Depreciation rates
de-linked from Income-tax Act
(Ss. 205, 350 Sch.
XIV)
By the Companies (Amendment) Act, 1988, the depreciation rates have been delinked from the Income-tax Act by amending sections 205 and 350 of the Act. The companies are now required to provide for depreciation as per rates specified in the new Schedule XIV. The rates of depreciation under Schedule XIV have come into force with effect from 2-4-1987. However, for purposes of Income-tax Act, the companies may continue to avail of the benefit by resorting to rates prescribed under that Act.
Remuneration paid to a foreign national
RESOLVED that pursuant to
the provisions of sections 198/269/309 of the Companies Act, 1956 and subject
to the approval of the Central Government, Mr. ABC, the Managing Director of
the company, who is a foreign national, be and is hereby paid a remuneration of
Rs.________ for a period of five years with effect from 1st October,
2002 upon the terms and conditions as set out in the agreement submitted to
this meeting.
RESOLVED FURTHER that the
Board of Directors of the company be authorised to alter or vary the terms and
conditions of the said agreement in such manner as it may deem fit and proper.
1. Central Government approval necessary for foreign nationals.-The Managing Director of a
company, if appointed and paid remuneration in accordance with Schedule XIII,
is not required to take Central Government's approval but in case of foreign
nationals who are not residents in India and thereby they do not comply with
the conditions given in clause (e) of Part I of Schedule XIII of the Companies
Act, 1956 have to go to Central Government irrespective of the limit of
remuneration given as per Part II of Schedule XIII.
2. The Clearance from Ministry of Home Affairs.-For appointing a foreign
national as a managerial personnel of a company incorporated in India, sanction
from the Ministry of Home Affairs is necessary which is usually taken by the
Central Government (Department of Company Affairs) by forwarding a copy of the
application filed with them for approval under the Companies act, 1956.
3. Private companies exempted.-This section does not apply to a private
company which is not a subsidiary of a public company.
4. Government companies exempted.-Provisions of this section
do not apply to a government company.
5. Compliance Certificate.-Companies having paid-up share capital
of less than Rs. 2 Crores but equal to or more than Rs. 10 lakhs are required
to obtain a Compliance Certificate from a secretary in whole-time
practice to be filed with the Registrar of Companies mentioning therein inter
alia that the appointment of Managing Director has been made in compliance with
the provisions of section 269 read with Schedule XIII of the Act and approval
of the Central Government has been obtained in respect of the appointment of
Mr. ABC not being in terms of Schedule XIII as per paragraph 15 of the Form of
Compliance Certificate appended to the Companies (Compliance Certificate)
Rules, 2001.
Payment of dividend"
S.
205-Payment of dividend-Ordinary Resolution
“RESOLVED that the balance
of Rs. 8,50,00,000/- being the current year's profit of the Company,
after transfer of Rs. 1,20,00,000/- to the general reserve and carry
forward of Rs. 8,75,000/- in the profit and loss account, be as
recommended by the Board of Directors applied for payment of dividend for the
year ended ________ subject to deduction of tax at source as under:
(i) on redeemable cumulative
preference shares at the
rate
of eleven per cent per annum
Rs.
50,00,000/-
(ii) on the equity shares at
the
rate
of twenty-five per cent
per share Rs.
8,00,00,000/-
________________
Rs. 8,50,00,000/-
________________”
1.Transfer of specified percentage to reserves.-Section 205(2A) requires a
company before distributing dividend exceeding 10% of distributable profit of
the company to transfer a specified percentage of the distributable income to
reserves.
2. Payment of dividend by investment company.-An investment company must
distribute 90% of its distributable income and must carry 10% of its
distributable profits to reserve without this 10% being allowed deduction for
purposes of income-tax. This results in great hardship being caused to
investment companies.
3. Free reserves-meaning.-In sub-section (2-A)
the expression reserves means free reserves and the expression free reserves
denotes that the reserves are not created or set apart or intended for any
special purpose or purposes.
4. Voluntary transfer of higher percentage to reserves.-A company can transfer to
reserves a higher percentage of its profits than that applicable to the
proposed dividend slab such transfer being of less than 10% of its current
profits.
5. Dividend warrant to contain TDS information.-Dividend warrant or
intimation sent to shareholders by companies should adopt a format for dividend
warrants to include information on TDS and the said format of TDS should be
printed on the reverse side of the warrant duly signed by persons responsible
for deduction of tax. [General Circular No. 17 of 2002 dated 5-7-2002].
Recommendation for payment of dividend
"RESOLVED that the
recommendation of the Board of Directors for payment of 10% dividend on the
paid-up equity share capital and 5% dividend on the preference share
capital be and is hereby approved and the dividend so declared."
1. Dividend not to exceed the rate recommended.-Dividends should be declared
by a company in a general meeting but no dividend should exceed the amount
recommended by the Board of Directors of that Company.
2. Mode of Payment.-Dividend in respect of shares may be paid by cheque
or warrant sent through the post direct to the registered address of the holder
or in case of joint holders, to the registered address of that one of the joint
holders who is first named on the register of members or to such person and to
such address as the holder or Joint holders may in writing direct.
"RESOLVED that pursuant
to the recommendations made by the Board of Directors of the company, a
dividend at the rate of Rs. ________ per equity share to the equity
shareholders of the company whose names appear in the Register of Members as on
________ be and is hereby declared out of the current/accumulated profits of
the company for the year ended on ________
RESOLVED FURTHER that
dividend warrants be posted within 30 days hereof to all the shareholders who
are entitled to receive the payment."
OR
"RESOLVED that a final dividend of ________ per cent out of the current/accumulated profits of the company per equity share to the holders of equity shares of the company as recommended by the Board of Directors be and is hereby declared for the year ended _____
RESOLVED FURTHER that
dividend warrants be posted within 30 days hereof to all the equity
shareholders whose names appear on the register of members as on ________
Declaration of final dividend and approval of interim dividend
"RESOLVED that a final
dividend of 10% on the paid-up equity share capital of Rs. 50,00,000/- of
the Company as recommended by the Board is hereby declared.
RESOLVED FURTHER that the
interim dividend of 5% on the paid up equity share capital of Rs. 50,00,000/-
declared by the Board at its meeting held on ________ be and is hereby
approved."
1. View of the Department of Company Affairs.-The Department Is of the
view that approval of dividend is the privilege of the general meeting and the
Board can pay interim dividend if so authorised by the Articles of Association
subject to the regularisation of the interim dividend by the Company in general
meeting [Letter No. 8/13/(205A)/79-CL-V, dated 18-7-1981
].
2. Compliance Certificate.-Companies having paid-up share capital
of less than Rs. 2 Crores but equal to or more than Rs. 10 lakhs are required
to obtain a Compliance Certificate from a secretary in whole-time
practice to be filed with the Registrar of Companies mentioning therein inter
alia that the company has deposited the amount of dividend declared including
interim dividend in a separate bank account on which is within 5 days from the
date of declaration of such dividend and has paid posted warrants for dividends
to all the members within a period of 30 days from the date of declaration and
that all unclaimed/unpaid dividend has been, transferred to Unpaid Dividend
Account of the Company with a particular Bank on a particular date and has also
transferred the amounts in unpaid dividend account, which have remained
unclaimed or unpaid for a period of seven years to Investor Protection Fund as
per paragraphs 13(ii), (iii) and (iv) of the Form of Compliance Certificate
appended to Companies (Compliance Certificate) Rules, 2001.
Payment of interim dividend as final dividend
"RESOLVED that interim
dividend at the rate of ten per cent on the paid-up equity share capital
of Rs. 30,00,000/- of the Company, paid by the Board of Directors as
interim dividend by the Company during the year, at meeting held on the
________ 2002 be and is hereby declared as final dividend for the year ended
________ 2002"
"RESOLVED that a dividend of ________ per cent per preference share as recommended by the Board of Directors of the company be and is hereby declared and that the same be paid to all the preference share holders whose names appear on the Register of Members as on ________
RESOLVED FURTHER that the
dividend warrants be posted by ________ to all the preference shareholders who
are entitled to receive the payment."
1. Board empowered to declare interim dividend.-Pursuant to Regulation 85 of
Table 'A' of Schedule I to the Companies Act, 1956, the Board may from time to
time pay to the members such interim dividends as appear to it to be justified
by the profits of the company.
2. When interim dividend can be paid.-An interim dividend need not
necessarily be paid before the financial year of the company ends. An interim
dividend is a dividend paid by the Directors at any time between two annual
General Meetings. In re: Fowilt, (1922) 2 Ch 442.
3. Members' confirmation necessary for payment of interim dividend as
final dividend.-Interim dividend paid by the Directors to be declared as the final
dividend, members' confirmation of such payment of dividend as final dividend
is necessary.
4. Interim dividend does not create debt.-The resolution of the Board
of Directors to pay interim dividend does not create a debt between the company
and the shareholders.
5. Interim dividend can be rescinded.-The interim dividend once
declared by the Directors may be rescinded by a subsequent Board Resolution.
6. Dividend includes interim dividend.-Clause (14A) has been
inserted to section 2 of the Act, by the Companies (Amendment) Act, 2000 to
provide for dividend to include interim dividend.
Formalities required to be complied for
declaring final dividend
For declaring final dividend-
(i) The Board of Directors
should consider the amount of dividend to be recommended to the ensuing Annual
General Meeting for declaration.
(ii) it is necessary to
notify the Stock Exchange without delay the date of the Board Meeting at which
the recommendation of a dividend is due to be considered if the company is
listed on a recognised Stock Exchange.
(iii) The required
percentage of profits must be transferred to the company's reserves (Rule 2 of
the Transfer of Profits to Reserve Rules, 1975).
(iv) The company may
transfer to reserve more than ten per cent of the current profits (Rule 3 of
the said Rules) after complying with the requirements of the said Rules.
(v) It is necessary to
inform the Stock Exchanges with which the shares in the company are listed,
immediately after the holding of the Board Meeting:
(a) all
dividends recommended or declared;
(b) the total turn-over,
gross profit/loss, provision for depreciation, tax provision and net profit for
the year (with comparison with the previous year) and the amount appropriated
from reserves, capital profits, accumulated profits of past years or other
special source to provide partly or wholly for the dividend even if this calls
for qualification that such information is provisional or subject to audit.
(vi) It is necessary to
include in the agenda of the Annual General Meeting the business of declaration
of dividend.
(vii) Necessary resolution
in the Annual General Meeting should be passed for declaring the dividend.
(viii) It is also necessary
to fix and notify the Stock Exchange at least twenty-one days in advance
of the date on and from which the dividend will be payable and also to issue
simultaneously the dividend warrant which shall be encashable at part at all
the branches of the company's bankers so as to reach the shareholders on or
before the date fixed for payment of dividend (applicable to listed companies
only) [Rules 30(2), 31(4) of the Income-tax Rules, 1962Sections 194 and
203 of the Income-tax Act, 1961].
(ix) Payment should be made
within forty-two days of declaration either in cash or by cheque/ warrant
sent through the post directed at the registered address of the shareholder
entitled to the payment of the dividend or in the case of joint shareholders,
to the registered address of that one of the Joint shareholders who is first
named on the register of members, or to such person and to such address as the
shareholder or the Joint shareholders may in writing direct [Sections 205(4)
and 207].
Payment of interest out of capital (S.
208)
Interest may be paid on
money not raised by way of share capital but taken as loan for the purpose of
defraying the expenses of construction etc. Challapalli Sugar Ltd. v. CIT A.
P., Hyderabad, 1975 Tax LR 40 at 44.
The payment of interest must be bona fide in the
interest of the company Lock v. Queens Land Investment Co., 1896 AC 461 and
should not exceed 12%.
Payment of interest out of capital
"RESOLVED that subject
to the approval of the Central Government interest at the rate of 12% per annum
for the year ended 30th June, 2002, be paid on the issued and paid-up
equity share capital of rupees one crore comprising of 10,00,000 equity shares
of Rs. 10/- each issued for the purpose of raising money to defray
expenses for the construction of the plant of the Company at Kanpur and which
the Company feels will not be profitable for quite some years, to all those
shareholders who are registered in the Register of Members of the Company as on
30th August, 2002."
1. Special Resolution not required when payment authorised by articles.-If there is a provision in
the Articles of Association of the company for payment of interest on the lines
of section 208, it will not be necessary to pass a Special Resolution; in that
case only an Ordinary Resolution may be passed.
2. No payment to be made before receipt of Central Government approval.-Approval of the Central
Government will be sought soon after passing of the resolution and no payment
be made before this approval is received.
3. Central Government approval for payment of interest when needed.-Approval of the Central
Government to pay interest is required only when shares are issued for the
purposes of raising money to defray the expenses for the construction of any
works, building or plant which cannot be made profitable for a long time. For making
an application" to the Central Government for approval there is no
prescribed form.
4. Payment must be bona fide.-The payment of interest must be bona fide in
the interest of the company. Lock v. Queens Land Investment Co., 1896 AC 461.
5. Interest be paid on money not raised as share capital.-Interest may be paid on
money not raised by way of share capital but taken as loan for the purpose of
defraying the expenses of construction etc. Challapalli Sugar Ltd. v. CIT A.P.
Hyderabad, 1975 Tax LR 40 at 44.
Payment of interest out of capital
(Another Format)
"RESOLVED that subject
to the approval of the Central Government and pursuant to section 208(3) of the
Companies Act, 1956, interest at a rate not exceeding twelve per cent per annum
be paid on the issued and paid-up share capital of Rs. 300 lakhs
(300,00,000 equity shares of Rs. 10/- each fully paid) for such period as
may be determined by the Central Government during the period beginning from
the financial year with ________ 2001 to ________ 2002 and that the amount so
paid as interest during the aforesaid period be capitalised as a part of
construction of the works and erection of machinery."
1. No necessity of Special Resolution when payment authorised by
Articles.-Special Resolution is not necessary if the Articles of Association of
the company contain provisions for payment of interest on paid-up
capital. The Special Resolution should precede the application for approval of
the Central Government and such approval should be obtained prior to payment of
such interest. The payment of interest must be bona fide in the interest of the
company. Lock v. Queens Land Investment and Land Mortgage Co., (1896) 1 Ch D
397 affirmed in 1986 AC 461.
2. Filing of Special Resolution.-If Special Resolution is
passed then ensure that the said resolution is filed with the Registrar of
Companies in Form No. 23 within 30 days of passing thereof along with requisite
filing fee as per Schedule X of the Act.
Adoption of annual accounts
"RESOLVED that the
balance-sheet for the financial year ended 31st March, 2002 and the
profit and loss account ended on that date and the report of the Auditors and
the Directors thereon, as placed before the meeting, be and are hereby
adopted."
1. Convening of Annual General Meeting by giving 21 days' clear notice.-Call the Annual General
Meeting of the company and give 21 days' clear notice of the meeting to all the
shareholders, Auditors, Stock Exchange concerned (in case the shares are
enlisted on the recognised Stock Exchange) and others entitled to receive the
same.
2. Directors not absolved from liability for not holding Annual General
Meeting.-The circumstances that no Annual General Meeting was held will not
absolve the Directors from liability as they were themselves responsible for
holding the meeting and have failed in their duty to do so. Assistant Registrar
of Companies, West Bengal v. Mati Beguin Safarm Khatoon, (1979) 49 Comp Cases
651.
3. Duty of Directors to lay Annual Accounts before Annual General
Meeting and file the accounts with Registrar.-It is the duty of the
Directors to lay before the General Meeting the annual accounts of the company.
It is for the General Meeting to adopt them or not to adopt them. The next duty
of the Directors is to file the accounts with the Registrar of Companies along
with the statements giving reasons where they are not adopted at the General
Meeting.
4. Balance-sheet and profit and loss account to be in conformity
with provisions of Schedule VI. -The accounts are to be prepared and should
contain the information in, the manner required in Schedule VI to the Act. In
the case of a new company which has not commenced production and the question
of profit or loss has not arisen, there will be no objection to the company
preparing the expenditure account of construction etC.21
5. Statutory duty of company to prepare proper accounts every year.-It is the statutory duty of
the company to issue a proper annual accounts every year. It cannot take
shelter behind the fact that there were disputes regarding the accounts and
that they cannot be compiled with. The Directors of the company shall be liable
for the default.
6. Filing with Registrar.-Three copies of the balance-sheet and other
statements attached thereto duly certified as correct are to be filed with the
registrar of companies concerned within thirty days after adoption by the
General Meeting.
7. Balance-sheet an acknowledgment to general public liabilities
of company. -The
balance-sheet of the company is a statement of its assets and liabilities
at the end of a particular period. It is in acknowledgment to the general
public of its liability. As soon as the balance-sheet is signed in the
Board by two Directors, it is sufficient acknowledgment for purposes of the
Limitation Act. Even though the Directors sign the balance-sheet, several
months after its date, the acknowledgment can relate to the date of the balance
sheet and not the date on which Directors sign it.
8. Balance-sheet showing fees due to director not acknowledgment.-But a balance-sheet
showing fees due to Directors has been held not to amount to an acknowledgment
on the ground that it is not competent for the Board of Directors to promise to
pay to themselves since each Is interested in the matter and is capable of
binding the company by passing any resolution. Re, Colisium (Barrow), (1930) 2
Ch 44.
9. Colourable and not bona fide acknowledgment not good as
acknowledgment.-It has also been held that an acknowledgment in the balance-sheet
if it was colourable and not bona fide will not be good as an acknowledgment so
as to save limitation. Babulal Bal Mukund v. Official Liquidator, (1969) 39 Com
Cases 4: (1968) 1 Comp Law Jr. Page 1.
10. Non-laying of balance-sheet an independent default.-The default in not laying
the balance-sheet before a General Meeting constitutes an independent
offence distinct from the offence arising out of the default in not calling the
meeting. Appaya v. State, (1952) 22 Comp Cases 78.
11. Directors cannot evade liability for failure to lay accounts on
ground of non receipt thereof from Auditors.-The Directors of a company
cannot evade liability for failure to lay the accounts and balance-sheet
before the Annual General Meeting merely by stating that the Auditors had not
sent the same. Registrar of Companies, West Bengal v. Proshad S, (1986) 59 Comp
Cases 780 (Cal).
Adoption of Annual Accounts
(Another Format)
"RESOLVED that the
audited balance- sheet of the Company as on 30th June, 2002 and the
profit and loss account for the year ended on that date, together with the
Directors' and the A6ditors' Reports thereon, be and are hereby received,
approved and adopted."
1. Ordinary business.-Adoption of annual accounts is an item of ordinary
business and therefore does not call for explanatory statement.
2. Period to which profit and loss account relate.-The profit and loss account
should relate to the period beginning with the incorporation of the company and
ending with a day which shall not precede the day of the meeting by more than
nine months, in case of first annual general meeting and in case of subsequent
annual general meetings, it shall relate to the period beginning with the day
immediately after the period for, which the account was last submitted and
ending with a day which shall not precede the day of the meeting by more than
six months.
3. Penalty.-If any person, being a director of a company falls to take all
reasonable steps to comply with the provisions of section 210, he will be
punishable in respect of each offence with imprisonment for 6 months or fine of
upto Rs. 10,000/- or with b4th.
Duty of Directors to lay before Annual General Meeting
Balance-sheet and Profit and Loss Account in conformity with provisions
of Schedule VI
Pursuant to the provisions
of section 210 of the Companies Act, 1956, the Board of Directors of a company
shall lay before the company at every Annual General Meeting a balance-sheet
as at the end of the financial year and a profit and loss account for the
period/year ended as on the aforesaid date. The form and contents of the
balance-sheet an the profit and loss account must follow the provisions
of section 211 and directives contained in Schedule VI of the Companies Act,
1956, duly authenticated as per the requirements of section 215 of the Act. The
aforesaid accounts are required to be submitted before the Auditors, pursuant
to section 216, for a report thereon. Such accounts should accompany the
Directors' Report and the observation on the accounts and future prospect of
the trading of the company, pursuant to the provisions of section 217.
In Schedule VI Part 1
against the sub-heading "current liabilities and provisions"
the following should be substituted" "the names of small scale
industrial undertaking(s) to whom the company owe any sum together with
interest outstanding for more than 30 days to be disclosed." The said
Schedule has again been altered by Notification No. GSR 545(E), dated 1-8-2002
by which Part I under the heading "B. Vertical Form" in the Notes at
the end, for paragraph 3, the following has been substituted:-
3. The figures in the
balance sheet may be rounded off as under:-
|
Where the turnover of the
company in any financial year is : |
Round off permissible |
|
(i) less than one hundred crore rupees |
to the nearest hundreds or thousands or decimals
thereof |
|
(ii)
One hundred crore rupees or more but less than five hundred crore rupees |
to the nearest hundreds thou sands, lakhs or
millions, or decimals thereof. |
|
(iii) Five hundred crore rupees or more |
to the nearest hundreds, thou sands, lakhs,
millions or crores, or decimals thereof |
Pursuant to section 219, a
copy of every balance-sheet (including the profit and loss account, the
auditor's report, Board's report and every other document required by law to be
annexed or attached, as the case may be, to the balance-sheet) which is
to be laid before a company in General Meeting must, not less than twenty-one
days before the date of the meeting, be sent to every member of the company, to
every trustee for holder of debentures issued by the company and to the
Auditors of the company.
In the case of a company
whose shares are listed on a Stock Exchange, it would be enough if the
documents as aforesaid are made available for inspection at the registered
office for 21 days before the date of the Annual General Meeting and a concise
version of the same is sent to all those entitled to the same in Form No. 23AB
appended to the Companies (Central Government's) General Rules and Forms, 1956.
Further, such a company is under obligation to supply free of charge a copy of
the aforesaid documents to all those members and holders of debentures who ask
for the same.
Under section 220, three copies of the balance-sheet and the profit and loss account with the annexures must be filed with the Registrar within thirty days of the Annual General Meeting at which they were laid. Where the Annual General Meeting of a company for any year has not been held, they must be filed with the Registrar within thirty days from the latest day on or before which that meeting should have been held in accordance with the Provisions of the Act. Provisions of the Act regarding presentation circulation and filing of the balance-sheet and the profit and loss account apply to all companies incorporated under the Act. Copies of the Board's report must also be filed along with the annual accounts as it is a document required to be attached to the balance-sheet. [Letter No. 44(69)-CL.IV/61 dated 11-12-1961].
Authorisation to inspect subsidiary's books of account
S. 214-Authorisation to inspect subsidiary's books of
account-Ordinary Resolution
"RESOLVED that Mr. A.B, the Financial Controller of the Company, and Mr. C.D, the Accounts Officer of the Company be and are hereby jointly and severally authorised to inspect the books of account of M/s. X.Y.Z. Ltd., a subsidiary of the Company at any time during the business hours of the company."
1. Authorisation to inspect subsidiary's account.-As per section 214 of the
Act, a holding company can authorise its representatives by a resolution to
inspect the books of accounts of a subsidiary and the subsidiary is bound to
make available for inspection the said books during the business hours of the
company.
Non-adoption of balance-sheet
[S. 220(2)]
Sub-section (2) of section 220 has been amended by the Companies (Amendment) Act, 1988. As per the amended section in case the annual accounts are not laid in the Annual General Meeting and the meeting is adjourned, the balance-sheet etc. will have to be filed by companies along with a statement containing reasons there for. Where a director takes no action in filing the requisite documents with the Registrar of Companies inspite of the default notice, the Court can take cognizance of the offence under sub-section (3) of section 220. Shashi Sood v. Asst. ROC, (2001) 41 CLA 338 (Cal). Directors who were not functioning as officials at the time of alleged default of non-filing of copies of balance sheet with the Registrar of Companies could not be held responsible by showing them accused for latches of their predecessors in discharge of official duty. Andhra Pradesh State Essential Commodities Corpn. Ltd. v. ROC, (2002) 38 SCL 1016 (A.P.).
Appointment of auditors
"RESOLVED that by M/s.
BPC & Company, Chartered Accountants, Nagpur 440 012, be and are hereby
appointed as the Auditors of the Company to hold office from the conclusion of
this meeting until the conclusion of the next Annual General Meeting of the
Company on a remuneration of Rs. ________ plus reimbursement of any out-of-pocket
expenses that may be incurred by the said M/s. BPC & Company for
discharging their duties as Auditors of the Company."
1. Obtaining of written certificate from auditor(s) to the effect that
appointment will be in accordance with limits specified in sub-section
(1B).-Before
any appointment or re-appointment of Auditor or Auditors is made by any
company at any Annual General Meeting, a written certificate shall be obtained
by the company from the auditor or Auditors proposed to be so appointed to the
effect that the appointment or reappointment, if made, will be in accordance
with the limits specified in sub-section (1B). The said limits will not
be applicable to a private company.
2. Central Government to appoint auditors if no appointment made at Annual
General Meeting.-Sub-section (3) to section 224 provides that the Central
Government will appoint the Auditors of the company if they are not appointed
at any Annual General Meeting. So, the Central Government can exercise the
powers under section 224(3) only where an Auditor is not appointed at an Annual
General Meeting and not otherwise.
Appointment of Joint Auditors
"RESOLVED that M/s. BPC
& Company, Chartered Accountants, Nagpur 440 012, be and are hereby
appointed as the Joint Auditors of the Company together with M/s. PQR &
Company, Chartered Accountants, from the conclusion of this Annual General
Meeting until the conclusion of the next Annual General Meeting of the Company,
at such remuneration as may be mutually agreed upon between M/s. BPC &
Company and the Board of Directors of the company."
1. Intimation within seven days.-The auditors so appointed
should be intimated within seven days of the appointment, in Form No. 23B.
2. Written Certificate.-Before appointing the auditors a written certificate
should be obtained from the proposed auditors to the effect that the said
appointment if made will be in accordance with the limits specified in sub-section
(1-B) of section 224 of the Act.
The appointment of Joint
Auditor is not really removal of Auditors or super imposition of one set of
Auditors over the other. Occasion arises when persons holding substantial block
of shares want to exercise their right by proposing appointment of another set
of Auditors (Joint Auditors) by giving a special notice under section 225. In
this case, for example notice must have been received from a block of members
under this provision, proposing the name of M/s. BPC & Company, Chartered
Accountants, to be appointed Joint Auditors of the company along with the
existing auditors M/s. PQR & Company, Chartered Accountants, from the
conclusion of this Annual General Meeting until the conclusion of the next
Annual General Meeting.
Resolution for
giving effect to appointment of person proposed as
The above resolution would
have the effect of appointment of M/s. BPC & Company as Joint Auditors with
M/s. PQR & Company, Chartered Accountants.
Service of special notice of shareholders
on existing auditors
M/s. PQR & Company, the
existing Auditors of the company, must be served with a copy of the aforesaid
notice from the shareholders proposing appointment of M/s. BPC & Company,
as the Joint Auditors of the company.
Re-appointment of the retiring auditor
S.
224-Re -appointment of the retiring Auditor-Ordinary
Resolution
"RESOLVED that the Auditors of the Company, M/s. PQR & Company, Chartered Accountants, who retire at this meeting, being eligible and willing to act as Auditors, be and are hereby appointed Auditors of the Company to hold office till the conclusion of the next Annual General Meeting at a remuneration of Rs. 100,000/- plus such out-of-pocket expenses, as may be incurred by such Auditors in connection with the audit of Company."
Same as under Resolution §
966.
Re-appointment of retiring auditor
In the usual course a
retiring Auditor should be re-appointed at the Annual General Meeting of
the company, but the members may at a General Meeting, resolve expressly, for
any valid reason, that such Auditor shall not be re-appointed or it may
appoint somebody instead of the retiring Auditor.
Central Government to appoint auditor when
no
auditor appointed
at Annual General Meeting
Pursuant to sub-section
(3) of section 224, if at an Annual General Meeting no Auditors are appointed
or re-appointed, the Central Government may appoint a person to fill the
vacancy.
Filling up of casual vacancy in the office of Auditors
"RESOLVED that M/s. BCD
& Company, the Chartered Accountants, Nagpur 440012, be and are hereby
appointed as auditors of the Company to fill up the casual vacancy caused by
the resignation of M/s. XYZ & Company, Chartered Accountant, until the
conclusion of the next Annual General Meeting of the Company at a remuneration
of Rs. ________ plus reimbursement of any out-of-pocket expenses
that may be incurred, in connection with the audit."
1. Board's power.-The Board of Directors of a company has the power to
fill up any casual vacancy in the office of an auditor except casual vacancy
caused by resignation of an auditor.
2. Intimation within seven days.-The auditors so appointed
should be intimated within seven days of the appointment, in Form No. 23B.
3. Written Certificate.-Before appointing the auditors a written certificate
should be obtained from the proposed auditors to the effect that the said
appointment if made will be in accordance with the limits specified in sub-section
(I-B) of section 224 of the Act.
Filling up of casual vacancy in the office
of auditor caused by
resignation
An Auditor appointed at a General Meeting should ordinarily be re-appointed at the next Annual General Meeting, unless he is unwilling to continue to serve the company and resigns from the office of the Auditor of the company and casual vacancy arises. The Board may fill any casual vacancy in the office of the Auditor to continue up to the conclusion of the first Annual General Meeting of the resignation of the Auditor or Auditors, such vacancy should be filled by the company in General Meeting.
Removal of Auditor appointed in a General Meeting
"RESOLVED that M/s. XYZ
& Company, the Chartered Accountants, Mumbai, who were appointed as the
Auditors of the Company at the last Annual General Meeting to hold office up to
the conclusion of the next Annual General Meeting of the Company, be and are
hereby removed from such office of the Auditors, before the expiry of their
term, such removal having been previously approved by the Central Government in
that behalf."
1. Removal of Auditor.-Sub-section (7) of section 224 makes special
provision for the removal of the auditors before the expiry of their term in
General Meeting after obtaining the previous approval of the Central Government
in that behalf. This provision has been made to meet a situation where an
existing Auditor is unable to fulfil his duties for any reason or is obviously
unsuitable for continuing in his appointment.
2. Application for removal of auditor to Central Government.-The application" for
removal of the Auditor of the Company before the expiry of his terms of office
must be addressed to the Regional Director concerned to whom the power of
Central Government has been delegated. There is no prescribed form of this
application". The application should set out in detail the reasons for the
removal of the Auditor and it must be accompanied by the following documents.
(i) A copy each of the
Memorandum and Articles of Association of the Company.
(ii) A demand draft or
treasury challan evidencing the payment of the requisite fee prescribed under
the Companies (Fees on Applications) Rules, 1999.
3. Forwarding of application.-A copy of the application should be delivered
to the Registrar of Companies concerned.
4. No statutory bar on holding a prior meeting.-There is no statutory bar on
a prior extraordinary general meeting being held, wherein the shareholders or
the members of a company approve the resolution for making an application to
seek the previous consent of the Central Government (by delegation Regional
Director) for removal of the statutory auditor under section 224(3) before the
expiry of the term of office which is till the next annual general meeting
specially when the Regional Director granted permission subject to further
approval of the members of the company in terms of section 224(7) read with
section 224(5). Basant Ram and Sons v. Union of India, (2002) 110 Com Cases 38
(Delhi).
Re-appointment of retiring auditor
"RESOLVED that pursuant
to the provisions of Section 224A and other applicable provisions, if any, of
the Companies Act, 1956, Messrs. R.S. Rawat & Co., Chartered Accountant,
the retiring Auditors, be and are hereby re-appointed auditors of the
Company to hold office from the conclusion of this meeting upto the conclusion
of the next Annual General Meeting on a remuneration of Rs. 70,000/- in
addition to all travelling and other out-of pocket expenses."
1. Reappointment of Auditors.-Where 25% or more of the subscribed share
capital of a company is held whether singly or in any combination by financial
institutions specified in Section 4A of the Act, then for appointment or re-appointment
of auditors Special Resolution is required to be passed at an annual general
meeting.
2. Material date for determining holding.-The time for determining the
25% holding will of course be the date of notice of the meeting.
3. Failure to appoint auditor.-If the company omits or fails to appoint or
re-appoint auditor the Central Government will appoint a person to fill
up the vacancy.
4. Filing of Special Resolution.-File the special resolution
in Form No. 23 along with the Explanatory Statement with the Registrar of
Companies concerned within 30 days of its passing after paying requisite filing
fee as per Schedule X. Non-filing of this form as above will make the
company and every officer of the company who is in default punishable with fine
of upto Rs. 100/-.
Appointment of Auditors by Special Resolution
"RESOLVED that a
'Written certificate pursuant to the proviso to subsection (1) of section 224
of the Companies Act, 1956, having been received from M/s. BCD & Company,
the Chartered Accountants, Nagpur-440012, the said M/s. BCD & Company
be and are hereby appointed as the Auditors of the Company to hold office from
the conclusion of this meeting until the conclusion of the next Annual General
Meeting of the Company at a remuneration as may be agreed upon between the
Board of Directors and the said M/s. BCD & Company."
1. Appointment/re-appointment of Auditor by Special Resolution
when 25 % of subscribed capital held by financial institutions etc.-Section 224A was inserted by
the Companies (Amendment) Act, 1974. This section requires that the appointment
or reappointment at each Annual General Meeting of an Auditor or Auditors shall
be made by a Special Resolution where-
(A) not less than twenty-five
per cent of the subscribed capital of a company is held, whether singly or in
any combination, by-
(a) a public
financial institution or a Government company or the Central Government or any State Government, or
(b) any financial or other
institution established by any provincial or State Act in which a State
Government holds not less than fifty one per cent of the subscribed share
capital, or
(c) a nationalised bank or
an insurance company carrying on general insurance business.
The above three sub-clause
(a), (b) and (c) of sub-section (1) of section 224A are not mutually
exclusive and therefore the provisions of sub-section (1) of section 224A
would apply to all cases of shareholdings in any combination by any of the
institutions mentioned in the aforesaid three clauses.
2. Material date for determination of 25% holding is date of Annual
General Meeting.-The material date on which such percentage is to be taken into account
is the date of the Annual General Meeting at which the Special Resolution is
passed and not the date of the notice of the meeting, because register of
members remains closed for a period not exceeding thirty days from the date of
the Annual General Meeting [Circular No. 2/76(inn6-CL.N) dated 5-6-1976].
3. Shares held by nationalised Bank to be taken into account.-The holding of shares by a
nationalised bank will be taken into account for the purpose of section 224A if
the name of the bank is entered in the register of members of the company
(whether they are beneficially held or they are transferred to its name just in
order to make the security for loans) (Circular No. 18/74, dated 12-12-1974).
4. Ordinary Business.-Appointment of auditors under section 224A by
special resolution is an ordinary business as provided by section 173(1)(iv)
and therefore no explanatory statement is required to be given statutorily
under sub-section (2) of section 173.
Retiring Auditor(s) not be appointed
"RESOLVED that pursuant
to the provisions of section 224(2)(c) of the Companies Act, 1956, M/s. XYZ
& Co., the retiring Auditors be not re-appointed at least 7 days
before the Annual General Meeting, as the name of Mr. X.Z., a partner thereof
has been struck off the register of members of the Institute of Chartered
Accountants of India."
1. Special notice.-Special notice is required for proposing the above
resolution.
2. Resolution required for non-appointment of existing
auditor(s).-The retiring auditor will not be reappointed if a resolution pursuant
to Section 224(2)(c) is passed at the meeting that he shall not be reappointed.
Appointment of some other person in place of the retiring Auditor
"RESOLVED FURTHER that
M/s. BCD & Company, Chartered Accountant, be and are hereby appointed as
the Auditors of the Company in place of the retiring Auditors, M/s. XYZ &
Company, to hold office until the conclusion of the next Annual General Meeting
at a remuneration of Rs._________
1. Special notice.-Special notice is required for proposing the above
resolution.
2. Notice to retiring auditor.-On receipt of the special notice a copy
thereof should be sent immediately to the retiring auditors.
3. Special notice required to be given 14 days before the day of
meeting.-The special notice should be given to the company at least 14 days
before the date of the Annual General Meeting.
4. Service of individual notice on members or by newspaper
advertisement not less than seven days before the date of meeting.-The company is required to
give individual notices to all those who are entitled to receive the notice.
Alternatively the fact of the receipt of the proposal should be got advertised
in a newspaper having an appropriate circulation or in any other manner allowed
by the articles, not less than 7 days before the date of the meeting.
5. Right of retiring auditor to make written representation.-Pursuant to the notice
given, to the retiring auditor making any representation, it should be dealt
with in the manner laid down in section 225(3) of the Act.
Appointment as an auditor of a person other than retiring
auditor
"RESOLVED that Messrs.
CDF, 6, Green Park, New Delhi 110016 be and are hereby appointed Auditors of
the Company in place of the retiring Auditors to hold office from the
conclusion of ensuing Annual General Meeting until the conclusion of the next
Annual General Meeting at a remuneration to be fixed by the Board of Directors
of the Company."
1. Special Notice.-Special notice is required for a resolution at an
Annual General Meeting appointing as auditor a person other than a retiring
auditor.
2. Notice to retiring auditor.-On receipt of notice of the resolution, the
Company must send forthwith a copy thereof to the retiring auditor.
3. Provision Mandatory.-The use of expressions "shall be required"
and "shall forthwith send" occurring in sub-sections (1) and
(2) of Section 225 show that the provisions of the Section are mandatory in
nature and must be complied with. Further any resolution requiring special
notice must comply with the requirements of section 190. (Department Circular
No. 35/6/68-CL. III, dated 18-11-1969).
4. Specific words to be mentioned.-The provisions of Section
225(l) do not require that the words "other than a retiring auditor"
or "instead of himself' should be specifically mentioned either in the
special notice or in the resolution of the annual general meeting respectively.
(Department Circular No. 22/76, dated 26-6-1976).
5. Mode of sending Special Notice.-The copy of the special
notice under section 225(2) of the Companies Act, 1956 should be sent to the
retiring auditors by Registered A.D. Post. (Department Letter No. 1/1/ 81-CL.
V, dated 17-11-1981).
Removal of Auditors and appointment of another Auditor therefor
"WHEREAS a notice has
been received pursuant to section 225(l) of the Companies Act, 1956, from
shareholders for the removal of the Company's retiring Auditors, M/s. XYZ &
Company, Chartered Accountants, and for appointment of M/s. BCD & Company,
in their place;
NOW THEREFORE IT IS RESOLVED
that M/s. BCD & Company, Chartered Accountants, Nagpur 440012, be and are
hereby appointed as the Auditors of the Company from the conclusion of this
Annual General Meeting until the conclusion of the next Annual General Meeting
at a remuneration as may be mutually agreed upon between the said M/s. BCD
& Company and the Board of Directors of the Company."
1. Special notice proposing appointment of a person other than retiring
auditor. -The
members may serve 'notice' before any forthcoming Annual General Meeting
proposing appointment of some person, other than the retiring Auditor, as the
Auditors of the company.
2. Resolution valid even if words "instead of him" not
mentioned.-The resolution passed in a General Meeting appointing any person other
than the retiring Auditor is quite sufficient and valid even if it does not
mention the words 'Instead of him' in that resolution.
3. Special notice even if words "in place of retiring auditors"
not mentioned.-The special notice given by the shareholders under section 225(l) is
also a sufficient compliance under that section even if it does not mention the
words 'in place or retiring Auditors'. These are not necessary because these
words have no specific meaning attached to them as the re-appointment of
a retiring Auditor is not automatic but a specific resolution for it is
required and in the absence of such a resolution the term of the retiring
Auditor will automatically end at the conclusion of the Annual General Meeting.
[Circular No. 22/76(35/4/76-CL.III) dated 26-7-1976].
4. Forwarding of copy of special notice to retiring auditor.-Every company should send a
copy of the special notice received by it under section 225(l) to the retiring
Auditor by Registered A/D post. (Circular No. 2/81(1/1/81-CL.V), 8/20
(225)/81-CL.V) dated 17-10-1981.
5. Removal of Auditors illegal and ineffective where copy of special
notice not forwarded to retiring auditor.-If a company fails to
forward a copy of the special notice to the retiring Auditors under section
225(2), then both the resolutions of appointment and removal of Auditors will
be illegal and ineffective. (Circular No. 35/6/68-CL.III, dated 18-11-1969).
6. Re-appointment of retiring Auditor not automatic.-The words "instead of
him" or words "in place of retiring Auditors" are not necessary.
Pursuant to sub-section
(3) of section 225, the notice of removal of the retiring Auditor should be
forthwith communicated to him and if the retiring Auditor makes with respect
thereto representation in writing to the company (not exceeding a reasonable
length) and requests their circulation to the members of the company, the
company shall, unless the representations received by it are too late for it to
do so, state the facts of the representation having been received in any notice
of the resolution given to the members. The idea is to afford a right to the
retiring Auditor to make a representation in writing to the company and to call
upon it to circulate his representation to the shareholders of the company. If,
for any reason, this representation cannot be circulated, the Auditor shall
have the right to call upon the company to read out the same at the General
Meeting. This right of the Auditor is, of course, without prejudice to his
right to be heard orally at any general meeting of the company.
Appointment of new Auditors and removal of existing Auditors
"RESOLVED that M/s.
A.B.C. Ltd., Chartered Accountants, Asaf All, New Delhi be and are hereby
appointed Auditors of the Company in place of M/s. Choksi and Co., Chartered
Accountant, retiring Auditors to hold office from the conclusion of this Annual
General Meeting until the conclusion of the next Annual General Meeting and
that they may be paid a remuneration of Rs. 145,000/- plus out-of-pocket
expenses."
OR
"RESOLVED that M/s.
Choksi and Co., Chartered Accountants, retiring Auditors shall not be re-appointed
as the Auditors of Company."
1. Forwarding of special notice to retiring auditor.-The resolution can be in
respect of the statutory Auditors as well as Branch Auditors of the company.
Special notice of the resolution will be necessary and notice thereof shall be
given to the retiring Auditors.
2. Right of company or of any person aggrieved to file petition to
Company Law Board.-Present a petition under proviso to sub-section (3) before the
Company Law Board in Form No. 1 of Annexure II to Company Law Board
Regulations, 1991 with a fee of Rs. 500/- and accompanied by the
following documents:
(1) Documentary evidence, if
any, showing the refusal of the company to give inspection to the petitioner;
(2) Affidavit verifying the
petition;
(3) Bank draft evidencing
payment of application fee;
(4) Memorandum of appearance
with copy of the Board Resolution or the executed Vakalatnama, as the case may
be.
3. Power of Central Government to appoint auditor.-If no Auditors are appointed
at the Annual General Meeting, inform the Central Government, and that
Government, will appoint the Auditors.
4. Failure of company to forward copy of notice to retiring auditor.-Failure to forward a copy of
the notice of a resolution to be moved under sub-section (1) of section
225 to a retiring Auditor whom it is proposed to remove would make the
resolution illegal and ineffective.
5. Power of Central Government to direct company to remove auditor and
appoint another in his place.-The Central Government is empowered under section
408(6) of the Act as amended by the Companies (Amendment) Act, 1988, to direct
a company to remove its Auditor and appoint another in his place.
6. Retiring auditor to hold office till conclusion of adjourned
meeting.-In case of an adjourned Annual General Meeting the retiring Auditor
whether reappointed or not would hold office of Auditor till the conclusion of
the adjourned meeting.
Removal of first Auditor and appointment of another
"RESOLVED that M/s. X
and Co., Chartered Accountants, who were appointed the first Auditors of the
Company vide Board Resolution dated _________ be and are hereby removed from
their office as Auditors of the company and M/s. Y and Company, Chartered
Accountants, be and are hereby appointed Auditors of the Company till the
conclusion of the next Annual General Meeting on a remuneration to be mutually
agreed upon between M/s. Y and Company and the Board of Directors of the
Company."
1. Board's power to appoint first auditor.-The Auditors of a company
should be appointed by the Board within one month of registration of the
company, and such Auditor will hold office until the conclusion of the first
Annual General Meeting.
2. Removal of first auditor and appointment of another in his place.-The general body can remove
such Auditor and appoint another Auditor in his place if such other Auditor has
been nominated by a member and notice of the nomination is given to the members
of the company not less than 14 days before the date of the meeting.
3. Notice to auditor whose removal is sought.-Notice of the resolution has
to be given to the existing Auditor whose removal has been sought and he will
have a right of making representation which shall be read out at the meeting
Audit of accounts of branch office
"RESOLVED that the
Board of Directors of the Company be and is hereby authorised to appoint any
person qualified for appointment as Auditor of the Company under section 226 of
the Companies Act, 1956, for auditing the accounts of the branch office of the
company, situated at Calcutta for the financial year 2001-2002, in consultation
with the statutory Auditors of the Company, at a remuneration of Rs. 1,20,000/-
plus actual out-of-pocket expenses."
1. Only person qualified for appointment as Auditors to be appointed as
branch auditors.-Only a person qualified for appointment as Auditors of the company
under section 226 can be appointed as Auditors for audit of accounts of the
branch office of company.
2. Person to be appointed as auditor for branch office situated outside
India be either qualified for appointment or qualified to act as auditor as per
laws of that country.-Where the branch office is situated in a country
outside India, the person appointed to act as Auditors should either be
qualified for appointment as Auditors of the company under section 226 of the
Act or are duly qualified to act as Auditors for audit of the accounts of the
branch office in accordance with the laws of that country.
3. General Meeting to either appoint branch auditors and fix
remuneration or authorise Board of Directors.-The General Meeting, may
either appoint the branch auditors and fix remuneration or may authorise the
Board of Directors to appoint the Branch Auditors any persons in consultation
with the statutory Auditors and to fix their remuneration.
4. No branch auditor need be appointed when branch office exempt from
audit. -In
case the audit of branch office is exempt under the Companies (Branch Audit
Exemption) Rules, 1961, then no branch Auditors need be appointed.
5. Branch Auditors to have same powers and duties as the statutory
auditors.
-The persons appointed as the branch Auditors shall have the same powers and
duties in respect of the audit of account of the branch office as the statutory
Auditors have in respect of the same.
6. Establishment not branch office to form part of head office for
auditor.- An establishment which is not branch office of a company will form part
of the head office for audit purposes.
Appointment of branch Auditors
"RESOLVED that M/s. PQR
& Company, Chartered Accountants, Nagpur 440 012, be and are hereby
appointed as the branch Auditors of the company for auditing the books of
accounts maintained by the Nagpur Branch of the company from the conclusion of
this Annual General Meeting till the conclusion of the next Annual General
Meeting of the company, pursuant to section 228(3) of tile Companies Act, 1956,
at a remuneration to be mutually fixed by the Board of Directors of the company
after discussion with the aforesaid Auditors."
1. Branch office accounts to be audited by company's auditor or by
person qualified for appointment or where branch office situated outside India
by a person either qualified for appointment or qualified to act as auditor as
per Laws of that country. -Pursuant to the provisions of section 228 of the Companies Act, 1956,
if a company has a branch office, the accounts of that office should be audited
by the company's Auditors appointed under section 224 or by a person qualified
for appointment as Auditor of the company under section 226 or where the branch
office is situated in a country outside India, either by the company's Auditor
or by a person qualified as aforesaid or by an accountant duly qualified to act
as an Auditor of the accounts of the branch office in accordance with laws of
the country concerned.
Authorisation to Director to apply for exemption from branch audit
"RESOLVED that the
Board of Directors of the Company be and is hereby authorised to apply in
accordance with the Companies (Branch Audit Exemption) Rules, 1961 to the
Central Government for obtaining exemption from audit in respect of the
companies branches situated at _________ and _________ for the financial year
2001-2002."
1. Company's branches to be separately audited either by company's
auditors or by any other auditor.-As per the provisions of section 228, a company's
branches will have to be separately audited either by the company's Auditors or
by any other Auditor duly appointed for that purpose.
2. Company's right to apply for exemption.-Sub-section (4) of
section 228, however, empowers the Central Government to enact rules providing
for exemption for this purpose. Pursuant to this provision, the Central
Government has enacted the Companies (Branch Audit Exemption) Rules, 1961, and
a company is at liberty to apply to it for exemption provided it fulfils the
provisions of the rules.
3. Application for exemption.-The application will have to be on the letter
head of the company as there is no prescribed form of this application and
accompanied by a demand draft or treasury challan in token of payment of fee
prescribed under the Companies (Fees on Applications) Rules, 1999.
4. Grounds for grant of exemption.-The following are the
grounds on which the Central Government may grant exemption:
(a) That a company carrying
on activities other than those of manufacturing or processing or trading has
made satisfactory arrangements for the scrutiny and check at regular intervals,
of the accounts of the branch office by responsible person who is competent to
scrutinize and check accounts;
(b) That a company has made
arrangements for the audit of the accounts of the branch office by a person
otherwise qualified for appointment as branch Auditor, even though such person
is an employee of the company;
(c) That having regard to
the nature and the quantum of activity carried on at the branch office or for
any other reason, a branch Auditor is not likely to be available at a
reasonable cost; and
(d) That, for any other
reason, the Central Government is satisfied that exemption may be granted.
5. Where exemption claimed on ground (b) above application to accompany
documents.-Where the exemption is claimed on ground (b) above, the application
should be accompanied by the following:-
(i) A certificate by the
Secretary, Managing Director or Manager of the company that arrangement has
been made for the audit of the branch office, and
(ii) A written statement
from the Auditor of the company, that in his opinion arrangements made for the
audit of the accounts of the branch office are adequate and that the
arrangements made for the keeping of the accounts of the branch office are such
as would enable the person auditing the accounts to certify that they show a
true and fair view of the branch office.
Inspection and investigation (Ss. 235,
236, 237, 241 and 245)
By the Companies (Amendment)
Act, 1988, amendments have been made in regard to inspection and investigation
of' companies under sections 235, 236, 237, 241 and 245. The Company Law Board
has also been invested with powers of investigation separately in order that
the Company Law Board can impose restriction and prevent change in management
under section 250.
Appointment of Inspector(s) to investigate
into the affairs of the
company (S.
237(a)(i))
The Central Government
cannot refuse to order investigation in the cases mentioned in clause (a) of
section 237 as it is a mandatory provision.
The order of the Court may
be passed in any proceedings in which the Court is seized of the company's
affairs. Alembic Glass Industries Ltd. Deodatta Purushottam Patel v. Alembic
Glass Industries Ltd., (1972) 42 Comp Cases 63; Delhi Flour Mills Co. Ltd.,
(1975) 45 Comp Cases 33 (Delhi). Where the allegations are more of a
recriminatory nature arising out of factional fights between two or more
predominant groups of share holders, the government will not ordinarily lend
itself to be a party to such disputes.
Small Shareholders' Director (S. 252(1)
Proviso)
A public company having a paid-up capital of Rs. 5 crores or more and 1000 or more small shareholders that is shareholders holding shares of nominal value of Rs. 20,000/- or less may have a director elected by such small shareholders in the manner as prescribed by the Companies (Appointment of Small Shareholders' Director) Rules, 2001.