1938 (7) TMI 10 - HC - Companies Law

Court upholds jurisdiction to sanction scheme despite shareholder opposition under Companies Act, 1929

Oceanic Steam Navigation Co., In re

Oceanic Steam Navigation Co., In re - [1939] 9 COMP. CAS. 229 (CD) Issues:1. Jurisdiction of the Court to sanction the scheme under sections 153 and 154 of the Companies Act, 1929.2. Validity of the proposed arrangement by the Oceanic Steam Navigation Co. under section 153 of the Act.Analysis:1. The judgment addressed the opposition by shareholders to a scheme proposed by the Oceanic Steam Navigation Co. under sections 153 and 154 of the Companies Act, 1929. The shareholders argued that the Court lacked jurisdiction to sanction the arrangement and that the discretionary jurisdiction should not favor the petitioner due to unfairness to the shareholders. The judge noted the unusual circumstances of the case, where the company was insolvent and the directors, nominated by creditors, proposed a scheme that excluded benefits for shareholders. Despite contentions, the judge found no impropriety in the directors' actions and upheld the consistent exercise of jurisdiction under section 153 without regard to shareholder wishes.2. The judgment delved into the question of the Court's jurisdiction to sanction the scheme, highlighting two crucial points. Firstly, the company's memorandum of association did not grant it the power to sell its entire undertaking. Secondly, the proposed scheme involved transferring assets to a new company. The judge emphasized that the company could not undertake such actions without invoking section 153. The judge rejected the argument that the scheme could override the company's memorandum, citing previous judgments and the principle that a company's powers are limited by its memorandum. The judge declined to sanction the scheme as it involved actions beyond the company's authorized scope, emphasizing the need for compliance with statutory provisions for altering a company's powers.3. Additionally, the judgment addressed a motion in an action brought by shareholders against the company and its directors to restrain them from proceeding with the arrangement. Given the refusal of the petition, the judge made no further orders on the motion, acknowledging the shareholders' concerns regarding the company's competence to enter into the arrangement. The judge emphasized the shareholders' correctness in their assessment of the company's actions and awarded costs to the opposing shareholders for bringing the jurisdictional issue to light.This detailed analysis of the judgment highlights the key legal issues surrounding the jurisdiction of the Court to sanction the scheme proposed by the Oceanic Steam Navigation Co. under the Companies Act, 1929, and the implications of the proposed arrangement on shareholder rights and company powers.