1956 (8) TMI 31 - HC - Companies Law

Court dismisses special resolutions as not bona fide, orders costs. Consolidated hearing fee set at Rs. 250.

Orient Paper Mills Ltd. Versus State

The court refused to confirm the special resolutions and dismissed the applications with costs, stating that the special resolutions of the two companies ... Memorandum of association – Special resolution and confirmation by CLB required for alteration of and Registered office of company Issues Involved:1. Competence of the State of Orissa or any other person to raise objections under section 12 of the Indian Companies Act, 1913.2. Consideration of objections by the court in confirming or not confirming the special resolutions.3. Practical difficulties in the administration of various Acts concerning industrial disputes and factories and labor.4. Impact of the proposed alteration on the revenue of the State of Orissa.5. Bona fide nature and good faith of the proposed change of the registered offices of the companies.Issue-Wise Detailed Analysis:1. Competence of the State of Orissa or any other person to raise objections under section 12 of the Indian Companies Act, 1913:The court held that the State of Orissa or any other person is competent to raise objections under section 12 of the Indian Companies Act, 1913, to a change of the registered office and confirmation of the special resolution to that effect. The court emphasized that the expressions 'any persons' or 'class of persons' in clause 3(a) of section 12 are very general and applicable not only to the creditors or debenture-holders of a company but also to every person whose interests may be affected by the alteration.2. Consideration of objections by the court in confirming or not confirming the special resolutions:The court can consider these objections in confirming or not confirming the special resolutions of the companies and can, if the objections are justified, refuse to confirm the special resolutions. The court noted that it must have regard to the rights and interests of the members of the company or any class of them, as well as to the rights and interests of the creditors, but this does not fetter the court's power to consider objections from any person or class of persons whose interests are affected.3. Practical difficulties in the administration of various Acts concerning industrial disputes and factories and labor:The court found that the proposed alteration creates many practical difficulties in the administration of various Acts concerning industrial disputes and factories and labor. The court noted that labor strikes are frequent, and the State, in the interests of law and order, would face difficulties if responsible officers of the company are not on the spot to reconcile differences between labor and capital.4. Impact of the proposed alteration on the revenue of the State of Orissa:The court held that the proposed alteration affects the revenue of the State of Orissa to a considerable extent. The court noted that the State of Orissa would lose a significant portion of its revenue from income tax and sales tax if the registered offices of the companies are transferred to West Bengal. The court also highlighted that a large portion of the income-tax realized by the Central Government is paid to the respective States in proportion to the tax realized from the State concerned.5. Bona fide nature and good faith of the proposed change of the registered offices of the companies:The court found that the proposed change of the registered offices of the companies is not bona fide and is not resolved upon in good faith and is not for the benefit of the companies. The court noted that the companies had previously changed their registered offices from West Bengal to Orissa in 1947 on the grounds of convenience due to the location of their mills and large staff in Orissa. The court found that the reasons provided for the current proposed change back to West Bengal were not convincing and suggested that the change was not made in good faith.Conclusion:The court refused to confirm the special resolutions and dismissed the applications with costs, stating that the special resolutions of the two companies passed on 26th August, 1955, are not bona fide and would create many practical difficulties. The consolidated hearing fee for both applications was fixed at Rs. 250.