Case: H. Fillunger &amp; Company Private Limited &amp; Others Vs. Ajit Arvind Marathe &amp; Others

provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and(b) any provision contained in the memorandum, articles, agreement or resolution shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be. The provision states that save as otherwise expressly provided in this Act, the provisions of this Act, notwithstanding anything to the contrary contained in the memorandum or articles of a company shall have an overriding effect. Considering the facts of the case and provisions of Section 13(1) and Section 61 of the Act of 2013, amending Memorandum of Association by the company would not be contrary to the provisions of Section 6 of the Act. Clause 7 of the Articles of Association would not go contrary to the provisions of Section 6 of the Act as it states that the memorandum could be altered subject to the provisions of the Act and Section 94 of the Act of 1956, which corresponds to the provisions of Section 61 of the Act of 2013.25. Section 16 of the Act of 1956 refers to alteration of memorandum, which reads as under:16. Alteration of memorandum. (1) A company shall not alter the conditions contained in its memorandum except in the cases, in the mode, and to the extent for which express provision is made in this Act.(2) Only those provisions which are required by section 13 or by any other specific provision contained in this Act to be stated in the memorandum of the company concerned shall be deemed to be conditions contained in the memorandum.(3) Other provisions contained in the memorandum including those relating to the appointment of a managing director or manager, may be altered in the same manner as the articles of the company, but if there is any express provision in this Act permitting of the alteration of such provisions in any other manner, they may also be altered in such other manner.(4) All references to the articles of a company in this Act shall be construed as including references to the other provisions aforesaid contained in its memorandum. Section 31 of the Act of 1956 refers to alteration of articles by special resolution, which reads as under:-31. Alteration of articles by special resolution.-(1) Subject to the provisions of this Act and to the conditions contained in its memorandum a company may, by special resolution, alter its articles:Provided that no alteration made in the articles under this subsection which has the effect of converting a public company into a private company, shall have effect unless such alteration has been approved by the Central Government.(2) Any alteration so made shall, subject to the provisions of this Act, be as valid as if originally contained in the articles and be subject in like manner to alteration by special resolution.(2A) Where any alteration such as is referred to in the proviso to sub-section (1) has been approved by the Central Government, a printed copy of the articles as altered shall be filed by the company with the Registrar within one month of the date of receipt of the order of approval.(3) The power of altering articles under this section shall, in the case of any company formed and registered under Act No. 19 of 1857 and Act No. 7 of 1860 or either of them, extend to altering any provisions in Table B annexed to Act 19 of 1857, and shall also, in the case of an unlimited company formed and registered under the said Acts or either of them, extend to altering any regulations relating to the amount of capital or its distribution into shares, notwithstanding that those regulations are contained in the memorandum.26. If we consider the provisions of Sections 16, 31 and 94 of the Act of 1956, we could notice a conscious and intentional change in the legislative approach while framing Section 13 of the Act of 2013. We cannot ignore the specific provisions of Section 13(1) so lightly. In the present case Clause V of the Memorandum of Association reads as under:-V. The share capital of the company shall consist of Rupees five lacs (Rs.5,00,000) divided into five thousand (5000/-) equity shares of Rupees one hundred (Rs.100/-) capable of being increased in accordance with the Companys regulations, and the legislative provisions for the time being in force in that behalf. The authorised capital of the company increased from Rs.2 lacs to 5 lacs by way of special resolution passed in the extra ordinary General Meeting held on Wednesday 17th Dec. 1969.The said clause further supports the view that the share capital can be increased in accordance with the Companys regulations and the legislative provisions of the Act of 2013, viz. Sections 13(1), 61 and 64.27. In the present facts of the case, the Board of Directors had amended the Memorandum of Association and Articles of Association by simple majority but in an EOGM of the company called on 23/3/2017 passed a special resolution for amending the Articles of Association. In accordance with the provisions of Section 13(6) of the Act of 2013, after amendment of Memorandum of Association, the company had filed an application with the Registrar of Companies for recording alterations of its memorandum. Accordingly, the Registrar of Companies had registered the same. In accordance with the increased share capital, new shares were distributed. It was argued that shares were even offered to the plaintiff but he declined to accept the same. The Articles of Association were amended in accordance with the provisions of Section 14 of the Act of 2013. We, therefore, find that there was reasonable and statutory compliance of the provisions of law.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]22. During the course of hearing, it was submitted that the company business had come to a standstill, because of which the company could not grow by expanding its business. The purpose of the new Companies Act, 2013 in regulating the affairs of the company will have to be considered in the light of the facts of the case and the interest of trade and commerce, as canvassed by the learned senior counsel appearing for the appellants. The company had issued additional shares on 9/3/2015 and the Registrar of Companies had already registered the amendment to the Memorandum of Association. This fact cannot be overlooked. Therelief was granted by the trial court on 21/9/2015 directing not to conduct the meeting when in the month of January 2015 itself the meeting of the Board of Directors was conducted. In fact, by retrospective effect theinjunction was interpreted to have been operated against the resolution passed in the meeting of the Board of Directors held in the month of January 2015. The second meeting was held on 30/9/2015 and accordingly the resolution was passed amending he Articles of Association by simple majority. The company consists of six directors who are family members inter se. The trial court while passing order below Exhs. 5, 40 and 54 prescribed the reasoning, which appears to be in para 27 of the order. It is the finding of the trial court that if the defendants want to make any alteration in the Articles of Association, it should be in consonance with the provisions of the newfacie, we find that the plaintiff approached the trial court at a belated stage. By that time, the resolution for amending Memorandum of Association was passed in the meeting held on 27/1/2015 by simple majority. Additional shares were issued on 9/3/2015. The Registrar of Companies had registered the amended Memorandum of Association. Objection raised by the plaintiff before the Registrar was overruled and thereafter the trial court passed anorder not to hold a meeting called on 25/9/2015. By a further order, the defendants were temporarily restrained from making changes in the Articles of Association in the meeting scheduled on 30/09/2016 only.In the present facts of the case, the Board of Directors had amended the Memorandum of Association and Articles of Association by simple majority but in an EOGM of the company called on 23/3/2017 passed a special resolution for amending the Articles of Association. In accordance with the provisions of Section 13(6) of the Act of 2013, after amendment of Memorandum of Association, the company had filed an application with the Registrar of Companies for recording alterations of its memorandum. Accordingly, the Registrar of Companies had registered the same. In accordance with the increased share capital, new shares were distributed. It was argued that shares were even offered to the plaintiff but he declined to accept the same. The Articles of Association were amended in accordance with the provisions of Section 14 of the Act of 2013. We, therefore, find that there was reasonable and statutory compliance of the provisions of law.