Page 157 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes Loss of revenues of state, whether relevant consideration. In Orient Paper Mills Ltd. v. State, AIR
(1957) Ori. 232 it was observed that a State whose interests are affected by the change has a
locus standi to oppose shift of registered office of a company. Accordingly, the Orissa High

court declined to confirm change of registered office from Orissa to West Bengal, inter alia, on
the ground that in a Federal constitution every State has the right to protect its revenue and,
therefore, the interest of the State must be taken into account.
But in Minerva Mills Ltd. v. Govt. of Maharashtra (1975) 45 Comp. Cas 1(Bom.), Justice Ray of the
Bombay High Court held that the Company Law Board (now Central government) cannot refuse
confirmation on the ground that the change would cause loss of revenue to a State or would have

adverse effects on the general economics of the State. The question of loss of revenue to one State
would have to be considered in the prospectus of total revenues for the Republic of India and
no parochial considerations should be allowed to turn the scale in regard to change of registered
office from one State to another within India.

Similar view was expressed in Rank Film Distributors of India Ltd. v. Registrar of Companies, West
Bengal [AIR (1969) Cal. 32]. i.e. that State has no statutory right under s. 17 to oppose the shifting

of the registered office from one State to another.
A printed or a typewritten copy of the special resolution both under s. 146 and s. 17 should be
sent to the Registrar within 30 days of its passing.
A certified copy of the Central Government order of the Central Government should be fi led

within three months thereof with the Registrar of each State – the old and the new State. If it is

not filed within the prescribed time, then the alteration shall, at the expiry of such period, become
void and inoperative.

A notice of the new location of the registered office must be given to the Registrar of the State to

which the office has been shifted, within thirty days after the change of the offi ce (s.146).
A company is in a position to shift its registered office from one State to another for certain

purposes only. These are discussed in the following paragraph (under ‘Alteration of objects’ – the
grounds being common).
Alteration of objects clause. Section 17 empowers a company by a special resolution to alter the

objects or to change the place of its registered office from one State to another if the alteration is
sought on any of the following grounds.
1. To carry on its business more economically and more effi ciently. In Dalmia Cement (Bharat)
Ltd., In re (1964) 34 Comp. Cas. 729 (Mad.), the Court observed that whether a company can
carry on its business more economically or more effi ciently is a matter for the judgement
of the directors. 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 such a conclusion may be fairly arrived at, the Court (now Central government)
will not go behind it and hold an enquiry as to whether the opinion of the directors is well
founded or is justifi ed.

The true legal position, observed the Delhi High Court, is that the business must remain
substantially the same and the additions, alterations and changes should only be steps-in-
aid to improve the efficiency of the company [Delhi Bharat Grain Merchants Assn. Ltd., In re

(1974) 44 Comp. Cas. 214 (Delhi)].

In Re, Scientific Poultry Breeders Association (1933) 3 Comp. Cas. 89 (CA), a company’s
memorandum prohibited payment of remuneration to the members of its governing body.

It wanted for efficient management, amendment in the memorandum to enable it to pay
remuneration to its governing body members which was allowed.
2. To attain its main purpose by new or improved means. For the companies registered after
10th October, 1965, there is no difficulty in ascertaining the main purpose because the

Memorandum would state it. But for the companies registered earlier, one has to look not
only to the memorandum but also to what has actually been done.

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