9911796707
TMI Blog1971 (9) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... e three following grounds: (a) Neither document disclosed whether permission has been obtained from the Central Government as required under the Monopolies and Restrictive Trade Practices Act for establishing the undertaking of Swadeshi Politex Ltd. which, when established, would be an inter-connected undertaking of the respondent company. (b) The said documents informed the members that the work of the said polyester fibre plant has commenced; no disclosure was made whether a licence has been obtained in respect thereof as required by Section 11 of the Industries Act. (c) None of the terms and conditions of the collaboration agreement --financial, technical or otherwise -- were disclosed. 4. The learned trial Judge held that, in his opinion the undertaking of Swadeshi Polytex Ltd. transpires to be an inter-connected undertaking of the respondent company to which Section 22 of the Monopolies and Restrictive Trade Practices Act, 1969 will apply. The learned Judge also held that the shareholder plaintiff had a legal right to bring an action against the company of which he is a share-holder, to restrain it from committing an illegal act under the Monopolies and Restrictive Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are relatives and for no other reason." 7. To complete the statement of facts, one more point has to be noted. The plaintiff in this case filed another suit in the High Court being Suit No. 105 of 1970. That suit was instituted on or about the 26th day of February, 1970 and a prior suit. In that suit, the prayer inter alia was a declaration that the notice dated the 29th January, 1970, with an explanatory note annexed thereto, was bad, inoperative and of no effect and for permanent injunction restraining the respondents from implementing or giving effect to any of the resolutions passed at the meeting. There, in that suit. Ghose, J., ordered on the 8th September, 1970 :-- "There shall be an interim injunction restraining the respondent directors (company's directors) from acting on the resolution No. 1 passed at the general meeting held on the 27th February, 1970 until the same is confirmed and approved at a meeting properly notified. All other interim orders stand vacated." The respondents called a properly notified meeting and the resolution has been unanimously passed, confirmed and approved. 8. S.K. Mukherjea, J., after having come to the aforesaid fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... listen to him and to take his view ? That is an equity which I have never yet heard of in this Court, and I have never known it insisted upon before; that is to say, that this Court is to entertain a bill for the purpose of enabling one particular member of the company to have an opportunity of expressing his opinions viva voce at a meeting of the share-holders. If so, I do not know why we should not go further, and say, not only must the meeting be held, but the share-holders must stay there to listen to him and to be convinced by him. The truth is, that is only part of the machinery and means by which the internal management is carried on. The whole question comes back to a question of internal management; that is to say, whether the meeting ought or ought not to be held in a particular way, whether the directors ought or ought not to have sanctioned certain proceedings which they are about to sanction, whether one director ought or ought not to be removed, and whether another director ought or ought not to have been appointed. If there is some one managing the affairs of the company who ought not to manage them, and if they are being managed in a way in which they ought not to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , had come into force. 13. Section 34 of the Companies Act is quite explicit on this point. Section 34(2) of the Companies Act states: "From the date of the incorporation mentioned in the certificate of incorporation, such of the subscribers of the memorandum and other persons, as may from time to time be members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act." 14. The significant features about Section 34(2) of the Companies Act may be noted. From the very inception of the incorporation it not only becomes a body corporate but also "capable forthwith of exercising all the functions of an incorporated company" and also with "liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act." I can read these features only as establishing "company capabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation was necessary and as Sikri J. pointed out at page 655 "if the legislature was thinking of incorporation of a company, then we fail to understand why this word was not used instead of the word "established." Further, if we look at Clause (d), it excludes certain industrial undertakings from the benefit of Section 45; what are excluded are companies "formed by the splitting up, or the reconstruction of a business already in existence or by the transfer to a new business of any building, machinery or plant used in a business which was being previously carried on." Ordinarily the date of incorporation of a company has nothing to do with the transfer of a machinery or plant to it." That consideration is absent here. The learned Counsel for the respondents also relied on another Wealth Tax Act case namely. Standard Mills Co. Ltd. v. Commr. of Wealth Tax Bombay reported in [1967]63ITR470(SC) . Reference was also made to the observations of Buckley J. at page 393 in the case of In re. Otto Electrical Manufacturing Co. reported in (1906) 2 Ch. D. 390. But the learned Judge there had no occasion to contrast it with such statutory provisions as Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme and procedure is through the Central Government and the Monopolies Commission in the first instance, and not through the Court. 19. Besides, there seems to be another great obstacle for the respondents. The prohibition contained in Section 22 of the Monopolies and Restrictive Trade Practices Act, 1969 does not make the contract or the undertaking illegal prima facie. There are many prohibitions in public statutes but they do not raise the question of illegality or ultra vires but whose breach is otherwise provided for in the statute itself. The scheme of the Monopolies and Restrictive Trade Practices Act, 1969 which has a series of sections on penalties and offences under Chapter 8 and Chapter 9 prima facie indicates that the establishment of a new undertaking which offends Section 22 of the Act and which is without the previous permission of the Central Government will be considered as offences under the said Act and will be visited by the penalties mentioned in the statute. See in this connection Archbold's (Freightage) Ltd. v. S. Spanglett Ltd., (1961) 1 QB 374 at PP. 389 to 393 per Lord Justice Devlin and also St. John Shipping Corporation v. Joseph Rank (1957) 1 Q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trade Practices Act applies or not should have been brought to the notice of the general body of the shareholders. It is difficult to understand the point which the learned Counsel for the respondents wanted to make. Is it to be stated in the explanatory statement to the notice that -- "we invite an argument on the Monopolies Act and its applicability"? Surely that is not the purpose of an explanatory statement to the notice. 23. But there is a more fundamental obstacle on the part of the respondent in this regard. The notice is given in the following terms:-- "Notice is hereby given that a General Meeting of the members of the Swadeshi Cotton Mills Ltd. will be held at the Registered Office of the company at Swadeshi House, Civil Line, Kanpur, on Monday, 12th day of October, 1970 at 2.30 p.m. to consider and if thought fit to pass with or without modification the following resolutions as an Ordinary Resolution. "Resolved that resolution No. 1 (set out hereunder) which had been unanimously passed as an Ordinary Resolution at a general meeting of the company held on the 27th February, 1970 at its registered office at Swadeshi House, Civil Line, Kanpur in pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Suit No. 105 of 1970. In that suit an interim order was made which was also recited. Then in the correspondence itself it is stated that the general meeting of the members was duly held on the 27th February, 1970 and business of the meeting was taken and there was a resolution unanimously passed. Thereafter, follows a recital in Suit No. 105 of 1970 where the learned Judge by his interim order dated the 8th September, 1970 directed that: "there shall be an injunction restraining the respondent Directors (Company Directors) from acting on the Resolutions passed at the General Meeting held on the 27th February. 1970 until the same is hereby confirmed or approved at a meeting properly notified. All other interim orders vacated." 25. This was duly passed at the General Meeting. Thereafter the present suit was filed being Suit No. 451 of 1970 by Banwarilal Jaipuria against the appellants. Before Mr. Justice Ghose the issue was whether the Letter of Intent has lapsed and it was on that ground that the order of injunction was made by the learned Judge. 26. In order to appreciate this point better, it will be necessary to refer to certain correspondence. On the 12th February, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tices Act. Then on the 12th May, 1970 the Government replied to the letter of 12 February, 1970 saying that "I am directed to say that on the facts stated this department is of the view that the provisions of Section 22 of the Monopolies and Restrictive Trade Practices Act, 1969 will not apply to the establishment of the new undertaking for the manufacture of polyester fibre." Finally on the 20th May, 1971 they categorically wrote stating that "in view of the department's letter dated the 14th May, 1971 addressed to you the application under Section 22 is filed." 27. Now all that Section 22 of the Monopolies and Restrictive Trade Practices Act does is to provide that "No person or authority other than the Government shall after the commencement of this Act establish any new undertaking which when established would become an inter-connected undertaking to which Clause (a) of Section 20 applies except in accordance with the previous permission of the Central Government". But the Central Government itself does not think that Section 22 of the Act applies. That seems to me to be an end of the matter. There is no prima facie case for an injunction on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the meaning of Section 22 of the Monopolies and Restrictive Trade Practices Act, 1969. Besides. I have already traced the history from the correspondence where the Government of India considers that Section 22 does not apply at all to the facts of this case. 32. Section 173(2) of the Companies Act does not imply that any and every lapse should be visited with the consequence of ultra vires doctrine. A special business requires to find a place in the explanatory statement, but it does not mean that any and every legal requirement should be placed before the General Meeting of the general body of the share-holders. It is to be presumed that all legal requirements, before a venture is undertaken, is carried out properly. For instance, there are various restrictions which require to be satisfied: for a factory, before it is intended to be put into operation, requires a factory licence, land, before it is purchased, requires registration, conveyance and permission in some cases of municipalities; foreign collaboration and import of materials requires permission under the Foreign Exchange Regulations Act and Import Control Act. It is not, in my view, necessary to state all that before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial Bank Ltd., 55 Ind App 274 ; AIR 1928 PC 180). 35. Then again when a Division Bench of this Court in East India Commercial Co. (P) Ltd. v. Raymon Engineering Works Ltd., AIR1966Cal232 had to consider the question of "material facts" in Section 173(2) of the Act, it was said that the solution of the problem as to whether all material facts were disclosed depends upon the facts of each case. It is, however, not the function of an explanatory statement to travel beyond the scope of the proposed resolution. Material facts have to be given but not detailed particulars. 36. There was some discussion in Narendra v. Institute of Engineers, AIR1964Cal73 . It dealt with the question of difference in the character of a chartered company and a company formed by or under an act of Parliament. 37. In Vita Food Products v. Unus Shipping Co. Ltd. (1939 AC 277) it was held that Section 3 of the New Foundland Carriage of Goods by Sea Act, 1932 which provides that every bill of lading shall contain an express statement that it is to have effect subject to the provisions of the said rules as expressed in this Act" were directory and not mandatory and that failure to obey the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ((1960) 64 CWN 970), the instant case does not come within the meaning of that test. 41. Lastly, the case of Firestone Tyre and Rubber Co. v. Synthetics and Chemicals Ltd., (1970)2 Com LJ 200 (Bom)) was cited. This was a judgment of a single Judge. At pages 244-45 it was observed in that case "Reliance was also placed upon AIR1962Cal127 in which the Privy Council's decision in Shamdasani's case was followed and upon Kalinga Tubes Ltd. v. Shanti Prasad Jain, AIR1963Ori189 which was affirmed by the Supreme Court in Shanti Prasad Jain V-Kalinga Tubes Ltd. [1965]2SCR720 . Relying upon these authorities it was sought to be contended that the plaintiffs having full knowledge of the facts which according to them were not disclosed in the explanatory statements, had no right to challenge the validity of the notices on this ground and were estopped from doing so. There is, however, no such plea in any of the affidavits in reply, and this question really does not arise for my consideration, 'but as this question, was argued at some length and as the contesting defendants, insisted that they could spell out such a plea from their affidavit-in-reply which they have not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. It is true that the learned Judge held that until and unless undertaking is established, no question of licence under Section 11(2) of the Industrial Development and Regulation Act,, 1969 can arise. The learned Counsel for the respondents drew our attention to the proviso to that section which he construed to mean that after an undertaking is established there will be no occasion for a licence. But we do not think that the industrial licence need at all be in the explanatory notice in view of what I have said under Section 173(2) of the Companies Act. 44. Various other points were argued by Mr. Samiran Sen, appearing on behalf of the appellants. One of them is a question of res judicata but it is unnecessary for us here to express an opinion on that point. His point was that the suit before Mr. Justice Ghose should have been amended to include the subject matter of the present suit. The Monopolies and Restrictive Trade Practices Act came into operation on the 1st June, 1970 and the hearing of the suit before Mr. Justice Ghose began and concluded in August 1970. Therefore he says that it barred by constructive res judicata. But, as I say, it is unnecessary to decide th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal will have to be raised, it was considerably expedient to promote a new company ... ... ... ... ... Accordingly, a company under the name and style of Swadeshi Polytex Co. Ltd. is being incorporated. Considering the future prospects and the profitability of the company. Swadeshi Polytex Ltd., it is considered desirable that this company should invest liberally in the shares of the said company. It is proposed to acquire Equity Shares to the extent of the aggregate value of Rupees One Crore in the new company aforesaid." 47. On receipt of this Notice the respondent instituted a Suit in this Court (Suit No. 105 of 1970) (Cal) against the 8th Appellant and its Directors, for an Injunction restraining them from holding any Meeting pursuant to the said Notice and from passing the resolutions mentioned therein on the ground that the Notice did not disclose material facts. In this Suit, on an application by the respondent an ad interim order was made by Ghose, J., on February 26, 1970, restraining the 8th appellant and its Directors from giving effect to any resolution that might be passed pursuant to the said Notice. The resolutions set out in the Notice were passed at the Meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suant to the said Notice or giving any effect to the resolution, if passed. The General Meeting of the company was duly held on October 12, 1970 and the resolution mentioned above, was unanimously passed. 50. In the second suit (that is the suit, out of which this appeal arises) filed by the respondent, he made an application for an Injunction and on this application S. K. Mukherjea, J., made an order on March 16, 1971 granting an Injunction restraining the appellants and each of them from giving effect to the resolution set out in the Notice dated September 14, 1970. The order was made without prejudice to the rights of the appellants and the Members of the 8th appellant to pass a fresh resolution according to law in terms similar to the resolution which was the subject-matter of the application. Aggrieved by this order the appellant has preferred to this appeal. 51. The grounds of attack on the resolution passed on October 12, 1970 confirming the earlier resolution of the company passed on February 27, 1970 were entirely different from the grounds which formed the subject matter of attack on the resolution passed on February 27, 1970. The new ground of attack canvassed by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the appellant was that the statute specifically provided for penalties for contravention of provisions of the same. These provisions have been made in Chapter VIII of the Act, and even assuming that Statutory provisions had been violated, no Injunction could be issued but the only remedy was imposition of a penalty as provided in Chapter VIII of the Act. 53. In support of these contentions Mr. S.C. Sen relied on several passages in Craies on Statute Law 6th Ed. pp. 231, 232, 234, 235 and 237. Reliance was placed on several English decisions Vallance v. Falle, (1884) 13 QBD 109, (Cutler v. Wandsworth Stadium Ltd.) 1949 AC 398, Newman v. Francis, (1953) 1 WLR 402 and in Re: Indo-Burma Wood Products (P) Ltd. AIR1968Cal198 . 54. In developing the points formulated by him Counsel for the appellants argued that in computing the aggregate value of the shares of the holding company and its subsidiary, the value of the shares of the subsidiary company, held by the holding company, should be excluded. It was argued that if the two undertakings were treated as one for the purpose of valuation, the shares of the subsidiary company in the hands of the holding company, ought not to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 22 of the Act, the shareholders attending the General Meeting was misled. In other words, if the shareholders were informed by a statement in the explanatory statement that no application had been made to the Central Government for permission contemplated by Section 22 of the Act, they would not have voted, as they did, at the Meeting held on October 12, 1970. It appears to us that this contention has no merit. What is the effect of the omission on the part of the Directors of the 8th appellant ? If an application, was in fact made, the Directors could have stated either that the application was pending or that it was refused by the Central Government, but that has not happened in this case. No application was made by the Directors of the 8th appellant for the permission contemplated by Section 22 of the Act at the time when the Notice and the explanatory statements were issued. In this situation what the Directors could have stated was that no application had been made to the Central Government for permission under Section 22 of the Act as they were advised not to make such application. I do not see how, a statement such as this, would have helped the shareholders eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control of the company by a new group of shareholders. 58. It seems to us, however, that for the purpose of this appeal it is not necessary for us to go into the various questions raised by parties. The Notice dated September 14, 1970, for a General Meeting of the company to be held on October 12, 1970, was manifestly given pursuant to the order of Ghose. J., by which the Directors of the 8th appellant were restrained from giving effect to the resolutions passed at the General Meeting of Company held on February 27, 1970, until the resolution was confirmed at another General Meeting of the Company properly notified. The order of Ghose, J., was obtained by the respondent, and as noticed earlier that order became final as between the parties. All that the respondent had to do, in order to terminate the effect of the Injunction, was to call a General Meeting of the company after duly giving Notice for the same, and have the resolution passed on February 27, 1970, confirmed at this Meeting. The General Meeting of the Company held on October 12, 1970, was held in accordance with the order of Ghose, J. It is to be noticed that no grievance was made by the respondent in the earlier suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to establish an undertaking after the commencement of the Act, which undertaking, if established, would infringe the provisions of the Act, that the previous permission of the Central Government is to be obtained. The Act came into force on June 1, 1970. The new undertaking in this case namely. Swadeshi Polytex Ltd. was incorporated on March 21, 1970. The letter of Intent, issued by the Central Government in favour of the 8th appellant, was transferred to the new undertaking on May 20, 1970. It seems to us, therefore, that prima facie Swadeshi Polytex Ltd. was not an undertaking which was established after the commencement of the Act. 60. The next question is whether the information which was omitted in the explanatory statement namely whether an application was made to the Central Government under Section 22 of the Act and if so the fate of this application was a material information, the omission to furnish which would make the resolution, passed at the Meeting invalid or void. Sub-section (2) of Section 22 of the Act requires a person or authority intending to establish a new undertaking to make an application to the Central Government before taking any action for the establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich would make the resolution void or illegal. In the view, that the Central Government took on the question of permission, there was no necessity, whatsoever, for an application for permission under Section 22 of the Act; and in omitting to make the application under Section 22 and in omitting to state in the explanatory statement that no application was made, the 8th appellant did not, in our view, act irregularly or in violation of or contrary to the provisions of the Act or the Companies Act, 1956. Information regarding an application for permission under Section 22 of the Act or information that no such application has been made is not in our view, a material information which should have been included in the explanatory statement or in the Notice of the Meeting. The absence of such information in the explanatory statement, does not make it or the resolution passed at the General Meeting confirming the resolution, which was passed at the General Meeting held on February 27, 1970, illegal or void. Nor does such omission, entitled the respondent to an Injunction restraining the appellants from giving effect to the resolutions passed at the General Meeting held on October 12, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be sufficient Notice to enable a Member to decide whether to attend or not and that an insufficient or misleading Notice invalidates a resolution. 62. Relying on the various authorities mentioned above. Counsel for the appellant contended that even assuming that there was omission to furnish material information, that would not make the resolution invalid or illegal. He further submitted that the omission, assuming there was one, did not, in any manner, mislead the shareholders of the company. He also urged that the explanatory statements should not be too strictly construed, but should be given a liberal construction and the only requirement should, be that its contents are clear to an ordinary person engaged in business. 63. It seems to us that there is a good deal of force and substance in the above contention of Counsel for the appellant. It is to be remembered that the General Meeting was called for the purpose of confirmation of a resolution passed by the company on February 27, 1970. The resolution passed on October 12, 1970 in terms of the order of Ghose, J., runs as follows : "Resolved that a Resolution No. I which had been unanimously passed as an ordinar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wadeshi Polytex Ltd., would undoubtedly be an inter-connected undertaking as contemplated by Section 20 of the Act. In aid of this argument he relied upon the definition of "inter-connected undertakings" in Section 2(g) of the Act. He argued that this case came within Clause (d) of Section 2(g)(iii) of the Act. It was contended that in this case, the 8th appellant, its Managing Director (by reason of his relationship with the Managing Director of the new company) and also the other Directors of the 8th appellant would undoubtedly exercise control over the new company. Control, it was argued, was not denned in the Act or in the Companies Act. Therefore, it was submitted, any kind of control whether de facto or de jure, would make the undertaking an inter-connected undertaking as contemplated by the Act. On this question the trial Court rejected the respondent's contention and the respondent has filed cross-objection against the judgment on, that ground. 67. It is true that Clause (d) of Section 2(g)(iii) of the Act merely provides "if one exercises control over the other in any other manner." It is also true that the control as contemplated by the Act has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the explanatory statement and the resolution, under the Company Law, and this right was protected by Section 4 of the Act. Therefore, he argued, the provisions for imposition of penalty in Chapter VIII of the Act should be held to be a remedy provided by the Act in addition to other remedies available under any other law. 70. Dealing with the question whether the private rights of the respondent could be protected by invoking the provisions of the Act, which should be enforced by the Central Government only, to avoid concentration of econo- mic power in the hands of a group of individuals it was argued, that if the individual and private rights of his client were injured or invaded, he was entitled to invoke the provisions of the Act to obtain remedy. In support of this contention. Counsel for the Appellant relied on Halsbury Third Edition Vol. 21, p. 347, Article 727 and Palmer's Company Law 21st Edition pp. 498-499. 71. It seems to us that the real and substantial issue in the application, out of which this appeal arises, has been lost sight of in the din and bustle created by the conflicting claims of the parties regarding the provisions of the Monopolies and Restrict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Court was delivered on March 16, 1971. Quite plainly, therefore, the trial Court did not have the advantage of having before it the opinion of the Central Government relating to the applicability of Section 22 of the Act. The application by the 8th appellant to the Central Government for permission under Section 22 of the Act is dated April 12, 1971. The application itself was, therefore, made after the judgment was delivered by the trial court. Shortly before the judgment was delivered the 8th appellant wrote to the Central Government on February 12, 1971, to say that according to the reported opinion given by the Attorney-General the provisions of the Act did not apply to the 8th appellant. In this letter a request was also made that a clearance 'should be issued to the 8th appellant that the provisions of the Act did not apply to it. This letter was answered on behalf of the Central Government by N. K. Sengupta. Deputy Secretary, on March 26. 1971. In this letter a request was made that the basis on which the undertaking would be an inter-connected undertaking, might be intimated to the Central Government. It was added that the question of granting clearance from the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Government under Section 22 of the Act. This intimation, no doubt, was not given in the explanatory statement as the Directors of the 8th appellant took the view that Section 22 of the Act was not attracted, and therefore no application need be made to the Central Government for permission contemplated by that section. The Central Government, which is the authority for granting permission also came to the same conclusion that the new undertaking would not be an inter-connected undertaking and therefore, no permission was needed, as required by Section 22 of the Act. In these facts we are of the opinion that there is no escape from the conclusion that the information that no application was made to the Central Government under Section 22, was not a material information to be included in the explanatory statement. 74. A notice of a General Meet-Ing of a company and an explanatory statement attached to such Notice can be condemned as tricky, if either of them is likely to mislead the share-holders or if there is omission to state facts which would enable the share-holders to decide if they would attend the Meeting or not. A Notice and an explanatory statement can also be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7ft. An application for consent of the Controller of Capital Issue for the issue of shares, was made on November 19, 1969. An application for import of machinery was duly filed on November 19, 1969. A plot of 80 acres of land at Gaziabad has been reserved for the purpose of the new undertaking and a letter of such reservation was issued by the Executive Engineer, U. P. State Industrial Corporation Limited on January 14 1970, and a sum of ₹ 2,51,800/- was deposited for the said plot of land on February 17, 1970. Sanction for supply of power by the U. P. State Electricity Board was obtained on January 24, 1970. A certificate for commencement of business was issued to Swadeshi Polytex Limited on July, 9, 1970. An industrial licence under the Industries (Development & Regulation) Act, was issued to the new company on October 7, 1970. The foundation stone of the factory premises was laid by the President of India on October 12, 1970. According to the explanatory statement, issued with the Notice of September 14, 1970, the plant is likely to go into production in early 1973. 76. It is clear from the steps, taken, that expeditious steps have been taken to enable the new company to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling to make the investment. In determining the question whether an Injunction should be granted restraining the 8th appellant from giving effect to the resolutions authorizing the investment, steps taken for the establishment of Swadeshi Polytex Ltd., are, in our view, material and relevant in deciding the question of balance of convenience in favour or against the grant of an order of Injunction. In dealing with the question whether the 8th appellant should be allowed to invest ₹ 1 Crore in Swadeshi Polytex Ltd., steps taken for the establishment of the latter can, by no means, be said to be irrelevant or immaterial in deciding the question of balance of convenience for or against an order of Injunction regarding the investment. If the decision of this appeal rested only on the question of balance of convenience or inconvenience, we would have had no hesitation in saying that the balance of convenience is entirely against the issue of an order of Injunction restraining the appellant from making the investment. But the decision of this appeal depends upon the various other questions which I have discussed earlier in the judgment. Quite apart from my views on the other questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Directors of the 8th appellant have deliberately suppressed from the shareholders, material information which may influence their mind in confirming the earlier resolution? Neither in fact, nor in law are such presumptions justified. As appears from the materials, an application for licence under Section 11(1) or the Act was duly made and a licence has been duly obtained. It is easy to overstate the requirement of Section 173 of the Companies Act, 1956. It is perhaps easier for a single share-holder to demand that every single step required for the establishment of a new undertaking must be communicated to the share-holders of an investing company. For instance, it might be said that the share-holders of the investing company should be told that a licence under the Factories Act had been obtained or that a licence under the local Municipal Law for carrying on business, has been obtained or again that the plans for erection of structure had been duly sanctioned by the local authority. But information about these matters can, by no means, be said to be material information which must be furnished to the shareholders in an explanatory statement and the omission to furnish which mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 949 AC 398. AIR1959All276 , [1952]1SCR1122 , AIR 1966 Mys 154, [1968]3SCR706 , AIR1952Cal645 , AIR1962Cal127 , AIR1966Cal232 , [1965]2SCR720 , AIR1955Cal132 . Mr. Prabir Sen relied upon. [1964]5SCR239 , [1967]63ITR478(SC) , (1970) 2 Com. LJ 200 (Bom). 1917 AC 607 (AIR 1917 PC 52), [1970]3SCR830 . 83. I have carefully taken into consideration the grounds advanced on behalf of the respondent in support of the Injunction issued by the trial Court. In my view, the order for Injunction cannot be sustained in the facts of this case. This appeal therefore succeeds and is allowed. The judgment and order of the trial Court are set aside. Costs of this appeal will be costs in the cause. Certified for two Counsel. 84. I now turn to the order that ought to be made in this appeal. On April 7, 1971, an order was made by this Bench on the application of the appellant for admission of the appeal and stay of operation of the order under appeal. That order seems to us to be a model order for the purpose of Ad Interim protection of the rights of the parties until final determination of the suit. If I say it is a model order it is because the order has taken into consideration the contentions advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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