SURYANARAYANA H Vs. HINDUSTAN MACHINE TOOLS LTD

JUDGEMENT

(1.) The petitioner joined the Machine Tools Factory, a concern under the management of the Government of India, in 1952 as a clerk. In 1953, "Hindustan Machine Tools, Ltd." to be hereinafter referred to as the company was registered as a private limited company under the Indian Companies Act, 1913. The Government of India made over the Machine Tools Factory to the company. Originally, there were seven shareholders in the company. They were :

(2.) We understand that the shares of Buchrle & Co. had been purchased by the President of India. At present, all the shares of the company are held in the name of the President of India and some of the Secretaries to the Government of India. It is not disputed that the entire share capital was subscribed from the consolidated funds of India. The company is managed by a board of directors. All the directors are appointed by the President. They are paid such salary and/or allowance as the President may from time to time determine. The directors are empowered to allot or otherwise dispose of the share of the company to such persons on such terms and conditions and at such time as the directors think fit. But, this power is subject to such direction as the President may be pleased to give. The company has a right to pay commission for the sale of shares. It has the duty to issue share certificates. It can call upon the members in respect of any money unpaid on their shares. The shares can be forfeited. Subject to the approval of the President, the directors may, with the sanctions of the company in general meeting, increase the share capital by such sum, to be divided into shares of such amounts, as the resolution shall prescribe. The right of members to transfer their shares are restricted as follows :

(3.) Articles of association provide for general meeting as well as extraordinary meetings. Resolutions before general meetings are decided by voice. But, the number of directors is determined by the President. As seen earlier, they are appointed by the President. In the articles of association, there is provision for creating a reserve fund, declaring dividends, as well as interim dividends, payment of bonus, etc. From a perusal of the article of association, it is seen, that by and large, the duties and rights of the company are similar to those of other private limited companies, registered under the Companies Act. But, in several respects the President of India had overriding powers. The Government of India has also been given certain powers such as the right to appoint auditors.