Skip to content


In Re: Orissa Chemicals and Distilleries Private Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtOrissa High Court
Decided On
Case NumberCompany Act Case No. 3 of 1957
Judge
Reported inAIR1961Ori62; [1962]32CompCas497(Orissa)
ActsCompanies Act, 1956 - Sections 17(1) and 17(3)
AppellantIn Re: Orissa Chemicals and Distilleries Private Ltd.
Appellant AdvocateM. Mohanty and ;B.P. Das, Advs.
Respondent AdvocateAdv. General
DispositionApplication dismissed
Cases ReferredLtd. v. The State of Orissa
Excerpt:
.....circumstances of the case, i am not satisfied as to the bona fides of the company's application for the proposed change of its registered office outside the state of orissa......that one of the objects of the company is to sell molasses, and this assessable under the orissa sales tax act (act 14) of 1947. in this context, the company relies on its balance-sheets to show that it is a losing concern. the state of orissa, however, contends that the company has a great future and so there is a great possibility of the state earning revenue on all counts including sales tax, income-tax etc. this court has however to decide the question of principle regardless of the present, past and future.11. with regard to labour and industrial legislation, there can be reasonably no denying the position that the change of the registered office of the company from orissa will create serious practical difficulties in giving effect to the various laws, connected with.....
Judgment:
ORDER

S. Barman, J.

1. This is an application by the Orissa Chemicals and Distilleries Private Ltd. (hereinafter referred to as the Company) for change of its registered office from Jharsuguda in the State of Orissa to Masulipatam in the State of Andhra Pradesh under Section 17 of the Indian Companies Act, 1956. The company's Head Office is at Masulipatam, Andhra Pradesh. There appears to be on record only three share-holders, all resident in Andhra Pradesh.

2. The company was incorporated in March 1950, one of the objects of the company being, as appears from the Memorandum and Articles of Association, to purchase, manufacture, produce, boil, refine, prepare, import, export, sell and generally to deal in sugar, sugar-candy, jaggery, sugar-beet, sugar cane, molasses, syrups, melada, alcohol, spirits and all products or by-products thereof and food products generally and in connection therewith to acquire, construct and operate sugar and other refineries, buildings, mills, factories, distilleries and other works.

On January 24, 1959 the share-holders of the Company appear to have passed a Resolution at an Extra-Ordinary General Meeting held at Masulipatam Office of the Company to the effect that the Registered Office of the Company be changed with immediate effect from Jharsuguda (Orissa) to Masulipatam (Andhra Pradesh) and to locate it in 14/98, Edepalli, Masulipatam. The present application fa for confirmation by this court of the said Resolution as required by Section 17 of the Indian Companies Act, 1956.

3. Necessary notice was duly served on the Registrar of Companies, Orissa, and there was also due publication of the notice in the local newspapers as directed by this Court. Notice was also issued to the State of Orissa, who alone is opposing the proposed change of the registered office from Orissa to Andhra Pradesh.

4. The points for consideration are whether the application is maintainable: whether the State of Orissa has any locus standi to oppose the application and lastly whether this Court should allow confirmation of the Resolution for change of the registered office.

5. The main ground for the proposed change is that the company can thereby facilitate more direct and economic administration of the affairs. The company, however, does not give any particulars as to how this can be effected by change of the registered office from Orissa to Andhra Pradesh, in paragraph 3 of a subsequent affidavit, filed on behalf of the company, dated September 17, 1950, it is stated that as all the share-holders and directors are residents of the State of Adhra Pradesh it would be more convenient, economical and efficient to hold meetings and carry Out other provisions of the Companies Act from there; that under the present arrangements, the Directors who are the only shareholders have to come down to Jharsugudo in Orissa for meetings and other purposes at great loss of time and money without any corresponding benefit either to the company or to others.

It thus appears that the alleged convenience for holding meetings is the only ground for which the company proposes to change the registered office from Orissa to Andhra Pardesh. A petition was filed on behalf of the State of Orissa wherein various objections were taken to the proposed change on the grounds, inter aha, that the proposed alteration will seriously affect the State of Orissa and deprive it of a considerable source of revenue by way of income-tax and sales tax etc; that there will be serious practical difficulties in working out and enforcing the provisions of the local Sales Tax Act, Excise Act, Municipal Act and Factories Act and various Labour and Industrial Laws.

6. Mr. Muralidhar Mohanty, learned counsel appearing for the Company, argued at length on the various aspects of the question, the gist of which is this; that considerations of income-tax, sales-tax etc. are not relevant for deciding an application under Section 17, that when the registered office of a company is allowed to be transferred from one State to another, such transfer may necessarily involve loss, if any, to a State due to such alteration; that if such consideration is allowed to prevail as a valid objection, Section 17 of the Companies Act will be rendered nugatory although that section contains categorical provisions allowing a company to alter its registered office to enable it to achieve its objects specified under Section 17(1); the confirmation by the High Court should therefore be based on contradiction of those objects only specified in Clauses (a) to (g) of Section 17(1) and other considerations should not be allowed to prevail; that the location of the registered office is relevant only for the purpose of the Companies Act; and for all other purposes, in a case in which there is a factory and other unit of production, as in the present case, the local office of such factory or other unit of production is sufficient and is competent.

With particular reference to income-tax, the learned counsel, reiving on Section 4A of the Income-tax Act, contended that the company is a resident in the taxable territory, if the control and management is situated wholly in the taxable territory during the year in question. If, therefore, a company is so situated that its control is situate in one State and management in another, then the authorities are stated to be unanimous that the taxable territory should be the place where the real control is exercised. With regard to Sales Tax, the Company appears to take the stand that the sale o! liquor is not subject to Sales Tax and that Sales Tax is determined by reference to locus, nexus, place of consumption etc. and accordingly sale tax position will not be altered by the proposed change.

7. The learned Advocate-General Mr. Banchhanidhi Mohapatra questioned the very maintainability of the application on the ground that notice was not served on all the persons interested. It appears that in the case of one deceased share-holder Sri Mool Lachminarayan Swamy, he is stated to have been represented by his son-in-law. There is however no evidence that the son-in-law is the legal I representative of the deceased share-holder. The absence of proper legal representative affects the validity of the Resolution itself. The law requires that notice must be given to all the shareholders. In the present case, out of three shareholders, only two passed the Resolution and accordingly the Resolution is not in order. I do not propose to express any opinion and leave open the question of maintainability, in view of my decision herein on merits.

8. Then as regards the locus standi of the State o Orissa appearing in the present application, which is challenged on behalf of the Company, it is clear from Section 17(3)(a) that State of Orissa is a person whose interests will, in the opinion of the Court, be affected by the alteration. This question has been decided by the Division Bench of this Court in a similar case, to which 1 shall refer hereinafter, holding that the State of Orissa in such cases has locus standi.

9. On the aspect of the income-tax, there is a great deal of force in the objection made on behalf of the State of Orissa that the change of the registered office of the Company from the State will seriously affect the revenue of the State. This aspect of the question was fully discussed in a previous decision of this Court in Orient Paper Mills Ltd. v. State, ILR (1956) Cut 697 : (AIR 1957 Orissa 232) which was followed by a later decision of the Division Bench of this Court (unreported) in The Bonai Industrial Co, Ltd. v. The State of Orissa, A.H.O. No. 1 of 1957, D/- 2-11-1959. The learned Advocate-General drew my attention to Article 270 of the Constitution providing for distribution of taxes levied and collected by the Union between the Union and the States, the percentage of the net proceeds of taxes or income falling to be distributed, appearing to be for Orissa 3.50 per cent. It is also to be noticed that under Section 4B of the Income-tax Act, a company is ordinarily resident in taxable territories,

As regards the place of assessment, Section 64 of the Income-tax Act provides that where an assessee carries on business etc. in more places than one he shall be assessed by the Income-tax Officer of the area in which the principal place of the business is situate. Section 5(7) (a) provides that the Commissioner of Income-tax may transfer any case from Income-tax Officer subordinate to him to another and the Central Board of Revenue may transfer any case from any Income-tax officer to another.

The Company takes the stand that the question of any loss to the State of Orissa on the basis of subventions of Income-tax, does not arise, because the Commissioner of Income-tax, Bihar and Orissa Circle, has transferred the assessment files of the Company from his own Circle to Andhra Pradesh Circle where it is said, the Company is being assessed to Income-tax for its total annual income. Apart from a statement made to this effect in an affidavit filed on behalf of the Company, there does not appear to be any other evidence or material on record. However, I do not attach any importance to the transfer, if any, in deciding this case. The fact, however, remains that the question of loss of revenue on Income-tax is involved and this position, by itself, is relevant consideration which should weigh in the present case.

10. Coming to the Sales-tax, similar considerations arise as fully discussed in the case of ILR (1956) Cut 697 : (AIR 1957 Orissa 232) and A.H.O. No. 1 of 1957, D/- 2-11-1959 (Orissa) referred to above. The objection, on behalf of the State of Orissa on the aspect of sales tax is further strengthened by the recent Central Sales Tax Act (Act 74) of 1956, Section 9(3) whereof provides that the proceeds in any financial year of any tax levied and collected under the said Act in any State on behalf of the Government shall, except in so far as those proceeds represent proceeds attributable to the Union territories, be assigned to that State and shall be retained by it and the proceeds attributable to the Union territories shall form part of the Consolidated Fund of India.

In the present case it is clear from paragraph III (f) of the Memorandum of Association that one of the objects of the company is to sell molasses, and this assessable under the Orissa Sales Tax Act (Act 14) of 1947. In this context, the company relies on its Balance-sheets to show that it is a losing concern. The State of Orissa, however, contends that the company has a great future and so there is a great possibility of the State earning revenue on all counts including sales tax, income-tax etc. This Court has however to decide the question of principle regardless of the present, past and future.

11. With regard to labour and industrial legislation, there can be reasonably no denying the position that the change of the registered office of the company from Orissa will create serious practical difficulties in giving effect to the various laws, connected with industrial and labour disputes. This aspect was also fully dealt with in the earlier decisions of this Court cited above which, with great respect, I follow in deciding this case,

12. In the ultimate analysis, I am satisfied that the location of the registered office is not a matter to be lightly dealt with, having regard to the intention of the legislature and the spirit of the law. Section 146 of the Indian Companies Act, 1956 provides that a company shall have registered office to which all communications and notices may be addressed. The importance of the location of the registered office is evident from Sub-section (2) of Section 146 in the notice of the situation of the registered office and every change therein shall be given within 28 days after the date of incorporation of the company or after the date of the change, as the case may be, to the Registrar who shall record the same. Then again, the proviso to Sub-section (2) of Section 146 makes it clear that except on the authority of special resolution passed by the company, the registered office of the Company shall not be removed as provided in Clauses (a) and (b) of the said proviso.

It is further stressed in Sub-section (3) of Section 146 that the inclusion in the annual return of the Company of statement as to the address of its registered office shall not be taken to satisfy the obligation imposed by Sub-section (2). It is also significant that there is a penal clause attached to all these provisions in Sub-section (4) of Section 146 in that if default is made in complying with the requirements of this section, the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs. 50/- for every day during which the default continues.

Furthermore, Section 166(2) requires that every annual general meeting of the Company shall be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the Company is situate. All these provisions, among others, clearly show the importance of the location of the registered office. It is thus, by reason of long experience and practice based on sound principle, that the English Law requires a company to state in its memorandum of association, in what part, of the United Kingdom the office of the proposed Company is to be situate; and this once declared, becomes unalterable condition of the company's constitution, which nothing short of re-registration can change. In India, the policy of State Autonomy in the federal scheme of our Constitution, does not appear to encourage such change of registered office from one State to another.

13. As to the bona 6des of this application, the learned Advocate General drew my attention to the position that although holding of meetings at Masulipatam is alleged to be the only ground for which the company proposes to change the registered office from Jharsuguda to Masulipatam, it is apparent that there is no substance in this contention because this very special Resolution itself, for change of the registered office, was passed at Masulipatam office of the Company. Therefore, the position is that either the special resolution is bad in law because it was not held at the registered office of the Company or if it is a valid Resolution then it is open to the Company to hold meeting at Masulipatam even now when the registered office is at Jharsuguda. Thus, there does not appear to be any alleged necessity for change in the location of the registered office of the Company for holding such meetings. It is, therefore, legitimately commented that there is some ulterior motive in the company proposing to change the location of the registered office from Orissa to Andhra Pradesh.

The company relies on Section 17(1)(a) of the change of the registered office on the ground of more direct and economic administration. The Company has, however, not made it clear how the expenses will be saved for economy or how the administration from Masulipatam can be more direct while its factory or unit of production is at Jharsuguda. Therefore, on the facts and circumstances of the case, I am not satisfied as to the bona fides of the company's application for the proposed change of its registered office outside the State of Orissa.

14. In this view of the matter, this application is dismissed with costs. Hearing fee Rs. 100/-.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //