IN THE HONBLE HIGH COURT OF RAJASTHAN In the matter of:

SHEKHAR SWAMI V. NOZLE INDIA

17 FEBRUARY, 2012.
TH

WRITTEN SUBMISSION ON BEHALF OF THE PETITIONER

Submitted by: Shashank Sharma 6th Semester B.A.,LL.B. (Hons.)

Submitted to: Mr. R.S. Solanki (Faculty, Seedling School of Law & Governance)

Table of Contents
Table of Contents.................................................................................................................................2 INDEX OF AUTHORITIES................................................................................................................3 Table of cases...................................................................................................................................3 - Books............................................................................................................................................3 - Statutes ........................................................................................................................................3 The Companies Act, 1956............................................................................................................3 Code of Criminal Procedure, 1973..............................................................................................3 Information Technology Act, 2000.............................................................................................3 STATEMENT OF JURISDICTION....................................................................................................4 STATEMENT OF FACTS...................................................................................................................5 STATEMENT OF ISSUES..................................................................................................................6 ARGUMENTS ADVANCED.............................................................................................................7 Whether the resolution passed by the co. is void............................................................................7 Whether Nozle India is a subsidiary................................................................................................8 Whether Nozle India is criminally liable regarding the display of the objectionable contents on the Net............................................................................................................................................10 PRAYER FOR RELIEF.....................................................................................................................12

INDEX OF AUTHORITIES
Table of cases 1. Alembic Glass Industries Ltd. V. Collector of Central Excise & Customs, (2002) 9 SCC 463. 2. Bennett Coleman & Co. vs. Union of India (1972) 2 SCC 788 3. Mafatlal Industries V Gujarat Gas 1999 97 CompCas 301 Guj, 4. Maqbool Fida Hussain vs. Raj Kumar Pandey Criminal Revision Petition No. 280 and 282/2007 5. Registrar of Companies v. F.S. Cabral, (1988) 63 Comp Cas 126 Bom. 6. Smt. Pushpa Katoch vs. Manu Maharani Hotels Ltd.2006 131 Comp Cas 42 Delhi 7. Sree Meenakshi Mills co. Ltd. V. Asstt Registrar of joint Stock Companies 8. V. B. Rangaraj Vs V. B. Gopalkrishnan AIR 1992 SC 453, 1992 73 Comp Cas 201 SC

- Books 1. Avtar Singh, Company Law, 15th Edition, EBC. - Statutes

The Companies Act, 1956 Code of Criminal Procedure, 1973. Information Technology Act, 2000.

STATEMENT OF JURISDICTION
This Honble High Court of Rajasthan has the jurisdiction and it should exercise jurisdiction in the present matter u/s 26 of the Cr.pc.

STATEMENT OF FACTS
1. 2. 3. 4. Nozle India, a Public Limited Company registered in India. Its head office is in Mumbai. It is an Internet Service provider doing the services for its Rotorua-based Holding company The company in its last Annual General Meeting which was held after 15(Fifteen months) passed

Nozle Inc. a resolution allowing the restriction on share transfer among its Shareholders. Shekhar Swami, one of its Shareholders and a resident of Udaipur, was a strong dissenter of this resolution. But being a minority share-holder, he could not prevent the resolution from being passed. 5. 6. Court a. b. c. Net. Challenging the Resolution so passed; The status of Nozle India; and The criminal liability of the company regarding the display of the objectionable contents on the Swami, a regular Net user, while surfing one day came across online (through Nozle India) And trouble started for Nozle India now. Shekhar Swami took the matter to Rajasthan High obscene depictions of Hindu deities, and the prophets and Godheads of other religions.

STATEMENT OF ISSUES
1. 2. 3. Whether the resolution passed by the co. is valid. Whether Nozle India is a subsidiary. Whether Nozle India is criminally liable regarding the display of the objectionable contents

on the Net.

ARGUMENTS ADVANCED
Whether the resolution passed by the co. is void. The resolution passed by the co. is invalid as it is in contravention of the provisions of the Act. Nozle India being a co. registered in India under the Indian Companies Act, 1956, has to work in compliance with Act. According to which, like any other co. it is required to call at least one meeting of its shareholders each year which is known as AGM. The gap between one meeting and the next meeting should not be of more than 15 (Fifteen months)1, whereas in the instant case the meeting took place after the expiry of this time period as the facts clearly state that: The company in its last Annual General Meeting which was held after 15(Fifteen months) passed a resolution. The failure to call this meeting is an offence punishable with fine2. Therefore, a company can be prosecuted for failure to call this meeting3. Also, it is an established law that any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of the Act, become or be void, as the case may be4. In the instant case passing of such resolution is in contravention of the Act, therefore the resolution thus passed is also void, unenforceable and inoperative. Alternatively, In case of V. B. Rangaraj Vs V. B. Gopalkrishnan5 the Supreme Court observed that the Companies Act makes it clear that Articles of Association is binding on company and
1 2 3 4

Section 166, Indian Companies Act, 1956. Registrar of Companies v. F.S. Cabral, (1988) 63 Comp Cas 126 Bom. Sree Meenakshi Mills co. Ltd. V. Asstt Registrar of joint Stock Companies Section 9(b), Indian Companies Act, 1956. AIR 1992 SC 453, 1992 73 Comp Cas 201 SC

shareholders. Transfer of shares is regulated by AOA if restrictions are specified in AOA; it is binding on company or on the shareholder otherwise if restrictions are not specified in AOA, its neither binding on company nor on the shareholders; In case of Mafatlal Industries V Gujarat Gas6.the Gujarat High Court observed that the ratio of Rangaraj case would apply to public companies with a great force. In has been held by the High Court of Delhi7 that, As per the provisions of Section 111A of the Act, there could not be any fetters on the right of a shareholder to transfer his/her shares. It may be noted that the Legislature has made different provisions for transfer of shares in case of private limited company and public limited company.

Whether Nozle India is a subsidiary.

6
7

1999 97 CompCas 301 Guj, Smt. Pushpa Katoch vs. Manu Maharani Hotels Ltd.2006 131 Comp Cas 42 Delhi

Nozle India is a subsidiary of the Rotorua-based Holding company Nozle Inc. In the instant case Nozle India is a co. registered in India under the Act rendering its valuable services in India to millions of people daily. Nozle India is a subsidiary is quite evident from the fact that its holding co. is based in Rotorua i.e. Nozle Inc. thereby making it a subsidiary. Also, it has been held by the SC time and again that a holding co. cannot be made liable for the dues of the subsidiary. In this case, the subsidiary owed certain sums to the Employees Provident Fund. The holding co. was held to be not liable in that respect, because it could not be supposed to be the employer of the workers of its subsidiary. The subsidiary was not a branch of the holding co8. A co. qualifies as a holding co. when it has the power to control the composition of the board o directors of another co. or holds a majority of its shares. It has been seen that a subsidiary co. is separate legal entity and its creator and controller is not to be held liable for its acts merely because he is the creator and controller9. An English Co. created a foreign subsidiary for listing and tax advantages. The foreign subsidiary was used for raising money on bonds through financial banks. The money thus raised was loaned to the holding co. When the holding co. became unable to pay and was put under administration, the financing banks lodged their claims for the money provided by them to the subsidiary and the subsidiary also lodged its claim for the same money because it provided the loans to the holding co. The financing banks wanted that the claim of the subsidiary should be ignored because it was a part of the same economic entity. The court refused to do so and said that those 2 companies could not be regarded as one and the same entity. Therefore, in the light of the arguments put forth it is clear that Nozle India is a subsidiary co. and the Nozle Inc. is a parent/holding co.

8 9

Alembic Glass Industries Ltd. V. Collector of Central Excise & Customs, (2002) 9 SCC 463. Para 4, Pg. 27, Avtar Singh, Company Law, 15th Edition.

Whether Nozle India is criminally liable regarding the display of the objectionable contents on the Net. As it has been already proved in the 2nd issue that Nozle India is a subsidiary of the Nozle Inc. therefore Nozle India can be held criminally liable for displaying objectionable contents on the internet. In the present case the company is criminally liable regarding the display of the objectionable content on the net by the charges of Section 292 of Indian Penal Code and section 67 of Information Technology Act, 2000. The Delhi High Court10 has held that Section 67 is the first statutory provision dealing with obscenity on the internet and it must be noted that the both under the Indian Penal Code, 1860 and the Information Technology act, 2000 the test to determine obscenity is similar. The Honble Supreme Court11 has held that publish means dissemination and circulation. In an electronic form, publication or transmission of information includes dissemination, storage and circulation. Information has been defined under section 2 (1) (v) as information includes data, text, images, sound, voice, codes, computer programmes, software and data bases or micro film or computer generated micro fiche. So, in present case obscene material in form of depictions i.e. images is there to attract the offence of section 67. Also, one in 10 of India's 1.2 billion population have access to the internet. The number of internet users in India is expected to almost triple to 300 million over the next three years. Therefore, it is very much evident from this fact that the large amount of data that is available over the internet in the form of depictions is easily accessible to minors and other sensitive sections of the society, which may result in
10 11

Maqbool Fida Hussain vs. Raj Kumar Pandey Criminal Revision Petition No. 280 and 282/2007 Bennett Coleman & Co. vs. Union of India (1972) 2 SCC 788

feud and quarrels amongst different communities of the country, henceforth threatening the peace and integrity of the country. Hence, these obscene depictions of Hindu deities, and the prophets and Godheads of other religions on the internet by Nozle India also attract section 153A and 153B, thereby making Nozle India criminally liable for the acts done by it over the internet.

PRAYER FOR RELIEF

It is most humbly prayed before this Honble Rajasthan High Court, in the light of the issues raised, arguments advanced and authorities cited, the court may adjudge and declare that:

The resolution passed by the Co. is void. The co. is a subsidiary and a separate legal entity from Nozle Inc. The co. is criminally liable.

Or pass any other judgment, order or decree in the light of justice equity and good conscience. All of which is respectfully submitted. Counsel for Petitioner