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MINERVA MILLS LTD.

Vs.
GOVT. OF MAHARASHTRA
[1975] 45 CompCas 1 (Bom)
FACTS OF THE CASE
 The Company had its mills situated in Bangalore,
whereas its registered office was situated in Bombay.
 The Mysore State Financial Corp. Ltd., Bangalore had
advanced to the Company a loan of Rs 20 lakhs on
the condition that the Company would take steps to
shift its registered office from Bombay to Bangalore.
 Petition filed by the Company u/s 17(2) of the
Companies Act, 1956 for alteration of the MoA so as
to shift the registered office of the company from
Bombay to Bangalore, after a special resolution had
been passed to that effect in 1969.
It was desirable to have the mills and the registered
office at the same place and that would help in
carrying on the business of the Company
economically and efficiently.
The secured creditors of the Company had no
objection to the transfer of the registered office from
Bombay to Bangalore.
FACTS (contd.)
 In 1971, the Central Government
authorised the National Textile Corp. Ltd.
to take over the management of the
Company u/s 18A, Industries (Development
and Regulation) Act, 1951 as the
authorised controller of the undertaking for
a period of five years.
 In 1973, the petition for shifting of the
registered office of the Company was
accepted and such was advertised in two
newspapers and notices were served to the
RoC and the State.
 The RoC did not contest the petition.
 The State of Maharashtra opposed the
petition and challenged the order of the
learned district court.
STATUTORY PROVISIONS
REFERRED:
The Companies Act, 1956
S. 17(1): Company may shift its
registered office through an alteration
in the MoA.
S. 17(2): Such alteration is to be
confirmed by the Court on petition.
S. 17(3): Notice to be served to every
interested person or class of persons.
Every creditor has to signify that either
his consent to the alteration has been
obtained or his debt has been
discharged or his claim has been
secured.
S. 17(4): The RoC will be given an
 S. 17(5): The court can grant the order
either wholly or in part.
 S. 17(6): The court will have regard to
the rights and interests of the
members of the Company and to the
rights and interests of the creditors.
 S. 18(3): Filing of the court’s order
with the RoCs of the two concerned
states who will register the same in
their records.
 S. 19: The alteration of the MoA will
not take place until the registration
under S. 18(3) has taken place.
 The Industrial (Development and Regulation) Act,
1951
S. 18A: The Cn. Govt. may authorise any person or
body of persons to take over the management of an
industrial undertaking.
S. 18B: In case of such authorisation, all persons in
charge of management will be deemed to have
vacated their offices, and any subsisting contract will
be deemed to have been terminated.
S. 18C: The authorised person may apply to court for
cancellation of any subsisting contract or agreement.
S. 18E(1): Without the permission of the Cn. Govt, no
resolution passed at any meeting of the shareholders
shall be given effect to.
S. 18E(2): The Companies Act will continue to apply to
such undertaking.
The hon’ble court suo-moto drew its attention to:
S. 13(1)(e): No owner of an “industrial undertaking”
can change the location of the whole or part of the
CONTENTIONS RAISED BY THE
RESPONDENTS:
1) The special resolution was passed back in
1969 and since then, the shareholders have
changed.
2) It is not in the interest of the Company and
the State to sanction the special resolution.
3) U/s 18E(1)(b), Industries (Development and
Regulation) Act, 1951, the special
resolution passed by the board of directors
would become inoperative, as it had not
been approved by the Cn. Govt.
4) The sanctioning of the resolution would
adversely affect the general economy of
the State.
REBUTTALS TO THE ABOVE
CONTENTIONS:
CONTENTION (1):
 The fact that the resolution is 4 years old is
not a proper ground for not sanctioning the
resolution.
 The grounds for the petition continue to be
there namely, the loan of Rs 20 lakhs from
the Mysore State Financial Corp. and the
location of the mills of the Company at
Bangalore.
 The fact that some of the shareholders may
be different from the shareholders who
passed the special resolution cannot be a
ground for refusing the sanction.
CONTENTION (2):
The shareholders are the best
judge of the interests of the
Company and the State cannot
assume the role of a guardian.
As for the interests of the State,
the same has been dealt with in
the case of Rank Film Distributors
v. RoC, W.B.
• CONTENTION (4)
The same has been dealt with in
the case of Rank Film Distributors
CONTENTION (3):
 It is the Cn. Govt and not the State Govt.
that is concerned with the contention u/s
18E(1)(b) of the Industries (Development
and Regulation) Act, 1951.
 Moreover, the resolution was passed long
before the directive of the Cn. Govt.
authorising the National Textile Corp. Ltd. to
take over the management of the Company.
 S. 18E(1)(b) cannot be given a retrospective
effect. It is a well-settled principle of law that
no statute can be construed to have a
retrospective effect unless such construction
appears very clearly in the terms of the Act
or by necessary and distinct implication.
 It is a well accepted canon of construction
ARGUMENTS RELIED UPON BY
THE COURT:
The State being a creditor of the Company to
the tune of Rs 73,882.45 as arrears of sales
tax was entitled to be served a notice u/s
17(3)(a) as an interested person and u/s
17(3)(b) as a creditor.
The State can challenge the petition only on
the ground of its adverse effect on some
specific pecuniary or proprietary interest of
the State and not on regional considerations
or the effect of its shifting on the general
economy of the State.
Being a creditor of the Company, the State is
not entitled to oppose the application on the
ground of its adverse effect on the
Rank Film Distributors of India
Ltd. v RoC, W.B., AIR1969 Cal
32
 The company carried on the business of film
distributors and its registered office was situate at
Calcutta. The company passed special resolutions for
the transfer to its registered office from the State of
West Bengal to the State of Maharashtra on the
grounds that its head office had already been
transferred to Bombay as far back as the year 1962,
that the registered offices of most of foreign film
companies were situated in Bombay, that there was
better scope in Bombay for expansion of the
company's business, and that it was in the interest of
the shareholders that the registered office of the
company should be moved to Bombay.
 This application was opposed, as in the present case,
only by the State. It was opposed in that case on the
ground that sufficient cause had not been shown for
the transfer of the registered office to Maharashtra.
Contd.
The test to be applied: whether at the time
when the resolution was passed, the
shareholders had decided to shift the
registered office under any of the conditions
stipulated u/s 17.
It was for the members of the company and
not for the State to decide whether the
registered office of the company should be
transferred from one State to another in the
interests of the company for the reasons
specified in section 17. To permit the State
to contend that the proposed transfer would
not enable the company to carry on its
business more efficiently or economically
would be to enable the State to have a voice
Contd.
A loss of employment in one State
would be balanced by employment in
another State.
The loss of revenue in one State will
be balanced by greater revenue
generation in another State.
Under the scheme of the State and
Cn. Sales Tax Act and Art. 270 of the
Constitution r/w the Constitution
(Distribution of Revenue) Orders, a
fixed percentage of revenue is allotted
to each State which does not depend
on the tax collected in each State.
CASES RELIED UPON BY THE
RESPONDENTS:
ORIENT PAPER MILLS v. STATE
IN RE ORISSA CHEMICALS AND DISTILLERIES
PVT. LTD.
 Where by a change of registered office of a
company, the State from which the office
was sought to be transferred would suffer a
substantial reduction of revenue from
income-tax and sales tax, the court should
take that fact into consideration and refuse
to confirm such a resolution.
 In both cases, the HC had refused the
petition on the ground that it was not
bonafide.
FINAL SUO-MOTO
CONSIDERATION BY THE COURT
OF BAR OF S. 13(1)(e)
S. 13(1)(e) bars the change of location of the whole or
any part of an “industrial undertaking”.
S. 3(4) of the Act defines “industrial undertaking” as
any undertaking pertaining to a scheduled industry
carried on in one or more factories.
Hence, the bar of the section would apply only to the
part of the undertaking in which the industry itself is
carried on, which would mean the factory of the
Company which is already located at Bangalore and is
not being shifted.
Whether the registered office or the head office, or
one or more of the branch company is also shifted or
not, unless the industrial unit of the Company is also
shifted, the bar of S. 13(1)(e) would not be attracted.
DECISION OF THE COURT
Company directed to furnish to
the State a bank guarantee to the
tune of Rs 73,882.45 claimed by
it by way of arrears of sales tax.
Company allowed to shift its
registered office from Bombay to
Bangalore.
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