TaxTMI 
TaxTMI 
1962 (6) TMI 42
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....ubscribe for, purchase or otherwise acquire and hold, sell, dispose of and deal in shares, stocks, debentures stocks or securities of any company or of any authority supreme, municipal, local or otherwise'," As section 293 of the Companies Act, 10.56, applies to a public company or a private company which is a subsidiary of a public company, it is obvious that it cannot be attracted to the present case of a private limited company. But Mr. S.C. Sen, learned counsel for the company, has invited me to impose the limits prescribed by section 293(1)(c) of the Companies Act, 1956, as to the quantum of contribution or subscription. Mr. Sen has also said that if this proposal does not appeal to me I may impose such restrictions as t may choose. It is stated in the petition that the proposed extension of the objects of the company is required to enable the company to carry on its business more conveniently, advantageously and efficiently than before. The company has no debenture debt nor any other debt nor any creditor except the Punjab National Bank Limited, the Central Bank of India Limited and the Bank of India Limited. These creditors have no objection to the order being made. ....
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....ase of controlling shares of the owner company management of a tea garden may very easily be taken over or the business carried on in conjunction and more efficiently. By the second method stamp duty of twelve annas per cent. is payable as against one rupee and a hall per cent. in the case of a sale deed and there are no registration expenses at all. (c)Sometimes large sums of moneys may remain idle in the hands of the company. For such moneys the company can earn only a small amount by way of interest. The company can invest surplus moneys profitably in the purchase of debentures, equity shares and other good securities of reputed companies and corporations, of the Poit Trust and of the Government. (d)It is prevalent among tea companies to invest and deal in shares and securities. On enquiry it has been found that several reputed tea companies make these investments. Their names have been set out in paragraph 3(1) of the affidavit. (e)Twelve other companies under the same management have obtained sanction from the court on the 2nd May, 1960, for similar alterations in their respective memoranda of association. A list of these companies have been given in paragraph 3(g) of....
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.... advantageously be combined with the business of the company. Mr. D. K. Sen has also referred to section 17(1)(e) which provides that the memorandum may be altered to restrict or abandon any of the company's objects specified therein. According to learned counsel in a case of restriction or abandonment of object the court has wider powers. In all other cases the court should be cautious so that the main objects of the company are not lightly interfered with. Reliance was placed in this connection on the observations of P.B. Mukharji J. in In the matter of Bhutoria Brothers (Private) Ltd. [1958] 28 Comp. Cas. 122 , 131-132 ; 61 C.W.N. 897 at pages 905 to 906 that "apparently the Companies Act, 1956, in India has not adopted the modern English law on the subject. In England the power to alter the objects of the company was first given by the Companies (Memorandum of Association) Act, 1890, which allowed the provisions of the memorandum to be altered for certain specified purposes by special resolution confirmed by the court, and this power was extended from time to time. It was later found that the procedure for altering the objects in that manner was cumbersome and expensive and ....
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....e estate or property or assets of any kind acquired or to be acquired by the company, or for any services rendered by, or to be rendered to, the company, and generally to pay or discharge any consideration to be paid or given by the company in money or in share or stock or debenture or debenture stock or obligation of the company or partly in one way and partly in another or otherwise however, with power to issue any shares or stocks as fully or partially paid up". If the company wants to purchase any shares in other tea companies, shares being movable properties can be purchased under sub-clause (r). It appears, therefore, according to Mr. Sen, that the proposed sub-clause (r(ii)) is wholly unnecessary; yet the company wishes to introduce it because its whole purpose is to avoid the payment of stamp duty and registration expenses in an attempt to secure control over other tea companies. The memorandum as it now stands permits acquisition of these shares in an honourable way. Bat now the company wishes to adopt dishonourable tactics. In paragraph 3(f) of this affidavit it is stated that tea companies now-a-days invest and deal in shares and securities, the names of some of these co....
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.... to benefit the company" : vide Palmer's Company Precedents, 17th edition, part I, pages 305 and 306. In this state of the law I have to overrule the contention of learned counsel for the respondent that the proposed sub-clause (r(ii)) is wholly in necessary. I do not find in sub-clauses (i) and (r) of clause (3) of the memorandum of this company any specific powers to take shares in another company. Consideration like avoidance of stamp duties or registration expenses appear to me to be immaterial as I do not find in Hariprosad's affidavit affirmed on the 19th December, 1960, anything to indicate that the company wishes to carry on its business illegally or that it proposes to acquire controlling shares in other tea companies unlawfully. I have already referred to the judgment of P. B. Mukharji J. in In the matter of Bhutoria Brothers (Private) Ltd. [1958] 28 Comp. Cas. 122 , 128 ; 61 C.W.N. 897. With reference to the construction and interpretation of the language of section 17(1)(b) his Lordship has observed at page 903 as follows: "That provision says that the memorandum may be altered with respect to the objects of the company to enable it to carry on ' some business ....
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....ance Act, 1938, also elaborate provisions have been made regarding the nature of investments of an insurer. So far as the present company is concerned my attention has not been drawn to any such legal restrictions. In New Westminster Brewery Co. Limited In re [1911] 105 L.T. 946, it has been held that the court under section 91 of the Companies (Consolidation) Act, 1908, may sanction very extensive alteration of the object of a company including a power to purchase other undertakings, a power to amalgamate with other undertakings and a power of sale of the whole undertaking of the company. A power to lease the whole undertaking of the company could also be sanctioned under section 91 : vide Anglo-American Telegraph Co. Ltd. In re [1911] 105 L.T. 947. In view of the averments in paragraph 3 of the supplementary affidavit of Hariprosad Kanoi affirmed on the 19th December, 1960, and upon consideration of the authorities on this point 1 do not find any reason to refuse the addition or alteration asked for in the proposed sub-clause (r(u)) of clause 3 of the memorandum. I shall now deal with the objections of learned counsel for the respondent to sub-clause (r(ii). It is true that....
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.... made an application to the Bombay High Court with the same end in view. In Jayantilal v. Tata Iron & Steel Company [1957] 27 Comp. Cas. 604 Chagla C.J. his expressed the view that it is axiomatic that what an individual can lawfully do can be done by a joint stock corporation. There is nothing to prevent an individual from making any contribution, however large, to the political funds of a party, and if an individual can contribute to the political funds of a party, in law it is difficult to understand how a company can be prevented from doing so. The same conclusion was reached by the Madras High Court in Sri Natesar Spinning and Weaving Mills Private Limited In re [1960] 30 Comp. Cas. 54 , 61 ; AIR 1960 Mad. 257. Ramaswami J. observes at page 260 as follows : "It is not disputed that similar companies in Coimbatore District have subscribed funds to political parties. Therefore, when we have this important factor before us, namely, that the shareholders of the company after considering the pros and cons of the matter have agreed that the funds of the company may be utilised for contribution to the funds of a political party, it does not seem to be right to me to take a view....