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TMI Blog1959 (7) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... bly carrying on its business to contribute to political funds and objects from time to time. The company finds that the making of contributions to political institutions and objects would prove beneficial and advantageous in several ways. The petitioner company is engaged in the business of producing and selling cotton and other yarn. The textile industry is to a large extent controlled and regulated by the Government. As such, the progress and development of the Industry on proper lines depends on several measures which Government might take for regulating the industry and aiding it in the matter of expansion etc. The petitioner company is not contemplating taking part in any political activities. But the petitioner finds it advantageous, in the interests of the textile industry in general and of itself, to contribute to the funds of such party or parties whose policies are in its opinion likely to protect and advance the legitimate interests of the industry and also ensure sound relationship between labour and management. The following additional information regarding the financial position of the company are relevant. On the date of the application the secured loans amounted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h contributions are an offer of a monetary temptation to the Government of the day run by the party in power to adopt policies that should help the donors in their business. It is pointed out in this connection that companies have been the recipients of financial assistance in the shape of loans or guarantees for the loans given by Government. On the other hand, it is said that there is no wrong-doing, moral or legal, in a company financially supporting a party whose economic and industrial policies the company considers to be or likely to be beneficial or profitable to it. Before the present Act it was open to the board of directors, if the memorandum allowed it, to make contributions without limit, out of its funds, to charitable purposes or political parties. Section 293(1)( e ) places a limit on the amount up to which the board may, on its own authority, make such contributions. As a result of full discussion in the Legislature, section 293(1)( e ) was enacted in terms wide enough to include contributions to political bodies, the expression "charitable and other funds not directly relating to the business of the company" being comprehensive enough for that purpose. This was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests of the public, is a broad question of public policy. It has been the subject of special legislation in America. The case of companies could not be considered in isolation and contributions from other sources, such as bodies corporate, partnerships, societies, trusts, trade unions and even from individuals might have to be regulated or prohibited by a comprehensive enactment. This, however, is a matter which falls outside the scope of the Companies Act. With all respect to the observations of the High Court in one of the recent cases, we consider that it is not desirable that companies should be called upon to seek the prior approval of the courts to any contributions which they may like to make to the funds of any political party. Such applications would be a source of embarrassment to the judges and it is also not desirable that courts should get involved in political or quasi-political controversies. In support of the suggestion that such contributions should be promptly published in newspapers immediately after they are made, the reason put forward was that if the information regarding such contribution was given to the shareholders long after the event, it would be too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is enough to recall how the late Mr. Lloyd George recruited funds for the Liberal Party by the sale of honours which necessitated drastic changes in the procedure for the conferment of honours in England. In America party funds are being collected by bizarre methods like holding dinners at 200 or 300 dollars a plate. In other countries where democracies are less advanced and more corrupt party funds are collected by sale of favours, permits, offices etc. Therefore, on the balance, this becomes only a choice of evils and it is far better that political parties should depend upon regular sources under section 293 of the Indian Companies Act than degenerate into adopting corrupt methods for securing funds. The price of democracy is the maintenance of stable political parties and the price of stable political parties is the existence of regular sources of subvention. The question is whether before confirming alteration the court should be satisfied that the alteration is not inconsistent with public interest. On this aspect, namely, the scope of section 17(1) I find myself in entire agreement with the following observations of SUBRAHMANYAM J. in O.P. No. 152 etc. of 1958 : "Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s power under section 17(1) and does not prejudice any of the interests which the court is required to safeguard by section 17(3), the court has no power under section 17(2) to refuse to confirm the alteration. It follows that the court's power under section 17 ( 5 ) to impose terms and conditions is also limited to such terms and conditions as may be called for in the interests of shareholders or creditors or other persons who might be prejudiced by the alteration. Where the alteration would not prejudice any such interest, the court has no power to impose terms and conditions." Buckley, whose text book on company law is a well known classic, in considering this section points out in his 12th Edition at page 29 that a liberal construction is placed upon these paragraphs and upon paragraph ( e ) in particular, which corresponds to our section 17(1)( a ) and at page 30 he points out that courts have acceded to applications for amendment, although strictly falling outside the ambit of clause ( a ) upon the court being satisfied that this was required to place the company on an equality as regards the efficient or economical carrying on of its business with more recently formed c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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