1960 (11) TMI 45 - HC - Companies Law

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

Summary

Issues:
1. Application under section 17 of the Companies Act for confirmation of alteration of memorandum of association to enable contributions to political parties.
2. Opposition by Registrar of Companies based on section 17(1)(a) prohibiting enlargement of company objects.
3. Comparison with similar alterations permitted by Calcutta and Bombay High Courts.
4. Consideration of conditions imposed by other courts for disclosure of political contributions in balance sheet and profit and loss account.
5. Argument regarding discriminatory nature of imposing conditions on existing companies while new companies can freely make contributions without disclosure.
6. Decision on confirming special resolution without imposing any conditions.

Analysis:
The High Court of Rajasthan heard an application by a company seeking confirmation of the alteration of its memorandum of association to allow contributions to political parties under section 17 of the Companies Act. The Registrar of Companies opposed the application, citing section 17(1)(a) which prohibits the enlargement of company objects. The court noted a similar alteration permitted by the Calcutta High Court in a previous case, emphasizing the importance of a healthy relationship between the government and industry for business efficiency in the modern age. The court highlighted the conditions imposed in the Calcutta case, including the requirement to disclose contributions in the balance sheet and profit and loss account annually.

In another case, the Jayantilal v. Tata Iron and Steel Co., similar alterations were confirmed with conditions such as clear disclosure of contributions in financial statements and publication in leading newspapers. The petitioner argued that new companies could freely provide for contributions without disclosure, questioning the necessity of imposing such conditions on existing companies. The court referenced a Madras High Court case where no conditions were imposed on disclosure, leading to a discussion on the discriminatory nature of imposing conditions on existing companies.

Ultimately, the court decided to confirm the special resolution without imposing any conditions, reasoning that imposing such conditions would create a discriminatory environment as new companies could make contributions without disclosure. The court highlighted that contributions to political parties are lawful and should be decided by the shareholders, with the Registrar having the authority under section 234 to request necessary information.