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Lets Analyze

February 5, 2014

In the earlier issue we discussed from Sections 26 to 36 of the Companies Act, 1956 which deals with the Articles of Association and in the present issue we shall proceed with Section 41 of the Companies Act, 1956 which deals with the definition of a member.

Query # 1: If the subscribers to memorandum have any objections to Memorandum and Articles of Association, can the objections contended by them be taken into consideration after they have put their signatures on to it?

Decided Case Law: East Bengal Mills Ltd., In re [1941] 11 Comp. Cas. 169 (Cal.)

Facts of the case:The petitioners, when put on the list of contributories, contended that they consented to become shareholders on condition that their suggestions were included in the Memorandum and Articles of Association, but subsequently they found that the Memorandum and Articles eventually filed were different from the draft Memorandum and Articles which had been shown to them, and did not embody their suggestions, and therefore, they were not shareholders.

Clarification: Held that whatever happened, prior to the incorporation of the company, at the time of incorporation it was the duty of the petitioners to satisfy themselves that the Memorandum and Articles were in accordance with their views. That was the time to object to their becoming shareholders. At such a stage they could not contend that since the condition had not been fulfilled they were not shareholders of the company.

Conclusion: Therefore if the subscribers to Memorandum and Articles of association have any objections contended by them, the time to object is before putting their signatures to it.

 

 

Query # 2: Can a member have rights which is independent of the statute and any bye-laws of the club?

Decided Case Law: M.P. Ananthadevaraj Urs v. Bangalore Turf Club Ltd. [1988] 64 Comp. Cas. 93 (Kar.)

Facts of the case: The club was a company registered under the Companies Act though it was not having any share capital. X, a member of the club registered as a company without share capital, filed a writ petition against the State Government challenging its order which necessitated prior approval of State Government to the appointment of the secretary of the club.

Clarification: Held that it was not the case of the petitioner that the impugned order affected his personal interest in the club nor was the right of the petitioner as a member of the club affected. Only the authority of the committee of management to appoint the secretary of the club was affected in as much as such an appointment had to take place with the prior approval of the State Government. The club was not aggrieved by the impugned order. Therefore, it was not possible to hold that the petitioner was entitled to maintain the writ petition.

Conclusion: A member of the club losses his individuality qua the club and has no independent rights except those given to him by the statutes and bye-laws of the club and he must speak through the club only.

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