1965 (4) TMI 77 - HC - Companies Law

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

Issues Involved:
1. Confirmation of the alterations of the memorandum of association of the company.
2. Whether the company's investment business is independent or ancillary.
3. Whether the proposed new business objects can be conveniently and advantageously combined with the existing business.
4. The financial position and liabilities of the company.
5. The appropriateness of the company's name given its cessation of insurance business.

Issue-wise Detailed Analysis:

1. Confirmation of the alterations of the memorandum of association of the company:
The petition under section 17 of the Companies Act, 1956, was filed by the New Asiatic Insurance Company Limited for confirmation of alterations to its memorandum of association. The alterations were proposed to change the company's objects, including the addition of new business activities such as engineering, metallurgy, textiles, and import/export, among others. The court noted that the special resolution for these alterations was passed unanimously at an extraordinary general meeting.

2. Whether the company's investment business is independent or ancillary:
The petitioner argued that the investment business carried on by the company was independent and not ancillary to its main objects. The court referred to the case of Standard General Assurance Co. Ltd., where it was held that the investment business was independent and not merely ancillary to the insurance business. The court accepted this view, noting that the company's investment activities, which included dividends, interest, and profits from the sale of investments, were substantial and constituted an independent business.

3. Whether the proposed new business objects can be conveniently and advantageously combined with the existing business:
The court considered whether the new business activities proposed could be conveniently and advantageously combined with the existing investment business. It was emphasized that the new business should not be destructive of or inconsistent with the existing business. The court referred to several precedents, including Ambala Electric Supply Co. Ltd. and Modi Spinning and Weaving Mills Co. Ltd., which supported the notion that new business activities could be added if they were capable of being conveniently and advantageously combined with the existing business. The court concluded that the new business activities proposed by the company were not inconsistent with or destructive of the existing investment business.

4. The financial position and liabilities of the company:
The court reviewed the financial position of the company, noting that its assets exceeded liabilities by over Rs. 39 lakhs and that satisfactory arrangements had been made for settling all pending liabilities. The company's financial position was deemed strong, and it had sufficient working capital to undertake new business activities.

5. The appropriateness of the company's name given its cessation of insurance business:
The court noted that the company had ceased to carry on insurance business and that the use of the word "insurance" in its name was incongruous. The petitioner had already applied to the Central Government for a change of name. The court directed that the order confirming the alterations would not take effect until the company's name was changed.

Conclusion:
The court allowed the petition to the extent of confirming the alterations related to the business of engineers, metallurgists, textiles, and import/export. The alterations related to other business activities were not accepted as there was no prospect of these being started in the near future. The court also directed that the order confirming the alterations would not take effect until the company's name was changed. The parties were left to bear their own costs.

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