In Re: Regent Estate, Ltd.

Bachawat, J.—This is a petition for confirmation of a special resolution proposing alterations and additions of the company's objects. If raises questions of practice with regard to petitions u/s 12 of the Indian Companies Act (VII of 1913). This section corresponds to Section 5 of the English Companies Act, 1929. Under the Indian Act, and also under the English Companies Act, 1929, the alteration of the company's objects does not take effect until it is confirmed by the Court. The law has now been changed in England. u/s 5 of the English Companies Act, 1948, the alteration takes effect without confirmation by the Court except where an application is made for cancellation of the alteration. Under the English practice before 1948 a summons for directions had to be taken out in every case immediately on the presentation of the petition. On such summons, directions for advertisements, services of notices, settlement of lists of creditors where necessary and other necessary directions were given. This practice was embodied in the Rules of the Supreme Court, Order 53B, Rules 5(a), 10 and 11. Having regard to the alteration of the law in England in 1948 there is now no necessity there for presenting a petition (sic) confirmation of the alteration and consequently no necessary (sic) taking out a summons for directions. The old R. (sic) 53B has been replaced by a new Order.

There has been no change of law in our country. The company may by special resolution alter the provisions of its memorandum with respect to its objects but the alteration cannot take effect in this country even now until it is confirmed by the Court on petition.

The foundation of the jurisdiction to confirm the alteration is the passing of the special resolution. There must be strict evidence that meetings have been duly convened and that the special resolution has been duly passed. In Re: Omnium Investment Company (1895) 2 Ch. 127 and In Re: Debenture Corporation, Ltd. (1931) 47 T.L.R. 399.

The alteration must be required for the purposes mentioned in Section 12.

Sub-section (3) of Section 12 provides that before confirming the alteration, the court must be satisfied:

(a) that sufficient notice has been given to every holder of debentures of the company, and to any person or class of persons whose interests will, in the opinion of the Court, be affected by the alteration; and

(b) that, with respect to every creditor who in the opinion of the Court is entitled to object, and who signifies his objection in manner directed by the Court, either his consent to the alteration has been obtained or his debt or claim has been discharged or has determined, or has been secured to the satisfaction of the Court.

Provided that the Court may, in the case of any person or class, for special reasons, dispense with the notice required by this section.

The Sub-section contemplates issue of general and special notices before the petition is heard. No rules have been framed by our Court dealing with petitions u/s 12.

Our Court has made Rules dealing with petitions for confirmation of reduction of share capital u/s 56 of the Indian Companies Act. Under these Rules a summons for directions is not taken out when the creditors are not entitled to object but on the presentation of the petition the Judge fixes a day for the hearing thereof and gives directions for the advertisements to be published of the presentation of the petition -see Rule 18 of App. 7 to the Original Side Rules. This is a departure from the English practice Where under R.S.C. Order 53B, Rules 5 and 10, both before and alter 1948, summons for directions must be taken out in every case even if creditors are not entitled to object.

Under our existing practice with regard to petitions under (sic) of the Indian Companies Act a summons for directions is (sic)en out when the creditors are not entitled to object. (sic)bly this practice is based upon the fact that similar followed here with regard to petitions u/s 56 of Companies Act. The Judge, however, must be satisfied that there are no creditors or that if there are creditors they are not entitled to object In Re: Minster and Leinster Bank (1907) 1 Ir. Rep. 237, 241-3.

When the creditors are not entitled to object, the Judge on the presentation of the petition fixes a day for the hearing of the petition and gives directions as to the advertisements to be published of the presentation of the petition and of the date of hearing: Having regards to Sub-section (3) of Section 12 directions for advertisement should ordinarily be given and may be dispensed with only for special reason. Similar practice has been followed in Ireland where also there were no rules dealing with such petition. In re: Cork Employers Federation (1921) 1 Ir. Rep. 61. Directions for service upon every holder of debenture and upon any person or classes of persons whose interests may be effected by the alteration must also be obtained. The Court may direct service of special notices upon the person or persons interested In Re: Government Stock Investment Company (18(sic) 649 (651) and In Re: Reversionary Interest Society (sic) 615 (619).

If there are creditors who are entitled to object to the proposed alteration, a summons for directions as to the proceedings to be taken for settling the list of creditors should be taken out immediately on the presentation of the petition. The settlement of the list of creditors is necessary because an objecting creditor is entitled to have his debt or claim discharged or secured to the satisfaction of the Court. Rules 19 to 30 of App. J. to our Rules contain the procedure with regard to the settlement of the list of creditors in case of reduction of capital. These rules correspond to R.S.C. Order 53B, Rule 11. Similar procedure may be followed with regard to the settlement of the list of creditors in case of alteration of objects. After the settlement of the list, further directions for the hearing of the petition may be obtained.

Counsel for the company has presented the petition and be asks for an order for sanction of the alteration straightway. I am unable to make such order for several reasons. Strict proof of the passing of the special resolution has not been given. I am also not satisfied on the present materials that no creditors are entitled to object. Besides, before making the order I should fix a date for the hearing of the petition and direct advertisement to be published of the presentation of it and of the date of hearing.

Under the circumstances let the petition be ke(sic) on the file. The Petitioner will be at liberty to file (sic) necessary affidavits.