- (1.) THIS is a petition under section 17 of the Companies Act, 1956, of Juggilal Kamlapat Jute Mills Company Limited (to be referred hereinafter as the company) for confirmation of the alteration to the memorandum of association of the company. The company was registered on the 7th of February, 1931, under the provisions of the Indian Companies Act, 1913, as a company limited by shares with its registered office at Kanpur. The objects for which the company was formed are set out in clause 3 of the memorandum of association. Even though the company was named Jute Mills company and is running the business of jute, it can, under the memorandum of association, carry on many businesses not connected with jute.
(2.) IT was recently that the directors of the company desired to manufacture goods of natural rubber, synthetic rubber and reclaim rubber, after a sister concern, J. and K. Commercial Corporation Ltd., obtained a letter of intent for industrial licence from the Government of India to establish a factory for reclaim rubber and also obtained an import licence (which it may be noted is not transferable for importing plant and machinery for producing reclaim rubber under Belgium credit.) The company held an extraordinary general meeting on September 30, 1964, and, in accordance with the Companies Act, 1956, unanimously passed the following by a special resolution: "Resolved that the memorandum of association of the company be altered by adding a new clause 4(A) as specified below after clause 4: "4(A) To undertake and carry on business as manufacturers of natural rubber, synthetic rubber and reclaim rubber and all kinds of rubber goods and rubber by-products and allied materials and to take all steps incidental to such business including acquisition of the requisite raw materials either by cultivation, purchase, processing or otherwise." As provided in section 17 of the Companies Act, 1956, alteration to the memorandum of association with respect to the objects of the company does not take effect until, and except in so far as, it is confirmed by the court on petition. The present petition was, therefore, made for the confirmation of the alteration to the memorandum of association. When the notice of the extraordinary general meeting was given to the shareholders for the consideration of the proposed alteration to the memorandum of association, it was merely indicated that the board of directors of the company, after giving its most careful consideration to the aspect of installing a rubber factory, was of the opinion that the company could conveniently and advantageously combine with the existing business, the business of installing and running a reclaim rubber factory at Kanpur as one of its facilities at its disposal to work a business of the type proposed. This opinion of the board of directors is contained in the explanatory statement accompanying the notice of the extraordinary general meeting. From the minutes of the general meeting it appears that after a free and frank discussion, the above resolution was put to the meeting and was declared carried unanimously. The shareholders of the company who attended the meeting or sent their Proxy were generally members of the Singhania family. Outsiders consisted of Sri Stanley D. Noronha and Sri P.D. Chandrana and two Agarwals representing the deities of the Singhania family. In one way, every one is connected with the Singhania family or the singhania group of companies. A few details have, however, been given in paragraph 8 of the petition to suggest why the proposed alteration can be conveniently or advantageously combined with the existing business of the company. These grounds are as below: "(a) The existing resources and administrative set up of the company are adequate and competent for installing and running the rubber reclamation plant. (b) The company already holds an industrial licence granted by the Government of India. In the meantime, the company has already received an import licence for importing the plant and machinery under Belgium credit. (c) The company will be able to get scrap rubber at competitive and cheaper rates at Kanpur, where the plant is proposed to start. (d) There is no other rubber reclamation plant in Northern India and it will be advantageous if the company carries on its new business. there is great demand for rubber and the rubber so produced by the company will immediately attract market to the advantage of the company."
(3.) IT is further mentioned that the company is in a sound financial position and has adequate arrangements for working capital (paragraph 10 of the petition); and that the company has taken a loan of Rs.27 lakhs from the National Industrial Development Corporation, New Delhi, for modernisation and expansion of the plant of the company and the Corporation has accorded its approval to the proposed alteration to the memorandum of association (paragraph 9 of the petition). The company, at no time, issued debentures; and the big creditors of the company, namely, J.K.Charitable Trust, J.K.Synthetics Ltd. and J.K.Commercial Corporation, gave their consent in writing to the proposed alteration. In the circumstances, it was not considered necessary to issue notice of the petition to the creditors of the company. The petition is opposed by the Registrar of Companies, U.P., Kanpur, on the ground that the business now sought to be undertaken by the petitioner-company is entirely new and alien to the existing business of the company, and it cannot be said that this business can profitably or conveniently and advantageously be combined with the business of the company. It was further mentioned that the company had not yet obtained an industrial licence for opening a rubber factory and hence the petition for confirmation of alteration to the memorandum of association was premature. The Registrar did not admit the material facts detailed above and merely put the company to proof. However, there exists no ground to doubt their correctness, and hence, for purposes of the present proceeding, such facts can be accepted.;