Class rights protection: only rights attached to a share class are protected; nomination rights in articles can be amended.

Sections 106 and 107 protect only rights attached to a class of shares; nomination or chairmanship rights arising solely from the articles are contractual provisions and do not constitute class rights. Such provisions are therefore subject to lawful amendment or deletion by the company through the section 31 procedure (special resolution) and are not protected by sections 106-107. The petition seeking to restrain amendment of the articles to remove governmental nomination rights was held not maintainable and dismissed by the HC.

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Issues: Whether a petition under sections 106 and 107 of the Companies Act is maintainable to restrain a company from amending its articles of association so as to remove the State Government's rights of nomination of directors and appointment of the chairman.

Analysis: Sections 106 and 107 permit relief only where rights attached to a particular class of shares are sought to be altered. The rights actually attached to ordinary equity and cumulative preference shares are limited to voting, dividends, preservation of face value, transfer and related protective voting rights; they do not include a separate class right of governmental nomination of directors or chairman. The power to alter articles by special resolution under the Companies Act (section 31) is broad and, subject to the statutory provisos, renders alterations valid as if originally contained in the articles. Contractual provisions in the articles that confer nomination rights which are not rights attached to a class of shares do not fall within the protective scope of sections 106 and 107; thus a company may lawfully amend or delete such provisions by the statutory procedure where shareholders approve.

Conclusion: The petition under sections 106 and 107 is not maintainable; the relief sought to restrain the proposed amendments is refused and the petition is dismissed in favour of the respondent.

Ratio Decidendi: Sections 106 and 107 protect only rights that are attached to a class of shares; rights arising solely from articles as contractual provisions and not constituting class rights are not protected thereby and are subject to lawful amendment under section 31 by special resolution.

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