Companies Act, 1956
[1 of 1956]
[As amended by companies (Amendment) Act, 2002,
companies (second amendment) act, 2002 and
companies (amendment) act, 2006]
An Act to consolidate and amend the law relating to companies and certain other associations
BE it enacted by Parliament in the Sixth Year
of the
Preliminary
Short title, commencement and
extent.
1. (1) This Act may be called the Companies Act,
1956.
(2) It shall come into force on such date as the Central Government
may, by notification in the Official Gazette, appoint.
[(3) It
extends to the whole of
[* * *]
[Provided
[* * *] that it shall apply to the State of Nagaland
subject to such modifications, if any, as the Central Government may, by notification
in the Official Gazette, specify.]
2. In this Act, unless the context
otherwise requires,—
(1) “abridged prospectus” means a memorandum
containing such salient features of a prospectus as may be prescribed;
(1A) “alter”
and “alteration” shall include the making of additions and omissions ;
(1B) “Appellate Tribunal” means the
National Company Law Appellate Tribunal constituted under sub-section (1) of
section 10FR;
(2) “articles”
means the articles of association of a company as originally framed or as
altered from time to time in pursuance of any previous companies law or of this
Act, including, so far as they apply to the company, the regulations contained,
as the case may be, in Table B in the Schedule annexed to Act No. 19 of 1857 or
in Table A in the First Schedule annexed to the Indian Companies Act, 1882 (6
of 1882), or in Table A in the First Schedule annexed to the Indian Companies
Act, 1913 (7 of 1913), or in Table A in Schedule I annexed to this Act ;
(3) [Omitted by the Companies (Amendment) Act,
2000, w.e.f. 13-12-2000;]
(4) [Omitted by the Companies (Amendment) Act,
2000, w.e.f. 13-12-2000;]
(5) “banking
company” has the same meaning as in the Banking Companies Act, 1949 (10 of
1949);
(6) “Board
of directors” or “Board”, in relation to a company, means the Board of directors
of the company ;
(7) “body
corporate” or “corporation” includes a company incorporated outside
(a) a corporation sole ;
(b) a co-operative
society registered under any law relating to co-operative societies ; and
(c) any other body corporate (not being a
company as defined in this Act), which the Central Government may, by notification in the Official
Gazette, specify in this behalf ;]
(8) “book and paper” and
“book or paper” include accounts, deeds, [vouchers,] writings, and documents ;
[(9) “branch office” in relation to a company means—
(a) any establishment described as a branch
by the company ; or
(b) any
establishment carrying on either the same or substantially the same activity
as that carried on by the
head office of the company ; or
(c) any establishment engaged in any
production, processing or manufacture,
but
does not include any establishment specified in any order made by the Central
Government under section 8 ;]
(10) “company”
means a company as defined in section 3 ;
[(10A) “Company
Law Board” means the Board of Company Law Administration constituted under section 10E ;]
[(11) “the Court” means,—
(a) with respect to
any matter relating to a company (other than any offence against this Act), the
Court having jurisdiction under
this Act with respect to that matter relating to that company, as provided in section 10 ;
(b) with
respect to any offence against this Act, the Court of a Magistrate of the First
Class or, as the case
may be, a Presidency Magistrate, having jurisdiction to try such offence ;]
(12) “debenture”
includes debenture stock, bonds and any other securities of a company, whether
constituting a charge on the assets of the company or not ;
[(12A) “depository”
has the same meaning as in the Depositories Act, 1996 (22 of 1996);
(12B) “derivative”
has the same meaning as in clause (aa) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42
of 1956);]
(13) “director”
includes any person occupying the position of director, by whatever name called
;
(14) “District
Court” means the principal Civil Court of original jurisdiction in a district,
but does not include a High
Court in the exercise of its ordinary original civil jurisdiction ;
[(14A) “dividend”
includes any interim dividend;]
(15) “document”
includes summons, notice, requisition, order, other legal process, and
registers, whether
issued, sent or kept in pursuance of this or any other Act or otherwise ;
[(15A) “employees
stock option” means the option given to the whole-time directors, officers or
employees of a company, which gives such directors, officers or employees the
benefit or right to purchase or subscribe at a future date, the securities
offered by the company at a pre-determined price;]
(16) “existing
company” means an existing company as defined in section 3 ;
(17) “financial
year” means, in relation to any body corporate, the period in respect of which
any profit and loss
account of the body corporate laid before it in annual general meeting is made up, whether that period is a
year or not :
Provided
that, in relation to an insurance company, “financial year” shall mean the
calendar year referred to in sub-section (1) of section 11 of the Insurance
Act, 1938 (4 of 1938) ;
(18) “Government
company” means a Government company within the meaning of section 617 ;
(18A) [Omitted by the MRTP (Amendment) Act, 1984, w.e.f. 1-8-1984. The original clause was earlier inserted
by the Companies (Amendment) Act, 1974, w.e.f.
1-2-1975] ;
(19) “holding
company” means a holding company within the meaning of section 4 ;
[(19A) “hybrid”
means any security which has the character of more than one type of security, including
their derivatives;
[(19AA) “industrial company” means a company which
owns one or more industrial undertakings;
(19AB) “industrial undertaking” means any
undertaking, pertaining to any industry carried on in one or more factories or
units by any company, as defined in clause (aa) of section 3 of the Industries
(Development and Regulation) Act, 1951 (65 of 1951) but does not include a
small-scale industrial undertaking as defined in clause (j) of that section;]
(19B) “information
memorandum” means a process undertaken prior to the filing of a prospectus by
which a demand for the securities proposed to be issued by a company is
elicited, and the price and the terms of issue for such securities is assessed,
by means of a notice, circular, advertisement or document;]
(20) [Omitted by the J & K (Extension of Laws)
Act, 1956 ;]
(21) “insurance
company” means a company which carries on the business of insurance either
solely or in conjunction with any other business or businesses ;
(22) “issued
generally” means, in relation to a prospectus, issued to persons irrespective
of their being existing members or debenture holders of the body corporate to
which the prospectus relates ;
(23) “limited
company” means a company limited by shares or by guarantee ;
[(23A) “listed
public companies” means a public company which has any of its securities listed
in any recognized stock
exchange;]
(24) “manager”
means an individual (not being the managing agent) who, subject to the
superintendence, control and direction of the Board of directors, has the
management of the whole, or substantially the whole, of the affairs of a
company, and includes a director or any other person occupying the position of
a manager, by whatever name called, and whether under a contract of service or
not ;
(25) [Omitted by the Companies (Amendment) Act,
2000, w.e.f. 13-12-2000;]
(26) “managing
director” means a director who, by virtue of an agreement with the company or of
a resolution passed by the company in general meeting or by its Board of
directors or, by virtue of its memorandum or articles of association, is
entrusted with [substantial powers of management] which would not otherwise be
exercisable by him, and includes a director occupying the position of a
managing director, by whatever name called :
[Provided that
the power to do administrative acts of a routine nature when so authorised by the Board such as the power to affix the
common seal of the company to any document or to draw and endorse any cheque on the account of the company in any bank or to draw
and endorse any negotiable instrument or to sign any certificate of share or to
direct registration of transfer of any share, shall not be deemed to be included
within substantial powers of management :
Provided further
that a managing director of a company shall exercise his powers subject to the
superintendence, control and direction of its Board of directors ;]
(27) “member”,
in relation to a company, does not include a bearer of a share-warrant of the
company issued in pursuance of section 114 ;
(28) “memorandum”
means the memorandum of association of a company as originally framed or as
altered from time to time in pursuance of any previous companies law or of this
Act ;
(29) “modify”
and “modification” shall include the making of additions and omissions ;
[(29A) “net worth” means the sum total of the
paid-up capital and free reserves after deducting the provisions or expenses as
may be prescribed.
Explanation.—For the purposes of this clause, “free reserves” means all reserves
created out of the profits and share premium account but does not include
reserves created out of revaluation of assets, write back of depreciation
provisions and amalgamation;]
[(30) “officer”
includes any director, manager or secretary or any person in accordance with
whose directions or instructions the Board of directors or any one or more of
the directors is or are accustomed to act;]
(31) “officer
who is in default” in relation to any provision referred to in section 5, has
the meaning specified in that section ;
[(31A) “option
in securities” has the same meaning as in clause (d) of section 2 of the Securities Contracts (Regulation) Act,
1956 (42 of 1956);]
[(31AA) “operating agency” means any group of
experts consisting of persons having special knowledge of business or industry
in which the sick industrial company is engaged and includes public financial
institution, State level institution, scheduled bank or any other person as may
be specified as the operating agency by the Tribunal;]
(32) “paid-up
capital” or “capital paid-up” includes capital credited as paid-up ;
(33) “prescribed”
means, as respects the provisions of this Act relating to the winding up of
companies except sub-section (5) of section 503, [sub-section (3) of section
550, section 552 and sub-section (3) of section 555], prescribed by rules made
by the Supreme Court in consultation with [the Tribunal], and as respects the other provisions of
this Act including sub-section (5) of section 503, [sub-section (3) of section
550, section 552 and sub-section (3) of section 555], prescribed by rules made
by the Central Government ;
(34) “previous
companies law” means any of the laws specified in clause (ii) of sub-section (1) of section 3 ;
(35) “private
company” means a private company as defined in section 3 ;
(36) “prospectus”
means [any document described or issued as a prospectus and includes any]
notice, circular, advertisement or other document [inviting deposits from the
public or] inviting offers from the public for the subscription or purchase of
any shares in, or debentures of, a body corporate ;
(37) “public
company” means a public company as defined in section 3 ;
(38) “public
holiday” means a public holiday within the meaning of the Negotiable
Instruments Act, 1881 (26 of 1881) :
Provided
that no day declared by the Central Government to be a public holiday shall be
deemed to be such a holiday, in relation to any meeting, unless the declaration
was notified before the issue of the notice convening such meeting ;
(39) “recognised stock exchange” means, in relation to any
provision of this Act in which it occurs, a stock exchange, whether in or
outside India, which is notified by the Central Government in the Official
Gazette as a recognised stock exchange for the
purposes of that provision ;
(40) “Registrar”
means a Registrar, or an Additional, a Joint, a Deputy or an Assistant
Registrar, having the duty of registering companies under this Act ;
(41) “relative”
means, with reference to any person, any one who is related to such person in
any of the ways specified in section 6, and no others ;
(42) “Schedule”
means a Schedule annexed to this Act ;
(43) “Scheduled
Bank” has the same meaning as in the Reserve Bank of India Act, 1934 (2 of 1934) ;
(44) [Omitted by the Companies (Amendment) Act,
2000, w.e.f. 13-12-2000 ;]
[(45) “secretary”
means a company secretary within the meaning of clause (c) of sub-section (1) of section
2 of the Company Secretaries Act, 1980 (56 of 1980), and includes any other individual
possessing the prescribed qualifications and appointed to perform the duties
which may be performed
by a secretary under this Act and any other ministerial or administrative duties ;]
[(45A) “secretary
in whole-time practice” means a secretary who shall be deemed to be in practice
within the meaning of sub-section (2) of section 2 of the Company Secretaries
Act, 1980 (56 of 1980), and who is not in full-time employment ;]
[(45AA) “securities”
means securities as defined in clause (h)
of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956),
and includes hybrids;]
[(45B) “Securities
and Exchange Board of India” means the Securities and Exchange Board of India
established under section 3 of the Securities and Exchange Board of India Act,
1992 (15 of 1992) ;]
(46) “share”
means share in the share capital of a company, and includes stock except where
a distinction between stock and shares is expressed or implied ;
[(46A) “share
with differential rights” means a share that is issued with differential rights
in accordance with the provisions of section 86;]
[(46AA) “sick industrial
company” means an industrial company which has—
(i) the accumulated losses in any financial
year equal to fifty per cent or more of its average
net worth during four years immediately preceding such financial year; or
(ii) failed to repay its debts within any
three consecutive quarters on demand made in writing
for its repayment by a creditor or creditors of such company;
(46AB) “State level institution” means any of the
following institutions, namely :—
(a) the
State Financial Corporations established under section 3 or section 3A and institutions notified under section
46 of the State Financial Corporations Act, 1951 (63 of 1951);
(b) the State Industrial Development
Corporations registered under this Act; ]
(47) “subsidiary
company” or “subsidiary” means a subsidiary company within the meaning of section
4 ;
(48) “total voting power”, in regard to
any matter relating to a body corporate, means the total number of votes which may be
cast in regard to that matter on a poll at a meeting of such body, if all the members thereof and all other persons, if any,
having a right to vote on that matter
are present at the meeting, and cast their votes;
(49) “trading
corporation” means a trading corporation within the meaning of entries 43 and
44 in List I in the Seventh Schedule to the Constitution;
[(49A) “Tribunal” means the National Company
Law Tribunal constituted under sub-section (1) of section 10FB;]
(50) “variation”
shall include abrogation; and “vary” shall include abrogate.
Interpretation of certain words and expressions.
2A. Words
and expressions used and not defined in this Act but defined in the
Depositories Act, 1996 (22 of 1996), shall have the same meanings respectively
assigned to them in that Act.]
Definitions
of “company”, “existing company”, “private company” and “public company”.
3.
(1) In this Act, unless the context otherwise requires, the expressions “company”, “existing company”, “private company” and “public company”, shall, subject to the provisions of sub-section (2), have the meanings specified below :—
(i) “company” means a company formed and registered under this Act or an existing company as defined in clause (ii);
(ii) “existing company” means a company formed and registered under any of the previous companies laws specified below:—
(a) any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866) and repealed by that Act;
(b) the Indian Companies Act, 1866 (10 of 1866);
(c) the Indian Companies Act, 1882 (6 of 1882);
(d) the Indian Companies Act, 1913 (7 of 1913);
(e) the Registration of Transferred Companies Ordinance, 1942 (54 of 1942); and
(f) any law corresponding to any of the Acts or the Ordinance aforesaid and in force—
(1) in the merged territories or in a Part B State (other than
the State of
(2) in the State of Jammu and Kashmir, or any part thereof, before the commencement of the Jammu and Kashmir (Extension of Laws) Act, 1956 [, in so far as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu & Kashmir) Act, 1968, in so far as other corporations are concerned];] and
(g) the Portuguese Commercial Code [* * *], in so far as it relates to “sociedades anonimas”;]
(iii) “private company” [means a company which has a minimum paid-up capital of one lakh rupees or such higher paid-up capital as may be prescribed, and by its articles,—]
(a) restricts the right to transfer its shares, if any;
(b) limits the number of its members to fifty not including—
(i) persons who are in the employment of the company; and
(ii) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased; and
(c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company;
[(d) prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives:]
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member;
[(iv) “public company” means a company which—
(a) is not a private company;
(b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed;
(c) is a private company which is a subsidiary of a company which is not a private company.]
(2) Unless the context otherwise requires, the following companies shall not be included within the scope of any of the expressions defined in clauses (i) to (iv) of sub-section (1), and such companies shall be deemed, for the purposes of this Act, to have been formed and registered outside India :—
(a) a company the registered office whereof is in Burma, Aden or Pakistan and which immediately before the separation of that country from India was a company as defined in clause (i) of sub-section (1);
(b) [Omitted by the J & K (Extension of Laws) Act, 1956.]
[(3) Every private company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid-up capital of less than one lakh rupees shall, within a period of two years from such commencement, enhance its paid-up capital to one lakh rupees.
(4) Every public company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid-up capital of less than five lakh rupees shall, within a period of two years from such commencement, enhance its paid-up capital to five lakh rupees.
(5) Where a private company or a public company fails to enhance its paid-up capital in the manner specified in sub-section (3) or sub-section (4), such company shall be deemed to be a defunct company within the meaning of section 560 and its name shall be struck off from the register by the Registrar.
(6) A company registered under section 25 before or after the commencement of the Companies (Amendment) Act, 2000, shall not be required to have minimum paid-up capital specified in this section.]
Meaning
of “holding company” and “subsidiary”.
4.
(1) For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if,—
(a) that other controls the composition of its Board of directors; or
(b) [that other—
(i) where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company;
(ii) where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital; or]
(c) the first-mentioned company is a subsidiary of any company which is that other’s subsidiary.
Company B is a subsidiary of Company A, and Company C is a subsidiary of Company B. Company C is a subsidiary of Company A, by virtue of clause (c) above. If Company D is a subsidiary of Company C, Company D will be a subsidiary of Company B and consequently also of Company A, by virtue of clause (c) above, and so on.
(2) For the purposes of sub-section (1), the composition of a company’s Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say—
(a) that a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid;
(b) that a person’s appointment thereto follows necessarily from his appointment as director [***] or manager of, or to any other office or employment in, that other company; or
(c) [that the directorship is held by an individual nominated by that other company or a subsidiary thereof.]
(3) In determining whether one company is a subsidiary of another—
(a) any shares held or power exercisable by that other company in a fiduciary capacity shall be treated as not held or exercisable by it;
(b) subject to the provisions of clauses (c) and (d), any shares held or power exercisable—
(i) by any person as a nominee for that other company (except where that other is concerned only in a fiduciary capacity); or
(ii) by, or by a nominee for, a subsidiary of that other company, not being a subsidiary which is concerned only in a fiduciary capacity;
shall be treated as held or exercisable by that other company;
(c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first-mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded;
(d) any shares held or power exercisable by, or by a nominee for, that other or its subsidiary [not being held or exercisable as mentioned in clause (c)] shall be treated as not held or exercisable by that other, if the ordinary business of that other or its subsidiary, as the case may be, includes the lending of money and the shares are held or the power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business.
(4) For the purposes of this Act, a company shall be deemed to be the holding company of another if, but only if, that other is its subsidiary.
(5) In this section, the expression “company” includes any body corporate, and the expression “equity share capital” has the same meaning as in sub-section (2) of section 85.
(6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a subsidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not.
[(7) A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India.]
Public financial institutions.
4A.
(1) Each of the financial institutions specified in this
sub-section shall be regarded, for the purposes of this Act, as a public
financial institution, namely :—
(i) the Industrial Credit and Investment Corporation of India Limited,
a company formed and registered under the Indian Companies Act, 1913 (7 of
1913);
(ii) the
Industrial Finance Corporation of
(iii) the
Industrial Development Bank of India, established under section 3 of the
Industrial Development Bank of India Act, 1964 (18 of 1964);
(iv) the
Life Insurance Corporation of
(v) the
Unit Trust of
[(vi) the Infrastructure Development Finance
Company Limited, a company formed and registered under this Act;]
[***]
(2) Subject to the provisions of sub-section
(1), the Central Government may, by notification in the Official Gazette,
specify such other institution as it may think fit to be a public financial
institution:
Provided that no institution shall be so specified unless—
(i) it has
been established or constituted by or under any Central Act, or
(ii) not less than fifty-one per cent of the paid-up share capital of such institution is held or controlled by the Central Government.]
Meaning of “officer who is in
default”.
5. For
the purpose of any provision in this Act which enacts that an officer of the
company who is in default shall be liable to any punishment or penalty, whether
by way of imprisonment, fine or otherwise, the expression “officer who is in
default” means all the following officers of the company, namely :—
(a) the
managing director or managing directors;
(b) the
whole-time director or whole-time directors;
(c) the
manager;
(d) the
secretary;
(e) any person in accordance with whose
directions or instructions the Board of directors of the company is accustomed
to act;
(f) any
person charged by the Board with the responsibility of complying with that
provision:
Provided
that the person so charged has given his consent in this behalf to the Board;
(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board
in this behalf or where no director is so specified, all the directors :
Provided that where the
Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers,
file with the Registrar a return in the prescribed form.]
6. A person shall be deemed to be a relative of another if, and only if,—
(a) they are members of a Hindu undivided family; or
(b) they are husband and wife; or
(c) the one is related to the other in the
manner indicated in
Interpretation of “person in accordance with whose
directions or instructions directors are accustomed to act”.
7. Except where this Act expressly provides otherwise, a person shall not be deemed to be, within the meaning of any provision in this Act, a person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act, by reason only that the Board acts on advice given by him in a professional capacity.
Power of Central Government to declare an establishment
not to be a branch office.
8. The Central Government may, by order, declare that in the case of any company, [* * *] any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the company, or [any establishment engaged in any production, processing or manufacture], shall not be treated as a branch office of the company for all or any of the purposes of this Act.
Act to override memorandum, articles, etc.
9. Save as otherwise expressly provided in the Act—
(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and
(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.
10. (1) The Court having jurisdiction under this Act shall be—
(a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and
(b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district.
(2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred—
(a) in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive;
(b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part VII (sections 425 to 560) and the other provisions of this Act relating to the winding up of companies.
(3) For the purposes of jurisdiction to wind up companies, the expression “registered office” means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up.
10A. [Omitted
by the Companies Tribunal (Abolition) Act, 1967, w.e.f.
1-7-1967. Earlier this section was inserted by the Companies (Amendment) Act,
1963, w.e.f. 1-1-1964.]
10B. [Omitted by the Companies
Tribunal (Abolition) Act, 1967, w.e.f. 1-7-1967. Earlier this
section was inserted by the Companies (Amendment) Act, 1963, w.e.f. 1-1-1964.]
10C. [Omitted by the Companies Tribunal (Abolition) Act, 1967, w.e.f. 1-7-1967.Earlier this section was inserted by the Companies (Amendment) Act, 1963, w.e.f. 1-1-1964.]
Appeals
against decisions, etc., of the Tribunal.
10D. [Omitted by the Companies Tribunal (Abolition) Act, 1967, w.e.f. 1-7-1967. Earlier this section was inserted by the Companies (Amendment) Act, 1963, w.e.f. 1-1-1964.]
Board of Company Law Administration
Constitution of Board of Company Law Administration.
10E.
[(1) As soon as may be after the commencement of the Companies
(Amendment) Act, 1988, the Central Government shall, by notification in the
Official Gazette, constitute a Board to be called the Board of Company Law
Administration.
(1A) The Company Law Board shall exercise and discharge such powers
and functions as may be conferred on it [before the commencement of the Companies (Second Amendment) Act, 2002]
by or under this Act or any other law, and shall also exercise and discharge
such other powers and functions of the Central Government under this Act or any
other law as may be conferred on it [before the commencement of the Companies (Second Amendment) Act, 2002]
by the Central Government, by notification in the Official Gazette under the
provisions of this Act or that other law.]
(2) The Company Law Board shall consist of such number of members,
not exceeding [nine], as the Central Government deems fit, to be appointed by
that Government by notification in the Official Gazette:
[Provided that the Central Government
may, by notification in the Official Gazette, continue the appointment of the
chairman or any other member of the Company Law Board functioning as such
immediately before the commencement of the Companies (Amendment) Act, 1988, as
the chairman or any other member of the Company Law Board, after such
commencement for such period not exceeding three years as may be specified in
the notification.]
[(2A) The members of the Company Law Board shall possess such
qualifications and experience as may be prescribed.]
(3) One of the members shall be appointed by the Central Government
to be the chairman of the Company Law Board.
(4) No act done by the Company Law Board shall be called in question
on the ground only of any defect in the constitution of, or the existence of
any vacancy in, the Company Law Board.
(4A) [Omitted by the
Companies (Amendment) Act, 1988, w.e.f. 31-5-1991.
For text of omitted sub-section (4A), refer Appendix I.]
[(4B) [The Board] may, by order in writing, form one or more Benches
from among its members and authorise each such Bench
to exercise and discharge such of the Board’s powers and functions as may be
specified in the order; and every order made or act done by a Bench in exercise
of such powers or discharge of such functions shall be deemed to be the order
or act, as the case may be, of the Board.
(4C) Every Bench referred to in sub-section (4B) shall have powers
which are vested in a Court under the Code of Civil Procedure, 1908 (5 of
1908), while trying a suit, in respect of the following matters, namely :—
(a) discovery and
inspection of documents or other material objects producible as evidence;
(b) enforcing the
attendance of witnesses and requiring the deposit of their expenses;
(c) compelling
the production of documents or other material objects producible as evidence
and impounding the same;
(d) examining
witnesses on oath;
(e) granting
adjournments;
(f) reception of
evidence on affidavits.
(4D) Every Bench shall be deemed to be a civil court for the purposes
of section 195 and [Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of
1974)], and every proceeding before the Bench shall be deemed to be a judicial
proceeding within the meaning of sections 193 and 228 of the Indian Penal Code
(45 of 1860), and for the purpose of section 196 of that Code.]
[(5) Without prejudice to the provisions of sub-sections (4C) and
(4D), the Company Law Board shall in the exercise of its powers and the
discharge of its functions under this Act or any other law be guided by the
principles of natural justice and shall act in its discretion.]
(6) Subject to the foregoing provisions of this section, the
Company Law Board shall have power to regulate its own procedure.]
Appeals against the orders of the Company Law Board.
10F. Any
person aggrieved by any decision or order of the Company Law Board [made before the commencement of the
Companies (Second Amendment) Act, 2002] may file an appeal to the
High Court within sixty days from the date of communication of the decision or
order of the Company Law Board to him on any question of law arising out of
such order :
Provided that the High Court may, if it is satisfied that the appellant was
prevented by sufficient cause from filing the appeal within the said period,
allow it to be filed within a further period not exceeding sixty days.]
Dissolution of Company Law Board.
10FA.
(1) On and from the commencement of the
Companies (Second Amendment) Act, 2002, the Board of Company Law Administration
constituted under sub-section (1) of section 10E shall stand dissolved.
(2) On the dissolution of the Company Law
Board, the persons appointed as Chairman, Vice-Chairman and members and
officers and other employees of that Board and holding office as such immediately
before such commencement shall vacate their respective offices and no such
Chairman, Vice-Chairman and member and officer and other employee shall be
entitled to claim any compensation for the premature termination of the term
of his office or of any contract of service :
Provided that every officer or other
employee, who has been, immediately before the dissolution of the Company Law
Board, appointed on deputation basis to that Board, shall, on such dissolution,
stand reverted to his parent cadre, Ministry or Department, as the case may be
:
Provided further that
every officer and other employee of the Company Law Board employed on regular
basis by that Board, shall become, on and from the dissolution of the Board,
the officer and employee, respectively, of the Central Government with the same
rights and privileges as to pension, gratuity and other like benefits as would
have been admissible to him if the rights in relation to that Board had not
been transferred to, and vested in, the Central Government and shall continue
to do so unless and until his employment in the Central Government is duly
terminated or until his remuneration, terms and conditions of employment are
duly altered by that Government :
Provided also that
notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947),
or in any other law for the time being in force, the transfer of the services
of any officer or other employee employed in the Company Law Board, to the
Central Government shall not entitle such officer or other employee to any
compensation under this Act or under any other law for the time being in force
and no such claim shall be entertained by any court, Tribunal (including the
Tribunal under this Act) or other authority :
Provided also that where the
Company Law Board has established a provident fund, superannuation fund,
welfare fund or other fund for the benefit of the officers and other employees
employed in that Board, the monies relatable to the officers and other
employees whose services have been transferred by or under this Act to the Central
Government shall, out of the monies standing, on the dissolution of the Company
Law Board to the credit of such provident fund, superannuation fund, welfare
fund or other fund, stand transferred to, and vest in, the Central Government
and such monies which stand so transferred shall be dealt with by that
Government in such manner as may be prescribed.
(3) All
matters or proceedings or cases pending before the Company Law Board on or
before the constitution of the Tribunal under section 10FB, shall, on such
constitution, stand transferred to the National Company Law Tribunal and the
said Tribunal shall dispose of such cases in accordance with the provisions of
this Act.]
National Company Law Tribunal
Constitution of National Company Law Tribunal.
10FB. The Central Government shall, by
notification in the Official Gazette, constitute a Tribunal to be known as the
National Company Law Tribunal to exercise and discharge such powers and
functions as are, or may be, conferred on it by or under this Act or any other
law for the time being in force.
Qualifications for appointment of President and Members.
10FD.
(1) The Central Government shall appoint a
person who has been, or is qualified to be, a Judge of a High Court as the
President of the Tribunal.
(2) A person shall not be qualified for
appointment as Judicial Member unless he—
(a) has,
for at least fifteen years, held a judicial office in the
(b) has, for at least ten years been an advocate
of a High Court, or has partly held judicial office and has been partly in
practice as an advocate for a total period of fifteen years; or
(c) has held for at least fifteen years a
Group ‘A’ post or an equivalent post under the Central Government or a State
Government [including at least three years of service as a Member of the
Indian Company Law Service (Legal Branch) in Senior Administrative Grade in
that service]; or
(d) has held for at least fifteen years a
Group ‘A’ post or an equivalent post under the Central Government (including at
least three years of service as a Member of the Indian Legal Service in Grade I
of that service).
(3) A person shall not be qualified for
appointment as Technical Member unless he—
(a) has held for at least fifteen years a
Group ‘A’ post or an equivalent post under the Central Government or a State
Government [including at least three years of service as a Member of the
Indian Company Law Service (Accounts Branch) in Senior Administrative Grade in
that Service]; or
(b) is, or has been, a Joint Secretary to
the Government of India under the Central Staffing Scheme, or any other post
under the Central Government or a State Government carrying a scale of pay
which is not less than that of a Joint Secretary to the Government of India for
at least five years and has adequate knowledge of, and experience in, dealing
with problems relating to company law; or
(c) is, or has been, for at least fifteen
years in practice as a chartered accountant under the Chartered Accountants
Act, 1949 (38 of 1949); or
(d) is, or has been, for at least fifteen
years in practice as a cost accountant under the Costs and Works Accountants
Act, 1959 (23 of 1959); or
(e) is, or has been, for at least fifteen
years working experience as a Secretary in whole-time practice as defined in
clause (45A) of section 2 of
this Act and is a member of the Institute of the Companies Secretaries of India
constituted under the Company Secretaries Act, 1980 (56 of 1980); or
(f) is
a person of ability, integrity and standing having special knowledge of, and
professional experience of not less than twenty years in, science, technology,
economics, banking, industry, law, matters relating to industrial finance,
industrial management, industrial reconstruction, administration, investment,
accountancy, marketing or any other matter, the special knowledge of, or
professional experience in, which would be in the opinion of the Central
Government useful to the Tribunal; or
(g) is,
or has been, a Presiding Officer of a Labour Court,
Tribunal or National Tribunal constituted under the Industrial Disputes Act,
1947 (14 of 1947); or
(h) is
a person having special knowledge of, and experience of not less than fifteen
years in, the matters relating to labour.
Explanation.—For the purposes of this Part,—
(i) “Judicial
Member” means a Member of the Tribunal appointed as such under sub-section (2)
of section 10FD and includes the President of the Tribunal;
(ii) “Technical Member” means a Member of the
Tribunal appointed as such under sub-section (3) of section 10FD.
Term of office of President and
Members.
10FE. The President and every other Member of the
Tribunal shall hold office as such for a term of three years from the date on which
he enters upon his office but shall be eligible for re-appointment :
Provided that
no President or other Member shall hold office as such after he has attained,—
(a) in
the case of the President, the age of sixty-seven years;
(b) in
the case of any other Member, the age of sixty-five years :
Provided further that the President
or other Member may retain his lien with his parent cadre or Ministry or
Department, as the case may be, while holding office as such.
Financial and administrative
powers of Member Administration.
10FF. The Central Government shall designate any
Judicial Member or Technical Member as Member Administration who shall exercise
such financial and administrative powers as may be vested in him under the
rules which may be made by the Central Government :
Provided that the Member Administration shall have
authority to delegate such of his financial and administrative powers as he may
think fit to any other officer of the Tribunal subject to the condition that
such officer shall, while exercising such delegated powers continue to act
under the direction, superintendence and control of the Member Administration.
Salary, allowances and other
terms and conditions of service of President and other members.
10FG. The salary and allowances and other terms and
conditions of service of the President and other members of the Tribunal shall
be such as may be prescribed:
Provided that
neither the salary and allowances nor the other terms and conditions of service
of the President and other Members shall be varied to their disadvantage after
their appointment.
10FH.
(1) In the event of the occurrence of any
vacancy in the office of the President of the Tribunal by reason of his death, resignation
or otherwise, the senior-most Member shall act as the President of the Tribunal
until the date on which a new President, appointed in accordance with the
provisions of this Act to fill such vacancy, enters upon his office.
(2) When the President is unable to discharge
his functions owing to absence, illness or any other cause, the senior-most
Member or, as the case may be, such one of the Members of the Tribunal, as the
Central Government, may, by notification, authorise
in this behalf, shall discharge the functions of the President until the date
on which the President resumes his duties.
(3) If, for reason other than temporary
absence, any vacancy occurs in the office of the President or a Member, the
Central Government shall appoint another person in accordance with the
provisions of this Act to fill the vacancy and the proceedings may be continued
before the Tribunal from the stage at which the vacancy is filled.
Resignation of President and Member.
10FI. The President or a Member of the Tribunal
may, by notice in writing under his hand addressed to the Central Government,
resign his office :
Provided that the President or a Member
shall, unless he is permitted by the Central Government to relinquish his
office sooner, continue to hold office until the expiry of three months from
the date of receipt of such notice or until a person duly appointed as his
successor enters upon his office or until the expiry of the term of office,
whichever is the earliest.
Removal and suspension of President or Member.
10FJ.
(1) The Central Government may, in
consultation with the Chief Justice of India, remove from office the President
or any Member of the Tribunal, who—
(a) has
been adjudged an insolvent; or
(b) has been convicted of an offence which, in
the opinion of the Central Government, involves moral turpitude; or
(c) has become physically or mentally
incapable of acting as such President or Member of the Tribunal; or
(d) has acquired such financial or other
interest as is likely to affect prejudicially his functions as such President
or Member of the Tribunal; or
(e) has so abused his position as to render
his continuance in office prejudicial to the public interest:
Provided that no such President or a Member shall be
removed on any of the grounds specified in clauses (b) to
(e) without giving him
reasonable opportunity of being heard in respect of those charges.
(2) The President or a Member of the Tribunal
shall not be removed from his office except by an order made by the Central Government
on the ground of proved misbehaviour or incapacity
after an inquiry made by a Judge of the Supreme Court in which such President
or a Member had been informed of the charges against him and given a reasonable
opportunity of being heard in respect of those charges.
(3) The Central Government may suspend from
office the President or Member of the Tribunal in respect of whom a reference
has been made to the Judge of the Supreme Court under sub-section (2) until the
Central Government has passed orders on receipt of the report of the Judge of
the Supreme Court on such reference.
(4) The Central Government may, by rules,
regulate the procedure for the investigation of misbehaviour
or incapacity of the President or a Member referred to in sub-section (2).
Officers and employees of Tribunal.
10FK.
(1) The Central Government shall provide the
Tribunal with such officers and other employees as it may deem fit.
(2) The officers and other employees of the
Tribunal shall discharge their functions under the general superintendence of
the Member Administration.
(3) The salaries and allowances and other
terms and conditions of service of the officers and other employees of the
Tribunal shall be such as may be prescribed.
10FL.
(1) Subject to the provisions of this
section, the powers of the Tribunal may be exercised by Benches, constituted by
the President of the Tribunal, out of which one shall be a Judicial Member and
another shall be a Technical Member referred to in clauses (a) to
(f) of sub-section (3) of
section 10FD:
Provided that it shall be competent for
the Members authorised in this behalf to function as
a Bench consisting of a single Member and exercise the jurisdiction, powers and
authority of the Tribunal in respect of such class of cases or such matters
pertaining to such class of cases, as the President of the Tribunal may, by
general or special order, specify :
Provided further that
if at any stage of the hearing of any such case or matter, it appears to the
Member of the Tribunal that the case or matter is of such a nature that it
ought to be heard by a Bench consisting of two Members, the case or matter may
be transferred by the President of the Tribunal or, as the case may be,
referred to him for transfer to such Bench as the President may deem fit.
(2) The President of the Tribunal shall, for
the disposal of any case relating to rehabilitation, restructuring or winding
up of the companies, constitute one or more Special Benches consisting of three
or more Members, each of whom shall necessarily be a Judicial Member, a
Technical Member appointed under any of the clauses (a) to
(f) of sub-section (3) of
section 10FD, and a Member appointed under clause (g) or clause (h) of sub-section (3) of section 10FD :
Provided that in case a Special Bench passes an order
in respect of a company to be wound up, the winding up proceedings of such
company may be conducted by a Bench consisting of a single Member.
(3) If the Members of a Bench differ in
opinion on any point or points, it shall be decided according to the majority,
if there is a majority, but if the Members are equally divided, they shall
state the point or points on which they differ, and the case shall be referred
by the President of the Tribunal for hearing on such point or points by one or
more of the other Members of the Tribunal and such point or points shall be
decided according to the opinion of the majority of Members of the Tribunal who
have heard the case, including those who first heard it.
(4) There shall be
constituted such number of Benches, as may be notified by the Central
Government.
(5) In
addition to the other Benches, there shall be a Principal Bench at New Delhi
presided over by the President of the Tribunal.
(6) The
Principal Bench of the Tribunal shall have powers of transfer of proceedings
from any Bench to another Bench of the Tribunal in the event of inability of
any Bench from hearing any such proceedings for any reason :
Provided that
no transfer of any proceedings shall be made under this sub-section except
after recording the reasons for so doing in writing.
10FM.
(1) The
Tribunal may, after giving the parties to any proceeding before it, an
opportunity of being heard, pass such orders thereon as it thinks fit.
(2) The
Tribunal may, at any time within two years from the date of the order, with a
view to rectifying any mistake apparent from the record, amend any order passed
by it under sub-section (1), and shall make such amendment if the mistake is
brought to its notice by the parties.
(3) The Tribunal shall send a copy of every order passed under this section to all the parties concerned.
10FN. The Tribunal shall have power to review its
own orders.
10FO. The Tribunal may, by general or special
order, delegate, subject to such conditions and limitations, if any, as may be
specified in the order, to any Member or officer or other employee of the Tribunal
or other person authorised by the Tribunal to manage
any industrial company or industrial undertaking or any operating agency, such
powers and duties under this Act as it may deem necessary.
Power to seek assistance of
Chief Metropolitan Magistrate and District Magistrate.
10FP.
(1) The
Tribunal or any operating agency, on being directed by the Tribunal may, in
order to take into custody or under its control all property, effects and
actionable claims to which a sick industrial company is or appears to be
entitled, request, in writing, the Chief Metropolitan Magistrate or the
District Magistrate within whose jurisdiction any property, books of account
or any other document of such sick industrial company, be situate or be found,
to take possession thereof, and the Chief Metropolitan Magistrate or the
District Magistrate, as the case may be, shall, on such request being made to
him,—
(a) take
possession of such property, books of account or other documents; and
(b) cause
the same to be entrusted to the Tribunal or the operating agency.
(2) For
the purpose of securing compliance with the provisions of sub-section (1), the
Chief Metropolitan Magistrate or the District Magistrate may take or cause to
be taken such steps and use or cause to be used such force as may, in his
opinion, be necessary.
(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority on any ground whatsoever.
Appellate Tribunal
Appeal from order of Tribunal.
10FQ.
(1) Any person aggrieved by an order or
decision of the Tribunal may prefer an appeal to the Appellate Tribunal.
(2) No appeal shall lie to the Appellate
Tribunal from an order or decision made by the Tribunal with the consent of
parties.
(3) Every appeal under sub-section (1) shall
be filed within a period of forty-five days from the date on which a copy of
the order or decision made by the Tribunal is received by the appellant and it
shall be in such form and accompanied by such fee as may be prescribed :
Provided that the Appellate Tribunal
may entertain an appeal after the expiry of the said period of forty-five days
from the date aforesaid if it is satisfied that the appellant was prevented by
sufficient cause from not filing the appeal in time.
(4) On receipt of an appeal preferred under
sub-section (1), the Appellate Tribunal shall, after giving parties to the
appeal, an opportunity of being heard, pass such orders thereon as it thinks
fit, confirming, modifying or setting aside the order appealed against.
(5) The Appellate Tribunal shall send a copy
of every order made by it to the Tribunal and parties to the appeal.
(6) The appeal filed before the Appellate Tribunal
under sub-section (1) shall be dealt with by it as expeditiously as possible
and endeavour shall be made by it to dispose of the
appeal finally within six months from the date of the receipt of the appeal.
Constitution of Appellate Tribunal.
10FR.
(1) The Central Government shall, by
notification in the Official Gazette, constitute with effect from such date as
may be specified therein, an Appellate Tribunal to be called the “National
Company Law Appellate Tribunal” consisting of a Chairperson and not more than
two Members, to be appointed by that Government, for hearing appeals against
the orders of the Tribunal under this Act.
(2) The Chairperson of the Appellate Tribunal
shall be a person who has been, a Judge of the Supreme Court or the Chief Justice
of a High Court.
(3) A Member of the Appellate Tribunal shall be a person of ability, integrity and standing having special knowledge of, and professional experience of not less than twenty-five years in, science, technology, economics, banking, industry, law, matters relating to labour, industrial finance, industrial management, industrial reconstruction, administration, investment, accountancy, marketing or any other matter, the special knowledge of, or professional experience in which, would be in the opinion of the Central Government useful to the Appellate Tribunal
Vacancy in Appellate Tribunal, etc.
10FS.
(1) In the event of the occurrence of any
vacancy in the office of the Chairperson of the Appellate Tribunal by reason of
his death, resignation or otherwise, the senior-most Member of the Appellate
Tribunal shall act as the Chairperson of the Appellate Tribunal until the date
on which a new Chairperson appointed in accordance with the provisions of this
Act to fill such vacancy enters upon his office.
(2) When the Chairperson of the Appellate
Tribunal is unable to discharge his functions owing to absence, illness or any
other cause, the senior-most Member or, as the case may be, such one of the
Member of the Appellate Tribunal, as the Central Government may, by
notification, authorise in this behalf, shall
discharge the functions of the Chairperson until the date on which the
Chairperson resumes his duties.
(3) If, for reason other than temporary
absence, any vacancy occurs in the office of the Chairperson or a Member, the
Central Government shall appoint another person in accordance with the
provisions of this Act to fill the vacancy and the proceedings may be continued
before the Appellate Tribunal from the stage at which the vacancy is filled.
Term of office of Chairperson and Members.
10FT. The Chairperson or a Member of the Appellate
Tribunal shall hold office as such for a term of three years from the date on
which he enters upon his office, but shall be eligible for re-appointment for
another term of three years:
Provided that
no Chairperson or other member shall hold office as such after he has
attained,—
(a) in
the case of the Chairperson, the age of seventy years;
(b) in
the case of any other Member, the age of sixty-seven years.
Resignation of Chairperson and Members.
10FU. The Chairperson or a Member of the Appellate
Tribunal may, by notice in writing under his hand addressed to the Central
Government, resign his office :
Provided that the Chairperson or a
member of the Appellate Tribunal shall, unless he is permitted by the Central
Government to relinquish his office sooner, continue to hold office until the
expiry of three months from the date of receipt of such notice or until a
person duly appointed as his successor enters upon his office or until the
expiry of his term of office, whichever is the earliest.
Removal and suspension of Chairperson and Members of
Appellate Tribunal.
10FV.
(1) The Central Government may, in
consultation with the Chief Justice of India, remove from office the
Chairperson or any Member of the Appellate Tribunal, who—
(a) has
been adjudged an insolvent; or
(b) has
been convicted of an offence which, in the opinion of the Central Government,
involves moral turpitude; or
(c) has
become physically or mentally incapable of acting as such Chairperson or Member
of the Appellate Tribunal; or
(d) has
acquired such financial or other interest as is likely to affect prejudicially
his functions as such Chairperson or Member of the Appellate Tribunal; or
(e) has
so abused his position as to render his continuance in office prejudicial to
the public interest.
(2) The Chairperson or a Member of the
Appellate Tribunal shall not be removed from his office except by an order made
by the Central Government on the ground of proved misbehaviour
or incapacity after an inquiry made by a Judge of the Supreme Court in which
such Chairperson or Member had been informed of the charges against him and
given a reasonable opportunity of being heard in respect of those charges.
(3) The Central Government may suspend from
office the Chairperson or a Member of the Appellate Tribunal in respect of
whom a reference has been made to the Judge of the Supreme Court under
sub-section (2) until the Central Government has passed orders on receipt of
the report of the Judge of the Supreme Court on such reference.
(4) The Central Government may, by rules,
regulate the procedure for the investigation of misbehaviour
or incapacity of the Chairperson or a Member referred to in sub-section (2).
Salary, allowances and other terms and conditions of
service of Chairperson and Members.
10FW.
(1) The salary and allowances and other terms
and conditions of service of the Chairperson and other Members of the Appellate
Tribunal shall be such as may be prescribed.
(2) The salary, allowances and other terms and conditions of service of the Chairperson and other Members of the Appellate Tribunal shall not be varied to their disadvantage after appointment
10FX.
(1) The Chairperson and Members of the
Appellate Tribunal and Presi-dent and Members of the
Tribunal shall be appointed by the Central Government on the recommendations of
a Selection Committee consisting of—
|
(a) |
Chief Justice of |
Chairperson; |
|
(b) |
Secretary in
the Ministry of
Finance and Company Affairs |
Member; |
|
(c) |
Secretary in the Ministry of Labour |
Member; |
|
(d) |
Secretary in the Ministry of Law and Justice (Department of
Legal Affairs or Legislative Department) |
Member; |
|
(e) |
Secretary in
the Ministry of Finance and
Company Affairs (Department of Company Affairs) |
Member. |
(2) The Joint Secretary in the Ministry or Department
of the Central Government dealing with this Act shall be the Convenor of the Selection Committee.
(3) The Central Government shall, within one
month from the date of occurrence of any vacancy by reason of death,
resignation or removal of the Chairperson and Members of the Appellate Tribunal
and President and Members of the Tribunal and six months before the
superannuation or end of tenure of the Chairperson and Members of the
Appellate Tribunal and President and Members of the Tribunal, make a reference
to the Selection Committee for filling up of the vacancy.
(4) The Selection Committee shall recommend
within one month a panel of three names for every vacancy referred to it.
(5) Before recommending any person for
appointment as the Chairperson and Members of the Appellate Tribunal and
President and Members of the Tribunal, the Selection Committee shall satisfy
itself that such person does not have financial or other interest which is
likely to affect prejudicially his functions as such Chairperson or Member of
the Appellate Tribunal or President or Member of the Tribunal, as the case may
be.
(6) No appointment of the Chairperson and
Members of the Appellate Tribunal and President and Members of the Tribunal
shall be invalidated merely by reason of any vacancy or any defect in the
constitution of the Selection Committee.
Chairperson, etc., to be public servants.
10FY. The Chairperson, Members, officers and other employees of the Appellate
Tribunal and the President, Members, officers and other employees of the
Tribunal shall be deemed to be public servants within the meaning of section 21
of the Indian Penal Code (45 of 1860).
Protection of action taken in good faith.
10FZ. No suit, prosecution or other legal proceedings
shall lie against the Appellate Tribunal or its Chairperson, Member, officer
or other employee or against the Tribunal, its President, Member, officer or
other employee or operating agency or liquidator or any other person authorised by the Appellate Tribunal or the Tribunal in the
discharge of any function under this Act for any loss or damage caused or
likely to be caused by any act which is in good faith done or intended to be
done in pursuance of this Act.
Procedure and powers of Tribunal and Appellate Tribunal.
10FZA.
(1) The Tribunal and the Appellate Tribunal
shall not be bound by the procedure laid down in the Code of Civil Procedure,
1908 (5 of 1908), but shall be guided by the principles of natural justice
and, subject to the other provisions of this Act and of any rules made by the
Central Government, the Tribunal and the Appellate Tribunal shall have power to
regulate their own procedure.
(2) The Tribunal and the Appellate Tribunal
shall have, for the purposes of discharging its functions under this Act, the
same powers as are vested in a civil court under the Code of Civil Procedure,
1908 (5 of 1908) while trying a suit in respect of the following matters,
namely:—
(a) summoning
and enforcing the attendance of any person and examining him on oath;
(b) requiring
the discovery and production of documents;
(c) receiving
evidence on affidavits;
(d) subject to the provisions of sections 123
and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning any public
record or document or copy of such record or document from any office;
(e) issuing commissions for the examination of
witnesses or documents;
(f) reviewing its decisions;
(g) dismissing a representation for default or
deciding it ex parte;
(h) setting aside any order of dismissal of any
representation for default or any order passed by it ex parte; and
(i) any other matter which may be prescribed by
the Central Government.
(3) Any
order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal
in the same manner as if it were a decree made by a court in a suit pending
therein, and it shall be lawful for the Tribunal or the Appellate Tribunal to
send in case of its inability to execute such order, to the court within the
local limits of whose jurisdiction,—
(a) in the case of an order against a company,
the registered office of the company is situate; or
(b) in the case of an order against any other
person, the person concerned voluntarily resides or carries on business or
personally works for gain.
(4) All
proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be
judicial proceedings within the meaning of sections 193 and 228, and for the
purposes of section 196, of the Indian Penal Code (45 of 1860) and the Tribunal
and the Appellate Tribunal shall be deemed to be a civil court for the purposes
of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of
1974).
10G. The Appellate Tribunal shall have the same
jurisdiction, powers and authority in respect of contempt of itself as the High
Court has and may exercise, for this purpose under the provisions of the
Contempt of Courts Act, 1971 (70 of 1971), shall have the effect subject to
modifications that—
(a) the reference therein to a High Court shall
be construed as including a reference to the Appellate Tribunal;
(b) the reference to Advocate-General in section
15 of the said Act shall be construed as a reference to such law officers as
the Central Government may specify in this behalf.
10GA.
(1) The
Central Government shall provide the Appellate Tribunal with such officers and
other employees as it may think fit.
(2) The
officers and other employees of the Appellate Tribunal shall discharge their
functions under the general superintendence of the Chairperson of the Appellate
Tribunal.
(3) The
salaries and allowances and other conditions of service of the officers and
other employees of the Appellate Tribunal shall be such as may be prescribed.
Civil court not to have
jurisdiction.
10GB. No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force
Vacancy in Tribunal or Appellate
Tribunal not to invalidate acts or proceedings.
10GC. No act or proceeding of the Tribunal or the
Appellate Tribunal shall be questioned or shall be invalid merely on the ground
of existence of any vacancy or defect in the establishment of the Tribunal or
the Appellate Tribunal, as the case may be.
Right to legal representation.
10GD. The applicant or the appellant may either
appear in person or authorise one or more chartered
accountants or company secretaries or cost accountants or legal practitioners
or any officer to present his or its case before the Tribunal or the Appellate
Tribunal, as the case may be.
Explanation.—For the purposes of this section,—
(a) “chartered accountant” means a chartered
accountant as defined in clause (b)
of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of
1949) and who has obtained a certificate of practice under sub-section (1) of
section 6 of that Act;
(b) “company secretary” means a company secretary
as defined in clause (c) of
sub-section (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980)
and who has obtained a certificate of practice under sub-section (1) of section
6 of that Act;
(c) “cost accountant” means a cost accountant as
defined in clause (b) of
sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of
1959) and who has obtained a certificate of practice under sub-section (1) of
section 6 of that Act;
(d) “legal practitioner” means an advocate, a vakil or any attorney of any High Court, and includes a
pleader in practice.
10GE. The provisions of the Limitation Act, 1963
(36 of 1963) shall, as far as may be, apply to an appeal made to the Appellate
Tribunal.
10GF. Any person aggrieved by any decision or
order of the Appellate Tribunal may file an appeal to the Supreme Court within
sixty days from the date of communication of the decision or order of the
Appellate Tribunal to him on any question of law arising out of such decision
or order:
Provided that
the Supreme Court may, if it is satisfied that the appellant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be
filed within a further period not exceeding sixty days.]
Incorporation
of Company and Matters
Incidental thereto CERTAIN
COMPANIES, ASSOCIATIONS AND PARTNERSHIPS TO
BE REGISTERED AS COMPANIES UNDER ACT
Prohibition of associations and partnerships exceeding
certain number.
11.
(1) No company, association or partnership consisting of more than
ten persons shall be formed for the purpose of carrying on the business of
banking, unless it is registered as a company under this Act, or is formed in
pursuance of some other Indian law.
(2) No company, association or partnership consisting of more than
twenty persons shall be formed for the purpose of carrying on any other business
that has for its object the acquisition of gain by the company, association or
partnership, or by the individual members thereof, unless it is registered as a
company under this Act, or is formed in pursuance of some other Indian law.
(3) This section shall not apply to a joint family as such carrying
on a business; and where a business is carried on by two or more joint
families, in computing the number of persons for the purposes of sub-sections
(1) and (2), minor members of such families shall be excluded.
(4) Every member of a company, association or partnership carrying
on business in contravention of this section shall be personally liable for all
liabilities incurred in such business.
(5) Every person who is a member of a company, association or
partnership formed in contravention of this section shall be punishable with
fine which may extend to [ten] thousand rupees.
Mode
of forming incorporated company.
12.
(1) Any seven or more persons, or where the company to be formed
will be a private company, any two or more persons, associated for any lawful
purpose may, by subscribing their names to a memorandum of association and
otherwise complying with the requirements of this Act in respect of
registration, form an incorporated company, with or without limited liability.
(2) Such a company may be either—
(a) a
company having the liability of its members limited by the memorandum to the
amount, if any, unpaid on the shares respectively held by them (in this Act
termed “a company limited by shares”);
(b) a
company having the liability of its members limited by the memorandum to such
amount as the members may respectively undertake by the memorandum to
contribute to the assets of the company in the event of its being wound up (in
this Act termed “a company limited by guarantee”); or
(c) a
company not having any limit on the liability of its members (in this Act
termed “an unlimited company”).
Requirements with respect to memorandum.
13. (1) The memorandum of every
company shall state—
(a) the
name of the company with “Limited” as the last word of the name in the case of
a public limited company, and with “Private Limited” as the last words of the
name in the case of a private limited company;
(b) the State in which the registered office of the company is
to be situate; 78[***]
[(c) in
the case of a company in existence immediately before the commencement of the
Companies (Amendment) Act, 1965, the objects of the company;
(d) in the case of a
company formed after such commencement,—
(i) the main objects of the company to be
pursued by the company on its incorporation and objects incidental or ancillary
to the attainment of the main objects;
(ii) other
objects of the company not included in sub-clause (i); and
(e) in
the case of companies (other than trading corporations), with objects not
confined to one State, the States to whose territories the objects extend.]
(2) The memorandum of a company limited by shares or by guarantee
shall also state that the liability of its members is limited.
(3) The memorandum of a company limited by guarantee shall also
state that each member undertakes to contribute to the assets of the company in
the event of its being wound up while he is a member or within one year after
he ceases to be a member, for payment of the debts and liabilities of the
company, or of such debts and liabilities of the company as may have been
contracted before he ceases to be a member, as the case may be, and of the
costs, charges and expenses of winding up, and for adjustment of the rights of
the contributories among themselves, such amount as may be required, not
exceeding a specified amount.
(4) In the case of a company having a share capital—
(a) unless
the company is an unlimited company, the memorandum shall also state the amount
of share capital with which the company is to be registered and the division
thereof into shares of a fixed amount;
(b) no subscriber of
the memorandum shall take less than one share; and
(c) each
subscriber of the memorandum shall write opposite to his name the number of
shares he takes.
14. The
memorandum of association of a company shall be in such one of the Forms in
Tables B, C, D and E in Schedule I as may be applicable to the case of the
company, or in a Form as near thereto as circumstances admit.
Printing and signature of memorandum.
15. The memorandum shall—
(a) be printed,
(b) be divided into
paragraphs numbered consecutively, and
(c) be
signed by each subscriber (who shall add his address, description and
occupation, if any), in the presence of at least one witness who shall attest
the signature and shall likewise add his address, description and occupation,
if any.
Special provision as to alteration of memorandum
consequent on alteration of name of State of
15A. Where,
in the memorandum of association of a company in existence immediately before the
commencement of the Madras State (Alteration of Name) Act, 1968 (53 of 1968),
it is stated that Madras is the State in which the registered office of that
company is situate, then, notwithstanding anything contained in this Act, the
said memorandum shall, as from such commencement, be deemed to have been
altered by substitution of a reference to the State of Tamil Nadu for the reference to the State of Madras, and the
Registrar of the State of Tamil Nadu shall make
necessary alterations in the memorandum of association and the certificate of
incorporation of the said company.]
Special provision as to alteration of memorandum
consequent on alteration of name of State of
15B. Where,
in the memorandum of association of a company in existence immediately before
the commencement of the Mysore State (Alteration of
Name) Act, 1973 (31 of 1973), it is stated that Mysore
is the State in which the registered office of that company is situate, then,
notwithstanding anything contained in this Act, the said memorandum shall, as
from such commencement, be deemed to have been altered by substitution of a
reference to the State of Karnataka for the reference to the State of Mysore, and the Registrar of the State of Karnataka shall
make necessary alterations in the memorandum of association and the certificate
of incorporation of the said company.]
16.
(1) A company shall not alter the conditions contained in its
memorandum except in the cases, in the mode, and to the extent, for which
express provision is made in this Act.
(2) Only those provisions which are required by section 13 or by
any other specific provision contained in this Act, to be stated in the
memorandum of the company concerned shall be deemed to be conditions contained
in its memorandum.
(3) Other provisions contained in the memorandum, including those
relating to the appointment of a managing director [***] or manager, may be altered in the same manner
as the articles of the company, but if there is any express provision in this
Act permitting of the alteration of such provisions in any other manner, they
may also be altered in such other manner.
(4) All references to the articles of a company in this Act shall
be construed as including references to the other provisions aforesaid
contained in its memorandum.
Special
resolution and confirmation by Central Government required for alteration of
memorandum.
17.
(1) A
company may, by special resolution, alter the provisions 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 so far as may be required to enable
it—
(a) to
carry on its business more economically or more efficiently; or
(b) to
attain its main purpose by new or improved means; or
(c) to
enlarge or change the local area of its operations; or
(d) to
carry on some business which under existing circumstances may conveniently or
advantageously be combined with the business of the company; or
(e) to
restrict or abandon any of the objects specified in the memorandum; or
(f) to
sell or dispose of the whole or any part of the undertaking, or of any of the
undertakings, of the company; or
(g) to
amalgamate with any other company or body of persons.
(2) The
alteration of the provisions of memorandum relating to the change of the place
of its registered office from one State to another shall not take effect unless
it is confirmed by the Central Government on petition.
(3) Before confirming the
alteration, the Central Government must be satisfied—
(a) that
sufficient notice has been given to every holder of the debentures of the
company, and to every other person or class of persons whose interests will, in
the opinion of the Central Government, be affected by the alteration; and
(b) that, with respect to every creditor
who, in the opinion of the Central Government, is entitled to object to the
alteration, and who signifies his objection in the manner directed by the
Central Government, either his consent to the alteration has been obtained or
his debt or claim has been discharged or has been determined, or has been
secured :
Provided that the Central
Government may, in the case of any person or class of persons, for special
reasons, dispense with the notice required by clause (a).
(4) The
Central Government shall cause notice of the petition for confirmation of the
alteration to be served on the Registrar who shall also be given a reasonable
opportunity of appearing before the Central Government and state his objections
and suggestions, if any, with respect to the confirmation of the alteration.
(5) The
Central Government may make an order confirming the alteration on such terms and
conditions, if any, as it thinks fit, and may make such order as to costs as it
thinks proper.
(6) The
Central Government shall, in exercising its powers under this section, have
regard to the rights and interests of the members of the company and of every
class of them, as well as to the rights and interests of the creditors of the
company and of every class of them.
(7) The
Central Government may, if it thinks fit, adjourn the proceedings in order that
an arrangement may be made to the satisfaction of the Central Government for
the purchase of the interests of dissentient members; and may give such
directions and make such orders as it thinks fit for facilitating, or carrying
into effect, any such arrangement :
Provided that no part of the capital of the company
may be expended for any such purchase.]
Change
of registered office within a State.
17A.
(1) No company shall change the place of its
registered office from one place to another within a State unless such change
is confirmed by the Regional Director.
(2) The company shall make an application in the
prescribed form to the Regional Director for confirmation under sub-section
(1).
(3) The confirmation referred to in
sub-section (1), shall be communicated to the company within four weeks from
the date of receipt of application for such change.
Explanation.—For the removal of doubts, it is hereby
declared that the provisions of this section shall apply only to the companies
which change the registered office from the jurisdiction of one Registrar of
Companies to the jurisdiction of another Registrar of Companies within the same
State.
(4) The company shall file, with the
Registrar a certified copy of the confirmation by the Regional Director for
change of its registered office under this section, within two months from the
date of confirmation, together with a printed copy of the memorandum as
altered and the Registrar shall register the same and certify the registration
under his hand within one month from the date of filing of such document.
(5) The certificate shall be conclusive
evidence that all the requirements of this Act with respect to the alteration
and confirmation have been complied with and henceforth the memorandum as
altered shall be the memorandum of the company.]
Alteration to be registered
within three months.
18. (1) A
company shall file with
the Registrar—
(a) a special resolution passed by a company
in relation to clauses (a) to (g) of sub-section (1) of section 17,
within one month from the date of such resolution; or
(b) (b) a
certified copy of the order of the [Central Government] made under sub-section (5) of that
section confirming the alteration, within three months from the date of order,
as the case may be, together with a printed copy of
the memorandum as altered and the Registrar shall register the same and certify
the registration under his hand within one month from the date of filing of
such documents.]
(2) The certificate shall be conclusive
evidence that all the requirements of this Act with respect to the alteration
and the confirmation thereof have been complied with, and thenceforth the
memorandum as so altered shall be the memorandum of the company.
(3) Where the alteration involves a transfer
of the registered office from one State to another, a certified copy of the
order confirming the alteration shall be filed by the company with the
Registrar of each of the States, and the Registrar of each such State shall
register the same, and shall certify under his hand the registration thereof;
and the Registrar of the State from which such office is transferred shall send
to the Registrar of the other State all documents relating to the company
registered, recorded or filed in his office.
(4) The [Central Government] may, at any time, by order, extend the
time for the filing of documents or for the registration of the alteration]
under this section by such period as it thinks proper.
Effect of failure to register.
19. (1)
No such alteration as is referred
to in section 17 shall have any effect until it has been duly registered in
accordance with the provisions of section 18.
(2) If the documents required to be filed
with the Registrar under section 18 are not filed within the time allowed under
that section, such alteration and the order of the [Central Government] made under
sub-section (5) of section 17 and all proceedings connected therewith, shall,
at the expiry of such period, become void and inoperative :
Provided that the [Central
Government] may, on sufficient cause shown, revive the order on
application made within a further period of one month.]
Provisions with respect to names of companies
Companies not to be registered
with undesirable names.
20. (1)
No company shall be registered by a
name which, in the opinion of the Central Government, is undesirable.
(2) Without
prejudice to the generality of the foregoing power, a name which is identical
with, or too nearly resembles,—
(i) the name by which a company in existence has been previously
registered, or
(ii) a
registered trade mark, or a trade mark which is subject of an application for
registration, of any other person under the Trade Marks Act, 1999,
may
be deemed to be undesirable by the Central Government within the meaning of
sub-section (1).
(3)
The Central Government may, before
deeming a name as undesirable under clause (ii) of sub-section (2), consult the Registrar of Trade Marks.]
21. A
company may, by special resolution and with the approval of the Central
Government signified in writing, change its name:
Provided that no such approval shall be required where the only change in the
name of a company is the addition thereto or, as the case may be, the deletion therefrom, of the word “Private”, consequent on the
conversion in accordance with the provisions of this Act of a public company
into a private company or of a private company into a public company.]
Rectification of name of company.
22. (1)
If, through inadvertence or
otherwise, a company on its first registration or on its registration by a new
name, is registered by a name which,—
(i) in the opinion of the Central
Government, is identical with, or too nearly resembles, the name by which a
company in existence has been previously registered, whether under this Act or
any previous companies law, the first-mentioned company, or
(ii) on
an application by a registered proprietor of a trade mark, is in the opinion of
the Central Government identical with, or too nearly resembles, a registered trade
mark of such proprietor under the Trade Marks Act, 1999, such company,—]
(a) may,
by ordinary resolution and with the previous approval of the Central Government
signified in writing, change its name or new name; and
(b) shall,
if the Central Government so directs within twelve months of its first
registration or registration by its new name, as the case may be, or within
twelve months of the commencement of this Act, whichever is later, by ordinary
resolution and with the previous approval of the Central Government signified in writing, change its
name or new name within a period of three months from the date of the direction
or such longer period as the Central Government may think fit to allow :
[Provided
that no application under clause (ii)
made by a registered proprietor of a trade mark after five years of coming to
notice of registration of the company shall be considered by the Central
Government.]
(2) If a company makes default in complying
with any direction given under clause (b)
of sub-section (1), the company, and every officer who is in default, shall be
punishable with fine which may extend to [one thousand] rupees for every day
during which the default continues.
Registration of change of name
and effect thereof.
23. (1)
Where a company changes its name in
pursuance of section 21 or 22, the Registrar shall enter the new name on the
register in the place of the former name, and shall issue a fresh certificate
of incorporation with the necessary alterations embodied therein; and the
change of name shall be complete and effective only on the issue of such a
certificate.
(2) The Registrar shall also make the
necessary alteration in the memorandum of association of the company.
(3) The change of name shall not affect any rights or obligations
of the company, or render defective any legal proceedings by or against it; and
any legal proceedings which might have been continued or commenced by or
against the company by its former name may be continued by or against the
company by its new name.
Change
of name of existing private limited companies.
24. (1)
In the case of a company which was
a private limited company immediately before the commencement of this Act, the
Registrar shall enter the word “Private” before the word “Limited” in the name
of the company upon the register and shall also make the necessary alterations
in the certificate of incorporation issued to the company and in its
memorandum of association.
(2) Sub-section (3) of section 23 shall apply to a change of name under sub-section (1), as it applies to a change of name under section 21.
Power to dispense with “Limited”
in name of charitable or other company.
25. (1) Where it is proved to the satisfaction
of the Central Government that an association—
(a) is
about to be formed as a limited company for promoting commerce, art, science,
religion, charity or any other useful object, and
(b) intends
to apply its profits, if any, or other income in promoting its objects, and to
prohibit the payment of any dividend to its members,
the Central Government may, by licence, direct that the association may be registered as a
company with limited liability, without the addition to its name of the word
“Limited” or the words “Private Limited”.
(2) The association may thereupon be
registered accordingly; and on registration shall enjoy all the privileges, and
(subject to the provisions of this section) be subject to all the obligations,
of limited companies.
(3) Where it is proved to the satisfaction of
the Central Government—
(a) that
the objects of a company registered under this Act as a limited company are
restricted to those specified in clause (a)
of sub-section (1), and
(b) that
by its constitution the company is required to apply its profits, if any, or
other income in promoting its objects and is prohibited from paying any
dividend to its members,
the Central Government may, by licence, authorise the company by
a special resolution to change its name, including or consisting of the
omission of the word “Limited” or the words “Private Limited”; and section 23
shall apply to a change of name under this sub-section as it applies to a
change of name under section 21.
(4) A firm may be a member of any association
or company licensed under this section, but on the dissolution of the firm, its
membership of the association or company shall cease.
(5) A licence may
be granted by the Central Government under this section on such conditions and
subject to such regulations as it thinks
fit, and those conditions and regulations shall be binding on the body to which
the licence is granted, and where the grant is under
sub-section (1), shall, if the Central Government so directs, be inserted in
the memorandum, or in the articles, or partly in the one and partly in the
other.
(6) It shall not be necessary for a body to
which a licence is so granted to use the word
“Limited” or the words “Private Limited” as any part of its name and, unless
its articles otherwise provide, such body shall, if the Central Government by
general or special order so directs and to the extent specified in the
directions, be exempt from such of the provisions of this Act as may be
specified therein.]
(7) The licence may
at any time be revoked by the Central Government, and upon revocation, the
Registrar shall enter the word “Limited” or the words “Private Limited” at the
end of the name upon the register of the body to which it was granted; and the
body shall cease to enjoy the exemption granted by this section :
Provided that, before a licence
is so revoked, the Central Government shall give notice in writing of its
intention to the body, and shall afford it an opportunity of being heard in
opposition to the revocation.
(8) (a) A body in respect of which a licence under this section is in force shall not alter the
provisions of its memorandum with respect to its objects except with the
previous approval of the Central Government signified in writing.
(b) The
Central Government may revoke the licence of such a
body if it contravenes the provisions of clause (a).
(c) In
according the approval referred to in clause (a), the Central Government may vary the licence
by making it subject to such conditions and regulations7 as that Government thinks fit, in lieu of, or
in addition to, the conditions and regulations, if any, to which the licence was formerly subject.
(d) Where
the alteration proposed in the provisions of the memorandum of a body under
this sub-section is with respect to the objects of the body so far as may be
required to enable it to do any of the things specified in clauses (a) to (g) of sub-section (1) of section 17, the provisions of this
sub-section shall be in addition to, and not in derogation of, the provisions
of that section.]
(9) Upon the revocation of a licence granted under this section to a body the name of
which contains the words “Chamber of Commerce”, that body shall, within a
period of three months from the date of revocation or such longer period as the
Central Government may think fit to allow, change its name to a name which does
not contain those words; and—
(a) the
notice to be given under the proviso to sub-section (7) to that body shall
include a statement of the effect of the foregoing provisions of this
sub-section; and
(b) section
23 shall apply to a change of name under this sub-section as it applies to a
change of name under section 21.
(10) If the body makes default in complying with the requirements of
sub-section (9), it shall be punishable with fine which may extend to [five
thousand] rupees for every day during which the default continues.
Articles prescribing
regulations.
26. There
may in the case of a public company limited by shares, and there shall in the case
of an unlimited company or a company limited by guarantee or a private company
limited by shares, be registered with the memorandum, articles of association
signed by the subscribers of the memorandum, prescribing regulations for the
company.
27. (1)
In the case of an unlimited
company, the articles shall state the number of members with which the company
is to be registered and, if the company has a share capital, the amount of
share capital with which the company is to be registered.
(2) In the case of a company limited by
guarantee, the articles shall state the number of members with which the
company is to be registered.
(3) In the case of a private company having a share capital, the
articles shall contain provisions relating to the matters specified in
sub-clauses (a), (b) and (c) of clause (iii)
of sub-section (1) of section 3; and in the case of any other private company,
the articles shall contain provisions relating to the matters specified in the
said sub-clauses (b) and (c).
Adoption and application of
Table A in the case of companies limited by shares.
28. (1)
The articles of association of a
company limited by shares may adopt all or any of the regulations contained in
Table A in Schedule I.
(2) In the case of any such company which is registered after the
commencement of this Act, if articles are not registered, or if articles are
registered, in so far as the articles do not exclude or modify the regulations
contained in Table A aforesaid, those regulations shall, so far as applicable,
be the regulations of the company in the same manner and to the same extent as
if they were contained in duly registered articles.
Form of articles in the case of
other companies.
29. The
articles of association of any company, not being a company limited by shares,
shall be in such one of the Forms in Tables C, D and E in ScheduleI
as may be applicable, or in a Form as near thereto as circumstances admit:
Provided that nothing in this section shall be deemed to prevent a company from
including any additional matters in its articles in so far as they are not
inconsistent with the provisions contained in the Form in any of the Tables C,
D and E, adopted by the company.]
Form
and signature of articles.
30. Articles shall—
(a) be printed;
(b) be divided into paragraphs numbered consecutively; and
(c) be signed by each subscriber of the memorandum of association (who shall add his address, description and occupation, if any,) in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any.
Alteration of articles
by special resolution.
31. (1) Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may, by special resolution, alter its articles:
Provided that no alteration made in the articles under this sub-section which has the effect of converting a public company into a private company, shall have effect unless such alteration has been approved by the Central Government.
(2) Any alteration so made shall, subject to the provisions of this Act, be as valid as if originally contained in the articles and be subject in like manner to alteration by special resolution.
(2A) Where any alteration such as is referred to in the proviso to sub-section (1) has been approved by the Central Government, a printed copy of the articles as altered shall be filed by the company with the Registrar within one month of the date of receipt of the order of approval.]
(3) The power of altering articles under this section shall, in the case of any company formed and registered under Act No. 19 of 1857 and Act No. 7 of 1860 or either of them, extend to altering any provisions in Table B annexed to Act No. 19 of 1857, and shall also, in the case of an unlimited company formed and registered under the said Acts or either of them, extend to altering any regulations relating to the amount of capital or its distribution into shares, notwithstanding that those regulations are contained in the memorandum.
Change
of registration of companies
Registration of unlimited
company as limited, etc.
32. (1)
Subject to the provisions of this
section,—
(a) a
company registered as unlimited may register under this Act as a limited
company; and
(b) a
company already registered as a limited company may re-register under this Act.
(2) On
registration in pursuance of this section, the Registrar shall close the former
registration of the company, and may dispense with the delivery to him of
copies of any documents with copies of which he was furnished on the occasion
of the original registration of the company; but, save as aforesaid, the
registration shall take place in the same manner and shall have effect, as if
it were the first registration of the company under this Act.
(3) The registration of an unlimited company as a limited company
under this section shall not affect any debts, liabilities, obligations or
contracts incurred or entered into, by, to, with or on behalf of, the company
before the registration, and those debts, liabilities, obligations and
contracts may be enforced in the manner provided by Part IX of this Act in the
case of a company registered in pursuance of that Part.
General provisions with respect to
memorandum and articles
Registration of memorandum and articles.
33. (1)
There shall be
presented for registration, to the Registrar of the State in which the
registered office of the company is stated by the memorandum to be situate—
(a) the memorandum of the company;
(b) its articles, if any;
and
[(c) the agreement, if any,
which the company proposes to enter into with any individual for appointment as
its managing or whole-time director or manager.]
(2) A declaration by an advocate of the Supreme Court or of a High
Court, an attorney or a pleader entitled to appear before a High Court, or a
secretary, or a chartered accountant, in whole-time practice in India], who is
engaged in the formation of a company, or by a person named in the articles as
a director [***], manager or secretary of the company, that all the requirements
of this Act and the rules thereunder have been complied
with in respect of registration and matters precedent and incidental thereto,
shall be filed with the Registrar; and the Registrar may accept such a
declaration as sufficient evidence of such compliance.
[Explanation
: For the purposes of this sub-section, “chartered accountant in whole-time
practice in India” means a chartered accountant within the meaning of clause (b) of sub-section (1) of section 2 of
the Chartered Accountants Act, 1949 (38 of 1949), who is practising
in India and who is not in full-time employment.]
(3) If the Registrar is satisfied that all the requirements aforesaid have been complied with by the company and that it is authorised to be registered under this Act, he shall retain and register the memorandum, the articles, if any, and the agreement referred to in clause (c) of sub-section (1), if any.
34. (1) On the registration of the memorandum of
a company, the Registrar shall certify under his hand that the company is incorporated
and, in the case of a limited company, that the company is limited.
(2) From the date of incorporation mentioned in the certificate of
incorporation, such of the subscribers of the memorandum and other persons, as
may from time to time be members of the company, shall be a body corporate by
the name contained in the memorandum, capable forthwith of exercising all the
functions of an incorporated company, and having perpetual succession and a
common seal, but with such liability on the part of the members to contribute
to the assets of the company in the event of its being wound up as is mentioned
in this Act.
Conclusiveness of certificate of incorporation.
35. A
certificate of incorporation given by the Registrar in respect of any association
shall be conclusive evidence that all the requirements of this Act have been
complied with in respect of registration and matters precedent and incidental
thereto, and that the association is a company authorised
to be registered and duly registered under this Act.
Effect of memorandum and articles.
36. (1) Subject to the provisions of this Act,
the memorandum and articles shall, when registered, bind the company and the
members thereof to the same extent as if they respectively had been signed by
the company and by each member, and contained covenants on its and his part to
observe all the provisions of the memorandum and of the articles.
(2) All money payable by any member to the company under the
memorandum or articles shall be a debt due from him to the company.
Provision as to companies
limited by guarantee.
37. (1) In the case of a company limited by
guarantee and not having a share capital, and registered on or after the first
day of April, 1914, every provision in the memorandum or articles or in any
resolution of the company purporting to give any person a right to participate
in the divisible profits of the company otherwise than as a member shall be
void.
(2) For the purpose of the provisions of this Act relating to the memorandum of a company limited by guarantee and of this section, every provision in the memorandum or articles, or in any resolution, of any company limited by guarantee and registered on or after the first day of April, 1914, purporting to divide the undertaking of the company into shares or interests, shall be treated as a provision for a share capital, notwithstanding that the nominal amount or number of the shares or interests is not specified thereby.
Effect of alteration in memorandum or articles.
38. Notwithstanding
anything in the memorandum or articles of a company, no member of the company
shall be bound by an alteration made in the memorandum or articles after the
date on which he became a member, if and so far as the alteration requires him
to take or subscribe for more shares than the number held by him at the date on
which the alteration is made, or in any way increases his liability as at that
date, to contribute to the share capital of, or otherwise to pay money to, the
company :
[Provided that this section
shall not apply—
(a) in
any case where the member agrees in writing either before or after a particular
alteration is made, to be bound by the alteration; or
(b) in any case where the company is a club or the company is any other association and the alteration requires the member to pay recurring or periodical subscriptions or charges at a higher rate although he does not agree in writing to be bound by the alteration.]
Copies of memorandum and articles, etc., to be given to
members.
39. (1) A company shall, on being so required by a member, send
to him within seven days of the requirement and subject to the payment of a fee
of one rupee, a copy each of the following documents as in force for the time being—
(a) the
memorandum;
(b) the
articles, if any;
(c) [***];
and
(d) every
other agreement and every resolution referred to in section 192, if and in so
far as they have not been embodied in the memorandum or articles.
(2) If a company makes default in complying with the requirements of this section, the company, and every officer of the company who is in default, shall be punishable, for each offence, with fine which may extend to [five hundred] rupees.
Alteration of memorandum or articles, etc., to be noted in
every copy.
40. (1) Where an alteration is made in the
memorandum or articles of a company, [***] or any resolution, referred to in
section 192, every copy of the memorandum, articles, agreement or resolution
issued after the date of the alteration shall be in accordance with the alteration.
(2) If, at any time, the company issues any copies of the memorandum,
articles, resolution or agreement, which are not in accordance with the
alteration or alterations made therein before that time, the company, and every
officer of the company who is in default, shall be punishable with fine which
may extend to [one hundred] rupees for each copy so issued.
Definition of “member”.
41. (1)
The subscribers of the memorandum
of a company shall be deemed to have agreed to become members of the company,
and on its registration, shall be entered as members in its register of
members.
(2) Every other person who [agrees in writing] to become a member
of a company and whose name is entered in its register of members, shall be a
member of the company.
(3) Every person holding equity share capital of company and whose
name is entered as beneficial owner in the records of the depository shall be
deemed to be a member of the concerned company.]
Membership of holding company.
42. (1)
Except in the cases mentioned in
this section, a body corporate cannot be a member of a company which is its
holding company and any allotment or transfer of shares in a company to its
subsidiary shall be void.
(2) Nothing in this section shall apply—
(a) where
the subsidiary is concerned as the legal representative of a deceased member
of the holding company; or
(b) where
the subsidiary is concerned as trustee, unless the holding company or a subsidiary
thereof is beneficially interested under the trust and is not so interested
only by way of security for the purposes of a transaction entered into by it in
the ordinary course of a business which includes the lending of money.
(3) This section shall not prevent a subsidiary from continuing to
be a member of its holding company if it was a member thereof either at the
commencement of this Act or before becoming a subsidiary of the holding
company, but except in the cases referred to in sub-section (2), the
subsidiary shall have no right to vote at meetings of the holding company or of
any class of members thereof.
(4) Subject to sub-section (2), sub-sections (1) and (3) shall
apply in relation to a nominee for a body corporate which is a subsidiary, as
if references in the said sub-sections (1) and (3) to such a body corporate
included references to a nominee for it.
(5) In relation to a holding company which is either a company
limited by guarantee or an unlimited company, the reference in this section to
shares shall, whether or not the company has a share capital, be construed as
including a reference to the interest of its members as such, whatever the form
of that interest.
Consequences of default in complying with conditions
constituting a company a private company.
43. Where
the articles of a company include the provisions which, under clause (iii) of sub-section (1) of section 3,
are required to be included in the articles of a company in order to constitute
it a private company, but default is made in complying with any of those
provisions, the company shall cease to be entitled to the privileges and
exemptions conferred on private companies by or under this Act, and this Act
shall apply to the company as if it were not a private company
:
Provided that the [Central Government], on being satisfied that the failure to comply with the conditions was
accidental or due to inadvertence or to some other sufficient cause, or that on
other grounds it is just and equitable to grant relief, may, on the application
of the company or any other person interested and on such terms and conditions
as seem to the [Central Government] just and expedient, order that
the company be relieved from such consequences as aforesaid.
Private company to become public company in certain cases.
43A. (1) Save as otherwise provided in this
section, where not less than twenty-five per cent of the paid-up share capital
of a private company having a share capital, is held by one or more bodies
corporate, the private company shall,—
(a) on
and from the date on which the aforesaid percentage is first held by such body
or bodies corporate, or
(b) where
the aforesaid percentage has been first so held before the commencement of the
Companies (Amendment) Act, 1960, on and from the expiry of the period of three
months from the date of such commencement unless within that period the
aforesaid percentage is reduced below twenty-five per cent of the paid-up share
capital of the private company,
become by virtue of this section a
public company :
Provided that even after the private company has so become a public company, its
articles of association may include provisions relating to the matters
specified in clause (iii) of
sub-section (1) of section 3 and the number of its members may be, or may at
any time be reduced, below seven :
Provided further that in computing the aforesaid percentage,
account shall not be taken of any share in the private company held by a
banking company, if, but only if, the following conditions are satisfied in
respect of such share, namely :—
(a) that the share—
(i) forms
part of the subject-matter of a trust,
(ii) has not been set
apart for the benefit of any body corporate, and
(iii) is
held by the banking company either as a trustee of that trust or in its own
name on behalf of a trustee of that trust; or
(b) that the share—
(i) forms
part of the estate of a deceased person,
(ii) has not been
bequeathed by the deceased person by his will to any body corporate, and
(iii) is
held by the banking company either as an executor or administrator of the
deceased person or in its own name on behalf of an executor or administrator of
the deceased person;
and the Registrar may, for the purpose of
satisfying himself that any share is held in the private company by a banking
company as aforesaid, call for at any time from the banking company such books
and papers as he considers necessary.]
Explanation : For the purposes of this sub-section, “bodies
corporate” means public companies, or private companies which had become public
companies by virtue of this section.]
(1A) Without prejudice to the provisions of sub-section (1), where
the average annual turnover of a private company, whether in existence at the
commencement of the Companies (Amendment) Act, 1974, or incorporated
thereafter, is not, during the relevant period, less than [such amount as may
be prescribed], the private company shall, irrespective of its paid-up share
capital, become, on and from the expiry of a
period of three months from the last day of the relevant period during
which the private company had the said average annual turnover, a public
company by virtue of this sub-section :
Provided that even after the private company has so become a public company, its
articles of association may include provisions relating to the matters
specified in clause (iii) of
sub-section (1) of section 3 and the number of its members may be, or may at
any time be reduced, below seven.
(1B) Where not less than twenty-five per cent of the paid-up share
capital of a public company, having share capital, is held by a private
company, the private company shall,—
(a) on
and from the date on which the aforesaid percentage is first held by it after
the commencement of the Companies (Amendment) Act, 1974, or
(b) where
the aforesaid percentage has been first so held before the commencement of the
Companies (Amendment) Act, 1974, on and from the expiry of the period of three
months from the date of such commencement, unless within that period the aforesaid
percentage is reduced below twenty-five per cent of the paid-up share capital
of the public company,
become, by virtue of this sub-section, a
public company, and thereupon all other provisions of this section shall apply
thereto :
Provided that even after the private company has so become a public company, its
articles of association may include provisions relating to the matters
specified in clause (iii) of
sub-section (1) of section 3 and the number of its members may be, or may at
any time be reduced, below seven.]
(1C) Where, after the commencement of the Companies (Amendment)
Act, 1988, a private company accepts,
after an invitation is made by an advertisement, or renews, deposits from the public, other than its members,
directors or their relatives, such private company shall, on and from the date
on which such acceptance or renewal, as the case may be, is first made after
such commencement, become a public company and thereupon all the provisions of this section shall apply
thereto :
Provided that even after the private company has so become a public company, its
articles of association may include provisions relating to the matters
specified in clause (iii) of
sub-section (1) of section 3 and the number of its members may be, or may at
any time be, reduced below seven.]
(2) Within three months from the date on which a private company
becomes a public company by virtue of this section, the company shall inform
the Registrar that it has become a public company as aforesaid, and thereupon
the Registrar shall delete the word “Private” before the word “Limited” in the
name of the company upon the register and shall also make the necessary
alterations in the certificate of incorporation issued to the company and in
its memorandum of association.
(2A) Where a public company
referred to in sub-section (2) becomes a private company on or after the
commencement of the Companies (Amendment) Act, 2000, such company shall inform
the Registrar that it has become a private company and thereupon the Registrar
shall substitute the words “private company” for the words “public company” in
the name of the company upon the register and shall also make the necessary
alterations in the certificate of incorporation issued to the company and in
its memorandum of association within four weeks from the date of application
made by the company.]
(3) Sub-section (3) of
section 23 shall apply to a change of name under sub-section (2) as it applies
to a change of name under section 21.
(4) A private company which
has become a public company by virtue of this section shall continue to be a
public company until it has, with the approval of the Central Government and in
accordance with the provisions of this Act, again become a private company.
(5) If a company makes
default in complying with sub-section (2), the company and every officer of the
company who is in default, shall be punishable with fine which may extend to
five hundred rupees for every day during which the default continues.
(6) & (7) [Omitted by the Companies (Amendment) Act,
1988, w.e.f. 15-6-1988. For sub-sections (6) and (7),
as they stood prior to omission, refer Appendix I.]
(8) Every private company having
a share capital shall, in addition to the certificate referred to in
sub-section (2) of section 161, file with the Registrar along with the annual
return a second certificate signed by both the signatories of the return,
stating either—
(a) that
since the date of the annual general meeting with reference to which the last
return was submitted, or in the case of a first return, since the date of the
incorporation of the private company, no body or bodies corporate has or have
held twenty-five per cent or more of its paid-up share capital, [***]
(b) [Omitted by the Companies (Amendment) Act,
1988, w.e.f.
15-6-1988. For clause (b) as it
stood prior to its omission, refer Appendix I.]
(c) that
the private company, irrespective of its paid-up share capital, did not have,
during the relevant period, an average annual turnover of [such amount as is
referred to in sub-section (1A) or
more,]]
[(d) that
the private company did not accept or renew deposits from the public.]
(9) Every private company, having share capital, shall file with
the Registrar along with the annual return a certificate signed by both the
signatories of the return, stating that since the date of the annual general
meeting with reference to which the last return was submitted, or in the case
of a first return, since the date of the incorporation of the private company,
it did not hold twenty-five per cent or more of the paid-up share capital of
one or more public companies.
(10) Subject to the other provisions of this Act, any reference in
this section to accepting, after an
invitation is made by an advertisement, or renewing deposits from the public
shall be construed as including a reference to accepting, after an invitation
is made by an advertisement, or renewing deposits from any section of the
public and the provisions of section 67 shall, so far as may be, apply, as if
the reference to invitation to the public to subscribe for shares or debentures
occurring in that section, includes a reference to invitation from the public
for acceptance of deposits.]
(11) Nothing contained in this section, except sub-section (2A),
shall apply on and after the commencement of the Companies (Amendment) Act,
2000.]
Explanation
: For the purposes of this section,—
(a) “relevant period”
means the period of three consecutive financial years,—
(i) immediately preceding the commencement of the Companies
(Amendment) Act, 1974, or
(ii) a part of
which immediately preceded such commencement and the other part of which immediately,
followed such commencement, or
(iii) immediately
following such commencement or at any time thereafter;
(b) “turnover”
of a company, means the aggregate value of the realisation
made from the sale, supply or distribution of goods or on account of services
rendered, or both, by the company during a financial year;]
[(c)
“deposit” has the same meaning as in section 58A.]
Prospectus or statement in lieu of prospectus to be filed
by private company on ceasing to be private company.
44. (1)
If a company, being a private
company, alters its articles in such a manner that they no longer include the
provisions which, under clause (iii)
of sub-section (1) of section 3, are required to be included in the articles of
a company in order to constitute it a private company, the company,—
(a) shall, as on the
date of the alteration, cease to be a private company; and
(b) shall,
within a period of [thirty] days after the said date, file with the Registrar
either a prospectus or a statement in lieu of prospectus, as specified in
sub-section (2).
(2)(a) Every prospectus filed
under sub-section (1) shall state the matters specified in Part I of Schedule
II and set out the reports specified in Part II of that Schedule, and the said
Parts I and II shall have effect subject to the provisions contained in Part
III of that Schedule.
(b) Every statement
in lieu of prospectus filed under sub-section (1) shall be in the form and
contain the particulars set out in Part I of Schedule IV, and in the cases
mentioned in Part II of that Schedule, shall set out the reports specified
therein, and the said Parts I and II shall have effect subject to the provisions
contained in Part III of that Schedule.
(c) Where the persons
making any such report as is referred to in clause (a) or (b) have
made therein, or have, without giving the reasons indicated therein, any such
adjustments as are mentioned in clause 32 of Schedule II or clause 5 of
Schedule IV, as the case may be, the prospectus or statement in lieu of
prospectus filed as aforesaid, shall have endorsed thereon or attached thereto,
a written statement signed by those persons, setting out the adjustments and
giving the reasons therefor.
(3) If default is made in complying with sub-section (1) or (2),
the company, and every officer of the company who is in default, shall be
punishable with fine which may extend to [five thousand] rupees for every day
during which the default continues.
(4) Where any prospectus or statement in lieu of prospectus filed
under this section includes any untrue statement, any person who authorised the filing of such prospectus or statement shall
be punishable with imprisonment for a term which may extend to two years, or
with fine which may extend to [fifty thousand] rupees, or with both, unless he
proves either that the statement was immaterial or that he had reasonable
ground to believe, and did up to the time of the filing of the prospectus or
statement believe, that the statement was true.
(5) For the purposes of this section—
(a) a
statement included in a prospectus or a statement in lieu of prospectus shall
be deemed to be untrue if it is misleading in the form and context in which it
is included; and
(b) where
the omission from a prospectus or a statement in lieu of prospectus of any
matter is calculated to mislead, the prospectus or statement in lieu of
prospectus shall be deemed, in respect of such omission, to be a prospectus or
a statement in lieu of prospectus in which an untrue statement is included.
(6) For the purposes of sub-section (4) and clause (a) of sub-section (5), the expression
“included” when used with reference to a prospectus or statement in lieu of
prospectus, means included in the prospectus or statement in lieu of
prospectus itself or contained in any report or memorandum appearing on the
face thereof, or by reference incorporated therein.
Reduction
of number of members below legal minimum
Members severally liable for debts where business carried on with fewer than seven, or in the case of a private company, two members.
45. If at any time the number of members of a company is reduced, in the case of a public company, below seven, or in the case of a private company, below two, and the company carries on business for more than six months while the number is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognizant of the fact that it is carrying on business with fewer than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor.
Contracts
and deeds, investments, seal, etc.
Form
of contracts.
46. (1) Contracts on behalf of a company may be made as follows:—
(a) a
contract which, if made between private persons, would by law be required to be
in writing signed by the parties to be charged therewith, may be made on behalf
of the company in writing signed by any person acting under its authority,
express or implied, and may in the same manner be varied or discharged;
(b) a
contract which, if made between private persons, would by law be valid although
made by parol only and not reduced into writing, may
be made by parol on behalf of the company by any
person acting under its authority, express or implied, and may in the same
manner be varied or discharged.
(2) A contract made according to this section shall bind the
company.
Bills of exchange and promissory notes.
47. A
bill of exchange, hundi or promissory note shall be
deemed to have been made, accepted, drawn or endorsed on behalf of a company if
drawn, accepted, made, or endorsed in the name of, or on behalf or on account of,
the company by any person acting under its authority, express or implied.
48. (1) A company may, by writing under its
common seal, empower any person, either generally or in respect of any
specified matters, as its attorney, to execute deeds on its behalf in any place
either in or outside India.
(2) A deed signed by such an attorney on behalf of the company and
under his seal where sealing is required, shall bind the company and have the
same effect as if it were under its common seal.
Investments of company to be held in its own name.
49. (1)
Save as otherwise provided in
sub-sections (2) to (5) [or any other law for the time being in force] and
subject to the provisions of sub-sections (6) to (8), —
(a) all
investments made by a company on its own behalf shall be made and held by it in
its own name; and
(b) where
any such investments are not so held at the commencement of this Act the
company shall, within a period of one year from such commencement, either cause
them to be transferred to, and hold them in, its own name, or dispose of them.
(2) Where the company has a right to appoint any person or
persons, or where any nominee or nominees of the company has or have been
appointed, as a director or directors of any other body corporate, shares in
such other body corporate to an amount not exceeding the nominal value of the
qualification shares which are required to be held by a director thereof, may
be registered or held by such company jointly in the names of itself and of each
such person or nominee or in the name of each such person or nominee [* * *].
(3) A company may hold any shares in its subsidiary in the name or
names of any nominee or nominees of the company, if and in so far as it is
necessary so to do, to ensure that the number of members of the subsidiary is
not reduced, where it is a public company, below seven, and where it is a
private company, below two.
(4) Sub-section (1) shall not apply to investments made by a
company whose principal business consists of the buying and selling of shares
or securities.
(5) Nothing in this section shall be deemed to prevent a company—
(a) from
depositing with a bank, being the bankers of the company, any shares or securities
for the collection of any dividend or interest payable thereon ; or
(aa) from depositing with, or transferring to,
or holding in the name of, the State Bank of India or a Scheduled Bank, being
the bankers of the company, shares or securities, in order to facilitate the
transfer thereof :
Provided
that if within a period of six months from the date on which the shares or
securities are transferred by the company to, or are first held by the company
in the name of, the State Bank of India or a Scheduled Bank as aforesaid, no
transfer of such shares or securities takes place, the company shall, as soon
as practicable after the expiry of that period, have the shares or securities
retransferred to it from the State Bank of India or the Scheduled Bank or, as
the case may be, again hold the shares or securities in its own name; or]
(b) from
depositing with, or transferring to, any person any shares or securities, by
way of security for the repayment of any loan advanced to the company or the
performance of any obligation undertaken by it ;
(c) from
holding investments in the name of a depository when such investments are in
the form of securities held by the company as a beneficial owner.]
(6) The certificate or letter of allotment relating to the shares
or securities in which investments have been made by a company shall, except in
the cases referred to in sub-sections (4) and (5), be in the custody of such
company or [with the State Bank of India or a Scheduled Bank], being the
bankers of the company.
(7) Where, in pursuance of sub-section (2), (3), (4) or (5), any
shares or securities in which investments have been made by a company are not
held by it in its own name, the company shall forthwith enter in a
register maintained by it for the
purpose—
(a) the
nature, value, and such other particulars as may be necessary fully to identify
the shares or securities in question; and
(b) the bank or person in whose name or
custody the shares or securities are held.
(8) The register kept under sub-section (7) shall be open to the
inspection of any member or debenture holder of the company without charge,
during business hours, subject to such reasonable restrictions as the company
may, by its articles or in general meeting, impose, so that not less than two hours
in each day are allowed for inspection.
(9) If default is made in complying with any of the requirements
of sub-sections (1) to (8), the company, and every officer of the company who
is in default, shall be punishable with fine which may extend to [fifty
thousand] rupees.
(10) If any inspection required under sub-section (8) is refused, the
[Central Government]
may, by order, direct an immediate inspection of the register.
Nothing in this sub-section shall be construed
as prejudicing in any way the operation of sub-section (9).
(11) In this section, “securities” includes stock and debentures.
Power for company to have official seal for use outside
50. (1)
A company whose objects require or comprise
the transaction of business outside India may, if authorised
by its articles, have for use in any territory, district or place not situate
in India an official seal which shall be a facsimile of the common seal of the company, with the addition
on its face of the name of the territory, district or place where it is to be
used.
(2) A company having an official seal for use in any such territory,
district or place may, by writing under its common seal, authorise
any person appointed for the purpose in that territory, district or place to
affix the official seal to any deed or other document to which the company is a
party in that territory, district or place.
(3) The authority of any agent authorised
under sub-section (2) shall, as between the company and any person dealing with
the agent, continue during the period, if any, mentioned in the instrument
conferring the authority, or if no period is there mentioned, until notice of
the revocation or determination of the agent’s authority has been given to the
person dealing with him.
(4) The person affixing any such official seal shall, by writing
under his hand, certify on the deed or other document to which the seal is
affixed, the date on which and the place at which, it is affixed.
(5) A deed or other document to which an official seal is duly
affixed shall bind the company as if it had been sealed with the common seal of
the company.
Service of
documents on company.
51. A
document may be served on a company or an officer thereof by sending it to the
company or officer at the registered office of the company by post under a
certificate of posting or by registered post, or by leaving it at its
registered office :
[Provided that where the securities are held in a depository, the records of the beneficial ownership may be served by such depository on the company by means of electronic mode or by delivery of floppies or discs.]
Service of documents on Registrar.
52. A document may be served on a Registrar by sending it to him at his office by post under a certificate of posting or by registered post, or by delivering it to, or leaving it for, him at his office.
Service
of documents on members by company.
53. (1) A document may be served by a company on
any member thereof either personally, or
by sending it by post to him to his registered address, or if he has no
registered address in India, to the address, if any, within India supplied by
him to the company for the giving of notices to him.
(2) Where a document is sent by post,—
(a) service
thereof shall be deemed to be effected by properly addressing, prepaying and
posting a letter containing the document, provided that where a member has
intimated to the company in advance that documents should be sent to him under
a certificate of posting or by registered post with or without acknowledgement
due and has deposited with the company a sum sufficient to defray the expenses
of doing so, service of the document shall not be deemed to be effected unless
it is sent in the manner intimated by the member ; and
(b) [*
* *] such service shall be deemed to have been effected—
(i) in the case of a notice of a meeting, at
the expiration of forty-eight hours after the letter containing the same is
posted, and
(ii) in
any other case, at the time at which the letter would be delivered in the
ordinary course of post.
(3) A document advertised in a newspaper circulating in the neighbourhood of the registered office of the company shall
be deemed to be duly served on the day on which the advertisement appears, on
every member of the company who has no registered address in India and has not
supplied to the company an address within India for the giving of notices to
him.
(4) A document may be served by the company on the joint-holders
of a share by serving it on the joint-holder named first in the register in
respect of the share.
(5) A document may be served by the company on the persons entitled to a share in consequence of the death or insolvency of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in India supplied for the purpose by the persons claiming to be so entitled, or until such an address has been so supplied, by serving the document in any manner in which it might have been served if the death or insolvency had not occurred.
Authentication
of documents and proceedings
Authentication of documents and proceedings.
54. Save
as otherwise expressly provided in this Act, a document or proceed-ing requiring authentication by a company may be signed by
a director [***], the manager, the secretary or other authorised
officer of the company, and need not be under its common seal.
Prospectus and allotment, and other matters relating to issue of
shares or debentures
Dating of prospectus.
55. A prospectus
issued by or on behalf of a company or in relation to an intended company shall
be dated, and that date shall, unless the contrary is proved, be taken as the
date of publication of the prospectus.
Powers of Securities and Exchange Board of
55A. The
provisions contained in sections 55 to 58, 59 to 81 (including sections 68A,
77A and 80A), 108, 109, 110, 112, 113, 116, 117, 118, 119, 120, 121, 122, 206,
206A and 207, so far as they relate to issue and transfer of securities and
non-payment of dividend shall,—
(a) in case of listed
public companies;
(b) in
case of those public companies which intend to get their securities listed on
any recognized stock exchange in
be
administered by the Securities and Exchange Board of India; and
(c) in any other case, be
administered by the Central Government.
Explanation.—For the removal of doubts, it is hereby
declared that all powers relating to all other matters including the matters
relating to prospectus, statement in lieu of prospectus, return of allotment,
issue of shares and redemption of irredeemable preference shares shall be
exercised by the Central Government, [Tribunal] or the Registrar of Companies, as the case may
be.]
Matters to be stated and reports to be set out in
prospectus.
56. (1) Every
prospectus issued—
(a) by or on behalf of a
company, or
(b) by or on behalf of
any person who is or has been engaged or interested in the formation of a
company,
shall state the matters specified in Part I of
Schedule II and set out the reports specified in Part II of that Schedule; and
the said Parts I and II shall have effect subject to the provisions contained
in Part III of that Schedule.
(2) A condition requiring or binding an applicant for shares in or
debentures of a company to waive compliance with any of the requirements of
this section, or purporting to affect him with notice of any contract, document
or matter not specifically referred to in the prospectus, shall be void.
(3) No one shall issue any form of application for shares in or
debentures of a company, unless the form is accompanied [by a memorandum
containing such salient features of a prospectus as may be prescribed] which
complies with the requirements of this section :
[Provided that a copy of the prospectus
shall, on a request being made by any person before the closing of the
subscription list, be furnished to him :]
Provided [further] that this sub-section shall not apply if it is shown
that the form of application was issued either—
(a) in
connection with a bona fide
invitation to a person to enter into an underwriting agreement with respect to
the shares or debentures; or
(b) in relation to shares or debentures
which were not offered to the public.
If any person acts in contravention of the
provisions of this sub-section, he shall be punishable with fine which may
extend to [fifty thousand] rupees.
(4) A director or other person responsible for the prospectus
shall not incur any liability by reason of any non-compliance with, or
contravention of, any of the requirements of this section, if—
(a) as regards any matter not disclosed, he
proves that he had no knowledge thereof; or
(b) he
proves that the non-compliance or contravention arose from an honest mistake of
fact on his part; or
(c) the
non-compliance or contravention was in respect of matters which, in the opinion
of the Court dealing with the case, [were] immaterial, or was otherwise such as
ought, in the opinion of that Court, having regard to all the circumstances of
the case, reasonably to be excused :
Provided that no director or other person shall incur any liability in respect
of the failure to include in a prospectus a statement with respect to the
matters specified in clause 18 of Schedule II, unless it is proved that he had
knowledge of the matters not disclosed.
(5) This section shall not apply—
(a) to
the issue to existing members or debenture holders of a company of a prospectus
or form of application relating to shares in or debentures of the company, whether
an applicant for shares or debentures will or will not have the right to
renounce in favour of other persons; or
(b) to
the issue of a prospectus or form of application relating to shares or
debentures which are, or are to be, in all respects uniform with shares or
debentures previously issued and for the time being dealt in or quoted on a recognised stock exchange ;
but, subject as aforesaid, this section shall
apply to a prospectus or a form of application, whether issued on or with
reference to the formation of a company or subsequently.
(6) Nothing in this section shall limit or diminish any liability
which any person may incur under the general law or under this Act apart from
this section.
Expert to be unconnected with formation or management of
company.
57. A
prospectus inviting persons to subscribe for shares in or debentures of a
company shall not include a statement purporting to be made by an expert,
unless the expert is a person who is not, and has not been, engaged or
interested in the formation or promotion, or in the management, of the company.
Expert’s consent to issue of prospectus containing
statement by him.
58. A
prospectus inviting persons to subscribe for shares in or debentures of a
company and including a statement purporting to be made by an expert shall not
be issued, unless—
(a) he
has given his written consent to the issue thereof with the statement included
in the form and context in which it is included, and has not withdrawn such
consent before the delivery of a copy of the prospectus for registration ; and
(b) a
statement that he has given and has not withdrawn his consent as aforesaid
appears in the prospectus.
Deposits not to be invited without issuing an
advertisement.
58A. (1) The
Central Government may, in consultation with the Reserve Bank of
(2) No company shall invite, or allow any other person to invite
or cause to be invited on its behalf, any deposit unless—
(a) such deposit is
invited or is caused to be invited in accordance with the rules made under
sub-section (1), [* * *]
(b) an
advertisement, including therein a statement showing the financial position of
the company, has been issued by the company in such form and in such manner as
may be prescribed [, and]
(c) the
company is not in default in the repayment of any deposit or part thereof and
any interest thereupon in accordance with the terms and conditions of such
deposit.]
(3)(a)
Every deposit accepted by a company at any time before the commencement of the
Companies (Amendment) Act, 1974, in accordance with the directions made by the
Reserve Bank of India under Chapter IIIB of the Reserve Bank of India Act, 1934
(2 of 1934), shall, unless renewed in accordance with clause (b), be repaid in accordance with the
terms [and conditions] of such deposit.
(b) No deposit
referred to in clause (a) shall
be renewed by the company after the expiry of the term thereof unless the
deposit is such that it could have been accepted if the rules made under
sub-section (1) were in force at the time when the deposit was initially
accepted by the company.
(c) Where, before the
commencement of the Companies (Amendment) Act, 1974, any deposit was received
by a company in contravention of any direction made under Chapter IIIB of the
Reserve Bank of India Act, 1934 (2 of 1934), repayment of such deposit shall be
made in full on or before the 1st day of April, 1975, and such repayment shall
be without prejudice to any action that may be taken under the Reserve Bank of
India Act, 1934 for the acceptance of such deposit in contravention of such
direction.
(3A) Every deposit accepted by a company after the commencement of
the Companies (Amendment) Act, 1988, shall, unless renewed in accordance with
the rules made under sub-section (1), be repaid in accordance with the terms
and conditions of such deposit.]
(4) Where any deposit is accepted by a company after the commencement
of the Companies (Amendment) Act, 1974, in contravention of the rules made
under sub-section (1), repayment of such deposit shall be made by the company
within thirty days from the date of acceptance of such deposit or within such
further time, not exceeding thirty days, as the Central Government may, on
sufficient cause being shown by the company, allow.
(5) Where a company omits or fails to make repayment of a deposit
in accordance with the provisions of clause (c) of sub-section (3), or in the case of a deposit referred to
in sub-section (4), within the time specified in that sub-section,—
(a) the
company shall be punishable with fine which shall not be less than twice the
amount in relation to which the repayment of the deposit has not been made,
and out of the fine, if realised, an amount equal to
the amount in relation to which the repayment of deposit has not been made,
shall be paid by the Court, trying the offence, to the person to whom repayment
of the deposit was to be made, and on such payment, the liability of the
company to make repayment of the deposit shall, to the extent of the amount
paid by the Court, stand discharged ;
(b) every
officer of the company who is in default shall be punishable with imprisonment
for a term which may extend to five years and shall also be liable to fine.
(6) Where a company accepts or invites, or allows or causes any
other person to accept or invite on its behalf, any deposit in excess of the
limits prescribed under sub-section (1) or in contravention of the manner or
condition prescribed under that sub-section or in contravention of the
provisions of sub-section (2), as the case may be,—
(a) the company shall be
punishable,—
(i) where such contravention relates to
the acceptance of any deposit, with fine which shall not be less than an amount
equal to the amount of the deposit so accepted ;
(ii) where
such contravention relates to the invitation of any deposit, with fine which
may extend to [ten] lakh rupees but shall not be less
than [fifty] thousand rupees ;
(b) every
officer of the company who is in default shall be punishable with imprisonment
for a term which may extend to five years and shall also be liable to fine.
(7)(a) Nothing contained in
this section shall apply to,—
(i) a banking company, or
(ii) such
other company as the Central Government may, after consultation with the
Reserve Bank of
(b) Except the
provisions relating to advertisement contained in clause (b) of sub-section (2), nothing in
this section shall apply to such classes of financial companies
as the Central Government may, after consultation with the Reserve Bank of
(8) The Central Government may, if it considers it necessary for
avoiding any hardship or for any other just and sufficient reason, by order,
issued either prospectively or retrospectively from a date not earlier than the
commencement of the Companies (Amendment) Act, 1974 (41 of 1974), grant
extension of time to a company or class of companies to comply with, or exempt
any company or class of companies from, all or any of the provisions of this
section either generally or for any specified period subject to such conditions
as may be specified in the order :
Provided that no order under this sub-section shall be issued in relation to a
class of companies except after consultation with the Reserve Bank of
(9) Where a company has failed to repay any deposit or part
thereof in accordance with the terms and conditions of such deposit, the [Tribunal] may, if it is
satisfied, either on its own motion or on the application of the depositor,
that it is necessary so to do to safeguard the interests of the company, the
depositors or in the public interest, direct, by order, the company to make
repayment of such deposit or part thereof forthwith or within such time and
subject to such conditions as may be specified in the order :
Provided that the [Tribunal]
may, before making any order under this sub-section, give a reasonable
opportunity of being heard to the company and the other persons interested in
the matter.
(10) Whoever fails to comply with any order made by the [Tribunal] under sub-section
(9) shall be punishable with imprisonment which may extend to three years and
shall also be liable to a fine of not less than rupees [five hundred] for every
day during which such non-compliance continues.]
[(11) A depositor may, at any
time, make a nomination and the provisions of sections 109A and 109B shall, as
far as may be, apply to the nomination made under this sub-section.]
Explanation : For the purposes of this section “deposit”
means any deposit of money with, and includes any amount borrowed by, a company
but shall not include such categories of amount as may be prescribed in
consultation with the Reserve Bank of
58AA. (1) Every company, which accepts deposits
from small depositors, shall intimate to the [Tribunal] any default made by it in repayment of any such
deposits or part thereof or any interest thereupon.
(2) The intimation under sub-section (1)
shall,—
(a) be given within sixty days from the date of
default;
(b) include
particulars in respect of the names and addresses of each small depositor, the
principal sum of deposits due to them and interest accrued thereupon.
Explanation.—For the removal of doubts, it is hereby
declared that the intimation under this section shall be given on monthly
basis.
(3) Where a company has made a default in
repayment of any deposit or part thereof or any interest thereupon to a small
depositor, the [Tribunal],
on receipt of intimation under sub-section (1) shall,—
(a) exercise, on its own
motion, powers conferred upon it by sub-section (9) of section 58A;
(b) pass
an appropriate order within a period of thirty days from the date of receipt of
intimation under sub-section (1) :
Provided that the [Tribunal] may pass order after expiry of the period of
thirty days, after giving the small depositors an opportunity of being heard :
Provided further that it shall not be necessary for a small
depositor to be present at the hearing of the proceeding under this
sub-section.
(4) No company shall, at any time, accept
further deposits from small depositors, unless each small depositor, whose
deposit has matured, had been paid the amount of the deposit and the interest
accrued thereupon:
Provided that nothing contained in this sub-section
shall apply to—
(a) any deposit which has been renewed by
the small depositor voluntarily; or
(b) any
deposit, whose repayment has become impracticable due to the death of the small
depositor or whose repayment has been stayed by a competent court or authority.
(5) Every company, which has on any occasion
made a default in the repayment of a deposit or part thereof or any interest
thereupon to a small depositor, shall state, in every future advertisement
and application form inviting deposits from the public, the total number of
small depositors and amount due to them in respect of which such default has
been made.
(6) Where any interest accrued on deposits of the small depositors
has been waived, the fact of such waiver shall be mentioned by the company in
every advertisement and application form inviting deposits issued after such
waiver.
(7) Where a company had accepted deposits from small depositors
and subsequent to such acceptance of deposits, obtains funds by taking a loan
for the purposes of its working capital from any bank, it shall first utilise the funds so obtained for the repayment of any
deposit or any part thereof or any interest thereupon to the small depositor
before applying such funds for any other purpose.
(8) Every application form, issued by a company to a small depositor
for accepting deposits from him, shall contain a statement to the effect that
the applicant had been apprised off—
(a) every
past default by the company in the repayment of deposit or interest thereon, if
any, such default has occurred; and
(b) the
waiver of interest under sub-section (6), if any, and reasons therefor.
(9) Whoever knowingly fails to comply with the provisions of this
section or comply with any order of the [Tribunal] shall be punishable with imprisonment which may
extend to three years and shall also be liable to fine for not less than five
hundred rupees for every day during which such non-compliance continues.
(10) If a company or any other person contravenes any provision of
this section, every person, who at the time the contravention was committed,
was a director of the company, as well as the company, shall be deemed to be
guilty of the offence and shall be liable to be proceeded against and punished
accordingly.
(11) The provisions of section 58A shall, as far as may be, apply to
the deposits made by a small depositor under this section.
Explanation.—For the purposes of this section, “a small
depositor” means a depositor who has deposited in a financial year a sum not
exceeding twenty thousand rupees in a company and includes his successors,
nominees and legal representatives.
Default in acceptance or refund
of deposits to be cognizable.
58AAA.(1) Notwithstanding
anything contained in sections 621 and 624, every offence connected with or
arising out of acceptance of deposits under section 58A or section 58AA shall
be cognizable offence under the Code of Criminal Procedure, 1973 (2 of 1974).
(2) No court shall take cognizance of any offence under sub-section
(1) except on a complaint made by the Central Government or any officer authorised by it in this behalf.]
Provisions relating to prospectus to apply to
advertisement.
58B. The
provisions of this Act relating to a prospectus shall, so far as may be, apply
to an advertisement referred to in section 58A.]
59. (1) If any prospectus is issued in
contravention of section 57 or 58, the company, and every person, who is
knowingly a party to the issue thereof, shall be punishable with fine which may
extend to [fifty] thousand rupees.
(2) In sections 57 and 58, the expression “expert”
includes an engineer, a valuer, an accountant and any
other person whose profession gives authority to a statement made by him.
Registration
of prospectus.
60. (1) No prospectus
shall be issued by or on behalf of a company or in relation to an intended
company unless, on or before the date of its publication, there has been
delivered to the Registrar for registration a copy thereof signed by every
person who is named therein as a director or proposed director of the company
or by his agent authorised in writing, and having
endorsed thereon or attached thereto—
(a) any consent to the
issue of the prospectus required by section 58 from any person as an expert;
and
(b) in the case of a
prospectus issued generally, also—
(i) a copy of every contract required by
clause 16 of Schedule II to be specified in the prospectus, or, in the case of
a contract not reduced into writing, a memorandum giving full particulars
thereof; and
(ii) where
the persons making any report required by Part II of that Schedule have made
therein, or have, without giving the reasons, indicated therein, any such
adjustments as are mentioned in clause 32 of that Schedule, a written statement
signed by those persons setting out the adjustments and giving the reasons therefor.
(2) Every
prospectus to which sub-section (1) applies shall, on the face of it,—
(a) state that a copy has
been delivered for registration as required by this section; and
(b) specify
any documents required by this section to be endorsed on or attached to the
copy so delivered, or refer to statements included in the prospectus which
specify those documents.
(3) The Registrar shall not register a prospectus unless the
requirements of sections 55, 56, 57 and 58 and sub-sections (1) and (2) of this
section have been complied with and the prospectus is accompanied by the
consent in writing of the person, if any, named therein as the auditor, legal
adviser, attorney, solicitor, banker or broker of the company or intended
company, to act in that capacity.]
(4) No prospectus shall be issued more than ninety days after the
date on which a copy thereof is delivered for registration; and if a prospectus
is so issued, it shall be deemed to be a prospectus a copy of which has not
been delivered under this section to the Registrar.
(5) If a prospectus is issued without a copy
thereof being delivered under this section to the Registrar or without the copy
so delivered having endorsed thereon or attached thereto the required consent
or documents, the company, and every person who is knowingly a party to the
issue of the prospectus, shall be punishable with fine which may extend to 98[fifty] thousand rupees.
60A. (1) Any public financial institution, public
sector bank or scheduled bank whose main object is financing shall file a shelf
prospectus.
(2) A company filing a shelf prospectus with the Registrar shall not
be required to file prospectus afresh at every stage of offer of securities by
it within a period of validity of such shelf prospectus.
(3) A company filing a shelf prospectus shall be required to file
an information memorandum on all material facts relating to new charges
created, changes in the financial position as have occurred between the first
offer of securities, previous offer of securities and the succeeding offer of
securities within such time as may be prescribed by the Central Government, prior
to making of a second or subsequent offer of securities under the shelf
prospectus.
(4) An information memorandum shall be issued to the public along
with shelf prospectus filed at the stage of the first offer of securities and
such prospectus shall be valid for a period of one year from the date of
opening of the first issue of securities under that prospectus :
Provided that
where an update of information memorandum is filed every time an offer of
securities is made, such memorandum together with the shelf prospectus shall
constitute the prospectus.
Explanation.—For the purpose of this section,—
(a) “financing”
means making loans to, or subscribing in the capital of, a private industrial
enterprise engaged in infrastructural financing or such other company as the
Central Government may notify in this behalf;
(b) “shelf
prospectus” means a prospectus issued by any financial institution or bank for
one or more issues of the securities or class of securities specified in that
prospectus.
60B. (1) A public company making an issue of
securities may circulate information memorandum to the public prior to filing
of a prospectus.
(2) A company inviting subscription by an information memorandum
shall be bound to file a prospectus prior to the opening of the subscription
lists and the offer as a red-herring prospectus, at least three days before the
opening of the offer.
(3) The information memorandum and red-herring prospectus shall
carry same obligations as are applicable in the case of a prospectus.
(4) Any variation between the information memorandum and the
red-herring prospectus shall be highlighted as variations by the issuing
company.
Explanation.—For the purposes of sub-sections (2), (3) and
(4), “red-herring prospectus” means a prospectus which does not have complete
particulars on the price of the securities offered and the quantum of
securities offered.
(5) Every variation as made and highlighted in accordance with
sub-section (4) above shall be individually intimated to the persons invited to
subscribe to the issue of securities.
(6) In the event of the issuing company or the underwriters to the
issue have invited or received advance subscription by way of cash or
post-dated cheques or stock-invest, the company or
such underwriters or bankers to the issue shall not encash
such subscription moneys or post-dated cheques or
stock-invest before the date of opening of the issue, without having
individually intimated the prospective subscribers of the variation and without
having offered an opportunity to such prospective subscribers to withdraw their
application and cancel their post-dated cheques or
stock-invest or return of subscription paid.
(7) The applicant or proposed subscriber shall exercise his right
to withdraw from the application on any intimation of variation within seven
days from the date of such intimation and shall indicate such withdrawal in
writing to the company and the underwriters.
(8) Any application for subscription which is acted upon by the
company or underwriters or bankers to the issue without having given enough
information of any variations, or the particulars of withdrawing the offer or
opportunity for cancelling the post-dated cheques or stock-invest or stop payments for such payments
shall be void and the applicants shall be entitled to receive a refund or
return of its post-dated cheques or stock-invest or
subscription moneys or cancellation of its application, as if the said
application had never been made and the applicants are entitled to receive back
their original application and interest at the rate of fifteen per cent from
the date of encashment till payment of realisation.
(9) Upon the closing of the offer of securities, a final
prospectus stating therein the total capital raised, whether by way of debt or
share capital and the closing price of the securities and any other details as
were not complete in the red-herring prospectus shall be filed in a case of a
listed public company with the Securities and Exchange Board and Registrar, and
in any other case with the Registrar only.]
Terms of contract mentioned in
prospectus or statement in lieu of prospectus, not to be varied.
61. A
company shall not, at any time, vary the terms of a contract referred to in
the prospectus or statement in lieu of prospectus, except subject to the
approval of, or except on authority given by, the company in general meeting.
Civil liability for mis-statements
in prospectus.
62. (1) Subject to the provisions of this
section, where a prospectus invites persons to subscribe for shares in or
debentures of a company, the following persons shall be liable to pay compensation
to every person who subscribes for any shares or debentures on the faith of
the prospectus for any loss or damage he may have sustained by reason of any
untrue statement included therein, that is to say,—
(a) every
person who is a director of the company at the time of the issue of the
prospectus;
(b) every
person who has authorised himself to be named and is
named in the prospectus either as a director, or as having agreed to become a
director, either immediately or after an interval of time;
(c) every
person who is a promoter of the company; and
(d) every
person who has authorised the issue of the prospectus:
Provided that where, under section 58, the consent of a person is required to
the issue of a prospectus and he has given that consent, or where, under [***]
sub-section (3) of section 60, the consent of a person named in a prospectus is
required and he has given that consent, he shall not, by reason of having given
such consent, be liable under this sub-section as a person who has authorised the issue of the prospectus except in respect of
an untrue statement, if any, purporting to be made by him as an expert.
(2) No
person shall be liable under sub-section (1), if he proves—
(a) that,
having consented to become a director of the company, he withdrew his consent
before the issue of the prospectus, and that it was issued without his
authority or consent;
(b) that
the prospectus was issued without his knowledge or consent, and that on
becoming aware of its issue, he forthwith gave reasonable public notice that it
was issued without his knowledge or consent;
(c) that,
after the issue of the prospectus and before allotment there-under, he, on
becoming aware of any untrue statement therein, withdrew his consent to the
prospectus and gave reasonable public notice of the withdrawal and of the
reason therefor; or
(d) that—
(i) as regards every untrue statement not
purporting to be made on the authority of an expert or of a public official
document or statement, he had reasonable ground to believe, and did up to the
time of the allotment of the shares or debentures, as the case may be, believe,
that the statement was true; and
(ii) as
regards every untrue statement purporting to be a statement by an expert or
contained in what purports to be a copy of or an extract from a report or
valuation of an expert, it was a correct and fair representation of the
statement, or a correct copy of, or a correct and fair extract from, the report
or valuation; and he had reasonable ground to believe, and did up to the time
of the issue of the prospectus believe, that the person making the statement
was competent to make it and that that person had given the consent required by
section 58 to the issue of the prospectus and had not withdrawn that consent
before delivery of a copy of the prospectus for registration or, to the defendant’s
knowledge, before allotment thereunder; and
(iii) as
regards every untrue statement purporting to be a statement made by an official
person or contained in what purports to be a copy of or extract from a public
official document, it was a correct and fair representation of the statement,
or a correct copy of, or a correct and fair extract from, the document:
Provided that this sub-section shall not apply in the case of a person liable,
by reason of his having given a consent required of him by section 58, as a
person who has authorised the issue of the prospectus
in respect of an untrue statement, purporting to be made by him as an expert.
(3) A person who, apart from this sub-section, would, under
sub-section (1), be liable by reason of his having given a consent required of
him by section 58 as a person who has authorised the
issue of a prospectus in respect of an untrue statement purporting to be made
by him as an expert, shall not be so liable, if he proves—
(a) that,
having given his consent under section 58 to the issue of the prospectus, he
withdrew it in writing before delivery of a copy of the prospectus for
registration;
(b) that,
after delivery of a copy of the prospectus for registration and before
allotment thereunder, he, on becoming aware of the
untrue statement, withdrew his consent in writing and gave reasonable public
notice of the withdrawal and of the reason therefor;
or
(c) that
he was competent to make the statement and that he had reasonable ground to
believe, and did up to the time of the allotment of the shares or debentures,
believe, that the statement was true.
(4) Where—
(a) the
prospectus specifies the name of a person as a director of the company, or as
having agreed to become a director thereof, and he has not consented to become
a director, or has withdrawn his consent before the issue of the prospectus,
and has not authorised or consented to the issue
thereof; or
(b) the
consent of a person is required under section
58 to the issue of the prospectus and he either has not given that consent or
has withdrawn it before the issue of the prospectus;
the directors of the company excluding those
without whose knowledge or consent the prospectus was issued, and every other
person who authorised the issue thereof, shall be
liable to indemnify the person referred to in clause (a) or clause (b),
as the case may be, against all damages, costs and expenses to which he may be
made liable by reason of his name having been inserted in the prospectus or of
the inclusion therein of a statement purporting to be made by him as an expert,
as the case may be, or in defending himself against any suit or legal
proceeding brought against him in respect thereof:
Provided that a person shall not be deemed for the purposes of this sub-section
to have authorised the issue of a prospectus by
reason only of his having given the consent required by section 58 to the
inclusion therein of a statement purporting to be made by him as an expert.
(5) Every person who, becomes liable to make any payment by virtue of
this section, may recover contribution, as in cases of contract, from any other
person who, if sued separately, would have been liable to make the same
payment, unless the former person was, and the latter person was not, guilty of
fraudulent misrepresentation.
(6) For
the purposes of this section—
(a) the
expression “promoter” means a promoter who was a party to the preparation of
the prospectus or of the portion thereof containing the untrue statement, but
does not include any person by reason of his acting in a professional capacity
for persons engaged in procuring the formation of the company; and
(b) the
expression “expert” has the same meaning as in section 58.
Criminal liability for mis-statements
in prospectus.
63. (1) Where a prospectus issued after the
commencement of this Act includes any untrue statement, every person who authorised the issue of the prospectus shall be punishable
with imprisonment for a term which may extend to two years, or with fine which
may extend to [fifty] thousand rupees, or with both, unless he proves either
that the statement was immaterial or that he had reasonable ground to believe,
and did up to the time of the issue of the prospectus believe, that the
statement was true.
(2) A person shall not be deemed for the purposes of this section
to have authorised the issue of a prospectus by
reason only of his having given—
(a) the
consent required by section 58 to the inclusion therein of a statement purporting
to be made by him as an expert, or
(b) the
consent required by [***] sub-section (3) of section 60.
Document containing offer of shares or debentures for sale
to be deemed prospectus.
64. (1) Where a company allots or agrees to allot
any shares in or debentures of the company with a view to all or any of those
shares or debentures being offered for sale to the public, any document by
which the offer for sale to the public is made shall, for all purposes, be
deemed to be a prospectus issued by the company; and all enactments and rules
of law as to the contents of prospectuses and as to liability in respect of
statements in and omissions from prospectuses, or otherwise relating to prospectuses,
shall apply with the modifications specified in sub-sections (3), (4) and (5),
and have effect accordingly, as if the shares or debentures had been offered to
the public for subscription and as if persons accepting the offer in respect
of any shares or debentures were subscribers for those shares or debentures,
but without prejudice to the liability, if any, of the persons by whom the
offer is made in respect of mis-statements contained
in the document or otherwise in respect thereof.
(2) For the purposes of this Act, it shall, unless the contrary is
proved, be evidence that an allotment of, or an agreement to allot, shares or
debentures was made with a view to the shares or debentures being offered for
sale to the public if it is shown—
(a) that
an offer of the shares or debentures or of any of them for sale to the public
was made within six months after the allotment or agreement to allot; or
(b) that
at the date when the offer was made, the whole consideration to be received by
the company in respect of the shares or debentures had not been received by it.
(3) Section 56 as applied by
this section shall have effect as if it required a prospectus to state in
addition to the matters required by that section to be stated in a prospectus—
(a) the
net amount of the consideration received or to be received by the company in
respect of the shares or debentures to which the offer relates; and
(b) the
place and time at which the contract under which the said shares or debentures
have been or are to be allotted may be inspected .
(4) Section 60 as applied by this section shall have effect as if the
persons making the offer were persons named in a prospectus as directors of a
company.
(5) Where a person making an offer to which this section relates is a
company or a firm, it shall be sufficient if the document referred to in
sub-section (1) is signed on behalf of the company or firm by two directors of
the company or by not less than one-half of the partners in the firm, as the
case may be; and any such director or partner may sign by his agent authorised in writing.
Interpretation of provisions relating to prospectuses.
65. (1) For the purposes of the foregoing provisions of this Part—
(a) a
statement included in a prospectus shall be deemed to be untrue, if the
statement is misleading in the form and context in which it is included; and
(b) where
the omission from a prospectus of any matter is calculated to mislead, the
prospectus shall be deemed, in respect of such omission, to be a prospectus in
which an untrue statement is included.
(2) For the purposes of sections 61, 62 and 63 and clause (a) of sub-section (1) of this section, the expression “included” when used with reference to a prospectus, means included in the prospectus itself or contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.
Newspaper advertisements of prospectus.
66. Where
any prospectus is published as a newspaper advertisement, it shall not be necessary
in the advertisement to specify the contents of the memorandum or the
signatories thereto, or the number of shares subscribed for by them.
Construction of references to offering shares or
debentures to the public, etc.
67. (1) Any reference in this Act or in the
articles of a company to offering shares or debentures to the public shall,
subject to any provision to the contrary contained in this Act and subject also
to the provisions of sub-sections (3) and (4), be construed as including a
reference to offering them to any section of the public, whether selected as
members or debenture holders of the company concerned or as clients of the
person issuing the prospectus or in any other manner.
(2) Any reference in this Act or in the articles of a company to
invitations to the public to subscribe for shares or debentures shall, subject
as aforesaid, be construed as including a reference to invitations to
subscribe for them extended to any section of the public, whether selected as
members or debenture holders of the company concerned or as clients of the
person issuing the prospectus or in any other manner.
(3) No offer or invitation shall be treated as made to the public by
virtue of sub-section (1) or sub-section (2), as the case may be, if the offer
or invitation can properly be regarded, in all the circumstances—
(a) as
not being calculated to result, directly or indirectly, in the shares or
debentures becoming available for subscription or purchase by persons other
than those receiving the offer or invitation; or
(b) otherwise
as being a domestic concern of the persons making and receiving the offer or
invitation :
[Provided that nothing contained in
this sub-section shall apply in a case where the offer or invitation to
subscribe for shares or debentures is made to fifty persons or more :
Provided further that nothing contained in the first proviso
shall apply to the non-banking financial companies or public financial
institutions specified in section 4A of the Companies Act, 1956 (1 of 1956).
(3A) Notwithstanding anything contained in sub-section (3), the
Securities and Exchange Board of India shall, in consultation with the Reserve
Bank of India, by notification in the Official Gazette, specify the guidelines
in respect of offer or invitation made to the public by a public financial
institution specified under section 4A or non-banking financial company
referred to in clause (f) of
section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934).]
(4) Without prejudice to the generality of sub-section (3), a
provision in a company’s articles prohibiting invitations to the public to
subscribe for shares or debentures shall not be taken as prohibiting the making
to members or debenture holders of an invitation which can properly be regarded
in the manner set forth in that sub-section.
(5) The provisions of this Act relating to private companies shall be construed in accordance with the provisions contained in sub-sections (1) to (4).
Penalty for fraudulently inducing persons to invest money.
68. Any
person who, either by knowingly or recklessly making any statement, promise or
forecast which is false, deceptive or misleading, or by any dishonest
concealment of material facts, induces or attempts to induce another person to
enter into, or to offer to enter into—
(a) any
agreement for, or with a view to, acquiring, disposing of, subscribing for, or
underwriting shares or debentures; or
(b) any
agreement the purpose or pretended purpose of which is to secure a profit to any
of the parties from the yield of shares or debentures, or by reference to
fluctuations in the value of shares or debentures;
shall be punishable with imprisonment for a term which may extend to five years, or with fine which may extend to [one lakh] rupees, or with both.
Personation for acquisition, etc., of shares.
68A. (1) Any person who—
(a) makes
in a fictitious name an application to a company for acquiring, or subscribing
for, any shares therein, or
(b) otherwise
induces a company to allot, or register any transfer of, shares therein to him,
or any other person in a fictitious name,
shall be punishable with
imprisonment for a term which may extend to five years.
(2) The provisions of sub-section (1) shall be prominently reproduced in every prospectus issued by the company and in every form of application for shares which is issued by the company to any person.]
Initial offer of securities to
be in dematerialised
form in certain cases.
68B. Notwithstanding
anything contained in any other provisions of this Act, every listed public
company, making initial public offer of any security for a sum of rupees ten crores or more, shall issue the same only in dematerialised form by complying with the requisite
provisions of the Depositories Act, 1996 (22 of 1996) and the regulations made thereunder.]
Prohibition of allotment unless minimum subscription
received.
69. (1) No allotment shall be made of any share
capital of a company offered to the public for subscription, unless the amount stated
in the prospectus as the minimum amount which, in the opinion of the Board of
directors, must be raised by the issue of share capital in order to provide for
the matters specified in clause 5 of Schedule II has been subscribed, and the
sum payable on application for the amount so stated has been paid to and
received by the company, whether in cash or by a cheque
or other instrument which has been paid.
(2) The amount so stated in the prospectus shall be reckoned exclusively
of any amount payable otherwise than in money, and is in this Act referred to
as “the minimum subscription”.
(3) The amount payable on application on each share shall not be
less than five per cent of the nominal amount of the share.
(4) All moneys received from applicants for shares shall be
deposited and kept deposited in a Scheduled Bank—
(a) until
the certificate to commence business is obtained under section 149, or
(b) where
such certificate has already been obtained, until the entire amount payable on
applications for shares in respect of the minimum subscription has been
received by the company,
and where such amount has not been received by
the company within the time on the expiry of which the moneys received from the
applicants for shares are required to be repaid without interest under
sub-section (5), all moneys received from applicants for shares shall be
returned in accordance with the provisions of that sub-section.
In the event of any contravention of the
provisions of this sub-section, every promoter, director or other person who is
knowingly responsible for such contravention shall be punishable with fine
which may extend to [fifty] thousand rupees.]
(5) If the conditions aforesaid have not been complied with on the
expiry of one hundred and twenty days after the first issue of the prospectus,
all moneys received from applicants for shares shall be forthwith repaid to
them without interest; and if any such money is not so repaid within one
hundred and thirty days after the issue of the prospectus, the directors of the
company shall be jointly and severally liable to repay that money with interest
at the rate of six per cent per annum from the expiry of the one hundred and
thirtieth day:
Provided that a director shall not be so liable if he proves that the default in
the repayment of the money was not due to any misconduct or negligence on his
part.
(6) Any condition purporting to require or bind any applicant for
shares to waive compliance with any requirement of this section shall be void.
(7) This section, except sub-section (3) thereof, shall not apply in
relation to any allotment of shares subsequent to the first allotment of shares
offered to the public for subscription.
Prohibition of allotment in certain cases unless statement
in lieu of prospectus delivered to Registrar.
70. (1) A company having a share capital, which
does not issue a prospectus on or with reference to its formation, or which has
issued such a prospectus but has not proceeded to allot any of the shares
offered to the public for subscription, shall not allot any of its shares or
debentures unless at least three days before the first allotment of either
shares or debentures, there has been delivered to the Registrar for
registration a statement in lieu of prospectus signed by every person who is
named therein as a director or proposed director of the company or by his agent
authorised in writing, in the form and containing the
particulars set out in Part I of Schedule III and, in the cases mentioned in
Part II of that Schedule, setting out the reports specified therein, and the
said Parts I and II shall have effect subject to the provisions contained in
Part III of that Schedule.
(2) Every statement in lieu of prospectus delivered under
sub-section (1), shall, where the persons making any such report as aforesaid
have made therein, or have without giving the reasons indicated therein, any
such adjustments as are mentioned in clause 5 of Schedule III, have endorsed
thereon or attached thereto a written statement signed by those persons, setting
out the adjustments and giving the reasons thereof.
(3) This section shall not apply to a private company.
(4) If a company acts in contravention of sub-section (1) or (2),
the company, and every director of the company who wilfully
authorises or permits the contravention, shall be
punishable with fine which may extend to [ten] thousand rupees.
(5) Where a statement in lieu of prospectus delivered to the
Registrar under sub-section (1) includes any untrue statement, any person who authorised the delivery of the statement in lieu of
prospectus for registration shall be punishable with imprisonment for a term
which may extend to two years or with fine which may extend to [fifty] thousand
rupees or with both, unless he proves either that the statement was immaterial
or that he had reasonable ground to believe, and did up to the time of the
delivery for registration of the statement in lieu of prospectus believe, that
the statement was true.
(6) For the purposes of this section—
(a) a
statement included in a statement in lieu of prospectus shall be deemed to be
untrue if it is misleading in the form and context in which it is included; and
(b) where
the omission from a statement in lieu of prospectus of any matter is calculated
to mislead, the statement in lieu of prospectus shall be deemed, in respect of
such omission, to be a statement in lieu of prospectus in which an untrue
statement is included.
(7) For the purposes of sub-section (5) and clause (a) of sub-section (6), the expression “included”, when used with reference to a statement in lieu of prospectus, means included in the statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein, or issued therewith.
Effect of irregular allotment.
71. (1) An allotment
made by a company to an applicant in contravention of the provisions of section
69 or 70 shall be voidable at the instance of the
applicant—
(a) within
two months after the holding of the statutory meeting of the company, and not
later, or
(b) in
any case where the company is not required to hold a statutory meeting or where
the allotment is made after the holding of the statutory meeting, within two
months after the date of the allotment, and not later.
(2) The allotment shall be voidable as
aforesaid, notwithstanding that the company is in course of being wound up.
(3) If any director of a company knowingly contravenes, or wilfully authorises or permits
the contravention of, any of the provisions of section 69 or 70 with respect to
allotment, he shall be liable to compensate the company and the allottee respectively for any loss, damages or costs which
the company or the allottee may have sustained or
incurred thereby:
Provided that proceedings to recover any such loss, damages or costs shall not
be commenced after the expiration of two years from the date of the allotment.
Applications for, and allotment of, shares and debentures.
72. (1)(a) No
allotment shall be made of any shares in or debentures of a company in
pursuance of a prospectus issued generally, and no proceedings shall be taken
on applications made in pursuance of a prospectus so issued, until the
beginning of the fifth day after that on which the prospectus is first so
issued or such later time, if any, as may be specified in the prospectus:
Provided that where, after a prospectus is first issued generally, a public
notice is given by some person responsible under section 62 for the prospectus
which has the effect of excluding, limiting or diminishing his responsibility,
no allotment shall be made until the beginning of the fifth day after that on
which such public notice is first given.
(b) Nothing in the
foregoing proviso shall be deemed to exclude, limit or diminish any liability
that might be incurred in the case referred to therein under the general law or
this Act.
(c) The beginning of
the fifth day or such later time as is mentioned in the first paragraph of
clause (a), or the beginning of
the fifth day mentioned in the second paragraph of that clause, as the case may
be, is hereinafter in this Act referred to as “the time of the opening of the
subscription lists”.
(2) In sub-section (1), the reference to the day on which the
prospectus is first issued generally shall be construed as referring to the day
on which it is first so issued as a newspaper advertisement :
Provided that, if it is not so issued as a newspaper advertisement before the
fifth day after that on which it is first so issued in any other manner, the
said reference shall be construed as referring to the day on which it is first
so issued in any manner.
(3) The validity of an allotment shall not be affected by any
contravention of the foregoing provisions of this section; but, in the event of
any such contravention, the company, and every officer of the company who is in
default, shall be punishable with fine which may extend to [fifty] thousand
rupees.
(4) In the application of this section to a prospectus offering
shares or debentures for sale, sub-sections (1) to (3) shall have effect with
the substitution of references to sale for references to allotment, and with
the substitution for the reference to the company and every officer of the
company who is in default of a reference to any person by or through whom the
offer is made and who is knowingly guilty of, or wilfully
authorises or permits, the contravention.
(5) An application for shares in, or debentures of, a company, which is made in pursuance of a prospectus issued generally shall not be revocable until after the expiration of the fifth day after the time of the opening of the subscription lists, or the giving, before the expiry of the said fifth day by some person responsible under section 62 for the prospectus, of a public notice having the effect under that section of excluding, limiting or diminishing the responsibility of the person giving it.
Allotment of shares and debentures to be dealt in on stock
exchange.
73. (1) Every
company intending to offer shares or debentures to the public for subscription
by the issue of a prospectus shall, before such issue, make an application to
one or more recognised stock exchanges for permission
for the shares or debentures intending to be so offered to be dealt with in the
stock exchange or each such stock exchange.]
[(1A)] Where a prospectus, whether issued generally or not, states that an
[application under sub-section (1) has been] made for permission for the shares
or debentures offered thereby to be dealt in one or more recognised
stock exchanges, such prospectus shall state the name of the stock exchange or,
as the case may be, each such stock exchange, and any allotment made on an
application in pursuance of such prospectus shall, whenever made, be void
[***], if the permission has not been granted by the stock exchange or each
such stock exchange, as the case may be, before the expiry of ten weeks from
the date of the closing of the subscription lists:
Provided that where an appeal against the decision of any recognised stock exchange refusing permission for the shares or debentures to be dealt in on that stock exchange has been preferred under section 22 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), such allotment shall not be void until the dismissal of the appeal.]
(2) Where the permission has not been applied [under
sub-section (1)], [or, such permission having been applied for, has not been
granted as aforesaid], the company shall forthwith repay without interest all
moneys received from applicants in pursuance of the prospectus, and, if any
such money is not repaid within eight days after the company becomes liable to
repay it, [the company and every director of the company who is an officer in
default shall, on and from the expiry of the eighth day, be jointly and
severally liable to repay that money with interest at such rate, not less than
four per cent and not more than fifteen per cent, as may be prescribed, having
regard to the length of the period of delay in making the repayment of such
money.]
[* * *]
(2A) Where permission has been granted by the recognised stock exchange or stock exchanges for dealing in
any shares or debentures in such stock exchange or each such stock exchange
and the moneys received from applicants for shares or debentures are in excess
of the aggregate of the application moneys relating to the shares or debentures
in respect of which allotments have been made, the company shall repay the
moneys to the extent of such excess forthwith without interest, and if such
money is not repaid within eight days, from the day the company becomes liable
to pay it, the company and every director of the company who is an officer in
default shall, on and from the expiry of the eighth day, be jointly and
severally liable to repay that money with interest at such rate, not less than
four per cent and not more than fifteen per cent, as may be prescribed, having
regard to the length of the period of delay in making the repayment of such
money.]
[* * *]
(2B) If default is made in complying with the provisions of
sub-section (2A), the company and every officer of the company who is in
default shall be punishable with fine which may extend to [fifty] thousand
rupees, and where repayment is not made within six months from the expiry of
the eighth day, also with imprisonment for a term which may extend to one
year.]
(3) All moneys received as aforesaid shall be kept in a
separate bank account maintained with a
Scheduled Bank [until the permission has been granted, or where an appeal has
been preferred against the refusal to grant such permission, until the disposal
of the appeal, and the money standing in such separate account shall, where the
permission has not been applied for as aforesaid or has not been granted, be
repaid within the time and in the manner specified in sub-section (2)]; and if
default is made in complying with this sub-section, the company, and every
officer of the company who is in default, shall be punishable with fine which
may extend to [fifty] thousand rupees.
(3A) Moneys standing to the credit of the separate bank account
referred to in sub-section (3) shall not be utilised
for any purpose other than the following purposes, namely :—
(a) adjustment
against allotment of shares, where the shares have been permitted to be dealt
in on the stock exchange or each stock exchange specified in the prospectus; or
(b) repayment
of moneys received from applicants in pursuance of the prospectus, where
shares have not been permitted to be dealt in on the stock exchange or each
stock exchange specified in the prospectus, as the case may be, or, where the
company is for any other reason unable to make the allotment of share.]
(4) Any condition purporting to require or bind any
applicant for shares or debentures to waive compliance with any of the requirements
of this section shall be void.
(5) For the purposes of this section, it shall be deemed
that permission has not been granted if the application for permission, where
made, has not been disposed of within the time specified in sub-section (1).]
(6) This
section shall have effect—
(a) in
relation to any shares or debentures agreed to be taken by a person
underwriting an offer thereof by a prospectus, as if he had applied therefor in pursuance of the prospectus; and
(b) in
relation to a prospectus offering shares for sale, with the following
modifications, namely,—
(i) references to sale shall be substituted for references to
allotment;
(ii) the
persons by whom the offer is made, and not the company, shall be liable under
sub-section (2) to repay money received from applicants, and references to the
company’s liability under that sub-section shall be construed accordingly; and
(iii) for
the reference in sub-section (3) to the company and every officer of the
company who is in default, there shall be substituted a reference to any person
by or through whom the offer is made and who is knowingly guilty of, or wilfully authorises or permits,
the default.
(7) No prospectus shall state that application has been made for permission for the shares or debentures offered thereby to be dealt in on any stock exchange, unless it is a recognised stock exchange.
Manner of reckoning fifth, eighth and tenth days in
sections 72 and 73.
74. In
reckoning for the purposes of sections 72 and 73, the fifth day, [or the eighth
day] after another day, any intervening day which is a public holiday under
the Negotiable Instruments Act, 1881 (26 of 1881), shall be disregarded, and
if the fifth, or eighth day] (as so reckoned) is itself such a public holiday,
there shall for the said purposes be substituted the first day thereafter which
is not such a holiday.
75. (1) Whenever a company having a share capital makes any allotment of
its shares, the company shall, within [thirty days] thereafter,—
(a) file with the
Registrar a return of the allotments, stating the number and nominal amount of
the shares comprised in the allotment, the names, addresses and occupations of
the allottees, and the amount, if any, paid or due
and payable on each share :
[Provided
that the company shall not show in such return any shares as having been
allotted for cash if cash has not actually been received in respect of such
allotment;]
(b) in the case of shares
(not being bonus shares) allotted as fully or partly paid-up otherwise than in
cash, produce for the inspection and examination of the Registrar a contract in
writing constituting the title of the allottee to the
allotment together with any contract of sale, or a contract for services or
other consideration in respect of which that allotment was made, such contracts
being duly stamped, and file with the Registrar copies verified in the
prescribed manner of all such contracts and a return stating the number and
nominal amount of shares so allotted, the extent to which they are to be
treated as paid-up, and the consideration for which they have been allotted;
and
(c) [file with the
Registrar—
(i) in the case of bonus shares, a return stating the number and
nominal amount of such shares comprised in the allotment and the names,
addresses and occupations of the allottees and a copy
of the resolution authorising the issue of such
shares;
(ii) in
the case of issue of shares at a discount, a copy of the resolution passed by
the company authorising such issue together with a
copy of the order of the [Tribunal]
sanctioning the issue and where the maximum rate of discount exceeds ten per
cent, a copy of the order of the Central Government permitting the issue at the
higher percentage.]
(2) Where a contract such as is mentioned in clause (b) of sub-section (1) is not reduced
to writing, the company shall, within [thirty days] after the allotment, file
with the Registrar the prescribed particulars of the contract stamped with the
same stamp duty as would have been payable if the contract had been reduced to
writing; and thos0e particulars shall be deemed to be an instrument within the
meaning of the Indian Stamp Act, 1899 (2 of 1899), and the Registrar may, as a
condition of filing the particulars, require that the duty payable thereon be
adjudicated under section 31 of that Act.
(3) If the Registrar is satisfied that in the circumstances of any
particular case the period of [thirty days] specified in sub-sections (1) and
(2) for compliance with the requirements of this section [is or was inadequate,
he may, on application made in that behalf by the company, whether before or
after the expiry of the said period, extend that period as he thinks fit]; and
if he does so, the provisions of sub-sections (1) and (2) shall have effect in
that particular case as if for the said period of [thirty days] the extended
period allowed by the Registrar were substituted.
(4) If default is made in complying with this section, every
officer of the company who is in default shall be punishable with fine which
may extend to [five thousand] rupees for every day during which the
default continues :
[Provided that in case of contravention
of the proviso to clause (a) of
sub-section (1), every such officer, and every promoter of the company who is
guilty of the contravention shall be punishable with fine which may extend to
[fifty] thousand rupees.]
(5) Nothing in this section shall apply to the issue and allotment
by a company of shares which under the provisions of its articles were
forfeited for non-payment of calls.
Power to pay certain commissions and prohibition of
payment of all other commissions, discounts, etc.
76. (1) A
company may pay a
commission to any person in consideration of—
(a) his
subscribing or agreeing to subscribe, whether absolutely or conditionally, for
any shares in, or debentures of, the company, or
(b) his
procuring or agreeing to procure subscriptions, whether absolute or
conditional, for any shares in, or debentures of, the company, if the following
conditions are fulfilled, namely :—
(i) the payment of the commission is authorised by the articles;
(ii) the
commission paid or agreed to be paid does not exceed in the case of shares,
five per cent of the price at which the shares are issued or the amount or rate
authorised by the articles, whichever is less, and in
the case of debentures, two and a half per cent of the price at which the
debentures are issued or the amount or rate authorised
by the articles, whichever is less;
(iii) the
amount or rate per cent of the commission paid or agreed to be paid is—
in
the case of shares or debentures offered to the public for subscription,
disclosed in the prospectus; and
in
the case of shares or debentures not offered to the public for subscription, disclosed
in the statement in lieu of prospectus, or in a statement in the prescribed
form signed in like manner as a statement in lieu of prospectus and filed
before the payment of the commission with the Registrar and, where a circular
or notice, not being a prospectus inviting subscription for the shares or
debentures, is issued, also disclosed in that circular or notice; [* * *]
(iv) the
number of shares or debentures which persons have agreed for a commission to
subscribe absolutely or conditionally is disclosed in the manner aforesaid;
[and]
[(v) a
copy of the contract for the payment of the commission is delivered to the
Registrar at the time of delivery of the prospectus or the statement in lieu of
prospectus for registration.]
(2) Save as aforesaid and save as provided in section 79, no company
shall allot any of its shares or debentures or apply [any of its moneys],
either directly or indirectly, in payment of any commission, discount or
allowance, to any person in consideration of—
(a) his
subscribing or agreeing to subscribe, whether absolutely or conditionally, for
any shares in, or debentures of, the company, or
(b) his
procuring or agreeing to procure subscriptions, whether absolute or
conditional, for any shares in, or debentures of, the company,
whether the shares, debentures or money be so
allotted or applied by being added to the purchase money of any property
acquired by the company or to the contract price of any work to be executed for
the company, or the money be paid out of the nominal purchase money or contract
price, or otherwise.
(3) Nothing in this section shall affect the power of any company
to pay such brokerage as it has heretofore been lawful for a company to pay.
(4) A vendor to, promoter of, or other person who receives payment
in shares, debentures or money from, a company shall have and shall be deemed
always to have had power to apply any part of the shares, debentures or money
so received in payment of any commission the payment of which, if made directly
by the company, would have been legal under this section.
[(4A) For the removal of doubts it is hereby declared that no commission
shall be paid under clause (a)
of sub-section (1) to any person on shares or
debentures which are not offered to the public for subscription:
Provided that where a person has
subscribed or agreed to subscribe under clause (a) of sub-section (1) for any shares in, or debentures of, the
company and before the issue of the prospectus or statement in lieu thereof any
other person or persons has or have
subscribed for any or all of those shares or debentures and that fact together
with the aggregate amount of commission payable under this section in respect
of such subscription is disclosed in such prospectus or statement, then, the
company may pay commission to the first-mentioned person in respect of such
subscription.]
(5) If default is made in complying with the provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to [five thousand] rupees.
Restrictions on purchase by company, or loans by company
for purchase, of its own or its holding company’s shares.
77. (1)
No company limited by shares, and no
company limited by guarantee and having a share capital, shall have power to
buy its own shares, unless the consequent reduction of capital is effected and
sanctioned in pursuance of sections 100 to 104 or of section 402.
(2) No public company, and no private company which is a subsidiary
of a public company, shall give, whether directly or indirectly, and whether
by means of a loan, guarantee, the provision of security or otherwise, any
financial assistance for the purpose of or in connection with a purchase or
subscription made or to be made by any person of or for any shares in the
company or in its holding company:
Provided that nothing in this sub-section shall be
taken to prohibit—
(a) the
lending of money by a banking company in the ordinary course of its business;
or
(b) the provision by a company, in accordance
with any scheme for the time being in force, of
money for the purchase of, or subscription for, fully paid shares in the
company or its holding company, being a purchase or subscription by trustees of
or for shares to be held by or for the benefit of employees of the company,
including any director holding a salaried office or employment in the company;
or
(c) the making by a company of loans, within the
limit laid down in sub-section (3), to persons (other than directors [* * *] or
managers) bona fide in the
employment of the company with a view to enabling those persons to purchase or
subscribe for fully paid shares in the company or its holding company to be
held by themselves by way of beneficial ownership.
(3) No loan made to any person in pursuance
of clause (c) of the foregoing
proviso shall exceed in amount his salary or wages at that time for a period of
six months.
(4) If a company acts in contravention of
sub-sections (1) to (3), the company, and every officer of the company who is
in default, shall be punishable with fine which may extend to [ten] thousand rupees.
(5) Nothing in this section shall affect the
right of a company to redeem any shares issued under section 80 or under any
corresponding provision in any previous companies law.
Power of company to purchase its
own securities.
77A. (1)
Notwithstanding anything contained in this Act, but subject to the provisions
of sub-section (2) of this section and section 77B, a company may purchase its
own shares or other specified securities (hereinafter referred to as
“buy-back”) out of—
(i) its free reserves; or
(ii) the
securities premium account; or
(iii) the
proceeds of any shares or other specified securities :
Provided
that no buy-back of any kind of shares or other
specified securities shall be made out of the proceeds of an earlier issue of
the same kind of shares or same kind of other specified securities.
(2) No company shall purchase its own shares or
other specified securities under sub-section (1), unless—
(a)
the buy-back is authorised
by its articles;
(b)
a special resolution has been passed in
general meeting of the company authorising the
buy-back:
[Provided
that nothing contained in this clause shall apply in any case where—
(A) the
buy-back is or less than ten per cent of the total paid-up equity capital and
free reserves of the company; and
(B) such
buy-back has been authorised by the Board by means of
a resolution passed at its meeting:
Provided
further that no offer of buy-back shall be made within a
period of three hundred and sixty-five days reckoned from the date of the
preceding offer of buy-back, if any.
Explanation : For the purposes of
this clause, the expression “offer of buy-back” means the offer of such
buy-back made in pursuance of the resolution of the Board referred in the first
proviso;]
(c) the
buy-back is or less than twenty-five per cent of the total paid-up capital and
free reserves of the company :
Provided
that the buy-back of equity shares in any financial year
shall not exceed twenty-five per cent of its total paid-up equity capital in
that financial year;
(d) the
ratio of the debt owed by the company is not more than twice the capital and its
free reserves after such buy-back :
Provided
that the Central Government may prescribe a higher ratio of
the debt than that specified under this clause for a class or classes of
companies.
Explanation.—For the purposes of
this clause, the expression “debt” includes all amounts of unsecured and
secured debts;
(e) all
the shares or other specified securities for buy-back are fully paid-up;
(f) the
buy-back of the shares or other specified securities listed on any recognised stock exchange is in accordance with the
regulations made by the Securities
and Exchange Board of India in this behalf;
(g) the
buy-back in respect of shares or other specified securities other than those
specified in clause (f) is in
accordance with the guidelines as may be prescribed.
(3) The notice of the meeting at which special resolution is
proposed to be passed shall be accompanied by an explanatory statement stating—
(a) a
full and complete disclosure of all material facts;
(b) the
necessity for the buy-back;
(c) the
class of security intended to be purchased under the buy-back;
(d) the
amount to be invested under the buy-back; and
(e) the
time limit for completion of buy-back.
(4) Every buy-back shall be completed within twelve months from
the date of passing the special resolution [or a resolution passed by the
Board] under clause (b) of
sub-section (2).
(5) The
buy-back under sub-section (1) may be—
(a) from
the existing security holders on a proportionate basis; or
(b) from
the open market; or
(c) from
odd lots, that is to say, where the lot
of securities of a public company, whose shares are listed on a recognised stock exchange, is smaller than such marketable
lot, as may be specified by the stock exchange; or
(d) by
purchasing the securities issued to employees of the company pursuant to a
scheme of stock option or sweat equity.
(6) Where a company has passed a special resolution under clause
(b) of sub-section (2) [or the
Board has passed a resolution under the first proviso to clause (b) of that sub-section] to buy-back
its own shares or other securities under this section, it shall, before making
such buy-back, file with the Registrar and the Securities and Exchange Board of
India a declaration of solvency in the form as may be prescribed and verified
by an affidavit to the effect that the Board has made a full inquiry into the
affairs of the company as a result of which they have formed an opinion that it
is capable of meeting its liabilities and will not be rendered insolvent
within a period of one year of the date of declaration adopted by the Board,
and signed by at least two directors of the company, one of whom shall be the
managing director, if any:
Provided that no declaration of solvency shall be filed with the Securities and
Exchange Board of India by a company whose shares are not listed on any recognised stock exchange.
(7) Where a company buys-back its own securities, it shall extinguish
and physically destroy the securities so bought-back within seven days of the
last date of completion of buy-back.
(8) Where a company completes a buy-back of its shares or other
specified securities under this section, it shall not make further issue of
the same kind of shares (including allotment of further shares under clause (a) of sub-section (1) of section 81)
or other specified securities within a period of [six] months except by way of
bonus issue or in the discharge of subsisting obligations such as conversion
of warrants, stock option schemes, sweat equity or conversion of preference
shares or debentures into equity shares.
(9) Where a company buys-back its securities under this section,
it shall maintain a register of the securities so bought, the consideration
paid for the securities bought-back, the date of cancellation of securities,
the date of extinguishing and physically destroying of securities and such
other particulars as may be prescribed.
(10) A company shall, after the completion of the buy-back under this
section, file with the Registrar and the Securities and Exchange Board of
India, a return containing such particulars relating to the buy-back within
thirty days of such completion, as may be prescribed :
Provided that no return shall be filed with the Securities and Exchange Board of
India by a company whose shares are not listed on any recognised
stock exchange.
(11) If a company makes default in complying with the provisions of
this section or any rules made thereunder, or any
regulations made under clause (f)
of sub-section (2), the company or any officer of the company who is in default
shall be punishable with imprisonment for a term which may extend to two years,
or with fine which may extend to fifty thousand rupees, or with both.
Explanation.—For the purposes of this section,—
(a) “specified
securities” includes employees’ stock option or other securities as may be
notified by the Central Government from time to time;
(b) “free
reserves” shall have the meaning assigned to it in clause (b) of Explanation to section 372A.
Transfer of certain sums to
capital redemption reserve account.
77AA. Where
a company purchases its own shares out of free reserves, then a sum equal to
the nominal value of the share so purchased shall be transferred to the capital
redemption reserve account referred to in clause (d) of the proviso to sub-section (1) of section 80 and details
of such transfer shall be disclosed in the balance-sheet.
Prohibition for buy-back in
certain circumstances
77B. (1) No company shall directly or indirectly purchase its own
shares or other specified securities—
(a) through
any subsidiary company including its own subsidiary companies; or
(b) through
any investment company or group of investment companies; or
(c) if
a default, by the company, in repayment of deposit or interest payable thereon,
redemption of debentures or preference shares or payment of dividend to any
shareholder or repayment of any term loan or interest payable thereon to any
financial institution or bank, is subsisting.
(2) No company shall directly or indirectly purchase its own shares
or other specified securities in case such company has not complied with the
provisions of sections 159, 207 and 211.]
Issue of shares at premium and
discount
Application of premiums received on issue of shares.
78. (1) Where a company issues shares at a
premium, whether for cash or otherwise, a sum equal to the aggregate amount or
value of the premiums on those shares shall be transferred to an account, to
be called “the [securities] premium account”; and the provisions of this Act
relating to the reduction of the share capital of a company shall, except as
provided in this section, apply as if the [securities] premium account were
paid-up share capital of the company.
(2) The [securities] premium
account may, notwithstanding anything in sub-section (1), be applied by the
company—
(a) in
paying up unissued shares of the company to be issued
to members of the company as fully paid
bonus shares;
(b) in writing off the preliminary expenses
of the company;
(c) in
writing off the expenses of, or the commission paid or discount allowed on, any
issue of shares or debentures of the company; or
(d) in
providing for the premium payable on the redemption of any redeemable
preference shares or of any debentures of the company.
(3) Where a company has, before the commencement of this Act,
issued any shares at a premium, this section shall apply as if the shares had
been issued after the commencement of this Act :
Provided that any part of the premiums which has been so applied that it does
not at the commencement of this Act form an identifiable part of the company’s
reserves within the meaning of Schedule VI, shall be disregarded in determining
the sum to be included in the [securities] premium account.
Power to issue shares at a discount.
79. (1) A company shall not issue shares at a discount except as
provided in this section.
(2) A company may issue at a
discount shares in the company of a class already issued, if the following
conditions are fulfilled, namely,—
(i) the issue of the shares at a discount
is authorised by a resolution passed by the company
in general meeting and sanctioned by the [Central Government];
(ii) the
resolution specifies the maximum rate of discount [* * *] at which the shares
are to be issued :
[Provided that no such resolution shall
be sanctioned by the [Central
Government] if the maximum rate of discount specified in the
resolution exceeds ten per cent, unless [the Central Government] is of opinion that a higher
percentage of discount may be allowed in the special circumstances of the
case;]
(iii) not less than one year has at the date of
the issue elapsed since the date on which
the company was entitled to commence business; and
(iv) the shares to be issued at a discount are
issued within two months after the date on which the issue is sanctioned by the
[Central Government] or
within such extended time as the [Central Government] may
allow.
(3) Where a company has passed a resolution authorising the issue of shares at a discount, it may apply
to the [Central Government]
for an order sanctioning the issue; and on any such application, the [Central Government], if,
having regard to all the circumstances of the case, it thinks proper so to do,
may make an order sanctioning the issue on such terms and conditions as it
thinks fit :
[Provided that
in the case of revival and rehabilitation of sick industrial companies under
Chapter VIA, the provisions of this section shall have effect as if for the words
“Central Government”, the word “Tribunal” had been substituted.]
(4) Every prospectus relating to the issue of
the shares shall contain particulars of the discount allowed on the issue of
the shares or of so much of that discount as has not been written off at the
date of the issue of the prospectus.
If default is made in complying
with this sub-section, the company, and every officer of the company who is in
default, shall be punishable with fine which may extend to [five hundred]
rupees.
79A. (1) Notwithstanding
anything contained in section 79, a company may issue sweat equity shares of a
class of shares already issued if the following conditions are fulfilled,
namely :—
(a) the issue of sweat equity shares is authorised by a special resolution passed by the company in
the general meeting;
(b) the resolution specifies the number of
shares, current market price, consideration, if any, and the class or classes
of directors or employees to whom such equity shares are to be issued;
(c) not less than one year has, at the date of
the issue, elapsed since the date on which the company was entitled to commence
business;
(d) the
sweat equity shares of a company whose equity shares are listed on a recognised stock exchange, are issued, in accordance with
the regulations made by the Securities and Exchange Board of India in this
behalf :
Provided
that in the case of a company whose equity shares are not
listed on any recognised stock exchange, the sweat
equity shares are issued in accordance with the guidelines as may be
prescribed.
Explanation
II.—For the purposes of this Act,
the expression “sweat equity shares” means equity shares issued by the company
to employees or directors at a discount or for consideration other than cash for
providing know-how or making available rights in the nature of intellectual
property rights or value additions, by whatever name called.
(2) All the limitations, restrictions and
provisions relating to equity shares shall be applicable to such sweat equity
shares issued under sub-section (1).]
[Issue
and redemption of preference shares]
Power
to issue redeemable preference shares.
80. (1) Subject
to the provisions of this section, a company limited by shares may, if so authorised by its articles, issue preference shares which
are, or at the option of the company are to be liable, to be redeemed :
Provided that—
(a) no
such shares shall be redeemed except out of profits of the company which would
otherwise be available for dividend or out of the proceeds of a fresh issue of
shares made for the purposes of the redemption;
(b) no such shares shall
be redeemed unless they are fully paid;
(c) the
premium, if any, payable on redemption shall have been provided for out of the
profits of the company or out of the company’s [security] premium account,
before the shares are redeemed;
(d) where
any such shares are redeemed otherwise than out of the proceeds of a fresh
issue, there shall, out of profits which would otherwise have been available
for dividend, be transferred to a reserve fund, to be called the capital
redemption reserve [account], a sum equal to the nominal amount of the shares
redeemed; and the provisions of this Act relating to the reduction of the share
capital of a company shall, except as provided in this section, apply as if the
capital redemption reserve [account] were paid-up share capital of the company.
(2) Subject to the provisions of this
section, the redemption of preference shares thereunder
may be effected on such terms and in such manner as may be provided by the
articles of the company.
(3) The redemption of preference shares under
this section by a company shall not be taken as reducing the amount of its authorised share capital.
(4) Where in pursuance of this section, a company
has redeemed or is about to redeem any preference shares, it shall have power
to issue shares up to the nominal amount of the shares redeemed or to be
redeemed as if those shares had never been issued; and accordingly the share
capital of the company shall not, for the purpose of calculating the fees
payable under [section 611], be deemed to be increased by the issue of shares
in pursuance of this sub-section :
Provided that, where new shares are issued before the
redemption of the old shares, the new shares shall not, so far as relates to
stamp duty, be deemed to have been issued in pursuance of this sub-section
unless the old shares are redeemed within one month after the issue of the new
shares.
(5) The capital redemption reserve [account]
may, notwithstanding anything in this section, be applied by the company, in
paying up unissued shares of the company to be issued
to members of the company as fully paid bonus shares.
[(5A)
Notwithstanding anything contained in
this Act, no company limited by shares shall, after the commencement of the
Companies (Amendment) Act, 1996, issue any preference share which is
irredeemable or is redeemable after the expiry of a period of twenty years from
the date of its issue.]
(6) If a company fails to comply with the provisions of this
section, the company, and every officer of the company who is in default, shall
be punishable with fine which may extend to [ten] thousand rupees.
[Redemption
of irredeemable preference shares, etc.
80A. (1) Notwithstanding anything contained in the
terms of issue of any preference shares, every preference share issued before
the commencement of the Companies (Amendment) Act, 1988,—
(a) which is irredeemable, shall be redeemed by
the company within a period not exceeding five years from such commencement, or
(b) which is not redeemable before the expiry of
ten years from the date of issue thereon in accordance with the terms of its
issue and which had not been redeemed before such commencement, shall be
redeemed by the company on the date on which such share is due for redemption
or within a period not exceeding ten years from such commencement, whichever is
earlier :
Provided that where a company is not in a position to redeem any such share within the period aforesaid and to pay the dividend, if any, due thereon (such shares being hereinafter referred to as unredeemed preference shares), it may, with the consent of the [Tribunal],on a petition made by it in this behalf and notwithstanding anything contained in this Act, issue further redeemable preference shares equal to the amounts due (including the dividend thereon), in respect of the unredeemed preference shares, and on the issue of such further redeemable preference shares, the unredeemed shares shall be deemed to have been redeemed.
(2) Nothing contained in
section 106 or any scheme referred to in sections 391 to 395, or in any scheme
made under section 396, shall be deemed to confer power on any class of
shareholders by resolution or on any court [or the Tribunal] or the Central Government to vary or
modify the provisions of this section.
(3) If any default is made in
complying with the provisions of this section,—
(a) the
company making such default shall be punishable with fine which may extend to
[ten] thousand rupees for every day during which such default continues; and
(b) every
officer of the company who is in default shall be punishable with imprisonment
for a term which may extend to three years and shall also be liable to fine.]
Further issue of capital.
81. (1) Where at any time
after the expiry of two years from the formation of a company or at any time
after the expiry of one year from the allotment of shares in that company made
for the first time after its formation, whichever is earlier, it is proposed to
increase the subscribed capital of the company by allotment of further shares,
then,—]
(a) such
[further] shares shall be offered to the persons who, at the date of the offer,
are holders of the equity shares of the company, in proportion, as nearly as
circumstances admit, to the capital paid-up on those shares at that date;
(b) the
offer aforesaid shall be made by notice specifying the number of shares offered
and limiting a time not being less than fifteen days from the date of the offer
within which the offer, if not accepted, will be deemed to have been declined;
(c) unless
the articles of the company otherwise provide, the offer aforesaid shall be
deemed to include a right exercisable by the person concerned to renounce the
shares offered to him or any of them in favour of any
other person; and the notice referred to in clause (b) shall contain a statement of this right;
(d) after
the expiry of the time specified in the notice aforesaid, or on receipt of
earlier intimation from the person to whom such notice is given that he
declines to accept the shares offered, the Board of directors may dispose of
them in such manner as they think most beneficial to the company.
Explanation : In
this sub-section, “equity share capital” and “equity shares” have the same
meaning as in section 85.
(1A) Notwithstanding anything contained in sub-section (1), the
further shares aforesaid may be offered to any persons [whether or not those
persons include the persons referred to in clause (a) of sub-section (1)] in any manner whatsoever—
(a) if a special resolution to that effect
is passed by the company in general meeting, or
(b) where
no such special resolution is passed, if the votes cast (whether on a show of
hands, or on a poll, as the case may be) in favour of
the proposal contained in the resolution moved in that general meeting
(including the casting vote, if any, of the chairman) by members who, being
entitled so to do, vote in person, or where proxies are allowed, by proxy,
exceed the votes, if any, cast against the proposal by members so entitled and
voting and the Central Government is satisfied, on an application made by the Board
of directors in this behalf, that the proposal is most beneficial to the
company.]
(2) Nothing in clause (c)
of sub-section (1) shall be deemed—
(a) to extend the time within which the
offer should be accepted, or
(b) to
authorise any person to exercise the right of renunciation
for a second time, on the ground that the person in whose favour
the renunciation was first made has declined to take the shares comprised in
the renunciation.
(3) Nothing in this section shall apply—
(a) to a private company; or
(b) to
the increase of the subscribed capital of a public company caused by the
exercise of an option attached to debentures issued or loans raised by the
company—
(i) to
convert such debentures or loans into shares in the company, or
(ii) to subscribe for
shares in the company :
[Provided that the terms of issue of
such debentures or the terms of such loans include a term providing for such
option and such term—
(a) either
has been approved by the Central Government before the issue of debentures or
the raising of the loans, or is in conformity with the rules, if any, made by
that Government in this behalf; and
(b) in
the case of debentures or loans other than debentures issued to, or loans
obtained from, the Government or any institution specified by the Central
Government in this behalf, has also been approved by a special resolution
passed by the company in general meeting before the issue of the debentures or
the raising of the loans.]]
(4) Notwithstanding anything contained in the foregoing provisions
of this section, where any debentures have been issued to, or loans have been
obtained from, the Government by a company, whether such debentures have been
issued or loans have been obtained before or after the commencement of the
Companies (Amendment) Act, 1963, the Central Government may, if in its opinion
it is necessary in the public interest so to do, by order, direct that such
debentures or loans or any part thereof shall be converted into shares in the
company on such terms and conditions as appear to that Government to be
reasonable in the circumstances of the case, even if the terms of issue of such
debentures or the terms of such loans do not include a term providing for an
option for such conversion.
(5) In determining the terms and conditions of such conversion,
the Central Government shall have due regard to the following circumstances,
that is to say, the financial position of the company, the terms of issue of
the debentures or the terms of the loans, as the case may be, the rate of
interest payable on the debentures or the loans, the capital of the company,
its loan liabilities, its reserves, its profits during the preceding five years
and the current market price of the shares in the company.
(6) A copy of every order proposed to be issued by the Central Government under sub-section (4) shall be laid in draft before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions.
(7) If the terms and conditions of such conversion are not acceptable
to the company, the company may, within thirty days from the date of
communication to it of such order or within such further time as may be granted
by the Court, prefer an appeal to the Court in regard to such terms and
conditions and the decision of the Court on such appeal and, subject only to
such decision, the order of the Central Government under sub-section (4) shall
be final and conclusive.]
Share capital and debentures
Nature,
numbering and certificate of shares
Nature of
shares [or debentures].
82. The
shares [or debentures] or other interest of any member in a company shall be
movable property, transferable in the manner provided by the articles of the
company.
83. Each share in a company having
a share capital shall be distinguished by its appropriate number
:
Provided that nothing in this section shall apply to
the shares held with a depository.]
84. [(1)] A
certificate, under the common seal of the company, specifying any shares held
by any member, shall be prima facie
evidence of the title of the member to such shares.
[(2) A certificate may be renewed or a duplicate of a certificate
may be issued if such certificate—
(a) is
proved to have been lost or destroyed, or
(b) having
been defaced or mutilated or torn is surrendered to the company.
(3) If a company with intent to defraud renews a certificate or
issues a duplicate thereof, the company shall be punishable with fine which may
extend to ten thousand rupees and every officer of the company who is in
default shall be punishable with imprisonment for a term which may extend to
six months, or with fine which may extend to [one lakh]
rupees, or with both.
(4) Notwithstanding anything contained in the articles of association
of a company, the manner of issue or renewal of a certificate or issue of a
duplicate thereof, the form of a certificate (original or renewed) or of a
duplicate thereof, the particulars to be entered in the register of members or
in the register of renewed or duplicate certificates, the form of such
registers, the fee on payment of which, the terms and conditions, if any
(including terms and conditions as to evidence and indemnity and the payment of
out-of-pocket expenses incurred by a company in investigating evidence) on
which a certificate may be renewed or a duplicate thereof may be issued, shall
be such as may be prescribed8.]
Two kinds
of share capital.
85. (1) “Preference
share capital” means, with reference to any company limited by shares, whether
formed before or after the commencement of this Act, that part of the share
capital of the company which fulfils both the following requirements, namely :—
(a) that
as respects dividends, it carries or will carry a preferential right to be paid
a fixed amount or an amount calculated at a fixed rate, which may be either
free of or subject to income-tax; and
(b) that
as respect capital, it carries or will carry, on a winding up or repayment of
capital, a preferential right to be repaid the amount of the capital paid-up or
deemed to have been paid-up, whether or not there is a preferential right to
the payment of either or both of the following amounts, namely :—
(i) any money remaining unpaid, in respect of
the amounts specified in clause (a),
up to the date of the winding up or repayment of capital; and
(ii) any
fixed premium or premium on any fixed scale, specified in the memorandum or
articles of the company.
Explanation : Capital shall be deemed to be preference
capital, notwithstanding that it is entitled to either or both of the following
rights, namely :—
(i) that, as respects dividends, in addition
to the preferential right to the amount specified in clause (a), it has a right to participate,
whether fully or to a limited extent, with capital not entitled to the
preferential right aforesaid;
(ii) that,
as respects capital, in addition to the preferential right to the repayment,
on a winding up, of the amounts specified in clause (b), it has a right to participate, whether fully or to a limited
extent, with capital not entitled to that preferential right in any surplus
which may remain after the entire capital has been repaid.
(2) “Equity share capital” means, with reference to any such company,
all share capital which is not preference share capital.
(3) The expressions “preference share” and “equity share” shall be
construed accordingly.
New issues of share capital to be only of two kinds.
86. The share capital of a company
limited by shares shall be of two kinds only, namely :—
(a) equity
share capital—
(i) with voting rights; or
(ii) with
differential rights as to dividend, voting or otherwise in accordance with such
rules and subject to such conditions as may be prescribed;
(b) preference
share capital.]
87. (1)Subject to the provisions of section 89 and
sub-section (2) of section 92,—
(a) every
member of a company limited by shares and holding any equity share capital
therein shall have a right to vote, in respect of such capital, on every
resolution placed before the company; and
(b) his
voting right on a poll shall be in proportion to his share of the paid-up
equity capital of the company.
(2)(a)Subject as aforesaid and save as provided in clause (b) of this sub-section, every member
of a company limited by shares and holding any preference share capital therein
shall, in respect of such capital, have a right to vote only on resolutions
placed before the company which directly affect the rights attached to his
preference shares.
Explanation : Any resolution for winding up the company or
for the repayment or reduction of its share capital shall be deemed directly to
affect the rights attached to preference shares within the meaning of this
clause.
(b) Subject as
aforesaid, every member of a company limited by shares and holding any preference
share capital therein shall, in respect of such capital, be entitled to vote on
every resolution placed before the company at any meeting, if the dividend due
on such capital or any part of such dividend has remained unpaid—
(i) in the case of cumulative preference
shares, in respect of an aggregate period of not less than two years preceding
the date of commencement of the meeting; and
(ii) in
the case of non-cumulative preference shares, either in respect of a period of
not less than two years ending with the expiry of the financial year
immediately preceding the commencement of the meeting or in respect of an
aggregate period of not less than three years comprised in the six years ending
with the expiry of the financial year aforesaid.
Explanation : For the purposes of this clause, dividend
shall be deemed to be due on preference shares in respect of any period,
whether a dividend has been declared by the company on such shares for such
period or not,—
(a) on
the last day specified for the payment of such dividend for such period, in the
articles or other instrument executed by the company in that behalf; or
(b) in
case no day is so specified, on the day immediately following such period.
(c) Where the holder of any preference share has a
right to vote on any resolution in accordance with the provisions of this
sub-section, his voting right on a poll, as the holder of such share, shall,
subject to the provisions of section 89 and sub-section (2) of section 92, be
in the same proportion as the capital paid-up in respect of the preference
share bears to the total paid-up equity capital of the company.
Prohibition of issue of shares with disproportionate
rights.
88. Omitted
by the Companies (Amendment) Act, 2000, w.e.f.
13-12-2000.]
Termination of disproportionately excessive voting rights
in existing companies.
89. (1)If at the commencement of this Act any
shares, by whatever name called, of any existing company limited by shares
carry voting rights in excess of the voting rights attaching under sub-section
(1) of section 87 to equity shares in respect of which the same amount of
capital has been paid-up, the company shall, within a period of one year from
the commencement of this Act, reduce the voting rights in respect of the shares
first-mentioned so as to bring them into conformity with the voting rights attached
to such equity shares under sub-section (1) of section 87.
(2) Before the voting rights are brought into such conformity,
the holders of the shares in question shall not exercise in respect thereof
voting rights in excess of what would have been exercisable by them if the
capital paid-up on their shares had been equity share capital, in respect of
the following resolutions placed before the company, namely :—
(a) any
resolution relating to the appointment or reappointment of a director or to
any variation in the terms of an agreement between the company and a managing
or wholetime director thereof;]
(b) any
resolution relating to the appointment of buying or selling agents.
(c) [***]
(3) If, by reason of the failure of the requisite proportion of
any class of members to agree, it is not found possible to comply with the
provisions of sub-section (1), the company shall, within one month of the
expiry of the period of one year mentioned in that sub-section, apply to the
Court for an order specifying the manner in which the provisions of that
sub-section shall be complied with; and any order made by the Court in this
behalf shall bind the company and all its shareholders.
If default is made in complying with this
sub-section, the company, and every officer of the company who is in default,
shall be punishable with fine which may extend to [ten] thousand rupees.
(4) The Central Government may, in respect of any shares issued by
a company before the 1st day of December, 1949, exempt the company from the
requirements of sub-sections (1), (2) and (3), wholly or in part, if in the
opinion of the Central Government the exemption is required either in the
public interest or in the interests of the company or of any class of
shareholders therein or of the creditors or any class of creditors thereof.
Every order of exemption made by the Central
Government under this sub-section shall be laid before both Houses of
Parliament as soon as may be after it is made.
90. (1) Nothing
in sections 85, 86, 88 and 89 shall, in the case of any shares issued by a
public company before the commencement of this Act, affect any voting rights
attached to the shares save as otherwise provided in section 89, or any rights
attached to the shares as to dividend, capital or otherwise.
(2) Nothing in sections 85 to 89 shall apply to a private company,
unless it is a subsidiary of a public company.
(3) For the removal of doubts, it is hereby declared that on and
from the commencement of the Companies (Amendment) Act, 1974, the provisions of
section 87 shall apply in relation to the voting rights attached to preference
shares issued by a public company before the 1st day of April, 1956, as they
apply to the preference shares issued by a public company after that date.
Explanation : For the purposes of this section,
references to a public company shall be construed as including references to a
private company which is a subsidiary of a public company.]
Miscellaneous
provisions as to share capital
Calls on
shares of same class to be made on uniform basis.
91. Where after the
commencement of this Act, any calls for further share capital are made on shares, such calls shall be made on a uniform basis on all
shares falling under the same class.
Explanation : For the purposes of this section, shares of
the same nominal value on which different amounts have been paid-up shall not be
deemed to fall under the same class.
Power of company to accept unpaid share capital, although
not called up.
92. (1) A
company may, if so authorised by its articles accept
from any member the whole or a part of the amount remaining unpaid on any shares
held by him, although no part of that amount has been called up.
(2) The member shall not however be entitled, where the company is
one limited by shares, to any voting rights in respect of the moneys so paid by
him until the same would, but for such payment, become presently payable.
Payment of dividend in proportion to amount paid-up.
93. A company may,
if so authorised by its articles, pay dividends in
proportion to the amount paid-up on each share where a larger amount is paid-up
on some shares than on others.
Power of limited company to alter its share capital.
94. (1) A
limited company having a share capital, may, if so authorised
by its articles, alter the conditions of its memorandum as follows, that is to
say, it may—
(a) increase
its share capital by such amount as it thinks expedient by issuing new shares;
(b) consolidate
and divide all or any of its share capital into shares of larger amount than
its existing shares;
(c) convert
all or any of its fully paid-up shares into stock, and reconvert that stock
into fully paid-up shares of any denomination;
(d) sub-divide
its shares, or any of them, into shares of smaller amount than is fixed by the
memorandum, so however, that in the sub-division the proportion between the
amount paid and the amount, if any, unpaid on each reduced share shall be the
same as it was in the case of the share from which the reduced share is
derived;
(e) cancel
shares which, at the date of the passing of the resolution in that behalf, have
not been taken or agreed to be taken by any person, and diminish the amount of
its share capital by the amount of the shares so cancelled.
(2) The powers conferred by this section shall be exercised by
the company in general meeting and shall not require to be confirmed by the
Court.
(3) A cancellation of shares in pursuance of this section shall
not be deemed to be a reduction of share capital within the meaning of this
Act.
[Share capital to stand increased
where an order is made under section 81(4).
94A. (1) Notwithstanding anything contained in
this Act, where the Central Government has, by an order made under sub-section
(4) of section 81, directed that any debenture or loan or any part thereof
shall be converted into shares in a company, the conditions contained in the
memorandum of such company shall, where such order has the effect of increasing
the nominal share capital of the company, stand altered and the nominal share
capital of such company shall stand increased by an amount equal to the amount
of the value of the shares into which such debentures or loans or part thereof
has been converted.
(2) Where, in pursuance of an option attached to debentures issued
or loans raised by the company, any public financial institution proposes to
convert such debentures or loans into shares in the company, the Central
Government may, on the application of such public financial institution,
direct that the conditions contained in the memorandum of such company shall
stand altered and the nominal share capital of such company shall stand
increased by an amount equal to the amount of the value of the shares into
which such debentures or loans or part thereof has been converted.
(3) Where the memorandum of a company becomes altered, whether by
reason of an order made by the Central Government under sub-section (4) of
section 81 or sub-section (2) of this section, the Central Government shall
send a copy of such order to the Registrar and also to the company and on
receipt of such order, the company shall file in the prescribed form, within
thirty days from the date of such receipt, a return to the Registrar with
regard to the increase of share capital and the Registrar shall, on receipt of
such order and, return, carry out the necessary alterations in the memorandum
of the company.]
Notice to Registrar of consolidation of share capital,
conversion of shares into stock, etc.
95. (1) If a company having a share capital has—
(a) consolidated and
divided its share capital into shares of larger amount than its existing
shares;
(b) converted any shares
into stock;
(c) re-converted any
stock into shares;
(d) sub-divided its
shares or any of them;
(e) redeemed any
redeemable preference shares; or
(f) cancelled any shares,
otherwise than in connection with a reduction of share capital under sections 100 to 104 ;
the company shall within [thirty days] after
doing so, give notice thereof to the Registrar specifying, as the case may be,
the shares consolidated, divided, converted, sub-divided, redeemed or
cancelled, or the stock reconverted.
(2) The Registrar shall thereupon record the notice, and make any
alterations which may be necessary in the company’s memorandum or articles or
both.
(3) If default is made in complying with sub-section (1), the
company, and every officer of the company who is in default, shall be
punishable with fine which may extend to [five hundred] rupees for every day
during which the default continues.
Effect of conversion of shares into stock.
96. Where
a company having a share capital has converted any of its shares into stock,
and given notice of the conversion to the Registrar, all the provisions of this
Act which are applicable to shares only, shall cease to apply as to so much of
the share capital as is converted into stock.
Notice of increase of share capital or of members.
97. (1) Where
a company having a share capital, whether its shares have or have not been
converted into stock, has increased its share capital beyond the authorised capital, and where a company, not being a
company limited by shares, has increased the number of its members beyond the
registered number, it shall file with the Registrar, notice of the increase of
capital or of members within [thirty] days after the passing of the resolution
authorising the increase; and the Registrar shall
record the increase and also make any alterations which may be necessary in the
company’s memorandum or articles or both.
(2) The notice to be given as aforesaid shall include particulars
of the classes of shares affected and the conditions, if any, subject to which
the new shares have been or are to be issued.
(3) If default is made in complying with this section, the company,
and every officer of the company who is in default, shall be punishable with
fine which may extend to [five hundred] rupees for every day during which the
default continues.
Power of unlimited company to provide for reserve share
capital on re-registration.
98. An
unlimited company having a share capital may, by its resolution for
registration as a limited company in pursuance of this Act, do either or both
of the following things, namely:—
(a) increase
the nominal amount of its share capital by increasing the nominal amount of each
of its shares, but subject to the condition that no part of the increased
capital shall be capable of being called up except in the event and for the purposes
of the company being wound up;
(b) provide
that a specified portion of its uncalled share capital shall not be capable of
being called up except in the event and for the purposes of the company being
wound up.
Reserve liability of limited company.
99. A
limited company may, by special resolution, determine that any portion of its
share capital which has not been already called up shall not be capable of
being called up, except in the event and for the purposes of the company being
wound up, and thereupon that portion of its share capital shall not be capable
of being called up except in that event and for those purposes.
Special
resolution for reduction of share capital.
100. (1)
Subject to confirmation by the [Tribunal],
a company limited by shares or a company limited by guarantee and having a share
capital, may, if so authorised by its articles, by
special resolution, reduce its share capital in any way; and in particular and
without prejudice to the generality of the foregoing power, may—
(a) extinguish
or reduce the liability on any of its shares in respect of share capital not
paid-up;
(b) either with or without extinguishing or
reducing liability on any of its shares, cancel any paid-up share capital
which is lost, or is unrepresented by available assets; or
(c) either with or without extinguishing or
reducing liability on any of its shares, pay of any paid-up share capital which
is in excess of the wants of the company;
and may, if and so far as is
necessary, alter its memorandum by reducing the amount of its share capital and
of its shares accordingly.
(2) A special resolution under this section
is in this Act referred to as “a resolution for reducing share capital”.