1965 (11) TMI 78 - HC - Companies Law

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

Summary

Issues Involved:
1. Confirmation of alteration to the memorandum of association under Section 17 of the Companies Act, 1956.
2. Adequacy of combining the new business with the existing business.
3. Interests of members and creditors.
4. Prematurity of the petition without an industrial license.

Issue-Wise Detailed Analysis:

1. Confirmation of alteration to the memorandum of association under Section 17 of the Companies Act, 1956:
The company sought to alter its memorandum of association to include the manufacture of natural rubber, synthetic rubber, and reclaim rubber. The alteration was unanimously passed in an extraordinary general meeting. Under Section 17, such an alteration requires court confirmation. The court noted that alterations should enable the company to carry on business that can be conveniently or advantageously combined with the existing business.

2. Adequacy of combining the new business with the existing business:
The court emphasized that the new business must not be detrimental to the existing business. The alteration must be one that can be combined with the existing business under current circumstances. The court referenced previous judgments, highlighting that the new business should not replace or be inconsistent with the existing business. The court found that the proposed rubber business could be conveniently and advantageously combined with the company's existing business, given the company's resources, business experience, and market demand for rubber products.

3. Interests of members and creditors:
The court considered the rights and interests of the company's members and creditors. The unanimous resolution and lack of opposition from shareholders and major creditors indicated no adverse impact on their interests. The National Industrial Development Corporation also approved the alteration. The court concluded that the alteration was not adverse to the rights and interests of the members and creditors.

4. Prematurity of the petition without an industrial license:
The Registrar of Companies argued that the petition was premature as the company had not yet obtained an industrial license. The court disagreed, stating that it was desirable to alter the memorandum of association before obtaining the license. The court found no grounds to consider the petition premature.

Conclusion:
The court allowed the petition and confirmed the proposed alteration to the memorandum of association. The alteration was found to be within the scope of Section 17(1)(d) of the Companies Act, 1956, and was not detrimental to the existing business or the interests of the members and creditors.