1963 (9) TMI 32 - HC - Companies Law

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

Summary

Issues:
- Application for confirmation of an amendment in the objects clause of the memorandum of association of a private limited company.
- Opposition by the Registrar of Companies based on various grounds.
- Whether the proposed new business of manufacturing steel goods can be conveniently combined with the existing business.
- Scope of the proposed amendment in the objects clause.
- Requirement for separate accounts and financial statements for the new business.
- Deletion of certain items in the proposed amendment.
- Confirmation and conditions imposed on the proposed amendment.

Analysis:
The judgment deals with an application by a private limited company to amend its memorandum of association to include the business of manufacturing steel goods. The Registrar of Companies opposes the petition, arguing that the new business is a significant departure from the company's existing activities. However, the court relies on precedent, emphasizing that the key consideration is whether the new business can be combined advantageously with the existing operations without being destructive or inconsistent. The court finds no reason to believe that adding steel manufacturing would harm the current businesses of sugar and oil production.

Regarding the scope of the proposed amendment, the Registrar suggests limiting it to the specific type of steel products for which the company has a license. The court disagrees, deeming this approach too restrictive and technical. It asserts that the company should be allowed to expand its steel manufacturing activities without repeated applications for each new product category. The court does, however, find the proposed amendment overly broad in mentioning brass founders and metal workers, deciding to delete these terms for clarity.

The Registrar recommends maintaining separate accounts and financial statements for the new business to assess its success independently. The court agrees to require a separate profit and loss account for the new venture for five years but declines to mandate a separate balance sheet due to practical difficulties in asset allocation. Additionally, the Registrar's suggestion to delete certain interpretation-related clauses from the existing articles of association is deemed beyond the scope of the current proceedings and is not implemented.

In conclusion, the court confirms the proposed amendment to the memorandum of association, subject to the deletion of specific terms and the condition of preparing a separate profit and loss account for the new business for five years. The judgment balances the company's expansion plans with the need for financial transparency and clarity in its operations.