TMI Blog1956 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 12 of the Indian Companies Act, 1913, for confirming a special resolution duly passed at an extraordinary general meeting of the company held on 26th August, 1955. Both the special resolutions were to the effect that the registered office of the company be changed from the State of Orissa to the State of West Bengal. Both the companies were incorporated on 25th July, 1936, under the Indian Companies Act, 1913, as companies limited by shares. Clause (2) of the memoradum of association of the companies provides that the registered offices of the companies would be situated in the State of Orissa. It is at present situated at Brajrajnagar in the district of Sambalpur. Hindusthan Cellulose and Paper Mills Ltd., is a subsidiary company of Orient Paper Mills Ltd. The objects of the Orient Paper Mills Ltd. are to carry on the business of manufacturer of pulp, paper, boards and other articles and the business of buyers, sellers, dealers, exporters of any goods or merchandise whatsoever and to transact all manufacturing or treating and preparing processes and mercantile business and to purchase and vend raw materials and manufacturing articles. The objects of the Hind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the usual course of business. It is alleged that the transfer of the registered office of the company will not affect the rights and interests of the creditors in any way and that the company has ample working capital and its assets are more than sufficient to pay all its debts and to make good the whole of its paid up capital and that no one will be prejudiced by the change of the registered office of the company from the State of Orissa to the State of West Bengal. The Hindusthan Cellulose and Paper Mills Ltd. has no debenture creditors. It is alleged that it has only general creditors, in the ordinary course of dealings who are paid from time to time in the usual course of business and the transfer of the registered office of the company will not affect the right or interest of the creditors in any way and that it has ample working capital and its assets are more than sufficient to pay all its debts and to make good the whole of its paid up capital. Due publication of the applications was made in the Eastern Times and the Matrubhumi. The learned Advocate-General appeared and filed an objection in both the matters on behalf of the State of Orissa. The objections of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice to the people of Orissa. Publication of the notice of these applications was ordered to be made on 18th November, 1955. The learned Advocate-General appeared for the State on 16th March, 1956. Publication of the notice of these applications was made in two issues on 24th November, 1955. On 6th April, 1956, I ordered notice of this application to be taken to the Registrar of the Joint Stock Companies, Orissa. The Registrar of the Joint Stock Companies was served on 10th April, 1956. But he did not choose to appear and place before the court any material to enable it to come to a decision whether to confirm the special resolution or not. On 13th July, 1956, these petitions were heard in part and I directed the petitioners to produce before me certified copies of the applications made by the petitioners in 1947 to change the registered offices from Calcutta to Orissa as also the orders of the High Court of Calcutta on those applications and a statement showing the income-tax paid by the companies to the Central Government each year. The learned Advocate-General also was asked by me to produce if there is any material with the Government as to the reasons why the companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently, his contention is that the court should not take into account any objections raised by the State. I cannot accept this contention. Clause (2) of section 12 is definitely to the effect that the alteration shall not take effect until and except in so far as it is confirmed by the court on petition, and clause (3) states: "Before confirming the alteration, the court must be satisfied ( a ) that sufficient notice has been given to every holder of debentures of the company, and to any persons or class of persons whose interests will, in the opinion of the court, be affected by the alteration." This sub-section ( a ) of clause 3 requires notice to any persons or class of persons whose interests will, in the opinion of the court, be affected by the alteration. The expressions "any persons" or "class of persons" in this clause are very general and are applicable not only to the creditors or debenture-holders of a company but also to every person whose interests may be affected. Section 14 only requires that before exercising its discretion under sections 12 and 13, the court shall have regard to the rights and interests of the members of the company or of any class of them, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in England or Scotland, must be stated in the memorandum of association. This fixes the country in which the company is to be registered; and as in this respect the provisions of the memorandum are unalterable, the situation of the office cannot be changed from England to Scotland or vice versa.... The situation of the registered office fixes the domicile of the company, and is important as regards the court which has the jurisdiction to wind up the company." Though under section 12 of the Indian Companies Act of 1913 the memorandum of association may be altered with regard to its registered office by a special resolution to be confirmed by a court, yet it is clear from the unalterable nature of a registered office in England that the registered office of a company in India should not be altered and the alteration should not be confirmed as and when the company passes a special resolution. A company is a corporation in law and a company is a different entity in law from that of its shareholders. The interests of the company may also be different from the interests of the shareholders in certain respects. It cannot be predicated that the interests of the shareholders are iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners in the Calcutta High Court, it was clearly stated that the Mills of the companies are situated in Orissa and that the companies had to manage a large staff at that place and the management consequently, finds it more convenient to have the registered offices of the companies in Orissa. If it was more convenient to have the registered offices of the companies in Orissa on account of their mills being situate in Orissa and a large staff was maintained at that place, in 1947, I cannot understand how now it could be more convenient to have the registered offices at Calcutta in West Bengal when the mills still continue to be in Orissa and the companies maintain a large staff at that place. The reason for the company changing its registered office from West Bengal to Orissa in 1947 might be, though there is absolutely no specific evidence to that effect, as suggested by the learned Advocate-General, to obtain certain permits and concessions for bamboos which are so very necessary for a paper mill, the main objects of the companies being to carry on the business of manufacturer of pulp, paper, boards, etc. The learned Advocate-General on this ground, urges that the alte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the companies and the central departments of various companies under their managing agency are situated at Calcutta in the State of West Bengal and necessary staff for such work is kept there and the management consequently finds it more convenient and economical to have the registered offices of the companies in the State of West Bengal. When a change of the registered offices was effected in 1947 from West Bengal to Orissa on the ground that it would be more convenient to carry on the business of the companies if the registered offices are changed to Orissa, I cannot understand how a retransfer of the registered offices of the companies to West Bengal again on the same ground without stating any other additional reasons would be a bona fide one. There is some force, therefore, in the suggestion of the learned Advocate-General that the said special, resolution passed on 26th August, 1955, for transfer of the registered offices of the companies to Calcutta are not passed in good faith and are not bona fide. The proposed alteration of the registered offices from Orissa to Calcutta may not also be for the benefit of the companies. The mills being mills for manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the companies would be credited to the State of West Bengal and the said tax would not be taken into account by the Union Government as the tax received from the State of Orissa, though the paper mills of the company are situate in Orissa. The State of Orissa will thus lose a considerable portion of the contribution of the Central Government from out of the income-tax realised, to the State. The interest of the State therefore is affected if the special resolutions are to be confirmed. Next, the learned Advocate-General contends that a considerable amount of sales tax would be realised if the registered offices of the companies are situate in Orissa. Though the learned Advocate-General had not furnished any figures as to what is the amount of sales tax collected by the State from these two petitioners each yet there is no denying the fact that sales tax collected would be of a considerable amount. Generally, the contracts for purchase or sale are entered into with the companies at the registered offices and if the registered offices are to be situated at Calcutta the liability to sales tax may arise at Calcutta when the State of West Bengal only will be competent to colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t contains vast natural resources and has not yet developed as West Bengal, Bombay and Madras, as far as industrial progress is concerned. Many companies are formed for the purpose of starting factories in Orissa and they are obtaining all facilities and permits for the said purpose from the State of Orissa. The objections of Shri Pati are very humble objections. They show that the persons on whose behalf he made the objections are satisfied only if facilities are given to the people of Orissa for being employed as clerks or labourers in the registered offices of the companies or in the factories of the companies and for a peaceful continuance of those appointments. The change of the registered offices of the companies may affect even those humble aspirations of the people. The Indian Constitution is of a federal type. Each unit of the federation has exclusive fields of State activity and is entitled to develop its State in its own way. The interests of the State are to be taken into account and are of considerable importance in confirming special resolutions of the companies if they have adverse effect on the interests of the State concerned. To summarise, my findings are as f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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