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TMI Blog1959 (7) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ns follow the same pattern and raise common questions of law and fact and could, therefore, be disposed of in one judgment. A few facts, which are material for appreciating the issues involved in these petitions, may be briefly set out. Express Newspapers Private Limited, otherwise termed as the Express Group, has been publishing several dailies and weeklies amongst them being the Indian Express, Dinamani, Andhra Prabha and Andhra Prabha Illustrated Weekly. We are now concerned only with Andhra Prabha and Andhra Prabha Illustrated Weekly. The Express Group is supposed to be the biggest chain in the newspaper world. This concern had in its employment a number of working journalists, proof readers, members of the staff and workers. Some of the newspapers published by this concern have a wide circulation and, according to the petitioners, it was a very flourishing industry earning enormous profits, while the respondents have it that the company was incurring huge losses for some years. There are several other newspapers similarly situated in India. For some years past working journalists were agitating for the creation of a machinery to have their salaries, allowances etc ., enqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one or two provisions, the Supreme Court set aside the decision of the Wage Board as illegal and void. One of the reasons adduced in support of the conclusion of their Lordships was that the Wage Board, in fixing the rates of wages, had not taken into account the capacity of the industry to pay. After this, the Government made an Ordinance, subsequently replaced by Act XXIX of 1958, which was in substance on the same lines as Act XLV of 1955 and which made no departure in regard to the main policy embodied in the earlier Act. By virtue of the authority conferred by Act XXIX of 1958, the Government of India constituted a Wage Committee in June, 1958, to fix the rates of wages etc . This Committee made tentative proposals in December, 1958, which were circulated to all newspaper proprietors including those of the Express Group. The Committee also classified the news paper industry into various Classes A to E according to their gross receipt. In this classification, the Andhra Prabha Limited, which was treated as a unit, was assigned place in Group C. As a result of the recommendations of this Committee, the Express Newspapers Limited had to pay a sum of about two lakhs of rupees a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e if the following fresh demands formulated by them were not complied with forthwith : "1.Payment of gratuity at the rate of one month's wages for every completed year of service or part thereof in excess of six months to every employee of Express Newspapers who was retired subsequent to November 1, 1958. 2.Reinstatement of the nine women clerks whose services were terminated as a measure of punishment following their participation in the protest demonstration conducted by the Union in October-November last. 3.Payment of three months wages as bonus for the financial year 1957-58." It is said that there being no prospect of resumption of work, the Express Newspapers Private Limited decided to close the publication of all the dailies and periodicals at Madras and notice of this was given to the workers and the working journalists individually as well as by publication in other newspapers. Thereupon, some of the persons working in the Andhra Prabha and the Andhra Prabha Illustrated Weekly section have filed these petitions for the prayers mentioned above, questioning the bona fides of the promoters of Andhra Prabha Private Limited, Vijayawada, and imputing a motive to them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Though it is not abolished, it is now out of use even in England except in Crown practice on the Revenue side of the King's Bench Division for recovery of Crown debts and also for rescinding Crown grants and charters. We will now consider the limits of the operation of this peculiar type of writ, which is rarely heard of in this country. On this topic, it is useful to refer to a passage in Halsbury's Laws of England, Vol. 11, 3rd Edition, page 153 : " Scire facias on the Crown side of the Queen's Bench Division is a proceeding for the purpose of rescinding or repealing Crown grants, charters and franchises. It must be distinguished from the obsolete writ of scire facias used in aid of executions and from scire facias on the Revenue side of the Queen's Bench Division which was abolished by the Crown Proceedings Act, 1947. Scire facias on the Crown side is still available." This passage indicates that it is available only for the purpose of cancelling or revoking the incorporation of a company created under a charter. The statement of law contained in Halsbury's Laws of England, Vol. 9 (Simonds Edition), page 99, is also apposite in this context. "A corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of was by getting it extinguished through the effect of the Act of Parliament which provides for the winding up and not by disincorporation. The speech of the Lord Chancellor (Lord Hatherley) brings out the scope of this writ: "The question is, therefore, simply whether it has been created. If created, there is no power given in this Act of Parliament, nor in any other Act of Parliament that I am aware of, by which through any result of a formal application, like an application by scire facias, to repeal a charter, the company can be got rid of, unless it can be got rid of by being extinguished through the effect of the Act of Parliament which provides for the winding up of companies when they ought, from any circumstances whatsoever, to be wound up." This doctrine was to some extent modified by the House of Lords in Bowman v. Secular Society Ltd. [1917] AC 406 Lord Parker observed that the section did preclude all His Majesty's lieges from going behind the certificate or from alleging that the society was not a corporate body with the status and capacity conferred by the Acts, that such a certificate of registration could not bind the Crown and that the Attorney-Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n upon that subject which seems to prevail, as it appears to me, that the Attorney-General, when applied to for his fiat, without which the writ cannot issue, has an important duty to perform." To a like effect is the dictum in the second one. It is to be borne in mind that these two cases are cases of either a charter or a patent. It is apparent from these two rulings that the fiat of the Attorney-General is an essential ingredient of the issue of this type of writ at the instance of a subject. Thus, these two decisions do not lay down anything inconsistent with our view. On the other hand, the rule stated therein accords with the conception indicated by us above. In view of this, it is still a moot question whether the writ of scire facias could be called in aid to get rid of an incorporation effected under the provisions of an enactment and not by virtue of a charter. Assuming that this form of writ survives, could the registration of the company be impugned on any of the grounds, which are urged in these cases, namely, that it was incompetent for the Registrar of Companies to issue the certificate having regard to the aims and objects of the company. This contention has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) or into collateral matters to probe into the motives of the promoters. Indisputably, the provisions of sub-sections (1) and (2) have been satisfied here. Yet the point presented for the petitioners is that the condition precedent to registration of a company is the existence of a validly incorporated company and if the purpose for which a company is floated is illegal or opposed to public policy, no recognition could be given to it by the Registrar. The admissibility of this argument depends upon the interpretation to be put upon section 12 of the Indian Companies Act. Section 12, so far as is relevant for this enquiry, runs thus: "(1) Any seven or more persons, or where the company to be formed will be a private company, any two or more persons, associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company, with or without limited liability." Thus the essence of a validly incorporated company is that it should consist of a particular number of persons and that it should be associated for a lawful purpose. It is not the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot enter the determination of the character of the object of the association since it is a collateral consequence. The view of ours gathers support from a judgment of the House of Lords in Salomon v. Salomon and Co. [1897] AX 22 What happened there was this. One Salomon carried on business as a leather merchant in a very satisfactory way for some time. Encouraged by this, he conceived the idea of starting a limited company with a nominal capital of 40,000 shares of 1 each. The issued shares were only 20,000. He sold all his assets to a limited company which consisted of himself, his wife, daughter and four sons, who each subscribed for one share, the sale being known and approved by the shareholders. In consideration of the transfer of his assets to the company, Salomon took all the shares for himself except those allotted to his wife and children, one each. In part payment of the purchase money, debentures forming floating security were issued to Salomon and these shares gave him the power of voting and all the requirements of the Companies Act were observed. The business was conducted for a while. Then, bad times came and the company had to be wound up. After satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 . There, the memorandum of association of a proposed company was signed by two adult persons and by a guardian of the other five members, who were minors at that time, the guardian making a separate signature for each of the minors. Thereupon, the Registrar issued a certificate of incorporation. The question arose in a suit for certain relief's whether the company was properly constituted, the memorandum of association not having been signed by the required number of subscribers, five of them being minors not competent to contract. The Privy Council, in disagreement with the Chief Court of Lower Burma, held that the certificate of incorporation was conclusive for all purposes and not merely a prima facie answer to such an objection and that courts would not question the validity of the certificate, even assuming that the conditions of registration were not fulfilled. The same concept underlies section 35 of the (Indian) Companies Act. This section gives legislative recognition to the dicta of the Judicial Committee in Moosa Goolam Ariff v. Ebrahim Goolam Ariff 7 , extending the conclusiveness of the certificate to matters precedent and incidental thereto. Thus the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rupees which indicates in the view of the petitioners that it was not financial consideration that was responsible for the transaction now attacked as fraudulent but an anxiety to avoid paying the workers according to the wages structure embodied in the proposals of the Wage Committee, and ( ii ) that the Express Newspapers Limited reserved the right of advertisement and that the new company would have nothing to do with advertisement revenue. According to the petitioners, this device was adopted with a view to show a reduced income since the mainstay of any newspaper is advertisement revenue. Without that the profits of a newspaper industry would be considerably low, which would deprive the workers and working journalists of a decent bonus. On the other hand it is stated for the respondents that the creation of the company in dispute was quite a bona fide act and that there were very weighty reasons for its formation with its registered office at Vijayawada. Sri Viswanatha Sastri, learned counsel for respondents 2 to 4 urges that in starting this company to publish a Telugu daily and weekly at Vijayawada, the founders were in a way meeting the past demands of the workers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service would be the same in the new concern and that the place assigned to Andhra Prabha in the classification would not be disturbed in the new set up also. Taking up the first ground of attack, we feel that it is unsubstantial. We cannot appreciate how such a move on the part of those controlling the destinies of the Express Group of papers could minimize the responsibility of the establishment to pay higher wages or adversely affect the position of the workers and the working journalists. As a result of the under-valuation, the net profits to be earned by this paper would be considerably swelled for the reason that the interest to be deducted would be very much less. On this account the undervaluation, far from being harmful to the workers, places them in a position of vantage in regard to bonus etc ., and it is hardly beneficial to the employers. If really the persons responsible for the promotion of this company had in contemplation the enrichment of themselves at the expense of the workers and the working journalists, they would have inflated the value they have paid to the going concern, so that a good part of the profits might be consumed by the interest payable on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those contracts, the new company is under an obligation to take into their service all the employees connected with these two Telugu papers on the same conditions of service and without any interruption. The purchasers were also bound to pay these persons, in the event of retrenchment, compensation on the basis that their services have been continuous and have not been interrupted. It is alleged in the counter-affidavit and it is not traversed in the reply affidavit that dues by way of retrenchment compensation, gratuity etc ., amounting to Rs. 7,09,480, had been paid to the employees of the Express Group of papers. We cannot, therefore, understand what grievance the petitioners could have by the publication of these Telugu papers from Vijayawada. In these circumstances, we are not convinced that there is much foundation for the complaint that the founders or the promoters of the company had any evil designs or were actuated by the fraudulent object of defeating the rights and privileges of the workers and working journalists connected with these two papers. At any rate, the objectives attributed to the promoters are not apparent to us. However, it does not preclude the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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