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TMI Blog1974 (4) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... pees hundred each and six thousand cumulative preference shares of rupees hundred each. Of the aforesaid, one lakh ninety thousand equity shares of rupees ten each and six thousand cumulative preference shares of rupees hundred each have been issued and fully paid up in cash. The object of the company is mainly to carry on the business of building automobile bodies and manufacturing its spare parts. The board of directors experienced difficulties in the efficient management of the company because in respect of all legal matters they had to consult with the company's chartered accountants, solicitors, etc., at Calcutta, the concern from which the company got orders for building bodies are situated in Calcutta, that the only, activity of the company at Adityapur is that of body building which is at present done by M/s. Utkal Automobiles Private Ltd., the company having leased out its factory to the said concern and most of the commercial transactions of the company are with concerns located in the city of Calcutta. The board of directors, therefore, thought that it was in the interest of economy and administrative convenience that the company's registered office should be situated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the required notice of twenty-one days, and (2) whether this court should confirm the resolutions. In respect of the first point, the relevant provisions which need be noticed are the following. Sub-section (1) of section 17 of the Act provides that: "A company may, by special resolution, alter the provisions of its memorandum so as to change the place of its registered office from one State to another.........." Sub-section (2) thereof provides that: "The alteration shall not take effect until, and except in so far as, it is confirmed by the court on petition." Sub-section (2) of section 189 of the Act provides as follows : "(2) A resolution shall be a special resolution when ( a )the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution ; ( b )the notice required under this Act has been duly given of the general meeting ; and ( c )the votes cast in favour of the resolution whether on a show of hands, or on a poll, as the case may be, by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gave them a right to vote had not consented to the aforesaid meeting being convened on a shorter notice. It appears, however, that subsequent to the meeting, 226 shareholders holding 1,82,250 equity shares out of the total number of 277 shareholders holding equity shares worth Rs. 1,90,000 have consented to waive the requirement of due notice and accepted and ratified the resolutions aforesaid. Mr. Ashwini Kumar Sinha, appearing for the Registrar of Companies, has, however, urged that it appeals that notices were not given to the holders of six thousand cumulative preference shares. It has been urged that in view of section 87 the preference shareholders also had a right to vote at the meeting aforesaid and in view of section 171(2)( ii ) the general meeting could be called on a shorter notice if consent had been accorded by members of the company holding "not less than 95 per cent, of such paid up share capital of the company as gives a right to vote at the meeting................." The question thus arises whether the preference shareholders had any right to vote at the meeting for the alteration of the memorandum of association in respect of the registered office. It will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of such dividend for such period, in the articles or other instrument executed by the company in that behalf ; or ( b )incase no day is so specified, on the day immediately following such period. ( c )Where the holder of any preference share has a right to vote on any resolution in accordance with the provisions of this sub-section, his voting right on a poll, as the holder of such share, shall, subject to the provisions of section 89 and sub-section (2) of section 92, be in the same proportion as the capital paid up in respect of the preference share bears to the total paid up equity capital of the company." Section 89 deals with the termination of disproportionately excessive voting rights in existing companies. It provides that if at the commencement of the Act any shares of any existing company limited by shares carry voting rights in excess of the voting rights attaching under subsection (1) of section 87 to equity shares in respect of which the same amount of capital has been paid up, the company shall, within a period of one year from the commencement of the Act, reduce the voting rights in respect of the shares first mentioned so as to bring them into conformity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days' notice prior to the meeting, the meeting could have been convened in view of sub-section (2) of section 171 of the Act and the resolution could have been valid and legal. The question, however, arises whether a waiver made after the meeting and its consent given subsequently could validate the resolution passed at the meeting. In this connection Mr. K. D. Chatterji appearing for the company has placed reliance on a few decisions of the English courts and one decision of the Madras High Court in support of the proposition that post consent given by members to a resolution passed at a meeting without proper notice would validate the same. In In re Pearce Duff Co. Ltd. [1960] 1 WLR 1014 (Ch D) , the question came up for decision. In that case the company had issued a notice of a special resolution to be passed at an extraordinary general meeting for the reduction of capital but the statutory period of twenty-one days' notice had not been observed. The directors later wished to propose a second resolution for the payment of premium to the holders of preference shares and appreciating that they could not give the statutory period of notice for the second resolution, request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 per cent, consent which has been obtained to the resolutions being treated as valid and to the fact that the petition has been presented upon that footing, I do not think that this court ought to hear any of the shareholders to say that those resolutions were not validly passed." In the case of Parker and Cooper Ltd. (supra) the question was whether certain resolutions passed irregularly in respect of debentures and appointment of directors and a receiver could be treated as valid in view of subsequent ratification thereof by all the shareholders. Astbury J. held; "..............where the transaction is intra vires and honest, and especially if it is for the benefit of the company, it cannot be upset if the assent of all the corporators is given to it." In In re Oxted Motor Co. (supra) the only two shareholders of the company had passed a resolution to wind up the company voluntarily and to appoint a liquidator. No notice of intention to propose this resolution as required by section 69 of the Companies (Consolidation) Act, 1908, had been previously given to the shareholders. The question turned round the validity of this resolution. It was held that it was competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the post-consent given by all the shareholders except one validated the resolution. Learned counsel for the Registrar of Companies has, however, urged that the provision of section 171(2) of the Act being mandatory the resolution cannot be treated as valid by subsequent consent obtained. In support of his argument he has placed reliance on decisions in the cases of Homi Cawasji Bharucha v. Arjun Prasad [1957] 27 Comp Cas 6 (Pat) and N. V. R. Nagappa Chettiar v. Madras Race Club [1949J 19 Comp Cas 175 , 194 (Mad). In the case of Homi Cawasji Bharucha (supra) the resolution passed was with respect to reduction of share capital but notice of twenty-one days as required by section 81(2) of the Companies Act of 1913 had not been given. The learned judges held that the meeting was illegal because of the failure to comply with the statutory provision of notice as required under section 81. In the case of N. V. R. Nagappa Chettiar (supra) a suit had been brought for a declaration, inter alia, that the meeting of the general body of the members held on a particular date was invalid, and that the amendments of the articles of association were not duly passed. It was alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be a special resolution when it has been passed by such a majority as is required for the passing of an extraordinary resolution and at a general meeting of which not less than twenty-one days' notice specifying the intention to propose the resolution as special resolution has been duly given : Provided that, if all the members entitled to attend and vote at any such meeting so agree, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one days' notice has been given." Sub-section (2) of section 189 of the present Act quoted earlier provides that a resolution shall be a special resolution when the notice required under this Act has been duly given of the general meeting ; and the provision regarding notice of meeting is to be found in section 171 of the present Act which has been quoted earlier and which provides that a general meeting of a company may be called by giving not less than twenty-one days' notice in writing ; and that it may be called after giving shorter notice, if consent is accorded thereto in the case of an annual general meeting, by all the members entitled to vote thereat; and in the case of any other mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l meeting or a meeting for the passing of a special resolution, fourteen days' notice in writing in the case of a company other than an unlimited company and seven days' notice in writing in the case of an unlimited company. (2) Save in so far as the articles of a company make other provisions in that behalf (not being a provision avoided by the foregoing sub-section) a meeting of the company (other than an adjourned meeting) may be called ( a )in the case of the annual general meeting, by twenty-one days' notice in writing, and ( b )in the case of a meeting other than an annual general meeting or a meeting for the passing of a special resolution, by fourteen days' notice in writing in the case of a company other than an unlimited company and by seven days' notice in writing in the case of an unlimited company. (3) A meeting of a company shall, notwithstanding that it is called by shorter notice than that specified in the last foregoing sub-section or in the company's articles, as the case may be, be deemed to have been duly called if it is so agreed ( a )in the case of a meeting called as the annual general meeting, by all the members entitled to attend and vote therea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which less than twenty-one days' notice has been given. It will appear that the proviso to this sub-section contains a provision similar to that provided in clause ( b ) of sub-section (3) of section 133 of the English Companies Act of 1948. In the Indian Companies Act, 1956, however, section 189(2) does not reproduce the provision already contained in sub-section (2) of section 171. The reason is that clause ( b ) of sub-section (2) of section 189 of the present Act provides that the notice required under this Act must have been given and section 171 provides for the notice of twenty-one days and it provides for shorter notice in sub-section (2) of section 171. An analysis of the English decisions aforesaid thus brings out that even though consent of shareholders to shorter notice for the meeting at which a special resolution has been passed is not obtained prior to the meeting, consent obtained thereafter would validate the resolution. In the case of Homi Caieasji Bharucha (supra) the learned judges did not have to consider the question of any consent given subsequent to the meeting. In the case of N. V. R. Nagappa Chettiar (supra) also it had been found that the consent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not for this court to substitute its opinion in this respect. No objection has been raised by the Registrar of Companies or for the matter of that by anybody else to show that the resolution is not bona fide and that it is likely to affect adversely any person. It is said that no debentures have been issued by this company. It has, however, been stated in the petition that the company has sundry creditors to whom it owes a debt of roughly two lakhs of rupees. In view of sub-section (3) of section 17 of the Act, before confirming the alteration, the court has to be satisfied that with respact to every creditor who is entitled to object to the alteration and who signifies his objection, either his consent to the alteration has been obtained or his debt or claim has been discharged or determined or secured to the satisfaction of the court. It is true that no creditor has appeared but it appears that no notice of this application was issued to the creditors of the company. In that view of the matter I am inclined to make the order conditional. In the result, I would confirm the special resolutions aforesaid subject to the condition precedent that the petitioner-company discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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