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Civil Original Matter No. 9 of 1964, decided on 27th April 1964.

Ss. 12, 13, 14 & 7‑Special resolution effecting amendments in Memorandum and Articles of Association‑Requirements of S. 7 not affected‑Changes effected, held, not beyond scope of alteration permitted under S.12‑Alteration of Memorandum of Association‑Entirely domestic affair‑Person or Company having mere expectation of an interest dependent on uncertain event or happening‑Not persons who have an interest in Company'‑Court confirming resolution effecting alteration in Memorandum of Association‑Not concerned with such person or Company.

In re : Hearts of Oak life and General Assurance Company, Limited and Reduced (1920) Ch. D 544 ref.

M..I. Jafar with S. M. Hussain for Petitioner.

Asrarul Hossain with R. Hoque for the Chittagong Chamber of Commerce and Industry.

The petitioner the Chittagong Chamber of Commerce (to be renamed C. S. Ltd.) is a joint stock Company incorporated under the Companies Act having its registered office at Chitta gong. The objects of the company inter alia were to promote and protect trade, commerce and manufactures of East Pakistan and In particular of Chittagong.

It is stated that the petitioner‑company being an associa tion not for profit obtained a licence under section 26 of the Companies Act and was duly registered on 2‑8‑1949, by the Registrar of Joint Stock Companies, East Pakistan, and while continuing to function as such it was confronted with a new situation in November 1958, because of the declared policy of the Government of Pakistan to recognise only one Chamber of Commerce in a city or a town. The efforts made by the petitioner to bring about an amalgamation of the various Chambers of Commerce failed and the Central Government refused to continue the exemption granted to it under the prov isions of subsection (4) of section 3, of the Trade Organizations Ordinance, 1961. In order to obviate this difficulty certain amendments of the Memorandum of Association were made so that the petitioner‑company may not be covered by the defini tion of Trade Organization' as laid down in subsection (12) of section 2 of the Ordinance. A Special Resolution effecting amendments in the Memorandum of Association and Articles of Association was passed at an Extraordinary General Meeting of the Company and submitted to this Court for confirmation. In confirming the said amendments on 28‑6‑1963, his Lordship Asir, J. observed as follows :‑----

"Upon a perusal of this application it seems desirable in the interest of the concern that the prayer for confirmation of amendments in regard to the Memorandum of Association as adopted by the special resolution set out in paragraph 16 and Annexure F' should be allowed in terms of the application and the permission is accordingly granted by way of confirma tion of the alteration as prayed for."

Asir, J. was satisfied that in the situation as presented in this matter, the amendments were desirable. This Court was only to find if the amendments were in the best interests of the company. The Central Government was however concerned to find out as to whether the amendments had the desired effect, namely, as to whether the petitioner‑company was taken out of the definition of trade organization' as obtaining in the Ordinance. The Central Government came to the conclusion that the amend ments effected were not sufficient to achieve the desired result. In doing so, it noticed that even after amendments the proposed Institution "will prohibit payment of any dividend to its members and intends to apply its, profits or other income for achieving Its objects and as such it comes within the definition of trade organisation'.

It was, therefore, necessary to delete clauses 4 and 7 of the Memorandum of Association as these two clauses prohibit payment of any dividend to its members. Regard being had to other objections raised by the Central Government some other changes were found necessary. The company, thereafter, at an Extraordinary General Meeting held on 24‑3‑1964, adopted unanimously a Special Resolution effecting necessary changes in the Memorandum of Association, and this application seeks confirmation of this Special Resolution.

Mr. Jafar learned counsel has placed before me the petition and its various annexures and submits that they are in best Interests of the petitioner‑company. He further submits that In view of the provision of the said Ordinance, the Company is faced with terrible consequences of winding up and for the same reasons changes previously effected were confirmed by Asir, J.

Mr. Asrarul Hussain, learned counsel appearing for the Chittagong Chamber of Commerce and Industry, submits that deletion of clause 4 as well as clause 7 of the Memorandum of Association as proposed in the said Special Resolution has converted this organisation into a profit earning association from a non profit earning one. He further submits that the deletion of these two clauses has vitally affected the interests of the Chittagong Chamber of Commerce and Industry. His submission is founded on the terms of clause 7 which are as follows :‑‑-----

"If upon winding up or dissolution of the Association there remains after the satisfaction of all Its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the members of the association, but shall be given or transferred to some other institution or institutions having objects similar to the objects of the Associ ation to be determined by the members of the Association at or before the time of the dissolution and in default thereof by such Court in East Bengal as may have or acquire jurisdic tion in the matter."

Mr. Hussain's contention therefore is that if the petitioner company is wound up or dissolved then by reason of clause 7, there is a possibility of his association of getting a share of the property that may remain after the satisfaction of the debts and other liabilities inasmuch as, the Chittagong Chamber of Commerce and Industry is an Association having similar objects.

Section 12 of the Companies Act provides, inter alia that a Company may by a Special Resolution alter the provisions (if its Memorandum of Association so as to change the place of the registered office from one province to another or with respect to the objects of the company so far as may be required to enable it "to restrict or abandon any of the objects specified in the Memorandum".

On a consideration of the clauses that have been substituted on the deletion of old ones by the resolution, I am satisfied that these Clauses come within the scope of clause (e) of section 12 of the Act and therefore the Company is entitled to pass the resolution effecting the changes. The question that now remains to be considered is whether these amendments are in the best interests of the Company. So far as the members, creditors, debentures holders and such other persons are concerned, I am satisfied on a careful consideration of the clauses that their interests will not be affected by the proposed alterations and that they are in the best interests of the petitioner‑company.

The only question is whether the Chittagong Chamber of Commerce and Industry which has an expectation of deriving some benefit on winding up or dissolution of the petitioner company, will be affected by the alteration, in as much as if the petitioner‑company is wound up Mr. Hussain's client may derive some benefit.

In considering the question of confirmation of a Special Resolution effecting alteration of a Memorandum of Association, the Court is concerned with the Interest of the holders of debentures of Company or creditors or persons or class of persons, having interests in the Company. The position will b e clear by reference to section 14 of the Act. That section provides' that the Court shall in exercising its discretion under sections 121 and 13 have regard for rights and interests of the members of the Company or of any class of them as well as to the rights and interests of creditors. I have no doubt in my mind that the Chittagong Chamber of Commerce and Industry which is re presented before me by Mr. Hussain is neither a member of the petitioner‑company nor has any right or interest therein as a creditor. This Court is not concerned with the remote expectation of a persona or a company which may get some profits on the happening of an uncertain event. Moreover, even on the winding up or dissolution of the company, its assets will be given or transferred to a company having similar objects to be selected by the members of the petitioner‑company, prior to its dissolution or in default by the Court as provided in the said clause 7. Mr. Hussain's client can not be deemed to have any interest in the petitioner‑company till it is selected for distribution of wealth prior to dissolution of the petitioner company.

Mr. Hussain has also argued that the deletion of clauses 4 and 7 will disentitle the company to continue to hold the registration certificate in as much as section 26 of the Companies Act applies only to the non‑profit earning associations.

Mr. War has very rightly pointed out that section 26 of the Companies Act relates to the licence and not to the registr ation under the Companies Act and the company is aware that the proposed changes will have the consequential effect of surrendering certain privileges enjoyed by it under the licence granted to it by virtue of section 26 of the Act. The petitioner company has unanimously adopted at a duly convened meeting a Special Resolution effecting the changes. It seems what weighed with petitioner‑company is that it is better to surrender certain privileges than to be wound up by reasons of the provisions of the aforesaid Ordinance. It has also been rightly contended by Mr. Jafar that the fundamental requirements for a Memo randum of Association as provided in section 7 of the Companies Act will continue to exist even after the proposed changes are effected. Therefore, the incorporation of the company based on Memorandum of Association will not be affected by the deletion of clauses 4 and 7 inasmuch as they do not constitute mandatory conditions required for a Memorandum of Association as provided in section 7 of the Companies Act.

Mr. Hussain contends that section 7 refers to a Memo randum of Association required at the time of the incorporation of a company. To my mind it makes no difference. If the requirements of section 7 are not affected by the subsequent amendments, I am unable to hold that the changes effected are beyond the scope of alteration permitted by section 12 of the Companies Act. I have already held that changes come within clause (e) of section 12.

Although I have heard Mr. Hussain on merits and given my decision on the points raised by him, I should consider the objection raised by Mr. War to his appearance. Mr. Jafar contends that Mr. Hussain's client Chittagong Chamber of Commerce and Industry having no interest in the petitioner‑company has no say in the matter of alteration of the Memorandum of Association of the petitioner. I have already stated above that on dissolution of the petitioner‑company there may be a mere expectation in the Chittagong Chamber of Commerce and Industry to have some property. This expectation is also dependent on the selection by the Company or the Court.

Mr. Jafar has urged that continuance of the existence of the petitioner‑company is in the best interests of the members of the company and a rival organisation intending its dissolu tion, must be deemed to be acting contrary to its interests and has no locus standi to raise any objection in a proceeding relating to confirmation of a resolution effecting changes fn the Memorandum of Association.

I have already made it clear that a person or a company which has a mere expectation dependent on the happening of uncertain events can not be contemplated to be included among those whose interests are to be taken into consideration at the time of considerating the application of a company for confirma tion of a resolution for the amendments of the Memorandum of Association. I have already referred to the provisions of section 14 of the Act in this respect and I have no hesitation in holding that the Chittagong Chamber of Commerce and Industry has no locus standi to object to the confirmation of the Special Resolution.

The view expressed above finds support in the case of In re-Hearts of Oak Life and General Assurance Company, Limited and Reduced ((1920) 1 Ch. D 544). In that case Lawrance, J. observed as follows:

"The Court on occasions such as this has, in my view, no concern with rival traders or with possible trading disputes. The alteration of the Memorandum of Association is entirely a domestic affair, and it is only those persons who have an interest in the company who are to be considered."

The expression "those persons who have an interest in the company" means those who have a present interest in the company and not those who are left with a mere expectation dependent on the happening of uncertain events as already pointed out.

Mr. Hussain at the initial stage made a verbal prayer for granting time for filing an affidavit‑in‑opposition. It should be noticed that it is stated in paragraph 27 of the petition that the failure of the petitioner‑company to effect the proposed changes within 30‑4‑64, might involve the company to be wound up under the Ordinance. The petitioner‑company complied with the directions relating to the advertisements and the service of the notice as given earlier. Mr. Hussain's client had therefore sufficient time to prepare an affidavit‑in‑opposition, if so advised. It is also stated by Mr. Jafar that a copy of the petition was obtained by the Chittagong Chamber of Commerce and Industry on Wednesday last. I was at first inclined to agree to an adjourn ment for a day but on the insistence of Mr. Hussain for a longer adjournment. I asked him to proceed with his arguments to find out if any affidavit‑in‑opposition was really necessary. After hearing the learned counsel Mr. Hussain fully on merits on the points raised by him, I am satisfied that no affidavit‑in‑opposition is necessary for the purpose of advancing his arguments, which are founded on interpretation of law, and not on facts and there is therefore no justification for the prayer for adjournment.

For the reasons stated above, the amendments in the Memorandum of Association passed by the Special Resolution set out in paragraph 21 of the petition and Annexure J' to the same are hereby confirmed as prayed for.

K. B. A. Amendments confirmed.

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