1. The petitioner-company has presented this petition under section 17 of the Companies Act, 1956 ('the Act') to this Bench on 23-3-1998 for confirmation of 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 West Bengal, as approved by the special resolution passed at its extraordinary general meeting held on 5-2-1998 in accordance with section 189 of the Act. The petition came up for hearing from time to time and finally on 27-8-1998.


2. Shri Harikrishnan, the senior counsel appearing for the company, while initiating arguments reiterated the averments made in the petition as well as reply to statement of objections filed by the objectors, to the effect that the company's corporate office is located at Calcutta. The Chairman and two other directors are based in Calcutta and more than 44 per cent of the share capital of the company is held by members residing in the State of West Bengal. The company has suspended its operations at Bangalore for nearly two years and the major products of the company are being manufactured through agencies located at Calcutta. By shifting the registered office the company will carry on its business more economically, efficiently and profitably achieve its main purpose, enlarge its operations and it will be in the interest of the company, its members and its employees. The company has duly complied with the procedural formalities and requirements as required under the provisions of the Act. There has been no opposition either from shareholders or creditors. The Government of Karnataka has no objection in shifting the registered office from the State of Karnataka to West Bengal. Moreover, shifting the registered office is purely a domestic matter left to the absolute discretion of shareholders of the company. He further pointed that Pharmaceutical Chemicals & Allied Employees Union, the objectors have misconceived the entire perception of shifting the registered office to the State of West Bengal under the pretext that the cases pending before the Courts at Karnataka will be transferred from the State of Karnataka, consequent upon shifting the registered office to the State of West Bengal. In this connection, Shri Harikrishnan categorically made a statement that the company will give an undertaking that all the pending cases before the Courts in Karnataka will continue to be heard at Karnataka, and that the company will abide by the decision of the Courts with regard to the claims of the employees. He further denied any mala fide intention on the part of the management of the company and accordingly sought for the prayer as made in the petition.


3. Shri Harikrishnan in support of his views has relied upon the following decisions:-


(i) KG. Khosla Compressors Ltd, In re [1998] 91 Comp. Cas. 546 (CLB) - to state that


"?.So long as the Company Law Board is satisfied that the company has complied with the prescribed procedure, it is only appropriate to presume that the interests of the relevant parties are taken due care of?..." (p. 546)


(ii) Zuari Agro Chemicals Ltd. v. F.S. Wadia [1974] 44 Comp. Cas. 465 (Bom.) - to state that


"....in considering a petition for confirming a resolution of alteration of memorandum of association of the company shifting the registered office of the company, the Court has to see whether all the formalities of the statute have been complied with. These formalities contain certain safeguards and protection for persons affected. If those formalities have been carried out, the Court will next look to the interest of absent shareholders and creditors and consider objections, if any, taken by the shareholders, creditors, Registrar of Companies and other persons affected by the shifting of the registered office. In so doing, the Court is not concerned to

consider the wisdom or desirability of the proposed alteration. It is not the function of the Court to substitute its own wisdom or judgment in the place of the collective wisdom or judgment of the company expressed in a special resolution. These matters must be left to the domestic decision of the shareholders...." (p. 465)


(iii) Mackinnon Mackenzie & Co. (P.) Ltd, In re [1967] 37 Comp. Cas. 516 (Cal.) - to state that


"....in applying section 17 of the Companies Act, what the Court has to see is whether all the formalities of the statute have been complied with, and if the safeguards and protection envisaged in the section have been complied with, the Court will look into the interests of absent shareholders and creditors and consider the objections of the Registrar and decide the matter...." (p. 516)


(iv) Minerva Mills Ltd v. Government of Maharashtra [1975] 45 Comp. Cas. 1 (Bom.)- to state that


"....It was for the members of the company and not for the State to decide whether the registered office of the company should be transferred from one state to another in the interest of the company...." (p. 2)


(v) Orient Paper Mills Ltd v. State [1958] 28 Comp. Cas. 523 (Ori.) - to state that the Court can confirm the special resolution altering the registered office only if it is satisfied that the said special Resolution was first bona fide and next was in the interests of the Company.


(vi) Bharat Commerce & Industries Ltd. v. Registrar of Companies [1973] 43 Comp. Cas. 275 (Cal.) - to state that


"under section 17 of the Companies Act, the Court has discretionary power to confirm the alteration of the memorandum wholly or in part and/or on such terms and conditions as it may deem fit. No creditor or shareholder of the company opposed the application for confirmation of the resolution. Only three of the employees of the company did not agree to the proposed transfer of the Registered office. Counsel for the company stated before the Court that the company would not retrench any of its employees because of the transfer of the registered office of the company from Calcutta to New Delhi. In view of that statement, there was no substance in the contention that the company's proposed act was mala fide and that the company was seeking to transfer the registered office in order to stifle the proceedings between the employees of the company and the company pending before the conciliation officer...." (p. 276)


4. Shri R. Yeashod Vardhan, advocate appearing for the objectors, submitted that the Bangalore unit of the company has been doing extremely well and contributed to the most of its turnover. However, the company has gradually topped its operations at Bangalore and entered into sub-contracting arrangement. The management has been adopting anti-labour policy and acting against the interest of the employees. The company has sought permission of the State Government of Karnataka to close down the factory at Bangalore which was not granted by the State Government of Karnataka against which the company has filed a writ petition before the Karnataka High Court. The management avoids the prescribed legal regime, especially as contemplated in section 25-O of the Industrial Disputes Act, 1947. There have been a number of cases pending before the Labour Courts and Karnataka High Court against the company in respect of dearness allowance and bonus for the employees, lay-off of the workmen, closure of the factory at Bangalore etc. According to him, the employees will be prejudiced by shifting the registered office especially when the pending cases will be transferred to the State of West Bengal. The employees will not be able to realise their dues as and when ordered by the Courts in their favour. The proposal of the company is motivated by mala fide intentions. In the circumstances, Shri Yeashod Vardhan prayed for dismissal of the petition.


5. After considering the pleadings and arguments of both the counsel for the petitioner and objectors, the issue that arises for considerations whether this Bench shall confirm alteration to the situation clause of memorandum of association of the company on the facts and in the circumstances of the case.


6. 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 West Bengal is in the interest of the company, its members, creditors and employees, it is contended on behalf of the objectors that shifting the registered office will be against the interest of the employees of the company.


7. Section 17 of the Act read with the Company Law Board (Regulations), 1991 provides a procedural framework 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 formalites of the statute have been complied with, safeguarding the interests of concerned parties. In the present case, it is absolutely free from doubt that formalities of the statute have been complied with by the company. Therefore, the CLB will look to the interest of any other persons affected by shifting the registered office, as held in the cases cited by Shri Harikrishnan. It may be observed that there has been no opposition from any of the shareholders or creditors other than the employees of the company. The State Government of Karnataka has on veyed its no objection to the proposed shifting of the registered office. The registrar of companies has not opposed the proposal. The apprehension of the objectors is on two counts that the interests of the employees will be prejudiced on account of pendency of the various cases before the Courts at Karnataka and that action of the management is motivated by mala fide intentions. In this connection, Shri Harikrishnan, the senior counsel for the company has categorically made a statement before this Bench that the company will abide by the order of the High Court of Karnataka in the matter of disputes between the company and its employees including payment of arrears of wages. In addition, Shri Ragavendra Kumar Agarwal, the company secretary has filed an affidavit sworn on 31-8-1998 to the following effect:


"The petitioner-company hereby undertakes that it will not prefer any application for transfer of the various cases pending in the High Court of Karnataka to High Court of Calcutta consequent upon the shifting of the Registered office from the State of Karnataka to the State of West Bengal. The various cases which are pending before the various Courts shall be conducted by the Petitioner at Karnataka subject to taking further proceedings in accordance with law if the Petitioner feels aggrieved by any decision rendered in the above cases.


The petitioner-company, hereby undertakes to comply with the various orders passed by the High Court of Karnataka made in accordance with law in the various pending cases with regard to payment of arrears of wages etc., without prejudice to seek appropriate statutory and legal remedies where available and necessary against such decision if the Petitioner is aggrieved of such directions/Orders by Courts."


8. In view of the statement of Shri Harikrishnan as well as written declaration made on oath by the representative of the company, there has been no substance in the contention of the objectors that the company's proposed Act is mala fide and that the company is seeking to transfer the registered office in order to stifle the proceedings between the employees of the company and the company pending before the Labour Courts and High Court at Karnataka, as has been held in Bharat Commerce & Industries Ltd., cited supra. However, in view of the apprehension ex-pressed by the counsel for the objectors and 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 employees of the company.


9. Moreover, the resolut

ion altering the situation clause has been duly and properly passed by majority of the shareholders, the fact of which is not disputed by the objectors. In the circumstances, 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 held in Zuari Agro Chemicals Ltd. 's case (supra) and Minerva Mills Ltd.'s case (supra). 10. 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 5-2-1998 is hereby confirmed subject to the conditions that the interests of one of the employees of the company shall be prejudiced either by way of transfer or retrenchment or otherwise and further that pending cases before various Courts at Karnataka between the employees of the company and the company shall not be adversely affected. Accordingly, Clause II of the company's memorandum will stand altered as follows: 11. The Registered office of the company will be situated in the state of West Bengal. 12. The company shall file a certified copy of this order with the concerned Registrar of Companies within the prescribed time limits. Ordered accordingly.