STRAW PRODUCTS LTD. V.

REGISTRAR OF COMPANIES

[1969] 39 COMP. CAS. 974 (ORI.)

IN THE HIGH COURT OF ORISSA

B.K. PATRA, J.

ISSUES: ALTERATION OF MOA TO INCLUDE MULTIPLE BUSINESSES

Companies Act, 1956, Section 17, Memorandum of Association, Alteration

requires special resolution and confirmation by CLB -

FACTS: This is a petition under section 17 of the Indian Companies Act, 1956
(1 of 1956), filed on behalf of M/s Straw Products Limited (hereinafter called
the company) having its registered office at Jaykaypur, Rayagada, in the
District of Koraput for confirmation of the alterations in the memorandum of
association of the company.

2. FACTS: The petitioner-company was registered on the 6th August, 1938,

under the provisions of the Companies Act, 1913, as a company limited by
shares. It is engaged in the manufacture of writing and printing paper and
straw board, etc. The objects for which the company was formed are set out in
clause 3 of its memorandum of association annexed to the petition as annexure
''A". The principal objects in brief are as under:

 To erect, purchase or take on lease or otherwise acquire any mills works,

machiney and other movable and immovable properties appertaining to
goodwill of, and any interests in, the business of manufacturing or
dealing in straw board, card board, mill "board and/or paste board,
vegetable oil, vegetable, ghee, sugar, matches, cement, lime and artificial
leather of all descriptions.

Page 1 of 20
  To purchase or otherwise acquire at Bhopal or other parts of India or
elsewhere land or to accept lease thereof, and on such lands to erect
building for the works and purpose of the company.
 To carry on all or any of the businesses following, namely, to
manufacture pulps from straw of all description, wood, bamboo, rags,
waste material of all description, and raw material of all other description
etc….VERY BROAD OBJECTIVE.
 To carry on the business of cultivating, growing, buying, selling or
otherwise and generally dealing in Kapas cotton.
 To carry on the business of cultivators, growers, buyers, manufacturers,
dealers in sugarcane sugar or sugar products and other vegetable
products or other products of the soil whatsoever manufacturers and
dealers in vegetable oils, oil seeds and oil cakes, refiners, fruit growers
and preservers……

Shortly after its incorporation the company commenced business and has been
carrying on its business all over the country. By a special resolution of the
company (annexure "B") duly passed in accordance with sub-section (2) of
section 189 of the Companies Act, 1956, at the 27th annual general meeting of
the members held on the 21st July, 1966, at its registered office, after due
notice dated 18th June, 1966 (annexure "C"), sent to the members of the
company as provided under the Act, it was resolved unanimously to amend
clause 3(10)(viii) of the company's memorandum of association by
incorporating therein the words and terms "political" and "national and
political.

Subsequently, by another resolution of the company (dated 2nd November,

1967) (it was resolved unanimously to alter clause 3 of the company's
memorandum of association.

Page 2 of 20
Mr, R. K. Ghosh, appearing for the Registrar of Companies, vehemently
opposed the incorporation of several items in the objects of the company on
grounds to be hereinafter referred.

Consequently, the resolution as it would stand after this alteration would be as

under:

"Resolved that subject to the confirmation by the High Court, clause III of the
memorandum of association of the company be altered as follows:

(i) That the existing sub-clause (10) be renumbered as sub-clause (18).

(ii) That the following sub-clauses (10) to (17) be inserted after sub-clause
(9).

10(a) To carry on the business of processors, producers, importers, exporters,

buyers, suppliers, stockists, agents, merchants, distributors, and
concessionaires of and dealers in general merchandise goods.

10(b)To carry on the business of manufacturers, fabricators, processors,

producers, growers, makers, importers, exporters, buyers, sellers, suppliers,
stockists, agents, merchants, distributors and concessionaires of and dealers
in commodities of all or any of the following :

(i) Office equipments of all descriptions, machinery parts, computors,

articles, parts, components, apparatus, instruments, gadgets, devices,
contraptions, tools, stores, spare parts, utensils, things and appliances of all
description and materials pertaining to the aforesaid.

(ii) Synthetic yarn, clothes and materials, rubber and elastomers, synthetic
resins, carbon black, rubber latex, plastics, latexes and formulations thereof:
including reclaimed rubber and other kinds of resins, rubber and plastic
products, starch and other sizing materials, textile intermediates and
compounds.

Page 3 of 20
 (iii) All types of chemical, caustic soda, disinfectants and of electrical,
photographical apparatus and materials of paper board, plastic rubber and
elastomer base.

(iv) Oils, colours, paints, varnishes, lacquers, pigments, enamels, dyestuffs,

fertilizers, pesticides, insecticides, surface active agents and glycerine.

(v) Carbons, inks, paper and stationery goods.

(vi) Petrochemicals and other synthetics, chemical and other substances of

all kinds, basic, intermediate or otherwise.

(vii) Nitrogen, oxygen and other industrial and domestic gases".

MORE ADDITION IN OBJECT CLAUSE:

 To carry on business as timber merchants, saw mill proprietors and

timber growers….
 To cultivate, press, prepare, process, buy, sell, distribute, trade, stock,
barter, exchange, pledge, make advances upon, speculate, enter into
forward transactions or otherwise deal in seeds, rubber, foodgrains,
forests, agricultural and natural produce of all kinds…
 To carry on (either in connection with the aforesaid business or as
distinct or separate business) the business of transporters, engineers,
chemists, printers, carriers, mechanics, researchers, technicians,
designers, planners, advisers, consultants, purchasers, sellers, erectors,
managers, superintendents, managers and to develop, acquire, supply
plans, drawings, estimates, project reports and know-how for industries,
business, companies and public bodies and Governments.
 To work or promote or acquire electrical and other undertakings for
generating electricity or other energy for running the company's mills,
factories, etc., or otherwise and to supply it to others and to work or
establish as electrical contractors, engineers, etc.

Page 4 of 20
  ) To amalgamate, enter into partnership or into any arrangement for
sharing profits, union of interests, co-operation, joint venture or
reciprocal concession, or for limiting competition with any person, firm or
body corporate whether in India or outside carrying on or engaged in, or
about to carry on or engage in any business or transaction which the
company is authorized to carry on or engage in or which can be carried
on in conjunction therewith or which is capable of being conducted so as
directly or indirectly to benefit the company and further to enter into any
arrangement or contract with any person, association or body corporate
whether in India or outside for technical collaboration, technical know-
how or for such other purpose that may seem calculated (sic) beneficial
and conducive to the objects of the company. ( AND MORE OBJECTS)

POINTS TO BE NOTED: It is averred in the petition that the company is in a

good financial position and has sufficient working capital, that its assets
amount to Rs. 7,91,84,224 and deducting there from the liabilities amounting
to Rs. 2,84,37 163 the net assets come to Rs. 5,07,47,061.

STRONG OBJECTION TO ALTERNATION IN MOA BY REGISTRAR: The

Registrar of Companies, Orissa, objects to the proposed alterations in the
objects of the company on several grounds. Regarding the proposed alterations
to clause 3(10)(viii) of the memo it is contended that this step is in conflict with
the proposed legislation in Parliament banning contributions to political parties
by companies.

Regarding the proposed alterations covered by the resolution dated 2nd

November, 1967. GROUNDS OF OBJECTION:

1. It is contended that the proposed alterations are neither necessary nor

required to enable the company's business to be carried on more
economically or more efficiently and that they are inconsistent with
the existing business of the company and,

Page 5 of 20
2. If allowed, they would not leave the existing business substantially as it
was before.
3. The proposed alterations do not come within the concept of "some
business" which, under existing circumstances, may conveniently or
advantageously be combined with the business of the company. It is true
that, although the main business of the company is the manufacture of
strawboards and paper, it has certain subsidiary and ancillary powers,
but they are in essence associated objects and related purposes.
4. The name of the company as "Straw Products Limited" would be illogical
and misleading to the world dealing with the petitioner-company if they
are permitted to carry on business in the proposed items which cannot
by any means be called business which, under the existing
circumstances, may conveniently or advantageously be combined with
the business of the company.
5. NO SCOPE FOR ADDITONAL FINANCE: Although, apparently, the
company is in a good financial position the excess of assets over
liabilities being above Rs. 5, 00, 00,000.00, a scrutiny of the balance-
sheet, annexure "F", shows that major portion of the capital of the
petitioner-company is locked up in fixed assets and there is no proper
scope and finance for the additional business, which the petitioner-
company proposes to undertake. The Registrar has also annexed to the
affidavit a copy of the letter received from one Sri B. A. Ojha of
Hyderabad, a shareholder of the company, addressed to the Company
Law Board objecting to the additional new business on the ground that
there would be no advantage from it to the shareholders as the profits of
the company would be ploughed back into the business thereby
depriving the shareholders of their dividends.
6. The Registrar finally prays that, in the best interest of all concerned and
for the protection of the interests of the shareholders against directors
embarking on spurious and doubtful business and squandering the
company's trading funds under the cover of vague and ambiguous object
Page 6 of 20
 clauses in the memorandum, the court should not confirm its
resolutions.

10. Section 17 of the Companies Act, 1956, deals with the special
resolution alteration of the memorandum of a company and its
confirmation by the court. Sub-sections (1) and (2) of that section read as
under : "(1) A company may, by special resolution, alter the provisions of
its memorandum so as to change the place of its registered office from one
State to another, or with respect to the objects of the company so far as may
be required to enable it—(Section 13 of 2013 Act does not contain such
conditions)

(a) to carry on its business more economically or more efficiently;

(b) to attain its main purpose by new or improved means ;

(c) to enlarge or change the local area of its operations;

(d) to carry on some business which under existing circumstances may

conveniently or advantageously be combined with the business of the company;

(e) to restrict or abandon any of the objects specified in the memorandum ;

(f) to sell or dispose of the whole, or any part, of the undertaking, or of any
of the undertaking, of the company ; or

(g) to amalgamate with any other company or body of persons.

(2) The alteration shall not take effect until, and except in so far as, it is
confirmed by the court on petition".

CONNTENTION OF COMPANY: Mr. B. K. Mohanty, for the petitioner, states

that the proposed alterations fall within the purview of the clauses (a) and (d) of
sub-section (1).

Page 7 of 20
COURT: I would first take up the special resolution passed unanimously at the
annual general meeting of the shareholders of the company held on the 21st
July 1966 and which essentially relates to contributions to be made by the
company to funds of political parties. In this connection a reference may be
made to section 293(1) of the Companies Act which runs as follows :

"(1) The board of directors of a public company, or of a private company which

is a subsidiary of a public company, shall not, except with the consent of such
public company or subsidiary in general meeting,

(e) contribute, after the commencement of this Act, to charitable and other
funds not directly relating to the business of the company or the welfare of its
employees, any amounts the aggregate of which will, in any financial year
exceed twenty-five thousand rupees, or five per cent, of its average net profits
as determined in accordance with the provisions of sections 349 and 350
during the three financial years immediately preceding, whichever greater".

12. The expression "other funds" in section 293(1)(e) is wide enough to

enable contributions of the kinds specified in the special resolution to be
made by the company. It cannot therefore be stated that the proposal is
contrary to law. ( contribution to Political Parties) Indeed what an
individual can lawfully do, can be done by the company and there being
nothing to prevent any individual from making any contributions to the
political funds of a party, a company cannot in law be prevented from
doing so. Apart from the implied sanction afforded by section 293(1)(e) of the
Companies Act, the proposed step can also be justified on the basis of section
17(1)(a) which is of very wide import and it can be said that the company by
contributing to the funds of political parties would be carrying on business
more efficiently.

HIGH COURT: True it is that the court has discretion to confirm or not to
confirm an alteration even if the conditions laid down in section 17 are
satisfied. But it has to be borne in mind that is primarily for the company

Page 8 of 20
to decide whether it is for its good that it is should make such
contributions and it is not for the court to tell the comply as to how it is
to carry on its business. If therefore the shareholders of tie company after
considering their own interests have agreed that the funds of the
company may be utilised for contribution to the funds of a political party
it is not for the court to take a view different from the view of the
shareholders when that view is not only not opposed to law, but falls
within the provisions of the Companies Act itself. The learned advocate
for the Registrar has not brought to my notice any decision in which a
contrary view has been taken.

HIGH COURT: Ramaswami J. of the Madras High Court in In re Sn Natesar

Spinning and Weaving Mills (P.) Ltd. [1960] 30 Comp. Cas. 54., referring to
the aforesaid decision of the Calcutta High Court, was of the view that the
court's power to impose terms and conditions under section 17(5) is
limited only to such terms and conditions as may be called for in the
interests of the shareholders or creditors or other persons who might be
affected by the alteration, and where no such prejudice is involved, the
court has no power to impose terms and conditions. Admittedly, in the
present case, there has been no objection from any shareholders or
creditors of the company in respect of this resolution. There is no serious
challenge that the financial position of the company is sound. Indeed, the only
objection advanced on behalf of the Registrar in paragraph 8 of his affidavit is
that the alteration suggested is in conflict with the proposed legislation in
Parliament banning contributions to political parties by companies. Apart from
the fact that no such bill has been placed before me, it is not certain whether
Parliament would ultimately enact such a measure. In case Parliament does
so in future it would certainly supersede the memorandum of the
company. It, therefore, appears to me to be idle to speculate on future
legislative measures and on that ground reject the resolution which at the

Page 9 of 20
present moment does not suffer from any infirmity. The special resolution
dated July 21, 1966, would therefore be confirmed.

MAIN CONTENTIOIS ISSUE: The main target of attack in this proceeding is

the special resolution dated December 6, 1967, by which substantial additions
are proposed to be made to the objects of the company and these additions are
sought to be justified under either clause (a) or clause (d) of section 17(1).

HIGH COURT: I may state at the outset that, so far as the expression
"some business" occurring in section 17(1)(d) is concerned, all the High
Courts agree that this expression must include business other than
business which is already being carried on under the existing
memorandum, the only requirement of the statute law being that the
business must be one which can (1) conveniently and advantageously be
combined with the existing business of the company and (2) that this
must be so under the existing circumstances and not under any
hypothetical circumstances. So long as these limits are observed, the
shareholders and the management of the company should be left free to
add to or reduce their business by suitable alterations in their
memorandum.

SOME CASES HIGH COURT REFERRED TO IN COURSE OF JUDGMENT:

 In the matter of In re Bhutoria Brothers (P.) Ltd. [1958] 28 Comp.

Cas. 122, the main object of the company was to purchase stores, sell,
manufacture and otherwise deal in agricultural, mineral and animal
products and livestock, and in the bye-products and the waste products
of their manufacture including jute. Extensive alterations were
proposed in the objects by a special resolution which tried to
include the business in optical, photographical, chemical and
surgical goods on the one hand and watches, clocks and musical
instruments on the other, as also other hinds of machinery.
Mukharji J. held that, so far as the alterations of the objects in
Page 10 of 20
 respect of business in jute, cotton and woollen mills are concerned,
they can be permitted under section 17(1)(a) and (d) on the ground
that the new business can be economically and efficiently carried on
and, under the existing circumstances, they can conveniently and
advantageously be combined with the existing business of the
company because jute and cotton will certainly come under
agricultural products forming one of the main objects in the existing
memorandum. But, in respect of items relating to clocks and
musical instruments and surgical goods, the learned judge thought
that they would be a very strange new-comer into a business in
agricultural, mineral and animal products and livestock and, hence,
disallowed those items.
 A recent decision of the Calcutta High Court in the matter of Standard
General Assurance Co. AIR 1965 Cal. 16 Ltd. dealt with the case of a
company whose original object was to carry on all kinds of insurance,
guarantee and indemnity business. One of the other objects was to carry
on business as capitalist, financiers, concessionaires and merchants and
to undertake and carry on and execute all kinds of financial, trading and
other operations. In July 12, 1963, a special resolution was passed to
alter the memorandum of association of the company, the net effect of
which was that the company sought to abandon insurance business of
all kinds and to acquire new objects, namely, to carry on business as
manufacturers of and dealers in chemicals, petrochemicals, drugs,
essences, acids, etc., to carry on business of engineers, metallurgists,
iron, steel and brass founders, metal makers, moulders, etc., to execute
contracts for supply or use of any machinery and to carry on ancillary or
other works comprised in such contracts, to carry on business of
importers, exporters, merchants, ship-owners and charterers of ships
and transport and haulage contractors, etc., to render pecuniary or other
assistance for helping settlement of industrial or labour problems or the

Page 11 of 20
 promotion of industry or trade. While allowing the application for
confirming the alterations of the memorandum of association of the
company in terms of the special resolution, Mitra J. observed that if
the directors and members of a company propose to alter its
objects, and if there is no objection from the creditors or if their
position is not prejudiced by the proposed alterations, the court
should not stand in the way of the company's seeking new objects to
enable it to embark on a new venture, subject to the limitations that
the new business must not be destructive of or inconsistent with
the existing business, and there must be some existing business
which the company should be carrying on at the time when it passes
the resolution for altering its objects and such business must be
carried on under its existing objects clauses and, lastly, that the
company's financial position must be sound to enable it to carry on
the new business.
 In the matter of Dalmia Cement (Bharat) Ltd. AIR 1965 Mad. 76, the
Madras High Court has taken the view that the directors of the
company alone are best fitted by reason of their experience in the
particular business to decide whether the business can be carried on
more economically or more efficiently by adding fresh objects and if
the directors consider that, under the existing circumstances, it will
be convenient and advantageous to combine the new objects with
the existing objects, and if it appears that that conclusion may be
fairly arrived at, the court would not go behind it and hold an
enquiry as to whether the opinion of the directors is well-founded or
is justified. That was a case where the existing objects of the company
included import, export in cement, alumina cement, lime and limestone,
kanker and bye-products thereof and building materials generally. The
new objects sought to be added were to enable the company to do export
business in all varieties of goods. The court allowed that application.

Page 12 of 20
 The Allahabad High Court in Juggilal Kamlapat Jute Mills Co. Ltd. v.
Registrar of Companies [1963] 33 Comp. Cas. 585 held that the
court cannot refuse to confirm the alteration to the memorandum of
association simply because the change is desired to carry on a new
business not connected with, nor having any relation to the existing
business or businesses of the company, provided the new business
desired to be undertaken is one which can be combined with the
existing business of the company, and it is not destructive of or
inconsistent with the existing business.
 Practically the same view was taken by the Punjab High Court in the
case of Ambala Electric Supply Co. Ltd., In re [1967] 37 Comp. Cas.
20 ; AIR 1966 All. 417. In another case of the same High Court in
Punjab Distilling Industries Ltd. v. Registrar of Companies (8) [1963]
33 Comp. Case. 331(Contra view taken by High Court) the
memorandum of association of a limited company stated that the main
object of the company was to purchase, acquire, and to carry on the
business carried on by an existing distillery company. The company
passed a special resolution to alter the memorandum of association by
adding- a new object, viz., to acquire or take over on hire, picture houses,
cinemas, theatres, etc., and applied to the court for confirmation of the
resolution. The application was rejected on the ground that there is
no suggestion whatsoever that the new business which is sought to
be carried on has anything to do even remotely with its existing
business and it cannot be said that the new business will be
conducive to the economical or efficient doing of the existing
business. Even the element of convenience or advantage in
combining the two businesses is absent. On the facts, therefore, this
case is clearly distinguishable. In a later decision of the same High
Court, however, reported as New Asiatic Insurance Co. Ltd., In re
[1967] 37 Comp. Cas. 331. Khanna J. allowed the application of a

Page 13 of 20
 company whose original object was to carry on business of insurance
and investment business and passed a special resolution to alter its
objects to enable it to carry on business of engineers, metallurgists, iron,
steel and brass founders, metal makers, moulders, millwrights,
wheelwrights, joiners, galvanizers, etc., and to carry on business of
cotton spinners and doublers, flax, hemp and jute spinners, etc., to carry
on business in chemicals, petro-chemicals, drugs, etc., and to undertake
and execute any contracts for work involving the supply or use of any
machinery and to carry out any ancillary or other works comprised in
such contracts and to carry on business of importers, exporters,
merchants, ship-owners, charterers of ships and transport. The learned
judge allowed the application on the grounds that the shareholders
were of the view that better returns are likely to be given to the
shareholders if some industrial or commercial activity is undertaken
by the company, that the new business suggested is not
inconsistent with or destructive of the previous business, that the
special resolution was passed unanimously and none of the
shareholders, who are the persons directly concerned, has appeared
to oppose the petition.

INTERPRETATION OF SECTION 13 of the COMPANIES ACT, 1956 by HIGH

COURT AND LAYING DOWN PRINCIPLES: On examination of section 17(1) of
the Companies Act and the law bearing on the subject, the following principles
can be laid down—

(i) The language of section 17(1) (d) of the Companies Act permits the
alterations in the memorandum of association of a company to enable it to
carry on a business which is entirely a new departure from the business
already carried on provided (a) that such business is one which can
conveniently or advantageously be combined with the existing business of the
company and (b) that this must be so under the existing circumstances and
not under hypothetical circumstances. The additional business need not be
Page 14 of 20
even akin to the existing business but it must not be destructive of or
inconsistent with and detrimental to the existing business. It must leave
the existing business substantially what it was before.

(ii) The question whether any additional business is one which may be
conveniently or advantageously combined with the business of the company
carried on at the time when the special resolution is passed, is essentially a
business proposition and must be determined by the persons engaged in
the business of the company (Commercial Wisdom)

(iii) The court can confirm the alteration either wholly or in part subject to
such terms and conditions as it may deem fit on being satisfied that the
alterations sought to be confirmed are not beyond the scope of section 17(1)
and do not adversely affect the rights and interests of the members of the
company and/or of its creditors. No hard and fast rule can be laid down as
to the quantum of evidence necessary for the satisfaction of the court.
The fact that the company is in a sound financial position and that the
shareholders unanimously or by majority decision seek alterations of the
memorandum is a factum in favour of confirmation thereof.

HIGH COURT ON THE FACTS OF THE CASE: It is not contended before

me that any one of the items of additional business proposed to be started
would be destructive of the existing business. What is vehemently
contended by Mr. Ghosh (Registrar of Company) is that there are certain
additional items of business which have no relation to the existing business
and cannot be conveniently or advantageously combined with it. In fact
consequent on his objection and as a result of discussion at the time of
hearing, the petitioner has, as already stated, deleted several items of proposed
new business from the original resolution and we are now therefore concerned
only with the resolution as it stands altered. Even in respect of some of the
items of the altered list, particularly the items relating to manufacture of
typewriters and computers, Mr. Ghosh presses his objections. It is, therefore,

Page 15 of 20
necessary for me to briefly notice the submissions made on behalf of the
petitioner in support of his contention that the proposed new items of business
can be economically or more efficiently combined with the existing business.

Regarding its proposed business in general merchandise goods it is

submitted by the company that it runs two factories, one at Bhopal and the
other at Jaykaypur, for developing townships and, to cope with modern times
and to supply amenities and comforts for its employees and workers, it has
been found expedient to deal in general merchandise goods.

(i) Regarding the activities mentioned in the proposed clause 3(10) it is

submitted that in the course of working of the factories for the last several
years it has been found expedient to deal in plant and machinery and office
equipments to meet its own requirements and since new industrial complexes
are coming up in near about places where the company is having its existing
factory, it is necessary that the company should be free to take up this and
other lines of business and once they "take up business relating to plant,
machinery and office equipments, the company would also be able to provide
the servicing and maintenance on account of its having experienced and
qualified engineers under the employment of the company.

(ii) Regarding manufacture of computers it is submitted that the company

is doing business in paper industry and has got an equipped workshop and
trained personnel. They can be able to assemble, manufacture repair, maintain
computers and other business machines considered to be efficient and
economic and this can be advantageously combined with their existing
business. The same argument is also advanced in respect of typewriters and it
is submitted that the company has already taken certain steps in collaboration
with other companies for the manufacture of typewriter.

(iii) Regarding furniture it is stated that for the purpose of running the
paper mills they take forest leases and for this purpose they have got a trained
staff and necessary machinery. At the present moment they operate and exploit

Page 16 of 20
bamboos in the forest. It would be economical to take up the business of
exploiting timber and manufacturing furniture therefrom, not only for its own
use in the factory and its own township but also for sale to others.

(iv) Regarding the proposal in paragraph 10(b) relating to synthetic yarn,

clothes and materials, rubber, latex, plastics and formations, etc. and
plastic products, it is submitted that with the technological development, paper
has been advantageously used with cloth, synthetic yarn and is also being
used in rubber, latex and plastics. It would therefore be convenient and
advantageous to combine this business with the existing one.

(v) Regarding manufacture of pharmaceuticals, medicinals, chemicals,

caustic soda, compound products, machines, live wires, disinfectants,
oils, colours paints and varnishes it is submitted that paper industry being
mostly and mainly a chemical-based industry, the company has got chemical
laboratories and it will be very efficient and economic to combine this business
with the existing one.

(vi) Regarding manufacture of carbons, ink, paper and stationery goods,

the argument is that in the process of manufacturing paper some chemicals
and impurities are burnt resulting in carbons and with the active elements of
ink and other ingredients, carbon papers can be manufactured. Since they are
dealing in paper they can be efficiently and advantageously combined with the
existing business.

(vii) Regarding the business referred to in sub-clause 11, it is submitted

that the company has taken various forests on lease and is also carrying on
forest operations. At the present moment it is only exploiting the bamboo
wealth of the forest. It is proposed that with the same machinery and without
spending more money it can also deal in timber and timber products,
economically and advantageously.

Page 17 of 20
Regarding the proposals mentioned in sub-paragraph 12 it is stated that the
effluent of the paper industry has been experimented to get fertilisers and the
company has got several experimental plots where agricultural operations can
be carried on and food stuffs can be produced for its own employees and the
township.

(ix) Regarding sub-paragraph 13 the submission is that the company has

taken up erection work of its factories by the engineers who have got vast
experience in designing, planning, erection, expansion and maintenance of
modern factories. The company can therefore use this personnel with
advantage. At the present moment the company has to engage transport
contractors to take finished products from them and also to get bamboo, etc.,
from the forest. If the company can maintain its own vehicles, it can save a
huge amount. For maintenance of its existing vehicles it runs an efficient motor
garage and workshop and, with little addition to it, this can efficiently handle
bigger transportation facilities both for itself and for the purpose of business.

(x) Regarding sub-paragraph 14, the submission of the company is that at

present it has to generate its own power and if the proposed expansion is done
this will mean a lot of savings and with small alterations and expansion of the
generating units and utilization of its own electrical staff and know-how it can
save a huge amount and also can have some profit.

(xi) Regarding sub-para. 15 it is stated that it is ancillary to the existing and

proposed objects and can be efficiently combined with the existing business.

(xii) Regarding sub-paragraphs 16 and 17 the submission of the company is

that these clauses are found in the memorandum of association of all
companies of repute and are necessary for more efficiently carrying on the
business either existing or future.

Page 18 of 20
NO OPPOSITION BY SHAREHOLDERS AND CREDITORS: 18. (Court Saying)
I have carefully considered the aforesaid submissions made by the learned
advocate for the petitioner and feel that, although in some respects they
appear to be ambitious, it cannot at all be said that any of the proposed
activities is either inconsistent with the existing business or would be
destructive of the same. The directors who are in charge of the day-to-day
administration of the affairs of the company are of the view that the
proposed activities can be efficiently and conveniently combined with the
existing business and how this would be so has been explained in the
submissions referred to above which prima facie appear to be acceptable.
The resolutions for the alteration of the provisions in the
memorandum had been passed unanimously by the
shareholders without a single dissenting voice. Notice of the
present petition was given to all concerned by publication in newspapers,
but apart from the Registrar of Companies, no shareholder or creditor of
the company has appeared to oppose the application.

The single objector, Sri Ojha, has not appeared before this court to raise
any objection.

FURTHER SAFEGUARDS IN LAW: A further safeguard so far as the

shareholders are concerned is afforded by sub-section (2A) newly added by
section 15 of the Companies (Amendment) Act, 1965, to Section 149 of the
Companies Act whereby before actually commencing any new business
the company has to get the approval of the general body of shareholders.
That would give a further opportunity to the shareholders to say whether
the company should actually take up any new business. This appears to
me to be a further safeguard against any speculative action on the part of
the directors of the company.

HIGH COURT CONFIRMING ALTERNATION IN MOA: In the result, I would

allow this application and confirm the alterations proposed by the

Page 19 of 20
company in the special resolutions dated July 21, 1966, and December 6,
1967.

Page 20 of 20