IN RE: INDIAN COMPANIES ACT VII OF 1913; IN RE: COIMBATORE MERCANTILE BANK LTD BY ITS SECRETARY MR T RAMASWAMI AIYENGAR; T R VENKATARAMANA AIYAR Vs. COIMBATORE MERCANTILE BANK LTDBY ITS SECRETARY MTTRAMASWAMY AIYENGAR

JUDGEMENT

(1.) This is an appeal from an order of Phillips, J., on a petition made under Section 12 of the Indian Companies. Act asking the Court to confirm the special resolution of a Company for an alteration in the Memorandum of Association. Clause 7 of the memorandum is in the following words. "T.R. Venketaramana Aiyrr has been appointed Agent, principal, secretary and Director to the Bank and given powers to enter on the responsibility of this Bank into an agreement or transaction with the register Banks in the following places and that places and with business and Industry Concerns of local traders with a view to the Bank's earning commission or profit. The actual words are in Tamil and the translation given above, I think, adequate; represents the meaning.

(2.) The only power that the Court has to confirm resolutions of a Company ii regard to an alteration of the Memorandun of Association is in respect of matter; covered by Section 12; for Section 10 enact: that a Company shall not alter the conditions contained in its Memorandum except in the cases and in the mode and to the extent for which express provision is made in this Act. Other specific condition; of the Memorandum can be altered in tin manner provided for in "other party of the Act. It is not contended that this clause comes under any of them. It is contended that it comes under " Section 12 as being" which respect to the objects of the Company which may be alter in this way "so far as may be required to enable it to carry on its business more economically or more efficiently or to restrict or abandon any of the objects specified in the Memorandum. In my judgment, this is not an object of the Company at all. The object of tie Company, as stated in clause 3 of the Memorandum, is to carry on banking business and things ancilliary there to, and the appointment of this gentleman as Agent, Secretary and Director is a method of carrying out the object of the Company but it is not in itself an object at all. If, however, it ought to be regarded as one of the objects of the Company, the question would arise whether the Court ought to confirm the resolution of the Company putting an end to it. I call attention to this, because the confirmation or otherwise of such a resolution is a matter of discretion, and, in this case, it is clear that no discretion has teen exercised at all because the learned Judge says that he "is satisfied that this is an alteration that can be made by the Company and, therefore, order the alteration as prayed." He gives no reasons for exercising his discretion t in that way, but apparently treats it as 7 a matter which, if the Company has the power to do, it is the duty of the Court r to assist the Company in so doing, and I think, it desirable to point out that that is not the intention of the legislature at all. The intention of the Legislature is, as indeed is clearly stated in Section 14, that the Court should exercise a discretion having regard to the interest of the various persons, share-holders, creditors and others. Now, if this were one of the objects of the Company, and the resolution has, therefore, to be confirmed by the Court and I had to exercise my discretion upon it without any hesitation, I should refuse and for this reason, that the Company, has made a contract with this man. in the most solemn form that the Company can, namely, by putting it into its Memorandum, and I can see no justification for a Court; so to speak, to unmake the contract or to permit the Company to unmake the contract by altering its Memorandum of Association. Nor. indeed, do I think it would have the least effect, because if there is such a contract the man has his contractual rights and the fact that the Company purports t revoke, with the consent of the Court, that contract does not, as between that man and the Company, interfere in any way with his rights.

(3.) But there are other things that can be put into a Memorandum of Association than the object and the matters set out in the Companies Act, such as name, capital, address, etc. They have been described as conditions. A very common one is a provision for the rights inter se of preferential and ordinary share-holders. It has been held that in respect of such condition no power given in the English Companies Act, which corresponds completely with the Indian Companies Act on the point, to alter the conditions to the Such a condition is unlaterat by the Company or by the (sec) Cor See Ashbury V/s. Watson (sec) (1) approved in In re Welsback Incandescent Gas Light-Co., Ltd. (sec)(2).