A.K.G. Acoustics (India) Ltd. v. Company Law Board (CLB)

A.K.G. Acoustics (India) Ltd. v. Company Law Board

70 (1997) DLT 767

Facts

In order to optimise the efficiency of the appellant Company and to economize on revenue expenses the appellant Company called an Extraordinary General Meeting to pass a Special Resolution to shift the registered office of the appellant Company from its location at New Delhi to its factory site at Gurgaon. CLB B confirmed the Special Resolution passed in the Extraordinary General Meeting permitting shifting of the registered office from Delhi to Gurgaon on specific condition that the appellant Company shall provide transportation facilities to its shareholders from Delhi to Gurgaon for every Annual General Meeting of the Company held at Gurgaon.

Law Points:

  • Section 17 of the Act which provides that a Company may be Special Resolution alter the provision of its Memorandum so as to change the place of its registered office from one State to another or with respect to the (objects of the Company to achieve the purposes as enumerated under Section 17(1). Section 17(3) provides that before confirming the alterations the Company Law Board must be satisfied about issuance of sufficient notice teethe shareholders and also to the creditors. Under Section 17(5) of the Act powder has been vested in the Company Law Board to make an order confirming alteration either wholly or in part and on such terms and conditions, if any, as it may think fit and pass such order as it thinks proper.
  • Section 171 makes’ provision with regard to issuance of notice for holding an Annual General Meeting whereas Section 174 of the Act provides for the quorum for such a meeting and Section 176 provides for proxies. These are the statutory requirements to be complied with by a Company for holding a valid Annual General Meeting.

Issue

Whether the Board is empowered to confirm the alteration in respect of the place of its registered office by laying down a specific condition that the Company shall have to provide transportation facilities to the shareholders to attend the Annual General Meeting of the Company.

OR

Whether the aforesaid condition could be said to be a valid term and condition within the meaning of Section 17(5) of the Act read with the other statutory requirements as provided for under sections 171, 174 and 176 for an Annual General Meeting to be valid.

Precedent Followed:

The Bombay High Court in Minerva Mills Limited v. Government of Maharashtra, (1975) 45 Company Cases page I, has held that shifting of the registered office from one State to the other can be opposed on the ground of its adverse effect on some specific pecuniary or proprietary interest of that particular State, and not on regional considerations, or on the vague ground of the effect of the shifting of the registered office on the general economy of the State which must necessarily be involved in every case.

Decision:

The condition attached by the Board to provide transport facilities to the shareholders is not only outside the scope and ambit of the statute but would also amount to interfering with the domestic matter of the Company. Shifting of the registered office from Delhi to Gurgaon cannot be opposed as the same would involve regional considerations.

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