the company’s compliance with accounting standards as required under Section 133 of the Companies Act, 2013.

It further observed that the capital reduction was a commercially prudent move based on genuine business reasons and that no stakeholder’s interest was compromised.“The reduction of capital, having been approved by the shareholders and affecting no creditors or employees, is a legitimate exercise of commercial discretion. It is intended to align the company’s capital structure with its scaled-down operations,” the order stated.

Order

Allowing the petition, the Tribunal sanctioned the reduction of the company’s paid-up share capital from ₹1,13,58,450 to ₹25,83,450, divided into 2,58,345 equity shares of ₹10 each, with ₹87,75,000 to be returned to shareholders proportionately. However, the Tribunal clarified that this approval does not absolve the company from any pending or future legal actions or statutory liabilities arising under other laws. “The sanction granted by this Tribunal does not preclude the company from any proceedings by statutory authorities for any contraventions of law, if any,” the Bench added.

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By approving the capital reduction, the NCLT Kochi Bench reiterated that such restructuring, when commercially justified and free from adverse impact on stakeholders, is permissible under Section 66 of the Companies Act, 2013. The decision underscores the Tribunal’s pragmatic approach in permitting companies to realign their capital structure in line with changed business realities.

Appearance

For the Petitioner: Mr. Nebil Nizar, Adv.,

For the Respondent: Authorized representative of ROC.

For the Income Tax Department: Adv Cyriac Tom, Adv.

For the Enforcement Directorate: Adv. Govindu P. Renukadevi, Adv.

For the Directorate General of Civil Aviation: Adv. M.A. Shaji, Adv.

Cause Title: M/s. Cochin Aircraft Maintenance Company Limited v. Registrar of Companies, Kerala

Case No: CP(C/Act)/18/KOB/2025

Coram: Shri Vinay Goel (Judicial Member), Smt. Madhu Sinha (Technical Member)