1967 (9) TMI 81 - HC - Companies Law

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

Issues Involved:
1. Confirmation of alteration of the memorandum of association.
2. Validity of reasons for transferring the registered office.
3. State's right to oppose the application.
4. Impact on the State's economy and revenue.
5. Interests of the public.

Issue-Wise Detailed Analysis:

1. Confirmation of Alteration of the Memorandum of Association:
The appeal challenges the dismissal of an application under section 17 of the Companies Act for confirmation of alteration of the memorandum of association by special resolutions to transfer the registered office from West Bengal to Maharashtra. The court ultimately confirmed the alteration, stating that the reasons provided by the shareholders were cogent and commercially sound.

2. Validity of Reasons for Transferring the Registered Office:
The petition listed several reasons for the transfer, including:
- The head office is in Bombay, and aligning the registered office would enhance administrative efficiency.
- Proximity to the registered offices of foreign film companies in Bombay would aid in business competition.
- Better business expansion opportunities in Bombay due to easier contact with foreign film industry visitors.
- The transfer would benefit the shareholders.

The court found these reasons sufficient, noting that the shareholders' decision, expressed through special resolutions, was made after mature deliberation. The court emphasized that not every reason needs to be justified by evidence, as future business operations are inherently speculative.

3. State's Right to Oppose the Application:
The State opposed the application, arguing insufficient cause for the transfer. However, the court held that the State does not have a statutory right to control the company's affairs or to challenge the shareholders' reasons for the transfer. The court stated, "It is for the members of the company and not for the State to decide whether the registered office of the company should be transferred."

4. Impact on the State's Economy and Revenue:
The State argued that the transfer would negatively impact its economy and revenue. The court dismissed this concern, stating:
- The location of the registered office does not significantly affect employment opportunities.
- Sales tax and income tax revenues are not dependent on the location of the registered office.
- The court found the State's concerns speculative and not a relevant consideration.

The court also noted that the country's economic interests as a whole should be considered, not just those of a particular State.

5. Interests of the Public:
The court considered whether the interests of the public should factor into the decision. It referred to precedents indicating that the public interest to be protected involves potential future shareholders and creditors, not the revenue interests of the State. The court concluded that the interests of the public, as interpreted in relevant case law, do not include the economic interests of the State.

Conclusion:
The court set aside the learned judge's order and confirmed the alteration of the memorandum of association. The appellant was ordered to pay the costs of the Registrar of Joint Stock Companies, with no additional order as to costs. The judgment underscores the autonomy of shareholders in making business decisions and limits the State's role in opposing such corporate decisions based on speculative economic impacts.

← Previous Next →