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1961 Supreme(Online)(Cal) 6
CALCUTTA HIGH COURT
S. C. Lahiri, C. J., *H. K. Bose, J.
Mahaluxmi Bank Ltd. Appellant v. Registrar of Companies West Bengal
A. F. O. O. No. 267 of 1959
Important Points
Subject
Corporate Law - Banking Regulation
Act Referred
Headnote
(B) Alteration of Memorandum - The court evaluated regulatory compliance and the necessity of Reserve Bank certification, concluding that the section requiring a certificate was not retroactive and did not apply to the appeal at hand. (Paras 10-11)
Facts of the case:
The appellant sought to confirm modifications to cease banking operations following regulatory guidance. An initial resolution and subsequent application to the High Court was opposed, leading to dismissal by P.B. Mukharji, J.
Findings of Court:
The resolution to amend was valid under the Companies Act, as no objections from creditors or shareholders were presented.
Issues: The core issue was whether the proposed amendments would legitimize the appellant’s former banking activity, subject to regulatory implications.
Ratio Decidendi: The essential character of banking cannot be claimed without deposit acceptance; therefore, changes to the Memorandum were warranted upon consensus.
Result: Appeal allowed.
| Table of Content |
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| 1. the appellant company sought confirmation to transform from a banking to a non-banking entity. (Para 1 , 2 , 3) |
| 2. definitions and requirements of banking are established, underscoring the importance of deposit acceptance. (Para 5 , 6 , 7) |
| 3. judicial interpretation clarifies that previous regulatory effects and actions must be upheld. (Para 8 , 9) |
| 4. the court concluded that alteration applications are subject to reserve bank approval but are not retroactive. (Para 10 , 11 , 12) |
1. This is an appeal from an order of P.B. Mukharji, J. dated the 15th June, 1959 dismissing an application for confirmation of certain alterations in the object clauses of the Memorandum of Association of a company known as Mahaluxmi Bank Ltd.
2. The appellant company was incorporated under the Indian Companies Act in 1910 as a company limited by shares to carry on inter alia the business of banking. On 27th February, 1950 by an order made by this Court a scheme of arrangement between the company and its creditors was sanctioned and by the said order the company was prohibited from receiving further deposits or to function as a bank until further orders from the Reserve Bank of India. The relevant portion of that order read as follows :
"And it is further ordered that the said company shall not be entitled to receive further deposits or to function as a Bank until the Reserve Bank of India permits the said Bank to do so."
By a letter dated 20th August, 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 the 27th August 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) alter 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 S.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 share - holders and creditors on 28th June, 1954 and 29th June, 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 object clauses in the Memorandum of Association be altered suitably. Thereafter by a special resolution of the company passed at an Extraordinary General Meeting of the company held on 14th August, 1954, it was resolved that the objects of the company be altered by abandoning the object clauses relating to banking and to expand the scope of its object with a view to carry On other non - banking business which under existing situation may conveniently and advantageously be taken up and carried on with its existing non - banking business. On 7th September, 1954, the company made an application to this Court for confirmation of the alteration of its objects as passed by the special resolution dated the 14th of August, 1954 and upon presentation of such application directions were given for proper advertisements and for service of notice on the Reserve Bank of India and the Registrar of Joint Stock Companies, West Bengal. It appears that the Registrar of Joint Stock Companies thereafter filed an affidavit - in - opposition in answer to this application and also appeared at the hearing of the application and opposed the application but on the 25th January. 1955 this Court made an order confirming the said alteration. A certified copy of this order was duly filed with the Registrar of Joint Stock Companies as required under the provisions of the Indian Companies Act and it appears that on the 29th May, 1958, the registration was effected by the Registrar of Joint Stock Companies. The alterations that
