1932 (11) TMI 10 - HC - Companies Law

General provisions with respect to memorandum and articles - Effect of memorandum and articles

Summary

Issues:
1. Power of Assistant Registrar to decline registration of memorandum or articles of a public company.
2. Legality of the scheme proposed by the company under section 294-A of the Indian Penal Code.

Analysis:

Issue 1: The judgment addresses the question of whether the Assistant Registrar of Joint Stock Companies has the authority to refuse the registration of any part of a memorandum or articles of a public company. The court notes that while certain sections may appear to mandate registration, the Registrar does possess discretion in refusing to register a memorandum. The judgment emphasizes that the Registrar fulfills a quasi-judicial function and can exercise this discretion to prevent companies with illegal objectives from obtaining registration. The court argues that if the Registrar can refuse to register a memorandum, it logically follows that he can also refuse to register articles or alterations to articles. The judgment concludes that the Registrar was within his rights to decline the registration of articles in the case at hand, supporting the exercise of discretion in such matters.

Issue 2: The judgment delves into the legality of the scheme proposed by the company under section 294-A of the Indian Penal Code. The court compares the present scheme with a previous case involving a similar scheme that was deemed to constitute a lottery and thus illegal. The court finds that the current scheme, although offering a less valuable prize than the previous one, still falls afoul of section 294-A. The judgment highlights that the scheme involves offering a loan as a benefit through a draw, which could potentially mislead individuals seeking to borrow money. The court opines that the scheme's reliance on a draw to select recipients of the loan indicates an attempt to provide an attractive benefit beyond regular business practices. Ultimately, the court determines that the scheme violates section 294-A and upholds the Assistant Registrar's decision to refuse registration of the articles. The judgment dismisses the motion and awards costs to the respondent.

In conclusion, the judgment clarifies the Registrar's discretionary powers in refusing registration and applies the provisions of the Indian Penal Code to assess the legality of the company's proposed scheme. The decision underscores the importance of preventing potentially illegal activities at the registration stage to protect the public interest and uphold legal standards in company operations.