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HIGH COURT OF CALCUTTA
B. C. Mitra
IN RE: STANDARD GENERAL ASSURANCE CO. LTD. - Appellant
Versus
STATE - Respondent
Company Petn. 21 Of 1964
Decided On : MAY 15, 1964
COMPANY - Alteration of Memorandum of Association - Confirmation - Conditions - Conveniently or advantageously combined with existing business - Financial position of company - Paramount or main object of company - Doctrine of substratum of company - Special Resolution - Validity.
Fact of the Case:
The company was incorporated in 1943 under the Indian Companies Act, 1913. The objects of the company, inter alia, were to carry on all kinds of insurance, guarantee and indemnity business. The insurance business was to include Life Assurance, Fire Insurance, Marine and Aerial Insurance, Transit Insurance, Accident Insurance and other varieties of Insurance business. Among the other objects were the purchase of and dealing in and lending on life, reversionary and other interest in property of ail kinds, to act as agent for the Issue of bills, bonds, debentures stock and to guarantee the subscription of any such shares or securities and act as trustees, executors or administrators. One among the other objects of the company of which mention should be made is to carry on business as capitalist, financiers, concessionaries and merchants and to undertake and carry on and execute all Kinds of financial, trading and other operations. Notice should be taken of another object clause whereby the objects specified in each paragraph of the memorandum of association was to be in nowise limited or restricted by reference to or inference from the terms of any other paragraph or the name of the company, except where otherwise expressed in such a paragraph. This provision in the memorandum makes each object an independent object and not a subsidiary of any other object.
Finding of the Court:
The court held that the alterations sought for by the company were permissible under Section 17 (1) (d) of the Companies Act, 1956, as the new business could be conveniently and advantageously combined with the existing business of the company. The court also held that the company's financial position was sound and that the alterations were fair to all classes of members of the company. The court further held that the doctrine of paramount or main object of the company was not relevant in an application for confirmation of alterations in the memorandum of association, and that the decision of the shareholders and directors of the company to carry on the new business proposed under the altered object must prevail.
Issues: Whether the alterations sought for by the company were permissible under Section 17 (1) (d) of the Companies Act, 1956. Whether the company's financial position was sound and the alterations were fair to all classes of members of the company. Whether the doctrine of paramount or main object of the company was relevant in an application for confirmation of alterations in the memorandum of association.
Ratio Decidendi: The court held that the alterations sought for by the company were permissible under Section 17 (1) (d) of the Companies Act, 1956, as the new business could be conveniently and advantageously combined with the existing business of the company. The court also held that the company's financial position was sound and that the alterations were fair to all classes of members of the company. The court further held that the doctrine of paramount or main object of the company was not relevant in an application for confirmation of alterations in the memorandum of association, and that the decision of the shareholders and directors of the company to carry on the new business proposed under the altered object must prevail.
Final Decision: The court ordered that the alterations of the memorandum of association of the company be confirmed in terms of the Special Resolution passed at the extraordinary general meeting of the company held on July 12, 1963. The court also directed that the company should take steps to change its name so as to indicate the new business it would be entitled to carry on under the alterations in the object clauses of its memorandum of association confirmed by the order.
( 1 ) THIS is an application under Section 17 of the Companies Act 1956, for confirmation of the alterations of the memorandum of association of the applicant company in terms of the special resolution passed at on extraordinary general meeting of the company on July 12, 1963.
( 2 ) THE company was incorporated in 1943 under the Indian Companies Act, 1913. The objects of the company, inter alia, were as follows: to carry on all kinds of insurance, guarantee and indemnity business. The insurance business was to include Life Assurance, Fire Insurance, Marine and Aerial Insurance, Transit Insurance, Accident Insurance and other varieties of Insurance business, set out under paragraph 3 of the petition. Among the other objects were the purchase of and dealing in and lending on life, reversionary and other interest in property of ail kinds, to act as agent for the Issue of bills, bonds, debentures stock and to guarantee the subscription of any such shares or securities and act as trustees, executors or administrators. One among the other objects of the company of which mention should be made is to carry on business as capitalist, financiers, concessionaries and merchants and to undertake and carry on and execute all Kinds of financial, trading and other operations. Notice should be taken of another object clause whereby the objects specified in each paragraph of the memorandum of association was to be in nowise limited or restricted by reference to or inference from the terms of any other paragraph or the name of the company, except where otherwise expressed in such a paragraph. This provision in the memorandum makes each object an independent object and not a subsidiary of any other object.
( 3 ) ON July 12, 1963, a special resolution was passed at an extraordinary general meeting of the company whereby subject to confirmation by this court, it was resolved to alter the memorandum of association of the company as set out under paragraph 6 of the petition. The net effect of the resolution is that the company seeks to abandon insurance business of all kinds and to acquire the following new objects; (1) to carry on business as manufacturers of and dealers in chemicals, petro-chemicals, drugs, essences, acids etc. , (2) to carry on business of engineers, metallurgists, iron, steel and brass founders, metal makers, moulders etc. , (3) to execute contracts for supply or use of any machinery and to carry out ancillary or other works comprised in such contracts, (4) to carry, on business of Importers, exporters, merchants, ship owners and charterers of ships and transport and haulage contractors etc. , (5) to render pecuniary or other assistance for helping settlement of industrial or labour problems or the promotion of industry or trade and to oppose legislation which may seem disadvantageous to the company, (6) to subscribe for any purpose which has a political object.
( 4 ) IN the petition it is alleged that in the opinion of the directors and share-holders of the company, the general insurance business of the company declined for various reasons including uncertain conditions of insurance market, and due to such shrinkage in such business the share-holder would not get a sufficient return. The company therefore ceased to carry on any insurance business from May 1, 1963, and reinsurance business from May 31, 1963. The company, it is claimed, is developing its investment, financing and other businesses which the company is authorised to carry on.
( 5 ) IT is alleged in the petition that the memorandum of association of the company is not adequate for the business needs of the company and it is necessary and desirable that the company should acquire new objects to carry on the business which may be conveniently or advantageously combined with the existing business of the company. An abstract of the financial position of the company has been set out under paragraph 12 of the petition and from this abstract it appears
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