1972 (11) TMI 31 - HC - Companies Law

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

Summary

Issues:
Confirmation of a special resolution altering the registered office of a company from one state to another.

Analysis:
The judgment pertains to a petition for confirmation of a special resolution passed by a company, altering its memorandum of association to transfer the registered office from Maharashtra to Goa, Daman, and Diu. The petition was opposed by shareholders, including F.S. Wadia, who argued that the resolution was not in the company's best interests. The company's principal business is the manufacture and sale of agricultural chemicals and fertilizers. The resolution was proposed due to the centralization of company activities at Goa, where its factory is located, and its proximity to the main marketing area. Shareholders, including those residing in Bombay, opposed the resolution, expressing concerns about attending future general meetings if the office was shifted to Goa.

The opposing shareholders highlighted the distribution of shares among residents abroad and in India, with a significant portion held by foreign entities. They argued that the location of the registered office in India mattered to local shareholders who invested based on the initial prospectus showing the office in Bombay. The opposing shareholders contended that investors generally prefer companies near their residence. The court was referred to relevant sections of the Companies Act, emphasizing the need to consider the rights and interests of shareholders and creditors in such cases.

The judge analyzed the arguments presented, including references to past judgments. The judge differentiated between classes of shares based on rights attached to them and the classification of shareholders by their residence. The judge emphasized that the rights and interests of shareholders as a whole are protected by the requirement of a special resolution passed by a significant majority. The judge also referred to a similar case where the court confirmed the shareholders' decision, stating that the court's role is not to question the business judgment of shareholders unless formalities and safeguards are not complied with.

Ultimately, the judge granted the petition for confirmation of the resolution, considering the majority shareholder's decision to shift the registered office to Goa. The judge highlighted that the interests of absent shareholders and creditors were considered, and objections were addressed, concluding that the opposing shareholders' contentions lacked substance. The judge did not impose additional conditions on the confirmation of the resolution and awarded costs to the Registrar of Companies but made no order regarding costs for the opposing shareholders.