JUDGMENT 1. - This is a petition filed by Rajasthan Castings Private Limited, Jaipur, for confirmation of alteration sought to be made in the provisions of its memorandum of association, with regard to the change of place of its registered office from the State of Rajasthan to the State of West Bengal, by a special resolution passed at an extraordinary general meeting of the said Company held on 20th March, 1972. It is alleged in the petition that the said Company was registered on 6th May, 1970 under the provisions of the Companies Act, 1956, hereinafter referred to as the Act, as a Company Limited by Shares. The registered office of the Company is situated at B 6 Prithvi Raj Marg, Jaipur. The authorised capital of the Company is Rs. 10,00,000/-, divided into 10,000 equity shares of Rs.100/- each. The subscribed and paid up share capital of the Company is Rs. 6,14,500/- divided into 6145 shares of Rs. 100/- each fully paid up in cash. The objects, for which the Company was formed, are set out in clause III of the memorandum of association of the company annexed with the petition and marked "A". Shortly after its incorporation, the Company started its business of iron and steel founders and is still doing the same business. It has its factory at Jaipur. By a special resolution of the Company duly passed in accordance with section 189 of the Act, at an extraordinary general meeting of the Company held on 20th March, 1972, after due notice as provided in the Act, it was resolved that subject to the confirmation of this Court the registered office of the Company will be situated in the State of West Bengal and that Shri Ghamandi Lal was authorised to complete all the formalities in this regard. It was further alleged that the raw materials for the Company's products are mainly procured from Calcutta or its nearby places and, therefore, the city of Calcutta is the main feeding source and the proposed change in the registered office from the State of Rajasthan to the State of West Bengal will greatly facilitate the procurement and handling of raw materials, and sale of products as the principal buyers of the products of the Company are available either in Calcutta or at place close thereto. It was further stated that as the main market for the sale of the products of the Company is situated in the State of West Bengal and all the Directors of the Company are residents of Calcutta, it will be more beneficial and convenient to control the business dealings and to manage the affairs of the Company from the proposed registered office at Calcutta in the State of West Bengal. Keeping in view the above facilities at Calcutta, the control of affairs of the Company from that place will give an increased impetus to the activities of the Company and the business of the Company will be carried on more economically and more efficiently from there. It was also stated in the petition that the proposed transfer of the registered office from the State of Rajasthan to the State of West Bengal will not adversely affect any employee of the Company or its contribution to the revenue, but will promote the general interest of the Company and its share holders. It was further stated in the petition that the Company has not issued nor has it agreed to issue any debenture. The Company has borrowed secured loans amounting to Rs. 4,43,786.82P. against security by mortgage of land, building, plant and machinery and other fixed assets and hypothecation/pledge of raw material and finished goods. The said secured loans including interest amounts Rs. 1,52,282.96P. out of which Rs. 24,984.28 represent loans from Directors, and that save and except as has been stated above, the Company has no other debts and creditors except the debts incurred in the usual course of business which are also paid in usual course. The interest of any the above creditors will not be affected by the proposed alteration in the memorandum of association of the Company i.e. transfer of registered office to the State of West Bengal. It was further stated that the Company is in good financial position and has sufficient working capital. The following summary extracted from the last balance sheet of the Company as at 30.6.73 indicates its financial position as follows:- Paid-up share capital (including application money 70,000/- 6,84,500.00 Reserve and surplus 26,000.00 Total 7,10,500.00 The assets (including loss) of the Company amounted to Rs. The following summary extracted from the last balance sheet of the Company as at 30.6.73 indicates its financial position as follows:- Paid-up share capital (including application money 70,000/- 6,84,500.00 Reserve and surplus 26,000.00 Total 7,10,500.00 The assets (including loss) of the Company amounted to Rs. 15,06,564.27 15,06,564.27 Less: Liabilities : Secured loans 4,43,786.82 Unsecured loans 1,51,282.96 current liabilities & provision 2,00,994.49 7,96,064.27 7,10,500.00 It was also stated that since the close of the financial year at 30.6.1973, there has been no substantial change in the financial position of the Company. No one will be prejudiced by the proposed alteration of the memorandum of association of the Company and it is just and equitable that the alteration should be confirmed by this Court, and that the application is made bonafide and in the interest of justice. 2. In support of the contents of the petition, Ghamandi Lal Saraogi, one of the Directors of the Company, has put in his own affidavit, wherein he stated on oath that the extraordinary general meeting of the Company duly convened on 20.3.72 in pursuance to the notice dated 18.2.72 annexed with the petition and marked 'B'. A copy of the said notice wat duly sent to all the members of the Company in accordance with the provisions of the Act, and the resolution referred to in para 6 of the petition was passed, in accordance with section 189 of the Act, and that the book marked 'C2' is a true copy of the relevant minutes of the proceedings of the said meeting of the Company held on 20.3.72. 3. After the petition was filed in this Court, notices of the presentation of the said petition and of the date appointed for hearing thereof were published in the Rajasthan Gazette, 'Hindustan Time' and the 'Rajasthan Patrika'. A notice of the petition was issued to every creditor of the Company and to every other person whose interests will be affected by the proposed alteration. Notice of the petition and the date of hearing was also issued to the Registrar of the Companies, Jaipur, to appear before this Court and to state his objections and suggestions, if any, with respect to the confirmation of the proposed alteration. A notice of the petition and date of hearing was also issued to the State of Rajasthan and the Central Government. A notice of the petition and date of hearing was also issued to the State of Rajasthan and the Central Government. The Registrar of the Companies, Rajasthan, Jaipur, has intimated to this Court vide his letter No. 1293/IC/6655 dated 4.9.74 that he does not wish to oppose the above petition of the Company and further requested that the same may please be decided on merits. However, the proposed shifting of the registered office from the State of West Bengal has been vehemently opposed by the creditor of the Company, namely, the Rajasthan Finance Corporation and the State of Rajasthan on the following grounds:- (1) that there is good market for sale of the products of the Company in Delhi and Bombay which are comparatively nearer to Jaipur where the registered office of the Company is situated at present. However, there is a branch office at Calcutta also which can procure raw materials and business for the Company; (2) that it is incorrect to say that shifting of the registered office of the Company to Calcutta would be conductive to better management of its affairs. Meetings of the Board of Directors of the Company can be held in the State of West Bengal as there is no ban for such meetings at that place; or course the general meeting would have to be held at the present registered office. Production and sale can be better controlled from the registered office at Jaipur; (3) that for proper maintenance of regional balances it is necessary that the Company should keep its registered office in the State of Rajasthan, otherwise there is every likelihood that the business may virtually be shifted to the State of West Bengal in due course of time; (4) that if the registered office of the Company is shifted from Jaipur to Calcutta in the State of West Bengal, the Rajasthan Finance Corporation will not have an easy approach to and control over the account books and other registers of the Company, because, under the registered deed of mortgage executed by the Company in favour of the Rajasthan Finance Corporation on 19.2.1972, the Corporation has a right to examine the books of accounts of the Company at all reasonable times and to take copies or extracts therefrom. In case the registered office is shifted, it will be very difficult & expensive for the Corporation to go to Calcutta and to examine the account books and other property of the Company. At the time of granting loan to the Company one of the important considerations that weighed with the Corporation was that the Company is having its registered office at Jaipur, because generally the Corporation does not grant loan where it feels that it will be put to inconvenience and heavy expenditure in inspecting the account books and verifying other registers maintained by the Company under the Company law. If the registered office is shifted to the State of West Bengal, the Rajasthan Finance Corporation will not be able to get disputes under the Company law decided by the High Court of Judicature for Rajasthan and will be put to great hardship and inconvenience. (5) that the shifting of the registered office of the Company will have adverse effect on the financial interests of the State of Rajasthan, which is an under developed State in comparison to the developed State of West Bengal and such shifting will certainly cause a heavy loss to the State. In support of their objections the Rajasthan Finance Corporation and the State of Rajasthan have put in affidavits of Shri Khadga Bahadur Singh and Shri P.N. Pradhan respectively. 4. I have carefully gone through the record and heard the arguments advanced by Mr. L.R. Mehta for the petitioner, Mr. Dinkar Lal Mehta for the Rajasthan Finance Corporation and Dr. S.S. Bhandawat, Deputy Government Advocate appearing on behalf of the State. Under Section 17 of the Act a power is given to this Court to confirm a resolution for alteration as to the place of registered office of the Company from one State to another if the Court is satisfied that the resolution for alteration is bonafide and in the interest of the Company. Before confirming the alteration, the Court shall have regard to not only the interests of the creditors and the members of the Company but every other person or class of persons whose interests may be affected by the alteration. The powers conferred on the Court under section 17 of the Act are discretionary but the discretion should be exercised on sound judicial principles. 5. The powers conferred on the Court under section 17 of the Act are discretionary but the discretion should be exercised on sound judicial principles. 5. The points for consideration in the instant case, therefore, are:- (1) whether the application for alteration is bonafide; and (2) whether this Court should sanction the resolution for change of the registered office in view of the objections raised by the Rajasthan Finance corporation and the State of Rajasthan? The main ground for the proposed alteration in that raw materials for the products of the Company can easily be procured from Calcutta and its nearby places and that it will be beneficial economical and convenient to control the business of the Company from its registered office at Calcutta as the main market for the products of the Company is available in the state of West Bengal and as all the Directors of the Company are residents of Calcutta. In support of this ground, Ghamandi Lal Saraogi one of the Directors of the Company has put in his affidavit. From a bare look into the petition and the affidavit of Ghamandi Lal, it is apparent that no particulars are given as to how the business and affairs of the Company will be more conveniently, efficiently and economically dealt with or controlled by having its registered office at Calcutta in the State of West Bengal. The factory of the Company and its units of production are admittedly located at Jaipur in the State of Rajasthan. There is no material placed by the Company on the record from which it may be shown how the Company will be financial benefited and how its administration will be conveniently and efficiently controlled by a mere change of its registered office from Jaipur to Calcutta with shifting its factory or unit of production from Jaipur. It is no doubt true that it may be more convenient for the Directors of the Company to hold meetings at Calcutta without loss of time and money, but except for coming down to Jaipur for holding their statutory general meetings, they are free to hold meetings at Calcutta. There does not appear good ground or necessity for change in the location of the registered office of the Company merely for the sake of convenience of the Directors holding meetings. There does not appear good ground or necessity for change in the location of the registered office of the Company merely for the sake of convenience of the Directors holding meetings. It is admitted by Ghamandi Lal Saraogi, one of the Directors in his affidavit dated 17.3.1975 that the Company in procurement of raw materials from Calcutta and its suburbs for its factory at Jaipur. No particulars are given to show that there is no market for sale of its products in the States of Delhi, Rajasthan, Haryana and Uttar Pradesh and that the sale of the products of the Company in these States is negligible and that the Company has to took for other markets in the eastern sector for sale of its products. The contention of the Company that in case the registered office is allowed to be shifted to Calcutta, it will cease to have its branch office at Calcutta and will thus save huge money that is now being spent in maintaining the branch office is not tenable, because in the absence of the registered office at Jaipur, the Company will have to make some sort of arrangement by way of branch office or otherwise to administer the affairs of the Company in an efficient manner at Jaipur. Hence, the Company could not make any case for change of the registered office from Jaipur to Calcutta on the ground of more economical, direct and efficient administration of its affairs. 6. Apart from this, an objection has been taken by the State of Rajasthan to the proposed change on the ground that it shall be deprived of revenue by way of income tax, sales tax etc. The State of Rajasthan is a person whose interests may be affected by the alteration. It has a right to challenge the resolution for change of the registered office of the Company, under Section 17(3)(a) of the Act. The contention of the State that the proposed alteration of the registered office of the Company from the State of Rajasthan to the State of West Bengal will adversely affect the revenue of the State is not devoid of substance. The company itself has asserted that it is not a losing concern and that its financial position is not weak. The contention of the State that the proposed alteration of the registered office of the Company from the State of Rajasthan to the State of West Bengal will adversely affect the revenue of the State is not devoid of substance. The company itself has asserted that it is not a losing concern and that its financial position is not weak. In view of the financial position of the Company, the State is bound to lose its revenue on all counts including sales tax and income tax if the registered office of the Company is shifted to the State of West Bengal. This aspect of the question is elaborately discussed in the following decisions:- In re Orissa Chemicals & Distilleries (1) and Orient Paper Mills Ltd. v. The State, AIR 1957 Ori 232 While discussing this aspect of the question Hon'ble S. Barman J observed in In re Orissa Chemicals & Distilleries (supra) at page 63 as follows:- "(9). On the aspect of the income tax, there is a great deal of force in the objection made on behalf of the State of Orissa that the change of the registered office of the Company from the State will seriously affect the revenue of the State. This aspect of the question was fully discussed in a previous decision of the Court in Orient Paper Mills v. State ILR 1956' Cut 697: AIR 1957 Orissa 232 which was followed by a later decision of the Division Bench of this Court (unreported) in The Bonal Industrial Co. Ltd. v. The State of Orissa, A.H.O. No. 1 of 1957, D/ 2.11.1959 . The learned Advocate General drew my attention to Article 270 of the Constitution providing for distribution of taxes levied and collected by the Union between the Union and the States, the percentage of the net proceeds of taxes or income falling to be distributed, appearing to be for Orissa 35 percent. It is also to be noticed that under Section 4 B of the Income Tax Act, a company is ordinarily resident in taxable territories. As regards the place of assessment, Section 64 of Income Tax Act provides that where an assessee carries on business etc. in more places than one he shall be assessed by the Income Tax Officer of the area in which the principal place of the business is situate. As regards the place of assessment, Section 64 of Income Tax Act provides that where an assessee carries on business etc. in more places than one he shall be assessed by the Income Tax Officer of the area in which the principal place of the business is situate. Section 5(7)(a) provides that the Commissioner of Income Tax may transfer any case from Income tax Officer subordinate to him to another and the Central Board of Revenue may transfer any case from any Income Tax Officer to another." The learned Judge further observed in para 10 as follows in his referred to above judgement:- "(10). Coming to the sales tax, similar considerations arise as fully discussed in the case of ILR (1956) Cut.697: AIR 1957 Orissa 232) and A.H.O. No. 1 of 1957, D/-2.11.1959 (Orissa) referred to above. The objection on behalf of the State of Orissa on the aspect of sales tax is further strengthened by the rent Central Sales Tax Act (Act 74) of 1956. Section 9(8) thereof provides that the proceeds in any financial year of any tax levied and collected under the said Act in any State on behalf of the Government shall, except in so far as those proceeds represent proceeds attributable to the Union Territories be assigned to that State and shall be retained by it and the proceeds attributable to the Union territories shall form part of the Consolidated Fund of India." Apart from this, the change of the registered office of the Company from Jaipur to Calcutta will create practical difficulties in distribution of taxes levied and collected by the Union between the Union and the State of Rajasthan. Hence, in the circumstances of the case, I am not satisfied that the proposed change of the registered office of the Company from Jaipur to Calcutta in the State of West Bengal is bonafide. 7. There is another ground against the proposed change in the location of the registered office of the Company. Hence, in the circumstances of the case, I am not satisfied that the proposed change of the registered office of the Company from Jaipur to Calcutta in the State of West Bengal is bonafide. 7. There is another ground against the proposed change in the location of the registered office of the Company. The ground is that if the registered office of the company is allowed to be located at Calcutta, the mortgagee, the Finance Corporation will be put to great hardship and inconvenience in inspecting the books of accounts of the mortgagor petitioner at all reasonable times and in taking copies or extracts therefrom, because, with the change of the registered office the record and the account books shall be kept therein at Calcutta and it will be highly difficult for the Rajasthan Finance Corporation to see that the principal sum advanced to mortgagor Company as loan is being utilised strictly for the purpose for which the same has been lent and advanced and to check and inspect such accounts from time to time through such person or persons as the Corporation may, from time to time by writing in that behalf, appoint in accordance with clause (12) of Para VII and clause (c) of Para 15 of the indenture of mortgage. Clause (10) of para 7 of the indenture of the mortgage, a true copy of which has been filed on the record, reads as follows:- "(10). The Mortgagor Company shall keep proper books of accounts of its business and shall have them at all times duly posted up and shall permit the Corporation or any other person appointed for that purpose by it to examine such books at all reasonable times and make copies or extracts therefrom." It has been contended on behalf of the petitioner by Mr. Lekh Raj Mehta that the petitioner Company has no existing liability to the State of Rajasthan in respect of any tax and that the State being a prospective creditor in respect of future liabilities is not entitled to raise any objection to the proposed alteration. In support of his above contention, he relied upon two authorities of the Calcutta High Court in In the matter of S.G. Assurance Co. (3) & In the matter of Mackinnon Mackerzie & Co. Pvt. Ltd. (4) and an unreported decision to this Court in In Re Orient Trading Co. Ltd. (5). In support of his above contention, he relied upon two authorities of the Calcutta High Court in In the matter of S.G. Assurance Co. (3) & In the matter of Mackinnon Mackerzie & Co. Pvt. Ltd. (4) and an unreported decision to this Court in In Re Orient Trading Co. Ltd. (5). I have carefully gone through these authorities. The first authority of the Calcutta High Court is distinguishable on facts. It was not a case of change of registered office of the Company, but in that case proposed alterations of the objects of the Company were sought to be confirmed by the Court. Apart from this it may be further observed that Section 17(3)(a) of the Act clearly provides that sufficient notice must be given to every holder of the debentures of the Company and every other person or class of persons whose interests will, in the opinion of the Court, be affected by the alteration. As stated earlier, the State of Rajasthan, is a person whose interests will, in the opinion of this Court, be adversely affected by the proposed change of the registered office of the petitioner Company from the State of Rajasthan to the State of West Bengal. In the matter of Mackinnon Mackenzie & Co. Private Ltd. (Supra), it was held that the question of likelihood of loss of revenue to one State may be considered with reference to the total revenue for the Republic of India and the possibility of the loss of revenue to one State should not be considered in arriving at a decision whether the resolution for change of the registered office from one State to another State within India should or should not be confirmed. The referred to above authority no doubt supports the contention of the learned counsel for the petitioner but in the instant case it is not helpful to the petitioner Company as I have already held on the facts and the circumstances that the proposed alteration of the registered office from Jaipur to Calcutta is not bonafide and in the interests of the creditors of the Company, i.e. the Rajasthan Finance Corporation and will not enable the Company to carry on its business more economically or more conveniently. In Re Orient Trading Company Ltd., Ratangarh (supra) decided by this Court, neither the State of Rajasthan, nor any person, whose interests may be affected by the alteration, had come forward to raise any objections or to make any suggestion with respect to the confirmation of the alteration of the registered office of the Company from Ratangarh to Calcutta. Hence these authorities are of no help to the petitioner Company. 8. The result of the above discussion is that the petition filed by the Rajasthan Castings Private Limited for confirmation of its special resolution dated 20th March, 1972, for the change of its registered office from the State of Rajasthan to the State of West Bengal is dismissed. However, in the circumstances of this case, the parties shall bear their own costs. *******