1934 (2) TMI 17 - HC - Companies Law

Memorandum of association Special resolution and confirmation by CLB required for alteration of

Summary

Issues:
1. Alteration of memorandum of association of a Nidhi company.
2. Approval of alteration by the Court.
3. Legality of conducting prize chits by the Nidhi.
4. Determination of the nature of the proposed prize chit.
5. Classification of the proposed prize chit as a lottery.
6. Dismissal of the appeal due to the proposed prize chit being deemed a lottery.
7. Extension of time for filing documents with the Registrar of Joint Stock Companies.

Analysis:

1. The judgment deals with an appeal regarding the alteration of Clause 3 of the memorandum of association of a Nidhi company. The alteration involved removing parts related to conducting various kinds of trade and prize chits. Stone, J., approved the alteration subject to certain deletions.

2. The Court examined the proposed alteration, focusing on the conditions of the prize chit. The conditions outlined the eligibility, subscription terms, prize distribution, and subscriber benefits. The Court noted the unequal advantages received by subscribers based on chance, emphasizing the nature of the proposed prize chit.

3. The Court delved into the legal classification of the proposed prize chit. It referenced previous judgments and definitions of lotteries and wagering contracts to determine the nature of the scheme. The Court concluded that the proposed prize chit constituted a lottery based on the unequal distribution of prizes by chance among subscribers.

4. Due to the proposed prize chit being classified as a lottery, the Court dismissed the appeal. The judgment highlighted that sanctioning a proposal to operate such a prize chit was not permissible under the law. Therefore, the appeal was dismissed based on the nature of the proposed scheme.

5. Additionally, the Court addressed a request to extend the time for filing documents with the Registrar of Joint Stock Companies. The Court invoked its power under section 15 of the Indian Companies Act to grant an extension of three months for filing the necessary documents, considering the circumstances of the case.

6. The judgment was a collective decision by Beasley and Butler, JJ., with the Chief Justice delivering the main judgment. The legal analysis provided a detailed examination of the proposed alteration, the nature of the prize chit, and the ultimate classification of the scheme as a lottery, leading to the dismissal of the appeal.