A company can amend its Memorandum of Association to permit contributions to political parties under Section 17(1)(a) and (b) of the Companies Act, 1956, if such contributions are considered to be in the best interests of the company and would enable it to carry on its business more efficiently.

Headnote:
TATA IRON AND STEEL COMPANY LTD. - COMPANY LAW - COMPANIES ACT, 1956 - SECTION 17(1)(A) AND (B) - AMENDMENT OF MEMORANDUM OF ASSOCIATION - CONTRIBUTION TO POLITICAL PARTIES - LEGALITY - PUBLIC POLICY - CONSTRUCTION OF "EFFICIENTLY" - DISCRETION OF COURT - CONDITIONS FOR CONFIRMATION - PUBLICITY OF CONTRIBUTIONS - NECESSITY FOR LEGISLATIVE CONTROL.
Fact of the Case:

Tata Iron and Steel Company Ltd. (TISCO) sought to amend its Memorandum of Association to permit contributions to political parties. The amendment was passed by the requisite majority of shareholders but required confirmation by the Court under Section 17 of the Companies Act, 1956.
Finding of the Court:

The Court held that the proposed amendment was lawful and fell within the ambit of Section 17(1)(a) and (b) of the Companies Act, 1956, as it would enable the company to carry on its business more efficiently. The Court also held that the contribution to political parties was not against public policy and that the company had the power to make such contributions under the existing provisions of its Memorandum of Association.
Issues: 1. Whether the proposed amendment to the Memorandum of Association was lawful and fell within the ambit of Section 17(1)(a) and (b) of the Companies Act, 1956? 2. Whether the contribution to political parties was against public policy? 3. Whether the company had the power to make such contributions under the existing provisions of its Memorandum of Association?
Ratio Decidendi: 1. The Court held that the proposed amendment was lawful and fell within the ambit of Section 17(1)(a) and (b) of the Companies Act, 1956, as it would enable the company to carry on its business more efficiently. The Court interpreted "efficiently" in a broad sense, holding that it included any method or means that would produce the desired results or effects, including contributions to political parties that could benefit the company. 2. The Court held that the contribution to political parties was not against public policy, as there was no law in India prohibiting such contributions. The Court also noted that in England and the United States, such contributions were not only lawful but were considered legitimate business expenses in certain circumstances. 3. The Court held that the company had the power to make such contributions under the existing provisions of its Memorandum of Association, specifically under Clause (r) which allowed the company to support and subscribe to any institution, society, or club that may be for the benefit of the company or its employees.
Final Decision: The Court dismissed the appeal and confirmed the amendment to the Memorandum of Association, subject to the condition that the company would publish a complete statement of all contributions and donations made by it to any political party or cause in two leading newspapers in India at the end of every financial year.

Judgment -

1. It is with considerable uneasiness of mind and a sinking feeling in the heart that we approach this appeal and the proposal of the Tata Iron Steel Co. Ltd. that they should be permitted by an amendment of their Memorandum of Association to make contributions to political parties. Democracy in this country is nascent and it is necessary that that democracy should be looked after, tended and nurtured so that it should rise to its full and proper stature. Therefore, any proposal or suggestion which is likely to strangle that democracy almost in its cradle must be looked at not only with considerable hesitation but with a great deal of suspicion. Now, democracy is a political system which ensures decisions by discussion and debate, but the discussion and debate must be conducted honestly and objectively and the decisions must be arrived at on merits without being influenced or actuated by any extraneous considerations. On first impression it would appear that any attempt on the part of anyone to finance a political party is likely to contaminate the very springs of democracy. Democracy would be vitiated if results were to be arrived at not on their merits but because money played a part in the bringing about of those decisions. The form and trappings of democracy may continue, but the spirit underlying democratic institutions will disappear. History of democracy has proved that in other countries democracy has been smothered by big business and money bags playing an important part in the working of democratic institutions and it is the duty not only of politicians, not only of citizens, but even of a Court of law, to the extent that it has got the power, to prevent any influence being exercised upon the voter which is an improper influence or which may be looked at from any point of view as a corrupt influence. The very basis of democracy is the voter and when in India we are dealing with adult suffrage it is even more important than elsewhere that not only the integrity of the representative who is ultimately elected to Parliament is safeguarded, but that the integrity of the voter is also safeguarded, and it may be said that it is difficult to accept the position that the integrity of the voter and of the representative is safeguarded if large industrial concerns are permitted to contribute to political funds to bring about a particular result. On the other hand, we must not also overlook a circumstance which is inseparable from the way the world has developed and democratic institutions have evolved. We are no longer dealing with a city State where democracy flourished among the few thousand citizens who knew each other, who knew the representatives, who knew the conflicting policies which they had to adjudicate upon. We are now dealing with a democracy which is spread over a whole continent; we are dealing with millions of voters; and whether it is a desirable or an undesirable result, the result has undoubtedly come about that you need large organizations, you need large political parties, you need modern methods of carrying on propaganda, and all that requires money and funds, and money and funds are to be obtained and normally they are obtained by the party from its sympathisers and supporters. But whatever our view may be as to the Tightness or wrongness of what the Tata Iron Steel Co. proposes to do, however strongly we may feel that the danger of the corrupting influence of money must not be allowed to increase in this country and it must be strongly curbed, we could only be guided sitting in a Court of law by legal principles and not by our own views as to politics or morality.

2. Turning to the petition from which this appeal arises, the petition is for confirmation of an alteration sought to be made in the Memorandum of Association of the Company. It was passed as a special resolution by the requisite majority in the shareholders meeting, and as required by Section 17 of the Companies Act, before it be

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