AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1960 (9) TMI 29
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....er deposits or to function as a bank until the Reserve Bank of India permits the said bank to do so." By a letter dated August 20, 1953, the company applied to the Reserve Bank of India for permission to carry on non-banking business. The Reserve Bank of India by its letter dated August 27, 1953, stated that if the company desired to convert itself into a non-banking company it should: (1)pass a resolution declaring in unequivocal terms its intentions to cease carrying on the business of banking; (2) lter the memorandum of association so as to delete therefrom such clauses as enable it to transact the business of banking; and (3)change its name so as to conform to section 7 of the Banking Companies Act, 1949. In pursuance of these directions of the Reserve Bank of India the company convened two separate meetings of the shareholders and creditors on June 28, 1954, and June 29, 1954, respectively to consider the question of conversion of the company into a non-banking company and at both these meetings it was unanimously resolved that the name of the company be changed to Mahaluxmi Loan and Trading Company Ltd. and the objects clauses in the memorandum of association be altered ....
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....lls of exchange, hundies, promissory notes, shares of joint stock companies and other transferable instruments. To buy, sell or other wise deal in bullions, jewels, Government promissory notes, Municipal and Port Trust debentures, War Bonds, Defence Certificates, Post Office Cash Certificates and like securities." It is not necessary to set out the other sub-clauses of clause B. "D. The word 'bank' be deleted and the word 'company' be inserted in its place wherever it occurs in clause 3 except in the fourth line of sub-clause (c) of clause 3 and the word ' banking * in sub-clause (1) be deleted and in its place the word 'similar' be inserted. The word ' other ' in the fourth line of sub-clause (c) be deleted. E. That the name of the company be changed to 'Mahaluxmi Loan and Trading Co. Ltd'." On March 25, 1955, the company applied to the Central Government for approval of the change of the company's name as Mahaluxmi Loan and Trading Co. Ltd. This step was obviously taken in view of the provisions of section 11(4) of the Indian Companies Act, 1913, which provides that "any company may by special resolution and subject to the approval of the Central Government signified in writi....
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....tion of the company be deleted." Resolved further that clause 3(c) be deleted and the following be inserted in its place : "To lend money to such person or persons or firms and at such terms as may seem expedient and in particular to customers or to Other persons having dealings with the company and to guarantee performance of contracts of members and/or persons having dealings with the company." The result was that the alterations, therefore, read as follows : "3(b) To borrow on interest or otherwise and4either with or without security from any person or persons, local authorities. Government. To raise money by issuing debentures charged upon all or any of the company's property both present and future and to purchase, redeem or pay off any such securities." 3 (c) As stated above. After this an application was made to this court for sanction of the special resolution effecting the said alterations. The court directed certain advertisements to issue and also directed service of the usual notices as required by section 17 of the Indian Companies Act, 1956. The Registrar of Joint Stock Companies filed an affidavit-in-opposition and at the hearing opposed the application but no ....
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....rporate or otherwise, can be a banker who does not (1) take deposit accounts, (2) take current accounts, (3) issue and pay cheques, and (4) collect cheques crossed and uncrossed for his customers." Sheldon in his book on the Practice and Law of Banking (seventh edition, at page 183) formulates the following definition of a "banker". "A person cannot claim to be carrying on the business of banking unless he receives money or instruments representing money on current account, honours cheques drawn thereon, and collects the proceeds of cheques which his customers place into his hands for collection." In the case of Bottomgate Industrial Co-operative Society, In re [1891] 65 L.T. (N.S.) 712 at 714, Smith, J., defines the business of "bankers" thus: "The principal part of the business of a banker is receiving money on deposit, allowing the same to be drawn against as and when the depositor desires, and paying interest on the amounts standing on deposit." Then section 6(1) of the Banking Companies Act, 1949, provides that in addition to the business of banking, a banking company may engage in any one or more of the different kinds of business specified in the various sub-clauses of s....
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....s become conclusive upon registration under section 18(1) of the Indian Companies Act, one finds it difficult to follow how the petitioner company can transact banking business or function as a bank by clever manipulation or in disguise. If the bank does any transaction of banking, such act would be ultra vires the company and illegal. Reference may be made in this connection to the case of Birkbeck Permanent Benefit Building Society, In re [1912] 2 Ch. 183 . In this case a building society was formed under the Building Societies "Act, 1936, in the year 1851 and it was never registered under the Building Societies Act, 1874. Its shares were divided into two classes-A and B shares. Rule 35 empowered its directors to borrow to an unlimited extent and rule 97 provided for the formation of a management and contingent fund and that the expenses of management, interest and bonus on A shares and any losses that might be incurred by the society should be defrayed out of that fund and the deficiency (if any) should be borne by the holders of B shares only in certain proportions. From its inception the society, in addition to the ordinary business of a building society, received money on dep....
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....in my opinion the acts of the society had brought it entirely beyond that stage, and for good or evil it must be taken to have been carrying on business as a bank." Buckley, L.J., at page 228 observed : "I find it plainly established that the business of banking as an independent and substantial business, not merely ancillary to or in aid of the building society business, was carried on by this society. Such business of banking was ultra vires. It was not authorised by any rule, unless it is rule 35, and if that rule was one which made the society a bank, then, in the words of Giffard, L.J., in Laing v. Reed [1869] L.R. 5 Ch. App. 4 the rule was repugnant to the Act, for it made the society a thing different from that which is specified in the Act and meant by the Act." For all these reasons the conclusion is inevitable that this ground on which the learned judge has refused the application cannot be sustained. The next point urged is that the petitioner company has failed to implement the scheme of arrangement which was sanctioned by this Court under section 153 of the Indian Companies Act on February 27, 1960, and it is now trying to get rid of the scheme and the controlling ....
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....of the power as conferred by these sections is, as has been pointed out by the English courts, fenced round by safeguards which were calculated to protect the interest of creditors, the interest of shareholders and the interest of the public. The creditors are protected by express provision in the section itself. Their consent has to be procured and their claims have to, be satisfied in certain events which are mentioned in the section itself. The public and the shareholders individually and collectively are protected by the necessary publicity of the proceedings and by the discretion which is entrusted to the court (see Jewish Colonial Trust Ltd., In re [1908] 2 Ch. 287). So, in determining whether the discretionary power of the court ought to be exercised in favour of the confirmation of the alteration and if so, in what manner, it is necessary to consider the facts of the case and the, background on which the alteration is asked for. It is clear that the company has not implemented the scheme of arrangement and, having regard to the long period that has elapsed since the sanction of the scheme, it is possible that the company may not be able in future to implement the scheme but....
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.... India as contemplated by that section. Section 49C is as follows : "Notwithstanding anything contained in the Companies Act, 1956, (1 of 1956), no application for the confirmation of the alteration of the memorandum of a banking company shall be maintainable unless the Reserve Bank certifies that there is no objection to such alteration." It is argued that this is a section which relates to procedure pure and simple, and as no one can have a vested right in procedure this section is attracted to the application for confirmation which is before us and unless the company succeeds in producing before the court the necessary certificate from the Reserve Bank to the effect that the Reserve Bank has no objection to the alteration, this court cannot grant this application for confirmation. It is to be noted that under section 17 of the Companies Act, 1956, the petitioner company had the right to present a petition for confirmation of an alteration provided the conditions laid down in that section had been fulfilled. What section 49C has done is to put an additional baron the presentation or maintainability of the petition by providing that a certificate is to be obtained from the Reser....