1932 (10) TMI 11 - DSC - Companies Law

Issues Involved:
1. Interpretation of Section 5, sub-section 1 of the Companies Act, 1929.
2. Whether the proposed alterations to the memorandum of association are "with respect to the objects of the company."
3. Determination of whether the alterations fundamentally alter the character of the company.
4. Jurisdiction and power of the Court to sanction the proposed alterations.

Issue-Wise Detailed Analysis:

1. Interpretation of Section 5, sub-section 1 of the Companies Act, 1929:
The judgment primarily revolves around the interpretation of Section 5, sub-section 1 of the Companies Act, 1929, which allows a company to alter its memorandum by special resolution to enable it to carry on its business more economically or efficiently or to attain its main purpose by new or improved means. The Court emphasized that the intention of the Legislature was to prevent easy alterations to the memorandum but also to allow necessary changes for the efficient and economical carrying on of the company's main objects.

2. Whether the proposed alterations to the memorandum of association are "with respect to the objects of the company":
The Court examined whether the proposed alterations, which included removing a restriction in clause 4 of the memorandum and allowing remuneration to members of the council or governing body, were "with respect to the objects of the company." The Court noted that the alterations were intended to enable the company to carry on its business more efficiently, particularly in light of its significant growth in membership and commercial operations. The alterations aimed to address inefficiencies by allowing reasonable remuneration to those managing the company's affairs, which was deemed necessary for its effective functioning.

3. Determination of whether the alterations fundamentally alter the character of the company:
The Court disagreed with the lower court's view that the alterations fundamentally altered the company's objects. The Court argued that the main object of the company, which was the encouragement of poultry husbandry, remained unchanged. The alterations were seen as ancillary to the main object, facilitating its attainment by providing for the remuneration of those managing the company's affairs. The Court referenced the case of Incorporated Glasgow Dental Hospital v. Lord Advocate, noting that alterations aimed at better attaining the company's real object were permissible.

4. Jurisdiction and power of the Court to sanction the proposed alterations:
The Court concluded that it had the jurisdiction to sanction the proposed alterations under Section 5, sub-section 1 of the Companies Act, 1929. The Court emphasized that the alterations were desirable and put forward in good faith, aiming to improve the efficiency of the company's operations without altering its main object. The Court noted that the alterations were closely connected with the objects of the association and fell within the scope of the section, allowing the Court to sanction them.

Conclusion:
The appeal was allowed, and the proposed alterations to the memorandum of association were sanctioned. The Court found that the alterations were necessary for the efficient carrying on of the company's main objects and fell within the scope of Section 5, sub-section 1 of the Companies Act, 1929. The judgment highlighted the importance of interpreting the section in a manner that allows for necessary changes to improve the company's operations while maintaining its main objects.

← Previous Next →