1974 (6) TMI 48 - HC - Companies Law

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

Summary

Issues:
1. Confirmation of alterations to the memorandum of a company under section 17 of the Companies Act, 1956.
2. Whether the proposed alterations in the objects clause of the memorandum of association are permissible.
3. Whether the new business activities intended by the petitioner-company are compatible with its existing business and legal provisions of the Companies Act.

Analysis:
1. The petitioner-company sought confirmation of alterations to its memorandum of association under section 17 of the Companies Act, 1956. The company was initially registered in 1913 under a different name and had subsequently undergone changes, including the sale of its original undertaking in 1972. The company approached the High Court for approval of alterations to the objects clause of its memorandum, as approved by a special resolution at an extraordinary general meeting in 1974.

2. The proposed alterations included a shift in the company's main business activity to the exhibition of films and related entertainment ventures. The Registrar of Companies raised objections, arguing that the new business was entirely different from the company's existing activities. However, the court held that the new business could be conveniently combined with the company's current operations, especially considering the substantial funds received from the sale of the original undertaking. The court emphasized that the new business did not undermine or alter the existing business foundation of the company.

3. The Registrar's concern about potential revenue loss to the state due to the alterations was dismissed by the court. It was clarified that the company had the legal right to alter its objects clause to pursue new business avenues, provided it was not in violation of any other provisions of the Companies Act. The court found no legal impediments to granting approval for the proposed alterations, as the new business activities were deemed compatible and advantageous for the company. Ultimately, the court allowed the petition and sanctioned the proposed alterations to the objects clause, except for certain deleted sub-paras, enabling the company to proceed with its intended business diversification.