1958 (8) TMI 28 - HC - Companies Law

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

Summary

Issues:
1. Confirmation of alteration of memorandum of association under section 17(2) of the Indian Companies Act.
2. Locus standi of objector to object to the confirmation of the resolutions.
3. Applicability of section 45 of the Banking Companies Act to the resolutions passed by the shareholders.

Analysis:

1. The petition was filed by a company seeking court's confirmation of the alteration of its memorandum of association through two special resolutions passed unanimously at an extraordinary general meeting. The resolutions aimed to alter the objects clause and substitute the word 'company' for 'bank' in the memorandum. The company provided reasons for the alteration, including discontinuing banking operations due to regulatory issues and seeking to engage in other lines of business. The Central Government also supported the company's proposed name change. The Registrar did not oppose the petition, and three creditors assented to the changes. The court considered the sufficiency of notice to debenture holders and other affected parties as required by section 17(3) of the Companies Act.

2. An objector, claiming to be a creditor, objected to the resolutions, alleging unpaid amounts due from the company. The company disputed the claims, arguing that the objector had no locus standi to object to the resolutions under section 17(2) of the Companies Act. The objector contended that his status as a former employee entitled him to object based on the company's admission of a smaller debt in a previous proceeding. The court assessed the objector's standing and the company's liability, emphasizing the need for security if the claims were valid.

3. The objector's counsel argued that section 45 of the Banking Companies Act controlled the company's ability to seek confirmation under section 17(2) of the Companies Act, requiring certification by the Reserve Bank for resolutions affecting banking operations. The company's counsel countered that section 45 applied to compromises or arrangements, not the alterations proposed by the resolutions. The court acknowledged the control of section 45 but questioned whether the resolutions constituted a compromise or arrangement. Ultimately, the court ruled that the creditor could not dictate the company's business decisions and that the shareholders' approval of the alterations was sufficient. The company was directed to provide security for the disputed amount, and upon compliance, the resolutions were confirmed, allowing the necessary changes to the memorandum of association.