1968 (8) TMI 82 - HC - Companies Law

Memorandum of association Special resolution and confirmation by CLB required for alteration of TO, Contents and manner of service of notice and persons on whom it is to be served

Issues Involved:
1. Validity of the notice of the extraordinary general meeting.
2. Adequacy of the explanatory statement.
3. Authority to issue the notice.
4. Allegations of mala fide intentions and mismanagement.

Issue-wise Detailed Analysis:

1. Validity of the notice of the extraordinary general meeting:

The plaintiff contested the validity of the notice dated March 30, 1968, calling for an extraordinary general meeting on April 29, 1968. The plaintiff argued that the notice was illegal and ultra vires the Companies Act and the memorandum of articles because it was signed by a director rather than the managing agents. The court held that it was not necessary on an interlocutory application to decide whether a company can amalgamate without specific power in the memorandum. The court noted that the company was seeking a bare power to amalgamate and would later make the necessary application for actual amalgamation. Thus, the notice was deemed valid for the purpose of seeking the power to amalgamate.

2. Adequacy of the explanatory statement:

The plaintiff alleged that the explanatory statement annexed to the notice was misleading and did not furnish the requisite information for consideration of the resolution. The court referred to previous decisions, including Henderson v. Bank of Australasia and East India Commercial Co. (P.) Ltd. v. Raymon Engineering Works Ltd., to determine that the adequacy of a notice must be considered in the circumstances of each case. The court found that the explanatory statement was sufficient for the resolution seeking a bare power to amalgamate. Detailed financial and commercial advisability would be required when the actual scheme of amalgamation was proposed.

3. Authority to issue the notice:

The plaintiff contended that the notice was not signed by the managing agents but by a member of the board, which was against the articles of the company. The court found that the board had the power to issue the notice under Articles 66 and 67 of the company, which empowered the board to call an extraordinary general meeting. The managing agents were subject to the superintendence, control, and directions of the board, as per Article 137 and section 368 of the Companies Act. The court concluded that the notice was issued with the authority of the board and any irregularity could be cured, referencing Browne v. La Trinidad.

4. Allegations of mala fide intentions and mismanagement:

The plaintiff alleged that the company acted mala fide and mismanaged funds amounting to Rs. 23,10,000. The court noted that there were no specific allegations in the petition about the depression of profits or that the amalgamation was for an ulterior purpose. There were no averments that the scheme was mala fide or that the directors made incorrect statements. The court emphasized that allegations of mismanagement might be relevant in other proceedings but were not pertinent at this stage. The statutory safeguards in sections 17, 391, and 394 of the Companies Act provided sufficient protection, and the court would investigate the matters during the actual application for amalgamation.

Conclusion:

The court affirmed the judgment of the learned judge and dismissed the appeal. The company was only seeking a bare power to amalgamate, and there was an application pending for alteration of the memorandum. The shareholders and other affected persons would have sufficient opportunity to challenge the actual scheme of amalgamation when proposed. The court found no necessity for an injunction and vacated the interim order. The appeal was dismissed with costs in the cause, certified for two counsel.

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