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2017 (8) TMI 391
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..... Ltd. (for short the Company). Suit was filed for declaration, cancellation, injunction and other reliefs against the Company and its directors. The directors are from the same family. Prayer clause (a) of the Suit reads as under :- (a) It may kindly be declared that the alteration made in the share capital clause No. V and increase made in the authorized share capital from Rs. 5,00,000/- to Rs. 1,00,00,000/- in the Memorandum of Association of the defendant no.1 Company in its extra ordinary general meeting dated 27/01/2015 by the defendants are illegal, null and void and the same may kindly be cancelled and/or set aside." 4. The plaintiff sought other declarations by way of various prayer clauses as described in the plaint. Pending the hearing, the plaintiff sought temporary injunction for giving effect to the Resolution passed in the EOGM dated 27/01/2015 and from passing proposed special resolution No.1, causing alteration in the Articles of Association of the defendant no.1. Plaintiff seeks restraining order against the defendants from claiming any rights on the basis of allotment of shares (rights issue) on 27/4/2015. 5. By an order dated 23/9/2015, learned 8t....
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....ccording to the plaintiff, was illegal, null and void. In para 18 of the plaint, it is contended by the plaintiff as under :- "18. It is further to the shock and surprise of the plaintiff that the defendant No. 2 to 5 as board of directors approved the alleged rights issue of Rs. 2,00,00,000/- (Two Crore Only) in their meeting held on 9/3/2015 without altering the share capital clause in the Articles of Association of the defendant No.1 Company, which action is grossly illegal, null and void on the part of the defendant No.2 to 5 being directors of the defendant No.1 Company and is liable to be set aside the same. The action of approving right issue by the defendant No.2 to 5 without altering the Articles of Association of the defendant No.1 Company cannot sustain under the provisions of law. Consequently, the defendant No.1 Company by its letter of offer dated 9/3/2015 allegedly offered alleged 10000 equity shares of Rs. 100/- each at a premium of Rs. 1900/- per equity share aggregating Rs. 2 Crore as rights issue to its members, which is in gross violation of the provisions of the Companies Act, 2013 and the same is liable to be set aside. It is submitted that the allege....
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....The Articles of Association were also amended, firstly, by passing resolution by simple majority and thereafter called EOGM of the company on 23/3/2017 and passed special resolution, amending the Articles of Association. The counsel, therefore, submitted that either way the Articles of Association were amended and there shall not be any impediment for the company to proceed further and take necessary steps. 12. Learned counsel submitted that impugned order suffers from non application of mind. The learned trial Judge failed to provide necessary reasoning in support of the order and the interpretation in respect of the provisions of Sections 13(1) and 61 of the Companies Act. Learned counsel places reliance on the judgment of Division Bench of this court in the case of Miheer Hemant Mafatlal vs. Mafatlal Industries Ltd. [1987 (89) Bom. L.R. 86], which is applicable to the principles of law enunciated by the appellants in this case in support of their arguments. 13. Learned counsel appearing for the respondent no.1 supported the order passed by the trial court. In the view of the learned counsel, Section 13(1) specifically refers to passing of special resolution for altering pr....
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.... Alteration of articles. - (1) Subject to the provisions of this Act and the conditions contained in its memorandum, if any, a company may, by a special resolution, alter its articles including alterations having the effect of conversion of - (a) a private company into a public company; or (b) a public company into a private company: Provided that where a company being a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, the company shall, as from the date of such alteration, cease to be a private company. Provided further that any alteration having the effect of conversion of a public company into a private company shall not take effect except with the approval of the Tribunal which shall make such order as it may deem fit. 61. Power of limited company to alter its share capital.- (1) A limited company having a share capital may, if so authorised by its articles, alter its memorandum in its general meeting to - (a) increase its authorised share capital by such amount as i....
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....to Section 64 shows that a notice could be given to Registrar for alteration of share capital. One of the method prescribed for alteration of share capital is in the manner specified in sub-section (1) of Section 61. A company is entitled to alteration of its memorandum in the prescribed manner as provided by the said provision. In the facts of the case, provisions of Sections 13 and 61 will be material having bearing in appreciating the facts of the case. 16. The respondent no.1 - plaintiff filed the Suit on 15/3/2016. On 23/9/2015, an interim order was passed by the trial court, the operative portion of which reads as under :- "1. The defendants are hereby restrained from holding EOGM on dated 25/09/2015 as scheduled in notice dated 20/08/2015 at Pune. 2. The plaintiff is directed to comply as per Order 39 Rule 3 of Code of Civil Procedure. 3. Issue notice to defendants as to why this order should not be confirmed till disposal of the application below Exh.5. The Trial Court passed interim order dated 29/9/2016, the operative portion of which reads as under :- "(1) The defendant No.2 to 6 are hereby temporarily restrained from making changes....
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.... was held on 27/1/2015 for amendment of Clause V of Memorandum of Association so as to increase share capital from Rs. 5,00,000/- to Rs. 1,00,00,000/-. On that day, first resolution was passed, and the second resolution could secure simple majority. Therefore, the counsel appearing for the respondent no.1-plaintiff submitted that the amendment of Articles of Association was not at all passed in a special resolution by 3/4th majority. 20. It is clear from the record that the plaintiff did not file any suit soon after the amendment of the Memorandum of Association of the company. The suit was filed at a belated stage when the substantive steps were taken by the Board of Directors by passing resolution and taking steps to get it registered with the Registrar of Companies. It is necessary, at this stage, to refer to Clause 7 of the Articles of Association, which reads as under :- "7. Subject to the provisions of the said Act, the Company shall be entitled, to exercise the powers to alter the conditions of its Memorandum so as to increase, consolidate and divide its share capital, convert shares into stock, subdivide or cancel shares as provided in section 94 of the said Act....
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....and accordingly the resolution was passed amending he Articles of Association by simple majority. The company consists of six directors who are family members inter se. The trial court while passing order below Exhs. 5, 40 and 54 prescribed the reasoning, which appears to be in para 27 of the order. It is the finding of the trial court that if the defendants want to make any alteration in the Articles of Association, it should be in consonance with the provisions of the new Act. 23. On behalf of the appellants reliance was placed on the Judgment of this court in the case of Miheer Hemant Mafatlal vs. Mafatlal Industries Ltd. (Supra) and on behalf of the respondent no.1, reliance was placed on the judgment of the Supreme Court in the case of M.S. Madhusoodhanan and anr. Vs. Kerala Kaumudi (P) Ltd. and ors. (Supra) before us. Both these cases were cited before the trial court. The trial court referred to these cases. We have also perused the judgments cited before us (Supra). Prima facie, we find that the plaintiff approached the trial court at a belated stage. By that time, the resolution for amending Memorandum of Association was passed in the meeting held on 27/1/2015 by simple....
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....ovisions which are required by section 13 or by any other specific provision contained in this Act to be stated in the memorandum of the company concerned shall be deemed to be conditions contained in the memorandum. (3) Other provisions contained in the memorandum including those relating to the appointment of a managing director or manager, may be altered in the same manner as the articles of the company, but if there is any express provision in this Act permitting of the alteration of such provisions in any other manner, they may also be altered in such other manner. (4) All references to the articles of a company in this Act shall be construed as including references to the other provisions aforesaid contained in its memorandum. Section 31 of the Act of 1956 refers to alteration of articles by special resolution, which reads as under :- "31. Alteration of articles by special resolution.- (1) Subject to the provisions of this Act and to the conditions contained in its memorandum a company may, by special resolution, alter its articles: Provided that no alteration made in the articles under this subsection which has the effect....