This is an application by Messrs Taj Woolen Mills Limited, a public limited company, under section 12
(2) of the Companies Act, praying that an amendment to the Memorandum of Association be confirmed, so as to include four other clauses, as 16 to 19, resulting further, in amendment of the serial numbers of the other objects subsequent thereto. The Assistant Registrar, Joint Stock Companies, in his written statement, objected to the prayer on the ground that the business and the manufacturing activities sought to be added are altogether new and different from that covered by the existing clauses and so not covered by section 12.
2. However, before going into the above objection informed the learned counsel on 12th March, 1982, that the affidavit placed on record did not refer to the special resolution having been passed about the said four clauses. It only mentioned `to set up a paper and board mill and to carry on the business of paper and board milling and any other business which may be connected or affiliated with this business of paper and board milling'. He then prayed for time to produce the minutes book.
3. The learned counsel has today produced the minutes book. The relevant portion about `Minutes' of the General Meeting of the Company Taj Woollen Mills Ltd. Held on 2nd November, 1981, at the registered office . . . .' at item (ii), concerns approval, for inserting in the Memorandum of Association, after sub-clause (15), some more clauses, as the object clauses of the Company. The minutes recorded is as under;- "The Managing Director of the Company Mian Muhammad Asif proposed to the Board that in view of some difficulties being faced by the management in the woollen sector it is better if a project of paper Board is established in the beginning and run by the Company. In this connection he pointed out that since the Memorandum of Associ--ation of the Company do not contain any clauses relating to the paper Board etc , therefore, he proposed that following sub-clauses he added in the Memorandum after sub-clause (15). The said proposal was carried unanimously by the members present in person."
4. Section 12, on the other hand, provides that a company may be special resolution alter the provisions of its Memorandum . . . . . . Or with respect to the objects of the company . . . . Sub-clause
(2) lays down that the alteration shall not take effect until and in so far as it is confirmed by the Court on petition. The important thing, therefore, is that the alteration must be initiated only by a special resolution so as to seek its confirmation from the Court.
' 5. . Section 81(2) concerning special resolution provides as under :- "81.--(2) A resolution shall be a special resolution when it has been passed by such a majority as is required for the passing of an extra-ordinary resolution and at a general meeting of which not less than twenty-one day's notice specifying the intention to propose the resolution as a special resolution has been duly given: Provided . . . . . . ,",.
The wording of this provision requires the existence of a special resolution which is to be passed.
The subsequent language also makes it clear that there has to be 21 days' notice specifying the intention to propose the resolution as a special resolution. Again subsections (3) and (4) also show that the special resolution is to be submitted to be passed. It is thus quite clear that the resolution to be passed must be notified to the members verbatim giving 21 clear days before it can be submitted to be passed in a general meeting. To support this view further the language of section 81 may be compared.1 Section 79 (1)(b) provides that notice of the meeting of a company with a statement of the business to be transacted at the meeting shall be served on every member . . . . . .
In section 78(1) the requisition of an extraordinary general meeting must state the objects of the meeting. It is thus quite clear that it is only in the case of an extraordinary or special resolution that the notice must specify the intention to propose the resolution as a special,' resolution.
6. The minutes reproduced in para. 3 above, do make it absolutely clear that it was not a special resolution but at the most a preliminary proposal made to the Board for establishing a project of paper-board in the beginning as some difficulty was being faced by the management in the woolen sector. The Managing Director thus proposed that the four clauses be added in the , Memorandum of Association after clause 15. It was thus proposal which was unanimously carried by the members present. There is not a word in the proceedings that there was any notice for a special resolution and it was so moved or passed. In this view of the matter, the company ought to have, thereafter, circulated the resolution with a 21 days' notice to call a general meeting, specifying its intention to propose the resolution as a special resolution as provided in section 81 of the Companies Act and it ought to have tabled the same in that general meeting to get it passed.
That, as said above, had never been done. -
7. The minutes even do not say that any special resolution was circulated, moved and passed. It shows rather that the proposal was made at the spot. t These minutes may be compared with those of the only other meeting held to consider the statutory report. It is stated there specifically that the report had been circulated to the members earlier in accordance with section 77. It is, therefore, clear that the company never had the occasion to circulate resolution with the four clauses to the members that it had let its intention known to the members with due notice, to pass a special resolution to amend the Memorandum of Association by their addition. The amendment is thus not lawful and it cannot be confirmed.
8. A similar question arose in MacConnell v. E. Prill & Co., Limited (1916) 2 Ch. 57A notice for an extraordinary meeting was sent to the petitioner. The agenda stated "To pass resolution to increase capital of the company". The resolution passed at the meeting was ".`That the capital of the company be increased to 35bCf by the creation and issue of 1500-- shares of 1 each". The petitioner and some others moved the Court for an interim injunction to restrain the defendants (the company and its directors) from acting on or carrying into effect the resolution passed. The case of the petitioner was that the notice was insufficient because it did not specify the resolution which was actually passed and because it did not state the intention to pass the resolu--tion as an extraordinary resolution. The Court upheld both the objections. It observed that the notice must have shown an intention to make the specific increase and not some increase as it was of great importance that shareholders shall be protected where specific notice was intended by law. The Court further observed that where law provided that notice shall specify the intention to propose the resolution as an extraordinary resolution, the notice "must not merely indicate but actually specify the intention to pass the resolution as an extraordinary resolution". It will be observed that the wording in section 69 of the English Companies Act, 1908, is similar to that of our Act of 1913.
Thus a valid notice will be the one which gave verbatim the resolution which was intended to be passed as an extraordinary or special resolution.
9. In view of the above, the company ought to have given a 21 days' notice specifying the intention to pass the resolution as a special resolution after its meeting dated 2nd November, 1981, and should have circulated the resolution verbatim. I have gone through the minutes of the day but do not find that there is the compliance of section 81. Hence no'' confirmation can be granted under section 12.
The result is that this petition is not competent and is dismissed with no order as to costs.