TMI Blog1971 (9) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... document disclosed whether permission has been obtained from the Central Government as required under the Monopolies and Restrictive Trade Practices Act for establishing the undertaking of Swadeshi Politex Ltd. which, when established, would be an inter-connected undertaking of the respondent company. (b) The said documents informed the members that the work of the said polyester fibre plant has commenced; no disclosure was made whether a licence has been obtained in respect thereof as required by Section 11 of the Industries Act. (c) None of the terms and conditions of the collaboration agreement --financial, technical or otherwise -- were disclosed. 4. The learned trial Judge held that, in his opinion the undertaking of Swadeshi Polytex Ltd. transpires to be an inter-connected undertaking of the respondent company to which Section 22 of the Monopolies and Restrictive Trade Practices Act, 1969 will apply. The learned Judge also held that the shareholder plaintiff had a legal right to bring an action against the company of which he is a share-holder, to restrain it from committing an illegal act under the Monopolies and Restrictive Trade Practices Act or from question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of facts, one more point has to be noted. The plaintiff in this case filed another suit in the High Court being Suit No. 105 of 1970. That suit was instituted on or about the 26th day of February, 1970 and a prior suit. In that suit, the prayer inter alia was a declaration that the notice dated the 29th January, 1970, with an explanatory note annexed thereto, was bad, inoperative and of no effect and for permanent injunction restraining the respondents from implementing or giving effect to any of the resolutions passed at the meeting. There, in that suit. Ghose, J., ordered on the 8th September, 1970 :-- There shall be an interim injunction restraining the respondent directors (company's directors) from acting on the resolution No. 1 passed at the general meeting held on the 27th February, 1970 until the same is confirmed and approved at a meeting properly notified. All other interim orders stand vacated. The respondents called a properly notified meeting and the resolution has been unanimously passed, confirmed and approved. 8. S.K. Mukherjea, J., after having come to the aforesaid findings gave an order for injunction restraining the respondents or each of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yet heard of in this Court, and I have never known it insisted upon before; that is to say, that this Court is to entertain a bill for the purpose of enabling one particular member of the company to have an opportunity of expressing his opinions viva voce at a meeting of the share-holders. If so, I do not know why we should not go further, and say, not only must the meeting be held, but the share-holders must stay there to listen to him and to be convinced by him. The truth is, that is only part of the machinery and means by which the internal management is carried on. The whole question comes back to a question of internal management; that is to say, whether the meeting ought or ought not to be held in a particular way, whether the directors ought or ought not to have sanctioned certain proceedings which they are about to sanction, whether one director ought or ought not to be removed, and whether another director ought or ought not to have been appointed. If there is some one managing the affairs of the company who ought not to manage them, and if they are being managed in a way in which they ought not to be managed, the company are the proper persons to complain of that. It see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act states: From the date of the incorporation mentioned in the certificate of incorporation, such of the subscribers of the memorandum and other persons, as may from time to time be members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act. 14. The significant features about Section 34(2) of the Companies Act may be noted. From the very inception of the incorporation it not only becomes a body corporate but also capable forthwith of exercising all the functions of an incorporated company and also with liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act. I can read these features only as establishing company capable of exercising all the functions of an incorporated company. If this is not the establishment of an undertaking I do not (know ?) what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not used instead of the word established. Further, if we look at Clause (d), it excludes certain industrial undertakings from the benefit of Section 45; what are excluded are companies formed by the splitting up, or the reconstruction of a business already in existence or by the transfer to a new business of any building, machinery or plant used in a business which was being previously carried on. Ordinarily the date of incorporation of a company has nothing to do with the transfer of a machinery or plant to it. That consideration is absent here. The learned Counsel for the respondents also relied on another Wealth Tax Act case namely. Standard Mills Co. Ltd. v. Commr. of Wealth Tax Bombay reported in [1967]63ITR470(SC) . Reference was also made to the observations of Buckley J. at page 393 in the case of In re. Otto Electrical Manufacturing Co. reported in (1906) 2 Ch. D. 390. But the learned Judge there had no occasion to contrast it with such statutory provisions as Section 34(2) of the Companies Act. But those decisions of the Supreme Court are with respect to the Wealth Tax Act where different considerations apply. The point we are concerned with relates to the Mono ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. The prohibition contained in Section 22 of the Monopolies and Restrictive Trade Practices Act, 1969 does not make the contract or the undertaking illegal prima facie. There are many prohibitions in public statutes but they do not raise the question of illegality or ultra vires but whose breach is otherwise provided for in the statute itself. The scheme of the Monopolies and Restrictive Trade Practices Act, 1969 which has a series of sections on penalties and offences under Chapter 8 and Chapter 9 prima facie indicates that the establishment of a new undertaking which offends Section 22 of the Act and which is without the previous permission of the Central Government will be considered as offences under the said Act and will be visited by the penalties mentioned in the statute. See in this connection Archbold's (Freightage) Ltd. v. S. Spanglett Ltd., (1961) 1 QB 374 at PP. 389 to 393 per Lord Justice Devlin and also St. John Shipping Corporation v. Joseph Rank (1957) 1 QB 267. The principles mentioned in those two English cases appear to have been followed in Neminath v. Jumboo Rao, AIR 1966 Mys. 154 and upheld by the Supreme Court in [1968]3SCR706 . The decision in Cutle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make. Is it to be stated in the explanatory statement to the notice that -- we invite an argument on the Monopolies Act and its applicability ? Surely that is not the purpose of an explanatory statement to the notice. 23. But there is a more fundamental obstacle on the part of the respondent in this regard. The notice is given in the following terms:-- Notice is hereby given that a General Meeting of the members of the Swadeshi Cotton Mills Ltd. will be held at the Registered Office of the company at Swadeshi House, Civil Line, Kanpur, on Monday, 12th day of October, 1970 at 2.30 p.m. to consider and if thought fit to pass with or without modification the following resolutions as an Ordinary Resolution. Resolved that resolution No. 1 (set out hereunder) which had been unanimously passed as an Ordinary Resolution at a general meeting of the company held on the 27th February, 1970 at its registered office at Swadeshi House, Civil Line, Kanpur in pursuance of the notice dated the 29th January, 1070 be and is hereby confirmed and approved. Resolved that subject to the necessary approval of the Central Government being obtained pursuant to the provisions of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting was taken and there was a resolution unanimously passed. Thereafter, follows a recital in Suit No. 105 of 1970 where the learned Judge by his interim order dated the 8th September, 1970 directed that: there shall be an injunction restraining the respondent Directors (Company Directors) from acting on the Resolutions passed at the General Meeting held on the 27th February. 1970 until the same is hereby confirmed or approved at a meeting properly notified. All other interim orders vacated. 25. This was duly passed at the General Meeting. Thereafter the present suit was filed being Suit No. 451 of 1970 by Banwarilal Jaipuria against the appellants. Before Mr. Justice Ghose the issue was whether the Letter of Intent has lapsed and it was on that ground that the order of injunction was made by the learned Judge. 26. In order to appreciate this point better, it will be necessary to refer to certain correspondence. On the 12th February, 1971 Swadeshi Polytex Ltd. wrote to the Secretary to the Government of India, Company Affairs, that that company has been registered for the establishment of polyester fibre unit and that it has been granted an industrial licence dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Trade Practices Act, 1969 will not apply to the establishment of the new undertaking for the manufacture of polyester fibre. Finally on the 20th May, 1971 they categorically wrote stating that in view of the department's letter dated the 14th May, 1971 addressed to you the application under Section 22 is filed. 27. Now all that Section 22 of the Monopolies and Restrictive Trade Practices Act does is to provide that No person or authority other than the Government shall after the commencement of this Act establish any new undertaking which when established would become an inter-connected undertaking to which Clause (a) of Section 20 applies except in accordance with the previous permission of the Central Government . But the Central Government itself does not think that Section 22 of the Act applies. That seems to me to be an end of the matter. There is no prima facie case for an injunction on that basis. 28. The learned Counsel for the respondents has placed a good deal of reliance on Section 173 of the Companies Act. Sub-section (2) of Section 173 reads as follows:-- Where any item of business to be transacted at a meeting are deemed to be special as aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act does not imply that any and every lapse should be visited with the consequence of ultra vires doctrine. A special business requires to find a place in the explanatory statement, but it does not mean that any and every legal requirement should be placed before the General Meeting of the general body of the share-holders. It is to be presumed that all legal requirements, before a venture is undertaken, is carried out properly. For instance, there are various restrictions which require to be satisfied: for a factory, before it is intended to be put into operation, requires a factory licence, land, before it is purchased, requires registration, conveyance and permission in some cases of municipalities; foreign collaboration and import of materials requires permission under the Foreign Exchange Regulations Act and Import Control Act. It is not, in my view, necessary to state all that before the general body of share-holders: What is necessary, as for instance in this case, is to inform the general body of share-holders as a special business that Swadeshi Cotton Mills Ltd. is investing one crore rupees of its money in Swadeshi Polytex Ltd. and the requirement of Section 372 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the solution of the problem as to whether all material facts were disclosed depends upon the facts of each case. It is, however, not the function of an explanatory statement to travel beyond the scope of the proposed resolution. Material facts have to be given but not detailed particulars. 36. There was some discussion in Narendra v. Institute of Engineers, AIR1964Cal73 . It dealt with the question of difference in the character of a chartered company and a company formed by or under an act of Parliament. 37. In Vita Food Products v. Unus Shipping Co. Ltd. (1939 AC 277) it was held that Section 3 of the New Foundland Carriage of Goods by Sea Act, 1932 which provides that every bill of lading shall contain an express statement that it is to have effect subject to the provisions of the said rules as expressed in this Act were directory and not mandatory and that failure to obey the directions did not, therefore, make the contract illegal. 38. But where an Act made the adoption of the agreement in the prescribed manner as a condition of its validity, it was held that the resolution was ineffective owing to the absence of notice of the contents of the agreement and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also placed upon AIR1962Cal127 in which the Privy Council's decision in Shamdasani's case was followed and upon Kalinga Tubes Ltd. v. Shanti Prasad Jain , AIR1963Ori189 which was affirmed by the Supreme Court in Shanti Prasad Jain V-Kalinga Tubes Ltd. [1965]2SCR720 . Relying upon these authorities it was sought to be contended that the plaintiffs having full knowledge of the facts which according to them were not disclosed in the explanatory statements, had no right to challenge the validity of the notices on this ground and were estopped from doing so. There is, however, no such plea in any of the affidavits in reply, and this question really does not arise for my consideration, 'but as this question, was argued at some length and as the contesting defendants, insisted that they could spell out such a plea from their affidavit-in-reply which they have not been able to do so -- I will shortly deal with the same. In my opinion, none of these authorities support the contesting defendants. Each turns upon its own facts. The Privy Council decision in Shamdasani's case was under the Indian Companies Act, 1913 which did not contain any section corresponding to Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued to mean that after an undertaking is established there will be no occasion for a licence. But we do not think that the industrial licence need at all be in the explanatory notice in view of what I have said under Section 173(2) of the Companies Act. 44. Various other points were argued by Mr. Samiran Sen, appearing on behalf of the appellants. One of them is a question of res judicata but it is unnecessary for us here to express an opinion on that point. His point was that the suit before Mr. Justice Ghose should have been amended to include the subject matter of the present suit. The Monopolies and Restrictive Trade Practices Act came into operation on the 1st June, 1970 and the hearing of the suit before Mr. Justice Ghose began and concluded in August 1970. Therefore he says that it barred by constructive res judicata. But, as I say, it is unnecessary to decide this point in the present application in view of what we have already stated before. 45. For these reasons the appellants succeed and the cross objection fails. The appellants' costs certified for two counsel will be costs in the cause. I have seen the judgment of my learned brother and I agree with the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esirable that this company should invest liberally in the shares of the said company. It is proposed to acquire Equity Shares to the extent of the aggregate value of Rupees One Crore in the new company aforesaid. 47. On receipt of this Notice the respondent instituted a Suit in this Court (Suit No. 105 of 1970) (Cal) against the 8th Appellant and its Directors, for an Injunction restraining them from holding any Meeting pursuant to the said Notice and from passing the resolutions mentioned therein on the ground that the Notice did not disclose material facts. In this Suit, on an application by the respondent an ad interim order was made by Ghose, J., on February 26, 1970, restraining the 8th appellant and its Directors from giving effect to any resolution that might be passed pursuant to the said Notice. The resolutions set out in the Notice were passed at the Meeting of the company held on February 27, 1970. 48. On September 7. 1970. Ghosh J. disposed of the application for Injunction by making the following order:-- There shall be an Injunction restraining the respondent-Directors from acting on the resolution No. 1, passed at the General Meeting held on the 27th of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for an Injunction and on this application S. K. Mukherjea, J., made an order on March 16, 1971 granting an Injunction restraining the appellants and each of them from giving effect to the resolution set out in the Notice dated September 14, 1970. The order was made without prejudice to the rights of the appellants and the Members of the 8th appellant to pass a fresh resolution according to law in terms similar to the resolution which was the subject-matter of the application. Aggrieved by this order the appellant has preferred to this appeal. 51. The grounds of attack on the resolution passed on October 12, 1970 confirming the earlier resolution of the company passed on February 27, 1970 were entirely different from the grounds which formed the subject matter of attack on the resolution passed on February 27, 1970. The new ground of attack canvassed by the respondent in the second application for Injunction, was that neither the Notice dated September 14, 1970, nor the explanatory statement set out therein disclosed whether permission had been obtained from the Central Government as required under the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in Chapter VIII of the Act. 53. In support of these contentions Mr. S.C. Sen relied on several passages in Craies on Statute Law 6th Ed. pp. 231, 232, 234, 235 and 237. Reliance was placed on several English decisions Vallance v. Falle, (1884) 13 QBD 109, (Cutler v. Wandsworth Stadium Ltd.) 1949 AC 398, Newman v. Francis, (1953) 1 WLR 402 and in Re: Indo-Burma Wood Products (P) Ltd . AIR1968Cal198 . 54. In developing the points formulated by him Counsel for the appellants argued that in computing the aggregate value of the shares of the holding company and its subsidiary, the value of the shares of the subsidiary company, held by the holding company, should be excluded. It was argued that if the two undertakings were treated as one for the purpose of valuation, the shares of the subsidiary company in the hands of the holding company, ought not to be taken into consideration in computing the assets of the two companies. In the Balance Sheet of the 8th appellant as at December 31, 1969, the value of the shares of the subsidiary held by the 8th appellant (holding company) has been shown at ₹ 1,69,56,121. If the value of the shares are left out, it was contended, as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as they did, at the Meeting held on October 12, 1970. It appears to us that this contention has no merit. What is the effect of the omission on the part of the Directors of the 8th appellant ? If an application, was in fact made, the Directors could have stated either that the application was pending or that it was refused by the Central Government, but that has not happened in this case. No application was made by the Directors of the 8th appellant for the permission contemplated by Section 22 of the Act at the time when the Notice and the explanatory statements were issued. In this situation what the Directors could have stated was that no application had been made to the Central Government for permission under Section 22 of the Act as they were advised not to make such application. I do not see how, a statement such as this, would have helped the shareholders either in supporting or opposing the resolution. 57. The next contention of Counsel for the appellant was that it was not necessary under Section 173 of the Companies Act 1956 to give all the details and particulars in matters covered by a proposed resolution. He argued that the approach to the question, whether an expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estly given pursuant to the order of Ghose. J., by which the Directors of the 8th appellant were restrained from giving effect to the resolutions passed at the General Meeting of Company held on February 27, 1970, until the resolution was confirmed at another General Meeting of the Company properly notified. The order of Ghose, J., was obtained by the respondent, and as noticed earlier that order became final as between the parties. All that the respondent had to do, in order to terminate the effect of the Injunction, was to call a General Meeting of the company after duly giving Notice for the same, and have the resolution passed on February 27, 1970, confirmed at this Meeting. The General Meeting of the Company held on October 12, 1970, was held in accordance with the order of Ghose, J. It is to be noticed that no grievance was made by the respondent in the earlier suit or in the petition for Injunction about the alleged contravention of any of the provisions of the Act or about the failure on the part of the Directors of the 8th appellant to state in the explanatory statement relating to the Notice dated January 29, 1970, about infringement of any of the provisions of the Act, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. was incorporated on March 21, 1970. The letter of Intent, issued by the Central Government in favour of the 8th appellant, was transferred to the new undertaking on May 20, 1970. It seems to us, therefore, that prima facie Swadeshi Polytex Ltd. was not an undertaking which was established after the commencement of the Act. 60. The next question is whether the information which was omitted in the explanatory statement namely whether an application was made to the Central Government under Section 22 of the Act and if so the fate of this application was a material information, the omission to furnish which would make the resolution, passed at the Meeting invalid or void. Sub-section (2) of Section 22 of the Act requires a person or authority intending to establish a new undertaking to make an application to the Central Government before taking any action for the establishment of such undertaking. Admittedly, in this case, nothing was stated in the explanatory statement about any application having been made to the Central Government as required by Section 22(2) of the Act. As I have noticed earlier the Notice for the General Meeting of the Company was dated September 14, 1970 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anatory statement that no application was made, the 8th appellant did not, in our view, act irregularly or in violation of or contrary to the provisions of the Act or the Companies Act, 1956. Information regarding an application for permission under Section 22 of the Act or information that no such application has been made is not in our view, a material information which should have been included in the explanatory statement or in the Notice of the Meeting. The absence of such information in the explanatory statement, does not make it or the resolution passed at the General Meeting confirming the resolution, which was passed at the General Meeting held on February 27, 1970, illegal or void. Nor does such omission, entitled the respondent to an Injunction restraining the appellants from giving effect to the resolutions passed at the General Meeting held on October 12, 1970. I shall revert to this question later in this judgment. 61. It was next contended by Counsel for the appellant that explanatory statements are not to be construed with excessive strictness and substantial compliance with the Articles would be sufficient. In support of this proposition reliance was placed on P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation, that would not make the resolution invalid or illegal. He further submitted that the omission, assuming there was one, did not, in any manner, mislead the shareholders of the company. He also urged that the explanatory statements should not be too strictly construed, but should be given a liberal construction and the only requirement should, be that its contents are clear to an ordinary person engaged in business. 63. It seems to us that there is a good deal of force and substance in the above contention of Counsel for the appellant. It is to be remembered that the General Meeting was called for the purpose of confirmation of a resolution passed by the company on February 27, 1970. The resolution passed on October 12, 1970 in terms of the order of Ghose, J., runs as follows : Resolved that a Resolution No. I which had been unanimously passed as an ordinary resolution at a General Meeting of the company held on February 27, 1970, in pursuance of the Notice dated the 29th January, 1970 be and is hereby confirmed and approved. 64. The object of the Meeting held on October 12, 1970, and the purpose of the resolution, passed at that Meeting, was to terminate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that in this case, the 8th appellant, its Managing Director (by reason of his relationship with the Managing Director of the new company) and also the other Directors of the 8th appellant would undoubtedly exercise control over the new company. Control, it was argued, was not denned in the Act or in the Companies Act. Therefore, it was submitted, any kind of control whether de facto or de jure, would make the undertaking an inter-connected undertaking as contemplated by the Act. On this question the trial Court rejected the respondent's contention and the respondent has filed cross-objection against the judgment on, that ground. 67. It is true that Clause (d) of Section 2(g)(iii) of the Act merely provides if one exercises control over the other in any other manner. It is also true that the control as contemplated by the Act has not been defined in the Act itself but in construing a provision such as this, certain considerations must be borne in mind. In the first place, the concept of control implies a dominant and a dominated undertaking. In other words, the controlling undertaking must be in a position to dominate the affairs of the controlled undertaking eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. Dealing with the question whether the private rights of the respondent could be protected by invoking the provisions of the Act, which should be enforced by the Central Government only, to avoid concentration of econo- mic power in the hands of a group of individuals it was argued, that if the individual and private rights of his client were injured or invaded, he was entitled to invoke the provisions of the Act to obtain remedy. In support of this contention. Counsel for the Appellant relied on Halsbury Third Edition Vol. 21, p. 347, Article 727 and Palmer's Company Law 21st Edition pp. 498-499. 71. It seems to us that the real and substantial issue in the application, out of which this appeal arises, has been lost sight of in the din and bustle created by the conflicting claims of the parties regarding the provisions of the Monopolies and Restrictive Trade Practices Act, 1969. The respondent claims that the provisions of the Act applied in this case, and that the new company, namely, Swadeshi Polytex Ltd., would be an inter-connected undertaking under the Act. The appellant, on the other hand, contend that the provisions in the Act have no application, for the reasons w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is dated April 12, 1971. The application itself was, therefore, made after the judgment was delivered by the trial court. Shortly before the judgment was delivered the 8th appellant wrote to the Central Government on February 12, 1971, to say that according to the reported opinion given by the Attorney-General the provisions of the Act did not apply to the 8th appellant. In this letter a request was also made that a clearance 'should be issued to the 8th appellant that the provisions of the Act did not apply to it. This letter was answered on behalf of the Central Government by N. K. Sengupta. Deputy Secretary, on March 26. 1971. In this letter a request was made that the basis on which the undertaking would be an inter-connected undertaking, might be intimated to the Central Government. It was added that the question of granting clearance from the applicability of Section 22 of the Act would arise only if such provisions were otherwise applicable to the undertaking. This letter, in its turn, was followed on April 12, 1971, by the 8th appellant's application for approval under Section 22 of the Act. On May 14, 1971, the Central Government wrote to the 8th appellant in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The Central Government, which is the authority for granting permission also came to the same conclusion that the new undertaking would not be an inter-connected undertaking and therefore, no permission was needed, as required by Section 22 of the Act. In these facts we are of the opinion that there is no escape from the conclusion that the information that no application was made to the Central Government under Section 22, was not a material information to be included in the explanatory statement. 74. A notice of a General Meet-Ing of a company and an explanatory statement attached to such Notice can be condemned as tricky, if either of them is likely to mislead the share-holders or if there is omission to state facts which would enable the share-holders to decide if they would attend the Meeting or not. A Notice and an explanatory statement can also be condemned if there is suppression of material facts. These principles are well settled and it is on the basis of such principles that it is to be determined if the impugned Notice and explanatory statement are illegal or invalid. Applying these well-settled tests, we cannot say that the Notice and the explanatory statement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation was issued by the Executive Engineer, U. P. State Industrial Corporation Limited on January 14 1970, and a sum of ₹ 2,51,800/- was deposited for the said plot of land on February 17, 1970. Sanction for supply of power by the U. P. State Electricity Board was obtained on January 24, 1970. A certificate for commencement of business was issued to Swadeshi Polytex Limited on July, 9, 1970. An industrial licence under the Industries (Development Regulation) Act, was issued to the new company on October 7, 1970. The foundation stone of the factory premises was laid by the President of India on October 12, 1970. According to the explanatory statement, issued with the Notice of September 14, 1970, the plant is likely to go into production in early 1973. 76. It is clear from the steps, taken, that expeditious steps have been taken to enable the new company to commence production. Statutory sanctions and licence has been obtained, collaboration agreement arrived at and approved by the Central Government, land secured and construction of factory premises started. It is in these facts that it is to be seen if the ends of justice demand that the 8th appellant should be restrai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of balance of convenience in favour or against the grant of an order of Injunction. In dealing with the question whether the 8th appellant should be allowed to invest ₹ 1 Crore in Swadeshi Polytex Ltd., steps taken for the establishment of the latter can, by no means, be said to be irrelevant or immaterial in deciding the question of balance of convenience for or against an order of Injunction regarding the investment. If the decision of this appeal rested only on the question of balance of convenience or inconvenience, we would have had no hesitation in saying that the balance of convenience is entirely against the issue of an order of Injunction restraining the appellant from making the investment. But the decision of this appeal depends upon the various other questions which I have discussed earlier in the judgment. Quite apart from my views on the other questions raised in this appeal, so far as, balance of convenience is concerned, we are of the opinion that balance of convenience is entirely against an order of Injunction at this stage, restraining the 8th appellant from investing Rupees One Crore in the share capital of Swadeshi Polytex Ltd. 78. I will now proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) or the Act was duly made and a licence has been duly obtained. It is easy to overstate the requirement of Section 173 of the Companies Act, 1956. It is perhaps easier for a single share-holder to demand that every single step required for the establishment of a new undertaking must be communicated to the share-holders of an investing company. For instance, it might be said that the share-holders of the investing company should be told that a licence under the Factories Act had been obtained or that a licence under the local Municipal Law for carrying on business, has been obtained or again that the plans for erection of structure had been duly sanctioned by the local authority. But information about these matters can, by no means, be said to be material information which must be furnished to the shareholders in an explanatory statement and the omission to furnish which must invalidate the resolution passed at the General Meeting. In our opinion, there is no substance in this ground of the cross-objection. 80. The second ground of cross-objection pressed before us was that the learned Judge was wrong in holding that non-disclosure of the financial aspect of the collaboration ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83. I have carefully taken into consideration the grounds advanced on behalf of the respondent in support of the Injunction issued by the trial Court. In my view, the order for Injunction cannot be sustained in the facts of this case. This appeal therefore succeeds and is allowed. The judgment and order of the trial Court are set aside. Costs of this appeal will be costs in the cause. Certified for two Counsel. 84. I now turn to the order that ought to be made in this appeal. On April 7, 1971, an order was made by this Bench on the application of the appellant for admission of the appeal and stay of operation of the order under appeal. That order seems to us to be a model order for the purpose of Ad Interim protection of the rights of the parties until final determination of the suit. If I say it is a model order it is because the order has taken into consideration the contentions advanced by the parties and has given them the protection to which they are legitimately entitled. It seems to us that the order made by this Bench on April 7, 1971 with minor variations to which I will presently refer, ought to remain in force until final determination of the suit out of which this ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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