PONDICHERRY TEXTILE CORPORATION LTD Vs. K K RAMANUJAM

JUDGEMENT

(1.) THE petitioner-company has presented this petition under Section 17 of the Companies Act, 1956 (hereinafter referred to as "the Act"), to this Bench on April 9, 1996, for confirmation of the alteration to the objects clause of the memorandum of association of the company as approved by the special resolution passed in accordance with Section 189 of the Act at its extraordinary general meeting held on February 15, 1996.

(2.) The petitioner-company has submitted that the company was established in the year 1985 with the main object of setting up and running a textile mill and to carry on the business of textile mills and manage such business. Now the company being a trading house and doing export business proposed to venture into any other profitable trading activity within and outside India, to improve its profitability. As the company is not empowered to carry on the proposed business under the existing memorandum of association, the present petition has been filed for insertion of new Sub-clause (1) under the main objects clause of the memorandum of association.

(3.) THE petitioner-company in compliance with regulation 36 of the Company Law Board Regulations, 1991, issued public notice about the proposed alteration in the memorandum of association. On publication of the public notice, two members of the public, viz., Shri D. K. Ramanujam and Shri R. Ramaswamy, have filed objections to the proposed alteration. According to Shri Ramanujam, the company being a sick unit has been continuously incurring losses since the year 1993-94. On account of mismanagement, the company incurred huge losses of Rs. 35 crores. In the pre-audit report for the nine months in the year 1996-97, the loss is reported to be of Rs. 19.65 crores. THE company has reduced the employment level from 6,300 in the year 1994 to 5,904. At present the work force has come down to less than 5,000. It is further submitted that 2,000 workers will be sent out by the company in the event of non-implementation of the modernisation programme of the unit. THE company shall not diversify into any other trading activity in unspecified items which would result in abandonment of the manufacturing activity. It is apprehended that his son, many "of his relatives and friends would lose their jobs if the company is allowed to diversify its activities into any other area. THE company has proposed primarily to take up liquor export on commission basis for some local manufacturers. THE objector, however, does not have any objection to confirming the alteration in the memorandum of association provided there is no potential danger of loss of employment and closure of the weaving section. Shri S. Ramaswamy, the other objector, has contended that the company is being mismanaged by the executives who do not have any experience in the textile business. THE company has not engaged any technically qualified and experienced personnel to run the unit, resulting in a huge loss to the tune of Rs. 10 crores. THE accounts are being manipulated, the proposed alteration clause is very vague and the proposed new activity has not been specified. For these reasons both the objectors are opposing the petition.