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TMI Blog1957 (6) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ries on business; to give pensions, gratuities, or charitable aid to any person or persons who have served the company, or to the wives, children, or other relatives of such persons; and to form and contribute to provident and benefit funds for the benefit of any persons employed by the company." Broadly stated, this sub-clause deals with two distinct classes of objects. The first is the power to support and subscribe to any charitable object and the second class concerns the support for activities calculated to benefit the employees. In so far as the second part of the power conferred by the sub-clause is concerned, such power would be implied in any company doing business: but in so far as the first part is concerned, it is clear law that in order to justify contributions to charitable or public objects unconnected with the employees of the company, express authority is necessary. The proposed alteration of the memorandum seeks to split up sub-clause (r) into two parts, (r) (1) and(r) (2). I shall not reproduce (r) (1) because it deals with the power of the company to incur expense, broadly stated, for the welfare and benefit of its employees and there is no controversy about th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice, upon the ground of some notion of fancied policy or expedience, is a new doctrine in Westminster Hall, and has a direct tendency to render all law vague and uncertain.' 'Public policy', said Parke B. in Egerton v. Brownlow [1853] 4 HLC 1,123, 'is a vague and unsatisfactory term, and calculated to lead to uncertainty and error, when applied to the decision of legal rights; it is capable of being understood in different senses; it may, and does, in its ordinary sense, mean 'political expedience,' or that which is best for the common good of the community; and in that sense there may be every variety of opinion, according to education, habits, talents, and dispositions of each person, who is to decide whether an act is against public policy or not. To allow this to be a ground of judicial decision, would lead to the greatest uncertainty and confusion. It is the province of the statesman, and not the lawyer, to discuss, and of the Legislature to determine, what is best for the public good, and to provide for it by proper enactments. It is the province of the judge to expound the law only; the written from the statutes: the unwritten or common law from the decisions of our pred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the passages cited above that the doctrine should only be invoked in clear cases in which the harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inferences of a few judicial minds." This passage must, of course, be read, so far as India is concerned, with the qualification that to the extent to which the Constitution of India leaves the power of judicial review to the courts, the courts may in effect be legislating and not merely interpreting the law; but that question does not arise in the present proceedings. Remembering therefore this warning, I must now turn to the plea that the proposed alteration, in so far as it is calculated to enable the company to give contributions or donations, directly or indirectly, to political parties, is opposed to public policy. The great jurist Sir Frederic Pollock in his well-known treatise on Principles of Contract, 13th edn., at page 305, cites with apparent approval a passage from a decision of the Supreme Court of America in Marshall v. Baltimore and Ohio Railroad Co. [1853] 16 Howard 314 at 334 to the following effect: "It is an undoubted principle of the common law, that it will not lend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the Lobbying Act was designed to help prevent." (p. 625). There is, therefore, no doubt that in any event the more serious forms of lobbying amount to a corrupt practice; and it is quite conceivable that the power with which the company seeks to clothe itself may enable it to resort to such corrupt practices. At the same time, I am clear in my mind that if a company clothed with such authority proposed to make a contribution or donation to a political party for a corrupt purpose which is manifestly against public policy, a single shareholder could come to court and successfully restrain the company from making such donation or contribution or, if it is already made, compel the directors to make good such amount to the company. It is argued by Mr. Gandhi that this is such a case. It is said that what the company proposes to do is in effect to procure the vote of the Congress Party in the Legislature to industrial policies which serve its own ends; and in support of this plea reliance is placed on the averments made quite frankly on behalf of the company as to the purpose for which the alteration of the memorandum was felt to be necessary. The petition inter alia states: "It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in my opinion, is a perfectly legitimate purpose. If there was the remotest suggestion that the attempt was going to be made to influence the party to act contrary to its better judgment and in order to benefit the petitioners for a price, that would be a form of political corruption which would, beyond question, be against public policy. I am, therefore, clear in my mind that what the company proposes to do is not to resort to any political corruption. But then the question is : whether short of an obvious case of corruption of political life, is it or is it not right to hold that the power of giving donations or contributions to a political party has at least a tendency to corrupt political life and is therefore against public policy? If the contribution or donation was comparatively small, it may perhaps be safe to assume that it was not likely to have any such tendency; but if it is unusually large, must it not arouse suspicion and fear in the mind of a citizen who desires to have public life protected against any corrupt tendencies? The power of money is proverbially known to work in very many insidious ways difficult in many cases to detect, and the danger is obviously the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Committee, has found as a fact that there has been a widespread evasion of this particular regulation. In England one of the attempts that was made to regulate contributions to political parties was a resolution passed by Parliament in 1949, sponsored by the Labour Party recommending that all political parties should publish annual accounts; but the resolution has, so far, at any rate, as the Conservatives are concerned, remained a dead letter. In 1947 Lord Woolton had made a public appeal for a million pounds fighting fund for the Conservative Party; but no accounts are known to have been published of this fighting fund or any fighting fund that existed theretofore. Whilst these restrictions or attempted restrictions on the campaign funds of political parties in the two major democracies of the present day world may well indicate matters to which Parliament may be expected to apply its mind in order to secure the purity of political life and democratic institutions which we all so cherish, it is, in my opinion, not the function of the court to give effect to whatever may be its own personal view of what is right in this context, for then the court would be usurping what are un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholder as distinct from the interest of the company; but, in any event, if there are any dissentients among the shareholders, provision has been made in section 17(7) for the purchase of the interest of the dissentient shareholders. The shareholders appearing before me apparently do not desire that their interests should be purchased; and, therefore, I do not consider the plea that the alteration is not in the interest of the shareholders as being justified. The latter part of the plea that it is not in the interests of the general public is really in effect a branch of the argument that it is against public policy. It is said that if a political party depends for its campaign funds on financing by companies which are, by and large, employers of labour, it may induce the party to water down, if not to abandon, its policies of labour and other welfare legislation in favour of the employers, and in doing so, the party may be tempted to disregard even the directive principles of State policy in that regard which are set out in Part IV of the Constitution, but which are not enforceable in a court of law or otherwise. The danger that a political party may succumb to such an inducement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, it is not possible to uphold the plea that the proposed alteration is not in the interests of the public. I come lastly to the third ground of opposition that the proposed alteration does not fall within the scope of section 17(1) (a) or (b). I have already set out the relevant portions of this section. They correspond to the provisions of section 5(1) (a) and (b) of the English Companies Act, 1929. The new Act of 1948 in England no longer requires confirmation by a court but provides instead that the holders of not less than 15 per cent. of the company's issued share capital may apply to court for cancellation of an alteration made, and in that case the alteration will not have any effect unless it is confirmed by the court. Looking at the language used in section 17, it is clear that what is contemplated is an alteration in the provisions of the memorandum, and the word "alter" is undoubtedly equally applicable, whether what is sought to be done is to restrict or expand the objects in any manner. But then it is equally clear that the alteration must fall within any of the sub-clauses (a) to (g) set out in section 17(1) before it can be said to fall within the scope of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to observe: "That is to say, anything which occupies the time and attention and labour of a man for the purpose of profit is business." Obviously the Master of the Rolls had overlooked the word "improvement" in the definition and fixed upon the word "profit". Then Mr. Seervai draws attention to a later decision in Rolls v. Miller [1884] 27 Ch. D. 71, where the question that the court had to consider was whether there was a breach of a convenant not to carry on trade or business when the lessee was carrying on a charitable institution called "Home for Working Girls," where the inmates were provided with board and lodging free of charge. It appears that in the course of arguments Smith case (supra) was cited, although it is not referred to in any of the judgments in the case. Lord Justice Cotton at page 85 observes: "I cannot read the two words 'trade' and 'business' as synonymous. There may be a great many businesses which are not trades, and although, in my opinion, receiving payment for what is done, using what you are doing as a means of getting payment with a view to profit- whether profit is actually obtained or not, must of course be immaterial - is certainly material in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n jurisdiction was restricted to an activity similar to that in Rolls v. Miller [1884] 27 Ch. D. 71, any court would be inclined to hold that he was carrying on business within jurisdiction so as to confer jurisdiction on the court to entertain a suit against him. Moreover, if this argument of Mr. Seervai was to be accepted, it would lead to the consequence that the word "business" in sub-clause (a) is equated with the word "object". Now, the entire sub-section (i) of section 17 deals with alteration with respect to the objects, but when we come to sub-clauses (a) to (g), one of which has to be satisfied before an alteration with respect to the objects of the company can take place, we find that in some of these sub-clauses the word "business" is used and in others the word "object". Thus, for example, in sub-clauses (a) and ( d) there is a reference to the business, and while sub-clause (a) enables an alteration which has the effect of carrying on the business more economically or more efficiently, sub-clause (d) enables the carrying on of some additional business which may be conveniently or advantageously combined with the original business of the company. This would be an exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of the Act of 1908, which did not contain paragraphs (f) and (g) of the present sub-section, the court had jurisdiction to, and would in a proper case, sanction any alteration of the company's objects, even though consisting of the adoption of an entire new objects clause in modern form and comprising the ancillary powers mentioned in paragraphs (f) and (g) in substitution for an old restricted objects clause, upon its being satisfied that this was required to place the company on an equality, as regards the efficient or economical carrying on of its business, with more recently formed companies, or to remove any reasonable doubts entertained as to the extent of the company's ancillary powers." Relying on this passage Mr. Seervai for the petitioners has argued firstly, that the original sub-clause (r) of clause 3 of the memorandum which is sought to be altered may leave some doubt as to whether a contribution could or could not be made for a political cause, and the object of the alteration is to remove that doubt. He has also handed over to me a statement showing that some nine companies formed in comparatively recent years have in their memorandum an objects-clause which enab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving donations or contributions to political parties would be attaining its main purpose by "new or improved means ". I cannot conceive of donations or contributions being the means of attaining the purpose of manufacturing or selling steel, even giving to the word "means" the widest possible connotation. But I do not wish to be understood to have determined this question. I leave it open. That leaves one comparatively small matter, but a matter of some substance. Sub-clause (r) (2) as drafted uses in the concluding part the words "or any other institutions, objects or purposes or for any exhibition." These words, as they stand, may perhaps warrant the application of the ejusdem generis rule; but I do not consider it desirable, when an attempt is made to remove all doubts as to the scope of this clause, to leave it at that. Mr. Seervai told me that they had elicited the fact that according to modern practice of drafting the objects clause of public companies in England such a clause usually contains the words " any other useful institutions, objects, etc." I have no doubt that that is what was intended by those who drafted the clause and those who approved of it. But since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 nourished 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficiently; and (b) to attain its main purpose by new or improved means. What has been pressed before us by Mr. Seervai on behalf of the company-and we will limit this judgment to that part of the case only-is that the case clearly falls within clause (a), and the reason for altering the objects of the company for the purpose of enabling the company to make contributions to political parties is to enable it to carry on its business more efficiently. There was a great deal of learned discussion in the court below as to the proper connotation to be given to the expression "business" occurring in this sub-section. While it was sought to be argued on the one hand that "business" as used in this sub-section must be construed to mean an activity with a profit motive, on the other hand it was sought to be argued that the profit motive was unnecessary and any activity which was undertaken as a result of a duty or an obligation or a necessity in contradistinction to an activity undertaken merely for the purpose of pleasure, was a business. In our opinion, in the view we take of this section and also in view of the facts before us, it is unnecessary to decide that aspect of the matter. Now, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready in the memorandum of association an object or rather, if we may call it, a power conferred upon the company to support and subscribe to any charitable or public object, and any institution, society or club which may be for the benefit of the company, or its employees. The rest of the clause is not material for the purpose of this discussion. The amendment which is sought and which was sanctioned by the company, without going into its details, sought to confer upon the company the power to subscribe or contribute or otherwise to assist or to guarantee money to charitable, benevolent, religious, scientific, national, public, political or any other institutions, objects or purposes, or for any exhibition. Therefore, the material change which was sought to be introduced by this amendment and alteration was a power to contribute to political institutions, which power in express terms was not possessed by the company under sub-clause (r) of clause 3 of the memorandum. The reason why the company wanted this alteration has been set out in some detail in the petition. Attention is drawn firstly to the industrial policy of Government published on April 30, 1956, and it is stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l institutions, whatever an individual can do in order to earn profit can equally be done by a joint stock corporation, and what has been strongly urged upon us by Mr. Gokhale is that contribution to political funds is unlawful and the court will not sanction an amendment of the memorandum by which an object is sought to be introduced which permits the company to indulge in an activity which is unlawful. What is forcefully pointed out by Mr. Gokhale is that nothing could be more corruptive in a democracy than to permit industrial or commercial concerns to contribute funds to a political party. It is nothing short of buying over the party so that the party should pursue a policy which would be in the interests of the commercial and industrial concerns which make contributions to the funds of the party. Mr. Gokhale says that if this was permissible it would be impossible to get a party which is elected to power with the help of such financial aid to determine upon policies in the interests of the country, in the interests of socialism, or in the interests of democracy. The policies are bound to be coloured by the extraneous consideration introduced by the big businesses financing pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icult to understand how the question of public policy arises here. We are not dealing with a case of a contract or a trust. We are not considering whether a contract should be enforced or a trust should be given effect to. If a particular activity is lawful, then the only question is whether the activity is such as satisfies the condition laid down in section 17. Whether the activity is in our opinion harmful or prejudicial to national interests are considerations which strictly, as far as the law is concerned, cannot weigh with us in deciding whether the application of the company should be granted or not. It may, however, be pointed out in this connection, as the matter was discussed at great length in the court below and even here certain authorities were referred to, that even in England the payment to a political party by a business is not only not frowned upon but has actually been considered to be a legitimate business expense under certain circumstances. See Morgan v. Tate & Lyle Ltd. [1955] AC 21 In that case a company engaged in sugar refining incurred expenses in a propaganda campaign to oppose the threatened nationalization of the industry, and the Commissioners for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt to say that any asserted beneficial tendency of restrictions upon expenditures for publicising political views, whether of a group or of an individual, is certainly counterbalanced to some extent by the loss for democratic processes resulting from the restrictions upon free and full public discussion. The claimed evil is not one unmixed with good. And its suppression destroys the good with the bad unless precise measures are taken to prevent this." Therefore, the learned Judge really puts his finger on the crux of the matter. Democracy requires free and full public discussion. Free and full public discussion may not be possible unless various parties are financed to put their views before the public. The question is, how to draw the line between money contributed in order to help the democratic process of free and full public discussion and the highly undemocratic and corruptive influence of influencing policies of political parties by means of money lavishly contributed to its political funds. The present Chief Justice of the Supreme Court of America, Mr. Justice Warren, also had to consider this question in another connection in United States v. Harriss [1954] 347 US 612; 98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral though not a strained construction should be placed upon this section, and in order to realise how liberal a construction English Judges have put upon this section, it may be pointed out that although at present in the English Companies Act this section practically corresponds to ours, in the earlier Companies Act clauses (f) and (g) did not find a place, and when a company wanted to alter its memorandum in order to enable it to sell or dispose of the whole or any part of its undertaking, or to amalgamate with any other company, clauses (f) and (g ) not finding a place in the section, the courts were driven to confirm the alteration by holding that the case fell under clause (a) and it should be considered that selling the whole or part of the undertaking or amalgamation with any other company was for the purpose of carrying on business more efficiently. Therefore, we must give to the expression "efficiently" a very wide import and we agree with Mr. Seervai that we must construe "carrying on business more efficiently" to mean carrying on business in a manner which will produce the desired results or effects. In other words, if a particular method or mode or means in connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law that we have taken to prevent the company from reconstructing itself and to have a new memorandum including this object, and it is difficult to take the view that what the company can do on reconstruction legally and lawfully should not be permitted when it comes before the court by a simpler procedure and a less elaborate machinery under section 17 of the Act. With regard to the other point to which Buckley refers about removal of any reasonable doubts as to its power, there is quite a strong case made out on this aspect of the matter by the company. What is urged is that the company was advised that it had the power to contribute to political funds under clause (r) of article 3 of the memorandum of association as it stood before the amendment and what is said is that the clause enables the company to support and subscribe to any institution, society or club which may be for the benefit of the company or its employees, and it is argued that if the Congress is considered by the company for its benefit, then it would be open to it under this clause to subscribe to its funds, and attention is also drawn to clause (u) which is a power given to the company in the widest poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it seeks to take, it is not for us to tell the company how it should carry on its business if its shareholders think that the business should be carried on in a particular way. Mr. Seervai has drawn our attention to the very proud record of this company which in the past has made large and munificent donations to many worthy causes, and we asked Mr. Seervai whether the company thought that contribution to political funds was an equally worthy cause and whether the company was not conscious of the danger both to national and democratic interests in acquiring this power and making it possible to act in a manner which may not be in consonance with the high traditions which it has always maintained. But Mr. Seervai has pointed out that in fact circulars were issued to 37,000 shareholders of the company, that all the facts were pointed out, and that at the special general meeting the amendment was carried nem-con and, as it happened, also by a large number of shareholders voting in person and by proxy. Therefore, we have this other important factor before us that the shareholders of the company after considering the pros and cons of the matter have agreed that the funds of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company at the end of every financial year will publish in two leading newspapers in India, one of which must be published in Bombay a complete statement of all the contributions and donations made by it to any political party or any political institution or any political cause. Before parting with this case we think it our duty to draw the attention of Parliament to the great danger inherent in permitting companies to make contributions to the funds of political parties. It is a danger which may grow apace and which may ultimately overwhelm and even throttle democracy in this country. Therefore, it is desirable for Parliament to consider under what circumstances and under what limitations companies should be permitted to make these contributions. As Mr. Seervai has pointed out, it is only because the Tata Iron & Steel Co. did not have such a provision in its memorandum of association and had to come to court that we could impose this condition upon it. The other companies which have already such an object included in their memoranda are under no obligation to publish to the world what funds they are contributing and to whom. Democracy cannot function unless the voters have a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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