1934 (12) TMI 11 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the High Court to revise orders passed by the District Court under the Indian Companies Act.
2. Validity of the resolutions passed by the company for the consolidation of shares.
3. Whether the resolutions of August 2 and October 11 should be read together.
4. Whether the resolutions affected the rights and privileges attached to different classes of shares.
5. Whether the District Court exercised its jurisdiction with material irregularity.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the High Court to revise orders passed by the District Court under the Indian Companies Act:
The preliminary objection raised was that the High Court has no jurisdiction to revise orders passed by a District Court under the Indian Companies Act. It was argued that the Indian Companies Act is a self-contained Act and does not confer revisional jurisdiction on the High Court. The High Court held that there is nothing in the Companies Act either expressly or impliedly ousting the revisional jurisdiction of the High Court. The District Court of Cawnpore, while exercising jurisdiction under the Companies Act, is still subordinate to the High Court within the meaning of Section 115, Civil Procedure Code. Therefore, the High Court has jurisdiction to entertain the application in revision.

2. Validity of the resolutions passed by the company for the consolidation of shares:
The company passed resolutions on August 2 and October 11, 1933, to consolidate deferred shares and put them on the same footing as ordinary shares. The District Court held that these resolutions must be read together and treated as a single scheme. However, the High Court disagreed, holding that the resolution of August 2 was a valid resolution and did not require the sanction of the Court for its validity. The resolution of October 11 could be considered separately and did not interfere with the special privileges attached to either class of shares.

3. Whether the resolutions of August 2 and October 11 should be read together:
The District Court held that the resolutions of August 2 and October 11 must be read together and considered as a whole. The High Court, however, found that the resolution of August 2, which consolidated the deferred shares and gave them the same rights as ordinary shares, was valid and did not require the sanction of the Court. Therefore, the resolution of October 11, which proposed to consolidate the ordinary and deferred shares, could be considered separately.

4. Whether the resolutions affected the rights and privileges attached to different classes of shares:
The High Court noted that the rights and privileges of the ordinary and deferred shareholders were conditionally stated in the memorandum and could be modified or dealt with in the manner provided by the Articles of Association. The resolution of August 2 was in strict conformity with these provisions and did not amount to an alteration of the memorandum. The resolution of October 11 did not interfere with any special privileges as the rights and privileges of the ordinary and deferred shares had already been equalized by the August resolution.

5. Whether the District Court exercised its jurisdiction with material irregularity:
The High Court found that the District Court exercised its jurisdiction with material irregularity by not judicially considering the resolution of October 11 on its own merits and by wrongly assuming that it could not be considered apart from the August resolution. The District Court deprived itself of the jurisdiction to confirm the October resolution by taking an erroneous view of the law regarding the validity of the August resolution, which was a matter wholly foreign to the proceedings before it.

Conclusion:
The High Court overruled the preliminary objection regarding its jurisdiction and held that the District Court of Cawnpore is subordinate to the High Court. On the merits, the High Court found that the District Court exercised its jurisdiction with material irregularity and erroneously rejected the company's application. The High Court set aside the order of the District Court and granted the application filed by the company, directing the parties to bear their own costs.