COMPANY IS THE BEST JUDGE TO DECIDE WHERE TO LOCATE ITS REGISTERED OFFICE FOR EFFICIENT RUNNING OF BUSINESS

[Mr. M. GOVINDARAJAN]

By means of Sec. 17A of the Companies Act, 1956 a company can change its registered office from one place to another after getting the confirmation of the Regional Director. The company shall, in this regard, make an application in the prescribed form to the Regional Director for the confirmation. The confirmation granted by the Regional Director shall be communicated to the company within four weeks from the date of receipt of application for such change. The company shall file, with Registrar a certified copy of the confirmation by the Regional Director for change of its registered office within two months from the date of confirmation, together with a printed copy of the Memorandum as altered and the Registrar shall register the same and certify the registration under his hand within one month from the date of receipt of such document. The certificate shall be conclusive evidence that all the requirements of the Act with respect to the alteration and confirmation have been completed with and henceforth the memorandum as altered shall be the memorandum of the company.

The company can change its registered office from one state to another state within India. The issue taken for discussion in this case whether any objections can be raised for such change with reference to decided case law 'In Re Kwality Ice Creams (India) Private Limited' - (2010) 98 CLA 218 (CLB).

In the above said case the petitioner company has presented this petition under Sec. 17 of the Companies Act, 1956 for confirmation of the alternation to the situation clause in the memorandum of association of the company for shifting of the registered office of the company from the State of West Bengal to the National Capital Territory of Delhi. The said shift was approved by a special resolution passed in accordance with Sec. 189 of the Act, at its annual general meeting held on 24.09.2004.

Initially, Director, Economic Offences Investigation Cell, Finance Department, Government of West Bengal raised certain queries in respect of the company for non payment of sales tax/profession tax and non payment of compensation to the employees for transferring the Company to Hindustan Lever Limited. The petitioner explained all the queries raised to which the Director of above said Cell did not response, despite further notice issued by the Bench.

Two employees of the company have filed objections. Their main contention is that shifting of registered office would prejudicially affect the objectors as the court proceedings initiated by them against the company are pending. The company also filed its counter replies refuting all the allegations raised therein. In the course of hearing the petitioner put forth the following submissions:

The Bench may allow the petition confirming the proposed transfer of registered office from the State of West Bengal to the National Capital Territory of Delhi through alteration of clause II of the memorandum of association of the company;

It is necessary of shifting of registered office mainly on the ground that the whole business of the company has been transferred to Hindustan Lever Limited  as a going concern;

It would be beneficial to the members if the registered office is shifted to Delhi as all the members and directors are Delhi based and for better administrative control and convenience, the shifting of registered office to Delhi is necessary.

The objectors are neither shareholders nor creditors of the company and the objections are baseless, frivolous, motivated and un-sustainable in law and on facts;

The objectors are being ex-employees of the company were not entitled to voice their grievances before this Bench which is not the proper forum to entertain and adjudicate such wrongful claims of the employees in the instant proceedings under Sec. 17 of the Act;

The company is defending the court cases filed by the objectors and pending litigation is not a plausible ground which stands in the way of confirming the alteration of situation clause of the memorandum of association of the company as maintained by the members of the company in the AGM.

The Bench noted that the special resolution has been passed unanimously by the members of the company at the AGM. Registrar of Companies, West Bengal has no objection to the proposed alteration and confirmed that the special resolution has been taken on record. The Bench held that while the decision to shift the registered office of the company to another State, being a domestic matter, rests with shareholders, the company is the best judge of how to run its business more economically or conveniently or where to locate the registered office for efficient running of the business, as has been filed in various reported decisions of the court. It is rather pertinent to note that neither any member nor any creditor of the company has raised or filed any objection to the company's proposal.

The pending court cases is not a valid ground to stall the shifting of the registered office of the company through alteration of situation clause of the memorandum of association of the company, as mandated by the members of the company. It is the corporate decision and has no connection with the pending litigation initiated by the said objectors before the Court. The Bench further observed that the shifting of the company will not affect the proceedings of the court cases adversely.

It is an admitted position, the Bench held, that there is no restraint order from any Court against the proposed alteration of situation clause of the memorandum of association. Neither the Bench has been restrained by any order of the Court from proceeding with the petition under Sec. 17 nor any thing stands in the way of passing an order by this Bench on the instant petition. The Bench finds no substance in the objections raised by the ex-employees of the company and hence the objections do not survive.

The petitioner has duly complied with the provisions of Regulation 36 of the Company Law Board Regulations, 1991 and that no objection has been received from anyone in this regard. Although a copy of the petition is served on the State Government by the petitioner, neither any one appeared at the time of hearing nor any specific objection has been filed by them.

Therefore the Bench is satisfied that having regard to the rights and interests of the members of the petitioner company as well as the rights and interests of the creditors of the petitioner company it is just and proper that the petition should be allowed subject to the condition that the interest of none of the employees at the registered office of the company shall be prejudiced by retrenchment or otherwise.