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Deutsche Babcock Power Systems Ltd., In re

    Company Petition No. 251/17/SRB of 98

    Decided On, 23 November 1998

    At, Company Law Board Southern Region Bench Chennai

    By, K.K. BALU
    By, MEMBER

    K. Krishnamurthy, Practising Company Secretary and Authorised Representative for the Petitioner. Athas Sen, Practising Company Secre-tary and Authorised Representative for Power Max India (P.) Ltd., the objector. Ms. Suparna Das Gupta, Executive Asstt, Power Max India (P.) Ltd.



Judgment Text

1. The petitioner-company has presented this petition under section 17 of the Companies Act, 1956 ('the Act') to this Bench on 28-4-1998 for confirmation of the alteration to the Situation Clause of the Memorandum of Association of the company shifting the registered office from the State of Karnataka to the State of Tamil Nadu as approved by the Special Resolution passed in accordance with section 189 of the Act at its extraordinary general meeting held on 27-1-1997.


2. Mr. K. Krishnamurthy, Practising Company Secretary and authorised representative for the petitioner while reiterating the averments made in the petition as well as reply to the statement of objections filed by Power-max India (P.) Ltd. ('the objector') to the effect that the company incorporated in the year 1988 is having its registered office in Bangalore. The company carrying on the business of designing, selling and manufacturing of heat exchangers has established the manufacturing facility at Chennai. The company is expecting substantial growth in catering to the needs of infrastructure industries such as power, fertiliser and refinery sectors. It will be convenient to the company to co-ordinate and follow up with the works and other statutory bodies, provided registered office is shifted to Chennai. He further submitted that with the transfer of registered office to Chennai, the company will easily deal with Customs Authorities, saving the expenses and time. The interest of none of the employees of the company will be affected by the proposed shifting of the registered office of the company as the factory and registered office of the company will be at one and the same place, i.e., at Chennai. He has further submitted that the company has duly complied with the procedural formalities and requirements as required under the provisions of the Act. There has been no opposition from shareholders or creditors, save the objector here above. The Government of Karnataka has no objection in shifting the registered office from the State of Karnataka to Tamil Nadu. Moreover, shifting the registered office is purely domestic matter left to the absolute discretion of shareholders of the company. He pointed out that a sum of Rs. 11,205 alone was due to the objector as per the books of account of the company, which was also subsequently paid by the company by Cheque No. 812314 dated 9-9-1998 drawn on ANZ Grindlays Bank in favour of the objector. At present, the company does not owe any money to the objector. The amount of Rs. 89,89,447.29 said to be due to the objector is in relation to a certain transaction between the objector and International Development and Engg. Associates Ltd. (IDEA), a group company of the petitioner. The alleged transaction is not between the company and objector. The objector cannot have any remedy for the said sum of Rs. 89,89,447.29 against the company. Shri Krishnamurthy relied on Symphony Comfort Systems Ltd., In re. [1998] 91 Comp. Cas. 404 ? to state that the CLB cannot adjudicate claims and counter claims between the company and its objector creditor. In the circumstances, he sought for the prayer as made in the petition.


3. Shri Athas Sen, Practising Company Secretary and Authorised Repre-sentative appearing on behalf of the objector submitted that the company is indebted to the objector to the tune of Rs. 89,89,447.29 in connection with supply of boilers to IDEA. According to Shri Sen, both IDEA and the company belong to the same group. There has been an internal arrangement between IDEA and the company regarding the supply of boilers by the objector, on account of which the aforesaid amount is due and payable by the company. According to him, the objector will be prejudiced by shifting the registered office, especially when the outstanding amount due to the objector is not settled by the company. Hence, Shri Sen reiterated that the company must settle the amount due to the objector before conceding to the prayer of the company.


4. After considering the pleadings and arguments of both the authorised representatives for the petitioner and objector, the issue that arises for consideration is whether this Bench shall confirm alteration to the Situation Clause of Memorandum of Association of the company on the facts and circumstances of the case.


5. While it is the contention of the company that shifting the registered office of the company from the State of Karnataka to the State of Tamil Nadu is in the interest of the company, its members and employees, it is contended on behalf of the objector that shifting the registered office will be against their interest.


6. Section 17 read with the Company Law Board (Regulations), 1991 provides a procedural frame work before the CLB for considering the petition in alteration of the Memorandum. These formalities contain certain safeguards and protection for persons affected. The CLB has to ensure that all the formalities of the Statute have been complied with, safeguarding the interests of concerned parties. In the present case, it is free from doubt that formalities of the Statute have been duly complied with by the company. Therefore, the CLB will look to the interest of any other person affected by shifting the registered office. There has been no opposition from any of the shareholders or any creditor other than the objector before this Bench. The State of Karnataka has conveyed its no objection to the proposed shifting of the registered office. The Registrar of Companies has not opposed the proposal. The apprehension of the objector is that their interest will be prejudiced if the registered office of the company is shifted without settlement of the amount said to be due to the objector by the company. Admittedly the claim of Rs. 89,89,447.29 is due from IDEA on account of supply, erection and commission of boilers by the objector. Though IDEA and the company belong to the same group, under law IDEA and the company are two different entities. The disputes are in relation to payment for supply of boilers by the objector to IDEA, a separate and different legal entity. The said disputes cannot be adjudicated in the present proceedings as held in Symphony Comfort Systems Ltd.'s case (supra). Further, the objector is at liberty, if so advised, to enforce their rights against the company before the Competent Court of Law. Accordingly, the petition has been considered without prejudice to the rights of the contesting objector. However, in view of the apprehen-sion expressed by the authorised representative for the objector in exercise of the discretion of this Bench available under sub-section (5) of section 17, I am inclined to impose suitable conditions safeguarding the interest of the objector. Moreover, the resolution altering the situation clause has been duly and properly passed by the majority of the share-holders, the fact of which is not disputed by the objector. In the circum-stances, the CLB will not go into the collective wisdom of the company expressed in the special resolution. This issue has to be left to the domestic decision of the shareholders as has b

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een held in quite a number of cases. 7. In view of the foregoing, the alteration in the Memorandum of Association of the petitioner company as approved by the special resolution passed at the extraordinary general meeting held on 27-1-1997 is hereby confirmed subject to the condition that the rights of any of the creditors of the company including the objector shall neither be prejudiced nor adversely affected. Accordingly, clause-H of the company's Memorandum will stand altered as follows: "The Registered Office of the company will be situated in the State of Tamil Nadu." 8. The company shall file a certified copy of this order with the concerned Registrar of Companies within the prescribed time limits. Ordered accordingly.
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