1970 (6) TMI 26 - HC - Companies Law

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

Issues Involved:
1. Whether the proposed alterations in the memorandum of association fall under clauses (a) and (d) of section 17(1) of the Companies Act, 1956.
2. Whether the company is carrying on any business at the relevant date.
3. Whether the court has the jurisdiction to sanction the proposed alterations.
4. Whether Mohamed Kayamuddin Gulamnabi Uraizee can contest the petition.

Issue-wise Detailed Analysis:

1. Whether the proposed alterations in the memorandum of association fall under clauses (a) and (d) of section 17(1) of the Companies Act, 1956:
The court examined whether the proposed alterations by the company fall within clauses (a) and (d) of section 17(1) of the Companies Act, 1956. Clause (a) allows alterations to carry on business more economically or efficiently, while clause (d) permits alterations to carry on some business which can be conveniently or advantageously combined with the existing business. The court emphasized that the company must be doing some business at the relevant date to invoke these clauses. The court concluded that since the company had ceased its primary business of manufacturing cotton yarn and cloth in 1941 and had not engaged in any other business, the proposed alterations did not fall under clauses (a) and (d) of section 17(1).

2. Whether the company is carrying on any business at the relevant date:
The court scrutinized whether the company was carrying on any business since 1941. The company had been leasing out land and distributing dividends from the income derived therefrom. The court determined that leasing out land did not constitute carrying on business in the ordinary sense of the term. The court cited precedents, including In re Eastern Woollen Mills Ltd., to support the view that merely leasing out property does not equate to carrying on business. Consequently, the court found that the company was not carrying on any business at the relevant date.

3. Whether the court has the jurisdiction to sanction the proposed alterations:
The court highlighted that the power to alter the objects clause of the memorandum of association is not unfettered and must fall within the clauses of section 17(1). Since the company was not carrying on any business, the court lacked jurisdiction to sanction the proposed alterations. The court cited In re Drages Ltd., where it was held that a company must be carrying on some business at the time of the application for alteration to be sanctioned. The court concluded that it had no jurisdiction to confirm the proposed alterations as the company was not carrying on any business.

4. Whether Mohamed Kayamuddin Gulamnabi Uraizee can contest the petition:
The court considered whether Mohamed Kayamuddin Gulamnabi Uraizee, claiming to be the mutawalli of a public trust, could contest the petition. The court noted that section 17 of the Companies Act provides that members, creditors, and debenture-holders are entitled to contest the petition. However, the court did not find it necessary to decide whether a landlord or other interested parties could contest the petition, as the petition was being dismissed on other grounds. The court did not take into consideration the contentions raised in Uraizee's affidavit.

Conclusion:
The court dismissed the petition, concluding that the company was not carrying on any business and, therefore, could not alter its memorandum of association to start new business activities. The court also highlighted the lack of commercial judgment and the futility of the proposed alterations. The petitioner was ordered to pay costs to the Registrar of Companies, while no order was made regarding the costs of the landlord.

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