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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether a company can validly prescribe, by resolution or articles, an additional qualification for directors requiring each director to maintain a fixed deposit with the company, and whether such a requirement is inconsistent with the memorandum of association or the Companies Act.
Analysis: The resolution did not conflict with the memorandum, which merely fixed the company's capital. The Companies Act provisions dealing with directors' share qualification did not exhaust the field or prohibit other qualifications. The holding of shares was not treated as a necessary condition for directorship, and the shareholders were held competent to prescribe further reasonable qualifications suited to the company's business. The fixed-deposit requirement was also held not to amount to an increase of share capital, since the amount remained returnable on cessation of office and therefore did not alter the company's capital structure.
Conclusion: The additional qualification was valid and intra vires, and the resolution was not illegal or void.
Final Conclusion: The decree of the lower appellate court was set aside and the trial court's dismissal of the suit was restored, so the challenge to the resolution failed.
Ratio Decidendi: Unless prohibited by the Companies Act or inconsistent with the memorandum, a company may validly impose additional qualifications for directorship beyond any share qualification contemplated by its articles.
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