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ACT NO. 1 OF 1956
[18th January, 1956]
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 Republic of India as follows—
Short title, commencement and extent.
1.Short title, commencement and extent. (1) This Act may be called the Companies Act, 1956.
(2) It shall come into force on such date2* as the Central Government may, by notification in the Official Gazette, appoint.
3[(3) It extends to the whole of India: 4 * * * * *] 5[Provided 6* * * 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.]
Definitions. 2.Definitions.In this Act, unless the context otherwise requires,-
(1) “alter” and “alteration” shall include the making of additions and omissions;
(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 ———————————————————————- 1 This Act has been extended to Goa, Daman and Diu by Regulation 12 of 1962 (with modifications), s. 3 and Sch.: to Dadra and Nagar Haveli by Regulation 6 of 1963, s. 2 and Sch. I and to Pondicherry by Regulation 7 of 1963, s. 3 and Sch. 1. The provisions of this Act shall apply to Goa, Daman and Diu, subject to the exceptions, modifications and adaptations contained in the Schedule to G.S.R. 615, dated the 24th April, 1965 (Gazette of India, Pt. II, Sec. 3(i), p. 670). Amended in its application to Goa, Daman and Diu by Reg. 11 of 1963, s. 9. 2 1st April, 1956, vide Notification No. S.R.O. 612, dated 8-3- 1956, Gazette of India, Extraordinary, 1956, Pt. II, Sec. 3, p. 473.
3 Subs. by Act 62 of 1956 s. 2 and Sch., for sub-section (3) (w.e.f. 1-11-1956). 4 Proviso omitted by Act 25 of 1968, s. 2 and Sch. (w.e.f. 15-8-1968). 5 Ins. by Act 31 of 1965, s. 2 (w.e.f. 15-10-1965). 6 The word “further” omitted by Act 25 of 1968, s. 2 and Sch. (w.e.f. 15-8-1968). 50 Schedule annexed to the Indian Companies Act, 1913, or in Table A in Schedule I annexed to this Act;
(3) “associate”, in relation to a managing agent, means any of the following, and no others: – (a)where the managing agent is an individual. any partner or relative of such individual; any firm in which such individual, partner or relative is a partner; any private company of which such individual or any such partner, relative or firm is the managing agent or secretaries and treasurers or a director or the manager ; and any body corporate at any general meeting of which not less than one- third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, such individual, partner or par- tners, relative or relatives, firm or firms; and private company or companies; (b) where the managing agent is a firm: any member of such firm; any partner or relative of any such member; and any other firm in which any such member, par- tner or relative is a partner; any private company of which the firm first mentioned, or any such member, partner, relat- ive or other firm is the manag- ing agent, or secretaries and treasurers, or a director, or the manager; and any body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the 51 following, namely, the firm firstmentioned, any such member or members, partner or part- ners, relative or relatives, other firm or firms and priv- ate company or companies; (c) where the managing agent is a body corpo- rate: (i)any subsidiary or holding company of such body corporate; the managing agent or secretaries and treasurers, or a director, the manager or an officer of. the body corporate or of any subsidiary or holding company thereof ; any partner or relative of any such director or manager; any firm in which such director, manager, partner or relative, is a partner;1 * * * (ii)any other body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, the body corporate and the companies and other persons specified in paragraph (i) above; and 2[(iii)any subsidiary of the other body corporate referred to in paragraph (ii) above: Provided that where the body corporate is the manag- ing agent of the other body corporate referred to in paragraph (ii) above, a subsidiary of such other body corporate shall not be an associate ——————————————————————- 1 The “and” omitted by Act 65 of 1960, s. 2. 2 Ins. by s. 2, ibid. ——————————————————————– 52 in relation to the managing agent aforesaid ; and] (d) where the managing agent is a private company or a body corporate having not more than fifty members: in addition to the persons men- tioned in sub clause (c), any member of the private company or body corporate; Explanation.-If one person is an associate in relation to another within the meaning of this clause, the latter shall also be deemed to be an associate in relation to the former within its meaning;
(4) ” associate “, in relation to any secretaries and treasurers, means any of the following, and no others:- (a) where the secretaries and treasurers are a firm: any member of such firm ; any partner or relative of any such member; and any other firm in which any such member, part- ner or relative is a partner ; any private company of which the firm first-mentioned, or any such member, partner, relat- ive or other firm is the manag- ing agent, or secretaries and treasurers, or a director, or the manager ; and any body corporate at any gene- ral meeting of which not less than one-third of the total vot- ing power in regard to any matter may be exercised or controlled by any one or more of the following, namely, the firm first-mentioned, any such member or members, partner or partners, relative or relatives, other firm or firms, and private company or companies; 53 (b) where the secretaries and treasurers are a body corporate: (i) any subsidiary or hold- ing company of such body corpo- rate; the managing agent or secretaries and treasurers, or a director, the manager or an officer of the body corporate or of any subsidiary or hold- ing company thereof ; any part- ner or relative of any such director or manager; any firm in which such director or manager, partner or relative, is a partner; 1 * * * (ii) any other body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, the body corporate and the com- panies and other persons speci- fied in paragraph (i) above; and 2 [ (iii) any subsidiary of the other body corporate refe- rred to in paragraph (ii) above: Provided that where the body corporate is the secretar- ies and treasurers of the other body corporate referred to in paragraph (ii) above, a subsidiary of such other body corporate shall not be an associate in relation to the secretaries and treasurers aforesaid; and] —————————————————————— 1 The word “and” omitted by Act 65 of 1960, s. 2. 2 Ins. by s. 2, ibid. ——————————————————————- 54 (c) where the secretaries and treasurers are a private company or a body corporate having not more than fifty members: in addition to the persons mentioned in sub-clause (b), any member of the private com- pany or body corporate ; Explanation.-If one person is an associate in relation to another within the meaning of this clause, the latter shall also be deemed to be an associate in relation to the former within its meaning;
(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 India but 1[does not include- (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 , 2 [vouchers,] writings, and documents;
3[(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, ———————————————————————- 1 Subs. by Act 65 of 1960, s. 2, for ” does not include a corporation sole”. 2 Ins. by Act 31 of 1965, s. 3 (w.e.f. 15-10-1965),
3 Subs. by Act 65 of 1960, s. 2, for cl. (9), ———————————————————————– 55 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; 1[(10A) “Company Law Board” means the Board of Company Law Administration constituted under section 10E;]
2[(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;
(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;
(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;
(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: ———————————————————————- 1 Ins. by Act 53 of 1963, s. 2 (w.e.f. 1-1-1964).
2 Subs. by Act 65 of 1960, s. 2, for cl. (11). ———————————————————————- 56 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; 1* * * * * *
(19) “holding company” means a holding company within the meaning of section 4; 2* * * * * *
(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:
(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 subsantially 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; ——————————————————————— 1 Omitted by Act 30 of 1984, s.52 (w.e.f. 1.8.1984).
2 Cl. (20) omitted by Act 62 of 1956, s. 2 and Sch. (w.e.f. 1-11- 1956). ———————————————————————- 57
(25) “managing agent” means any individual, firm or body corporate entitled, subject to the provisions of this Act, to the management of the whole, or substantially the whole, of the affairs of a company by virtue of an agreement with the company, or by virtue of its memorandum or articles of association, and includes any individual, firm or body corporate occupying the position of a managing agent, by whatever name called. 1[Explanation I.-For the purposes of this Act, references to “managing agent” shall be construed as references to any individual, firm, or body corporate who, or which, was, at any time before the 3rd day of April, 1970, the managing agent of any company. Explanation II.-For the removal of doubts, it is hereby dec- lared that notwithstanding anything contained in section 6 of the Companies (Amendment) Act, 1969, (17 of 1969.) this clause shall remain, and shall be deemed always to have re- mained, in force;]
(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 2[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: 3[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;] ——————————————————————— 1 Ins. by Act 41 of 1974, s. 2 (w.e.f. 1-2-1975). 2 Subs. by Act 65 of 1960, s. 2, for “any powers of management”. 3 Ins. by s. 2, ibid. ——————————————————————— 58
(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;
1[(30) “officer” includes any director, managing agent, secretaries and treasurers, manager or secretary, 2[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,] and also includes- (a) where the managing agent, 3[or the secretaries and treasures] is or are a firm, any partner in the firm; (b)where the managing agent or the secretaries and treasurers is or are a body corporate, any director or manager of the body corporate; 4* * * * * * but save in sections, 477, 478, 539, 543, 545, 621, 625 and 633 does not include an auditor;]
(31) “officer who is in default”, in relation to any provision referred to in section 5, has the meaning specified in that section;
(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, 5[sub-section (3) of section 550, section
552 and sub-section (3) of section 555], prescribed ———————————————————————
1 Subs. by Act 65 of 1960, s. 2, for cl. (30). 2 Ins. by Act 31 of 1965, s. 3 (w.e.f. 15-10-1965). 3 Subs. by Act 41 of 1974, s. 2, for “the secretaries and treasurers or the secretary” (w.e.f. 1-8-1975). 4 Sub-clause (c) omitted by s. 2, ibid. (w.e.f. 1-8-1975).
5 Subs. by Act 65 of 1960, s. 2, for “sub-section (1) of section
549 and subsection (3) of section 550”. ———————————————————————– 59 by rules made by the Supreme Court in consultation with High Courts, and as respects the other provisions of this Act
including sub-section (5) of section 503,1[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 2[any document described or issued as a prospectus and includes any] notice, circular, adver- tisement or other document 3[inviting deposits from the public or] inviting offers from the public for the subscrip- tion 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; ———————————————————————-
1 Subs. by Act 65 of 1960. s. 2, for “sub-section (1) of section
549 and subsection (3) of section 550”. 2 Subs. by s. 2, ibid., for “any prospectus”. 3 Ins. by Act 41 of 1974, s. 2 (w.e.f. 1-2-1975). ———————————————————————– 60
(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) “secretaries and treasurers” means any firm or body corporate (not being the managing agent) which, 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 any firm or body corporate occupying the position of secretaries and treasurers, by whatever name called, and whether under a contract of service or not. 1[Explanation I.-For the purposes of this Act, references to “secretaries and treasurers” shall be construed as references to any firm or body corporate which was, at any time before the 3rd day of April, 1970, secretaries and treasurers of any company. Explanation II.-For the removal of doubts, it is hereby declared that notwithstanding anything contained in section 6 of the Companies (Amendment) Act, 1969 (17 of 1969), this clause shall remain, and shall be deemed always to have remained, in force;]
4[(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;] 5[(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 fulltime employment;] 6[(46A) “Securities and Exchange Board of India” means the Securities and Exchange Board of India established under section 3 of the Securi- ties 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;
(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 ———————————————————————– 1 Ins. by Act 41 of 1974, s. 2 (w.e.f. 1-2-1975).
2 Subs. by Act 65 of 1960, s. 2, for el. (45). 3 41 of 1974, s. 2, for certain words (w.e.f. 1-2-1975). 4 Subs. by Act 31 of 1988, s. 2 (w.e.f. ————–). 5 Subs by s.2 ibid (w.e.f. 15.6.1988). 6 Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20.9.1995). ———————————————————————– 60A 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; 1* * * * * *
(50) “variation” shall, include abrogation; and “vary” shall include abrogate. 2[(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.Definitions of “Company”, “Existing Company”, “Private Company”
and “Public Company”.(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 register- ed 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 2[(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 Jammu and Kashmir), or any part thereof, before the extension thereto of the Indian Companies Act, 1913 (7 of 1913); or ———————————————————————- 1 Cl. (49A) omitted by Act 17 of 1967, s. 4 and Sch. (w.e.f. 1-7- 1967). 2 Ins. by Act 22 of 1996, s. 31 and Sch. (w.e.f. 20.9.1995). 3 Subs. by Act 62 of 1956, s. 2 and Sch., for cl. (f) (w.e.f. 1- 11-1956). ———————————————————————- 60B
(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 (62 of 1956). 1[in so far as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968) in so far as other corporations are concerned];] (iii) “private company” means a company which, by its arti- cles,- (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 ——————————————————————— 1 Ins. by Act 25 of 1968, s. 2 and Sch. (w.e.f, 15-8-1968). ———————————————————————- 61 (c)prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company: 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 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 where of 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 subsection (1); 1* * * * * *
Meaning of “holding company” and “subsidiary”.
4.Meaning of “holding company” and “subsidiary”.(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 2[(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 com- pany which is that other’s subsidiary. ——————————————————————— 1 Cl. (b) omitted by Act 62 of 1956, s. 2 and Sch (w.e.f. 1-11- 1956). 2 Subs. by Act 65 of 1960, s. 3, for cl, (b), ——————————————————————— 62 Illustration 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. It 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, managing agent, secretaries and treasurers, or manager of, or to any other office or employment in, that other company; or 1[(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 hold 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; ———————————————————————- 1 Subs. by Act 65 of 1960, s. 3, for cl. (c). ——————————————————————— 63 (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 sub- sidiary 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.
1[(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.] 4A. Public financial institutions.
2[4A.Public financial institutions. (1) Each of the financial institutions specified in this subsection 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); ——————————————————————— 1 Ins. by Act 65 of 1960, s. 3. 2 Ins. by Act 41 of 1974, s. 3 (w.e.f. 1-2-1975). ——————————————————————– 64 (ii) the Industrial Finance Corporation of India, established under section 3 of the Industrial Finance Corporation Act, 1948 (15 of 1948); (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 India, established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (v) the Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963).
(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”. 1[5.Meaning of “officer who is in default”. 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.
Meaning of “relative”. 2[6.Meaning of “relative”. 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 Schedule IA.] ———————————————————————– 1 Subs by Act 31 of 1988, s. 3 (w.e.f. 15.7.1988). 2 Subs by Act 65 of 1960, s.4, for s.6. ———————————————————————- 65
Interpretation of “person in accordance with whose directions orinstructions directors are accustomed to act”. 7.Interpretation of “person in accordance with whose directions or instructions directors are accustomed to act”. 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 bea branch office. 8.Power of Central Government to declare an establishment not to be a branch office. The Central Government may, by order, declare that in the case of any company, 1* * *, any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the company, or 2[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.Act to override memorandum, articles, etc. 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.
Jurisdiction of Courts.
10. Jurisdiction of Courts. (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 subsection
(2); and ———————————————————————- 1 The words “not being a banking or an insurance company” omitted by Act 65 of 1960, s. 5. 2 Subs. by s. 5, ibid., for “any production or manufacture”. ———————————————————————- 66 (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. [Constitution of Tribunal.] Repealed by the Companies Tribunal (Abolition) Act, 1967 (17 of 1967) s. 4 and Sch. 10B. [Procedure of Tribunal.] Repealed by s. 4 and Sch. ibid 10C. [Powers of Tribunal.] Repealed by s 4 and Sch., ibid 10D. [Appeals against decisions. etc.. of the Tribunal.] Repealed by s. 4 and Sch., ibid. 1[PART IA, BOARD OF COMPANY LAW ADMINISTRATION 10E. Constitution of Board of Company Law Administration. 10E. Constitution of Board of Company Law Administration.
2[(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, 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 by the Central Government, by notification in the Official Gazette under the provisions of this Act or that other law.] ———————————————————————- 1 Ins. by Act 53 of 1963, s. 4 (w.e.f. 1-1-1964). 2 Subs. by Act 31 of 1988, s. 4 (w.e.f. 31.5.1991). ——————————————————————— 66A
(2) The Company Law Board shall consist of such number of members, not exceeding 1[nine], as the Central Government deems fit, to be appointed by that Government by notification in the Official Gazette: 2[“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 (31 of 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. 3[(2A)The members of the Company Law Board shall possess such qualifications and experience as maybe prescribed.”]
(3) One of the members shall be appointed by the Central Gov- ernment 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. 4* * * * * 5[(4B) 6[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; ———————————————————————- 1 Subs. by Act 41 of 1974, s. 4, for “five” (w.e.f. 1-2-1975). 2. Ins. by Act 31 of 1988, s.4 (w.e.f. 31-5-1991). 3 Ins by s.4, ibid (w.e.f. 4-8-1989). u 4 Omitted by s.4, ibid Act 31 of 1988, s. 4 (w.e.f.31-5-1991). 5 Ins.by Act 41 of 1974, s.4 (w.e.f. 1-2-1975). 6. Subs. by s.4, ibid (w.e.f.1-2-1975). ———————————————————————- 66B (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 1[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 section 193 and 228 of the Indian Penal Code and for the purpose of section 196 of that Code.] (45 of 1860).
2[(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”] 10F. Appeals against the orders of the Company Law Board. 3[10F.Appeals against the orders of the Company Law Board. Any person aggrieved by any decision or order of the Company Law Board 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.] PART II 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.Prohibition of associations and partnerships exceeding certain
number.(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. ———————————————————————- 1 Subs. by Act 46 of 1977, s. 2, for the words and figures “Chapter XXXV of the Code of Criminal Procedure, 1898″. 2 Subs. by Act 31 of 1988, s. 4 (w.e.f.31-5-1991). 3 Ins. by s. 5, ibid. (w.e.f. 31-5-1991). ———————————————————————- 67
(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 carry- ing 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 punish- able with fine which may extend to one thousand rupees. Memorandum of Association
Mode of forming incorparated company.
12.Mode of forming incorparated company.(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”); (c) a company not having any limit on the liability of its members (in this Act termed ” an unlimited company “). 68
Form of memorandum.
13.Requirements with respect to memorandum. (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 word 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; 1* * * 2[(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 ———————————————————————- 1 The word “and ” omitted by Act 31 of 1965, s. 5 (w.e.f. 15-10- 1965). 2 Subs. by s. 5, ibid., for clause (c) (w.e.f. 15-10-1965). ———————————————————————- 69 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.Form of memorandum.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.Printing and signature of memorandum. 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. 15A. Special provision as to alternation of memorandum consequent on alter-ation of name of State of Madras. 1[15A.Special provision as to alternation of memorandumconsequent on alteration o 15B. Special provision as to alternation of memorandum consequent on alter-ation of name of State of Mysore. 1[15B.Special provision as to alteration of memorandum consequent on alteration of name of State of Mysore. 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.]
Alteration of memorandum.
16.Alteration of memorandum.(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 con- ditions contained in its memorandum.
(3) Other provisions contained in the memorandum, including those relating to the appointment of a managing director, managing agent, secretaries and treasurers 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. ———————————————————————- 1 Ins. by the Mysore State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1974 (w.e.f. 1-11-1973), see Notification No. G.S.R. 431(E), dated 21st October, 1974, see Gazette of India, Extraordinary, Pt. II, Sec. 3(i), P. 1981. ———————————————————————- 71
Special resolution and confirmation by Company Law Board required foralternation of memorandum. 17.Special resolution and confirmation by Company Law Board
required for alternation of memorandum.(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; (b) to attain its main purpose by new or improved means; (c) to enlarge or change the local area of its operations; (d)to carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company; (e)to restrict or abandon any of the objects specified in the memorandum; (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 shall not take effect until, and except in so far as, it is confirmed by the 1[Company Law Board] on petition.
(3)Before confirming the alteration, the 1[Company Law Board] 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 1[Company Law Board], be affected by the alteration; and (b) that, with respect to every creditor who, in the opinion of the 1[Company Law Board], is entitled to object to the alteration, and who signifies his objection in the manner directed by the 1[Company Law Board], either his consent to the alteration has been obtained or his debt or claim has been discharged or has determined, or has been secured to the satisfaction of the 1 [Company Law Board] : Provided that the 1[Company Law Board] may, in the case of any person or class of persons, for special reasons, dispense with the notice required by clause (a). ———————————————————————- 1 Subs. by Act 41 of 1974, s. 5, for “Court” (w.e.f. 1-2-1975). ———————————————————————- 72/1
1[(4) The 2[Company Law Board] 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 to appear before the 2[Company Law Board] and state his objections and suggestions, if any, with respect to the confirmation of the alteration.]
(5) The 2[Company Law Board] may make an order confirming the alteration either wholly or in part, and 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 2[Company Law Board] 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 2[Company Law Board] may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the satis- faction of the 2[Company Law Board] 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 ex- pended in any such purchase.
Alternation to be registered within three months.
18.Alternation to be registered within three months.3[(1) A certified copy of the order of the 2[Company Law Board] made under
sub-section (5) of section 17 confirming the alteration, together with a printed copy of the memorandum as altered, shall, within three months from the date of the order, be filed by the company with the Registrar who shall register the same and certify the registration under his hand within one month from the date of the filing of such documents.)
(2)The certificate shall be conclusive evidence that all the re- quirements of this Act with respect to the alteration and the confir- mation 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 ———————————————————————-
1 Subs. by Act . 65 of 1960, s. 6, for sub-section (4). 2 Subs. by Act 41 of 1974, s. 5, for “Court” (w.e.f. 1-2-1975).
3 Subs. by Act 65 of 1960, s. 7, for sub-section (1). ———————————————————————- 72/2 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 1[Company Law Board] may, at any time, by order, extend the time for the filing of documents 2[or for the registration of the alteration] under this section by such period as it thinks proper. 19 Effect of failure to register.
19.Effect of failure to register.(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.
3[(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 1[Company Law Board]
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 1[Company Law Board] 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.Companies not to be registered with undesirable names.(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, the name by which a company in existence has been previously registered, may be deemed to be undesirable by the Central Government within the meaning
of sub-section (1). ———————————————————————- 1 Subs. by Act 41 of 1974, s. 5, for “Court” (w.e.f. 1-2-19 75). 2 Ins. by Act 65 of 1960, s. 7.
3 Subs. by s. 8, ibid., for sub-section (2). ———————————————————————- 72/3
Change of name by company. *21.Change of name by company. A company may, by special resolution and with the approval of the Central Government signified in writing, change its name: 1[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.Rectification of name of company.(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, 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- (a)may, by ordinary resolution and with the previous approval of the Central Government signified in writing, change its name or new name; and ———————————————————————- * In its application to Government Companies, section 21 shall be read along with the following proviso: “Provided that nothing in this section shall apply to a Government Company where the change in its name consists only in the deletion of the word ‘Private’ therefrom”: Vide Notification No.GSR 1649 dt. 13.11.65, Gaz. of India, Pt.II, Sec. 3(i), p. 1733-34 (issued under s. 620). 1 Added by Act 31 of 1965, s. 6 (w.e.f. 15-10-1965). ———————————————————————- 72A (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.
(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 hundred rupees for every day during which the default continues.
Registration of change of name and effect thereof.
*23.Registration of change of name and effect thereof.(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 existing private limited companies.
24.Change of existing private limited companies. (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. ———————————————————————- *In its application to Government Companies section 23 shall be read along with the following sub-section:- “(1A) Where the change in the name of a Government Company consists only in the deletion of the word “Private” therefrom, that Government Company shall, not later than three months from the date thereof,inform the Registrar of the aforesaid change 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”: Vide Notifn. No. (GSR 1649 dt. 13.11.1965, Gaz. of India, Pt.II, Sec.3(i), p-1733-34 (issued under s. 620). ———————————————————————- 72B
Power to dispense with “Limited” in name of charitable or othercompany. 25.Power to dispense with “Limited” in name of charitable or
other company. (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, 73 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.
1[(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 direction, 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 Gov- ernment, 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.
2[(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). ———————————————————————-
1 Subs. by Act 65 of 1960 s. 9, for sub-section (6).
2 Subs. by s. 9, ibid., for sub-section (8). ———————————————————————- 74 (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 regulations 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
(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 hundred rupees for every day during which the default continues. Articles of Association.
Articles prescribing regulations. 26.Articles prescribing regulations.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.
Regulations required in case of unlimited company, company limited byguarantee or private company limited by shares. 27.Regulations required in case of unlimited company, company
limited by guarantee or private company limited by shares.(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. 75
(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 limitedby shares. 28.Adoption and application of Table A in the case of companies
limited by shares. (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 regula- tions 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.Form of articles in the case of other companies.The articles of a 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 Schedule I as may be applicable, or in a Form as near thereto as circumstances admit: 1[Provided that nothing in this section shall be deemed to pre- vent 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.Form and signature of articles. Articles shall- (a) be printed; (b) be divided into paragraphs numbered consecutively ; and (c) be signed by each subscriber of the memorandum of asso- ciation (who shall add his address, description and occu- pation, 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. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 10. ———————————————————————- 76
Alteration of articles by special resolution.
31.Alteration of articles by special resolution.(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: 1[Provided that no alteration made in the articles under this subsection 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. 1[(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 1360 or either of them, extend to altering any provisions in Table B annexed to Act 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.Registration of unlimited company as limited, etc. (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 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. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 11. ———————————————————————- 77
(3) The registration of an unlimited company as a limited com- pany 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.Registration of memorandum and articles.(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 1[(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 plader entitled to appear before a High Court,or 2[“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, 2* * * 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 precede- nt and incidental thereto, shall be filed with the Registrar; and the Registrar may accept such a declaration as sufficient evidence of such compliance. 3[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 fultime 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.
Effect of Registration.
34.Effect of Registration.(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. ———————————————————————- 1 Subs. by Act 31 of 1988, s. 6 (w.e.f. 15-6-1988). 2. Omitted by s.6, ibid. (w.e.f. 15-6-1988). 3. Added by s.6, ibid (w.e.f. 15-6-1988). ———————————————————————- 78
(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.Conclusiveness of certificate of incorporation. 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.Effect of memorandum and articles.(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.Provision as to companies limited by guarantee.(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. 79
Effect of alteration in memorandum or articles. 38.Effect of alteration in memorandum or articles. 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: 1[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.Copies of memorandum and articles, etc, to be given to
members.(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)the agreement, if any, entered into or proposed to be entered into, by the company with any person appointed or to be appointed as its managing agent or as its secretaries and treasurers ; 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 fifty rupees.
Alteration of memorandum or articles, etc., to be noted in every copy. 40.Alteration of memorandum or articles, etc., to be noted in
every copy.(1) Where an alteration is made in the memorandum or articles of a company, in the agreement referred to in clause (c) of ———————————————————————- 1 Subs. by Act 65 of 1960, s. 12, for the proviso. ———————————————————————- 80
sub-section (1) of section 39 or in any other agreement, 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 memo- randum, 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 ten rupees for each copy so issued. Membership of company
Definition of “member”.
41.Definition of “member”. (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 1[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.
2[(3) Every person holding equity share capital or company and whose name is entered as beneficial owner in the records of the depository shall be deemed to be a members of the conserned company.]
Membership of holding company.
42.Membership of holding company.(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. ———————————————————————- 1 Subs. by Act 65 of 1960, s, 13, for ” agrees.” 2. Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995). ———————————————————————- 81
(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. Private companies
Consequences of default in complying with conditions constituting acompany a private company. 43.Consequences of default in complying with conditions constituting a company a private company. 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 1[Company Law Board] 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 1[Company Law Board] just and expedient, order that the company be relieved from such consequences as aforesaid. 43A. Private company to become public company in certain cases. 2[43A.Private company to become public company in certain cases.
(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 cor- porate, 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 (65 of 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 ———————————————————————- 1 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31-5-1991). 2 Ins. by Act 65 of 1960, s.14. ———————————————————————- 82 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. 1[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.]
2[(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, ———————————————————————- 1 Added by Act 31 of 1988, s. 7 (w.e.f. 15.6.1988). 2 Ins. by Act 41 of 1974 s.6 (w.e.f. 1-2-1975). ———————————————————————- 83 1974, (41 of 1974) or incorporated thereafter, is not, during the relevant period 1[less than such amount as may be prescribed] the pri- vate 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, (41 of 1974), or (b)where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1974,( 41 of 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.] 2[(1C)Where, after the commencement of the Companies (Amendment) Act, 1988,(31 of 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. ———————————————————————- 1 Subs. by Act 31 of 1988, s. 7 (w.e.f. 15.6.88). 2 Ins. by s.7, ibid (w.e.f. 15.6.88). ———————————————————————- 84/1
(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. 1* * * * * ———————————————————————- 1 Omitted by Act 31 of 1988, s. 7 (w.e.f. 15-6-1988). ———————————————————————- 84/2
(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, 1* * * 1* * * * * 2[(c) that the private company, irrespective of its paid-up share capital, did not have, during the relevant period, an average annual turnover of 3[such amount as is referred to in such-section (1A) or more.]] 4[“(d) that the private company did not accept or renew deposits from the public.]
2[(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.
4[(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.] ———————————————————————- 1 Omitted by Act 31 of 1988, s. 7 (w.e.f. 15.6.88). 2 Ins. by Act 41 of 1974, s.6 (w.e.f. 1-2-1975). 3 Subs. by Act 31 of 1988 s.7 (w.e.f. 15-6-88). 4 Ins. by s.7, ibid (w.e.f. 15-6-1988). ———————————————————————- 84/3 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, (41 of 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.] 1[“(c) “deposit” has the same meaning as in section 58A.]
Prospectus or statement in lieu of prospectus to be filed by privatecompany on ceasing to be private company. 44.Prospectus or statement in lieu of prospectus to be filed by
private company on ceasing to be private company. (1) If a company, being a private company, alters its article 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 2[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 the Schedule, shall set out the reports specified therein, and the said Parts I and II ———————————————————————- 1 Ins. by Act 31 of 1988, s.7 (w.e.f. 15-6-1988). 2 Subs. by Act 31 of 1965, s. 62 and Sch., for “fourteen” (w.e.f. 15-10-1965). ———————————————————————- 84A 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 85 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 hundred 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 five 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 prospects 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 withfewer than seven, or in the case of a private company, two members. 45.Members severally liable for debts where business carried on with fewer than seven, or in the case of a private company, two members.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 cognisant of the fact that it is carrying on business with fewer than seven members or two 86 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.Form of contracts.(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.Bills of exchange and promissory notes. 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.
Execution of deeds.
48.Execution of deeds.(1) A company any, 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.Investments of company to be held in its own name. (1) Save
as otherwise provided in sub-sections (2) to (5) 1[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 ———————————————————————- 1 Ins. by Act 65 of 1960, s. 15. ———————————————————————- 87 (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 1** *.
(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 2[(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 thin 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 ———————————————————————- 1 The words “expressly described as a nominee of the company” omitted by Act 65 of 1960, s. 15. 2 Ins. by s. 15, ibid. ———————————————————————- 88 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. 1[(c) from holding investments in the name of a depository when such investment 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 2[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 subsections (1) to (8), the company and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.
(10)If any inspection required under sub-section (8) is refused, the 3[Company Law Board] may, by order, direct an immediate inspec- tion, 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. ———————————————————————- 1. Ins. by Act 22 of 1996 s.31 and Sch. (w.e.f. 20-9-1995). 2 Subs. by Act 65 of 1960 s. 15, for “with a Scheduled Bank”. 3 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31-5-1991). ——————————————————————— 89
Power for company to have official seal for use outside India. 50.Power for company to have official seal for use outside
India.(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 terri- tory, district or place may by writing under its common seal, autho- rise 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 agents 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
Service of documents on company. 51. Service of documents on company. 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 certificate of posting or by registered post, or by leaving it at its registered office: 1[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.Service of documents on Registrar. 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.Service of documents on members by company. (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 supp- lied 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 ——————————————————————— 1. Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995). ——————————————————————— 90 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)1* * * 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 jointholders 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.Authentication of documents and proceedings.Save as otherwise expressly provided in this Act, a document or proceeding requiring authentication by a company may be signed by a director, the managing agent the secretaries and treasurers, the manager, the secretary or other authorised officer of the company, and need not be under its common seal. ———————————————————————- 1 The words ” unless the contrary is proved,” omitted by Act 65 of 1960, s. 16. ———————————————————————- 91 PART III PROSPECTUS AND ALLOTMENT, AND OTHER MATTERS RELATING TO ISSUE OF SHARES OR DEBENTURES Prospectus
Dating of prospectus. 55. Dating of prospectus.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.
Matters to be stated and reports to be set out in prospectus. 56.Matters to be stated and reports to be set out in prospectus.
(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 accompanid 1[by memorandum containing such salient features or a prospectus as may be prescribed] which complies with he requirements of this section: 1[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 five 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 ———————————————————————- 1 Subs. by Act 31 of 1988, s. 8 (w.e.f.31-5-1991). ——————————————————————— 92 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 1[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 pros- pectus 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.Expert to be unconnected with formation or management of company.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. ———————————————————————- 1 Subs. by Act 52 of 1964 s. 3 and Sch. II, for “was immaterial”. ———————————————————————- 93
Expert’s consent to issue of prospectus containing statement by him. 58.Expert’s consent to issue of prospectus containing statement by him. 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. 58A. Deposits not to be invited without issuing an advertisement. 1[58A.Deposits not to be invited without issuing an
advertisement. (1) The Central Government may, in consultation with the Reserve Bank of India, prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited or accepted by a company either from the public or from its members.
(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), and (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.
(3) (a) Every deposit accepted by a company at any time before the commencement of the Companies (Amendment) Act, 1974, (41 of 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 2[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. ———————————————————————- 1 Ins. by Act 41 of 1974, s. 7 (w.e.f. 1-2-1975). 2 Subs. by Act 31 of 1988, s. 9 (w.e.f. 1.9.1989). ———————————————————————- 94 (c) Where, before the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), any deposit was received by a company in con- travention 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. 1[(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 subsection (1), be repaid in accordance with the terms and conditions of such deposit.]
(4)Where any deposit is accepted by a company after the com- mencement of the Companies (Amendment) Act, 1974(41 of 1974), in cont-
ravention 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 excee- ding 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 ———————————————————————- 1 Ins. by Act 31 of 1988, s. 9 (w.e.f. 1.9.1989). ———————————————————————- 94A the manner or condition prescribed under that sub-section or in con-
travention of the provisions of subsection (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 one lakh rupees but shall not be less than five 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 India, specify in this behalf. (b)Except the provisions relating to advertisement contained in
clause (b) of sub-section (2), nothing in this section shall apply to such closess of financial companies as the Central Government may after consulationwith the Reserve Bank of India, specify in this behalf.
1[(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 India.]
2[(9)Where a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board 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 Company Law Board 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 Company
Law Board 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 fifty for every day during which such noncompliance continues.] ———————————————————————- 1 Ins. by Act 46 of 1977, s. 3. 2 Ins. by Act 31 of 1988, s. 9 (w.e.f. 1.9.1989). ———————————————————————- 94B 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 India. 58B. Provisions relating to prospectus to apply to advertisement. 58B. Provisions relating to prospectus to apply to advertisement. The provisions of this Act relating to a prospectus shall, so far as may be, apply to an advertisement referred to in section 58A.]
Penalty and interpretation.
59.Penalty and interpretation.(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 five thousand rupees.
(2)In sections 57 and 58, the expression “expert” includes an engineer, a valuer, an accountant and any other person whose profes- sion gives authority to a statement made by him.
Registration of prospectus.
60.Registration of prospectus.(1) No prospectus shall be issued by or on behalf of a company orin relation to an intended company unless, on or before the date ofits 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. 94C
(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 requird 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,
1[(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 five thousand rupees.
Terms of contract mentioned in prospectus or statement in lieu ofprospectus, not to be varied. 61.Terms of contract mentioned in prospectus or statement in lieu of prospects, not to be varied. 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. ———————————————————————-
1 Subs. by Act 65 of 1960, s. 17, for sub-section (3). ———————————————————————- 94D
Civil liability for misstatements in prospectus.
62.Civil liability for misstatements in prospectus.(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; 95 (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 1* * * sub-section
(3)of section 60, the consent of a person named in a pros- pectus 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 thereunder, 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 ———————————————————————- 1 The words, brackets and letter “clause (b) of ” omitted by Act 65 of 1960, S. 18. ———————————————————————- 96 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 re- quired 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 97 in writing and gave reasonable public notice of the with- drawal 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 98 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.Criminal liability for mis-statements in prospectus. (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 five 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 1* * * sub-section (3) of section 60.
Document containing offer of shares or debentures for also to bedeemed prospectus. 64.Document containing offer of shares or debentures for also to
be deemed prospectus. (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 misstatements contained in the document or otherwise in respect thereof. ———————————————————————- 1 The words, brackets and letter ” clause (b) of ” omitted by Act 65 of 1960, S. 19. ———————————————————————– 99
(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.Interpretation of provisions relating to prospectuses. (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 be untrue 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. 100
(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.Newspaper advertisements of prospectus. 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 thepublic, etc] 67.Construction of references to offering shares or debentures to
the public, etc](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 sub- scription 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.
(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 101 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.Penalty for fraudulently inducing persons to invest money. 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 ten thousand rupees, or with both. 68A. Personation for acquisition, etc., of shares.
1[68A. Personation for acquisition, etc., of shares. (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.] Allotment
Prohibition of allotment unless minimum subscription received. 69.Prohibition of allotment unless minimum subscription
received.(1) No allotment shall be made of any share capital of a company offered to the public for subscription, unless the amount ———————————————————————- 1 Ins. by Act 31 of 1965, s. 8 (w.e.f. 15-10-1965). ———————————————————————- 102 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.
1[(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 res- pect of the minimum subscription has been received by the company, and where such amount has not been received by the company within the time or 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 five 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 ———————————————————————-
1 Subs. by Act 31 of 1965, s. 9, for sub-section (4) (w.e.f. 15- 10-1965). ———————————————————————- 102A 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 mis- conduct 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 ofprospectus delivered to Registrar. 70.Prohibition of allotment in certain cases unless statement in
lieu of prospectus delivered to Registrar. (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. 103
(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 one 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 five 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. 104
Effect of irregular allotment.
71.Effect of irregular allotment. (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, notwithstand- ing 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 pro- visions 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.Applications for, and allotment of, shares and debentures.(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 men- tioned in the first paragraph of clause (a), or the beginning of the fifth day mentioned in the second paragraph of that clause, as the 105 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 five 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 sec- tion 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 Allotment of shares and debentures to be dealt in on stock
exchange. 1[(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.] 2[1A] Where a prospectus, whether issued generally or not,
state that an 3[application under sub-section (1) has been] made for permission for the shares or debentures offered thereby to be dealt in one or more recognized 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 applica- tion in pursuance of such prospectus shall, whenever made, be void 4* * * ———————————————————————- 1 Ins. by Act 31 of 1988, s.10(w.e.f.15-6-1988).
2 Subs. by Act 41 of 1974, s.8 sub-section (1) (w.e.f. 1-2-1975) and renumbered as sub-section (1A) by Act 31 of 1988, s.10 (w.e.f. 15-6-1988). 3 Subs. by Act 31 of 1988, s.10 (w.e.f. 15-6-1988). 4 Omitted by s.10, ibid.(w.e.f. 15-6-1988). ———————————————————————- 106 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 recog- nized 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 1[applied under sub-
section(1)] 2[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 1[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.] 3* * * * * 4[(2A) Where permission has been granted by the recognized 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, 1[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.] 3* * * * * ———————————————————————- 1 Subs. by Act 31 of 1988, s.10 (w.e.f. 15-6-1988). 2 Subs. by Act 41 of 1974, s. 8, for certain words (w.e.f. 1-2-1975). 3 Omitted by Act 31 of 1988, s.10 (w.e.f. 15-6-1988). 4 Ins. by Act 41 of 1974, s.8 (w.e.f. 1-2-1975). ———————————————————————- 106A (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 five 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 1[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 five thousand rupees. 2[(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 per- mitted 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 require- ments of this section shall be void. ———————————————————————- 1 Subs. by Act 41 of 1974, s. 8, for certain words (w.e.f. 1-2- 1975). 2 Ins. by s. 8, ibid. (w.e.f. 1-2-1975). ———————————————————————- 106B
1[(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 pros- pectus, 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; ———————————————————————-
1 Subs. by Act 41 of 1974, s.8, for sub-section (5) (w.e.f. 1-2- 1975). ———————————————————————- 107 (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 and73. 74. Manner of reckoning fifth, eighth and tenth days in sections 72 and 73. In reckoning for the purposes of sections 72 and 73, the fifth day 1[or the eighth day] another day, any intervening day which is a public holiday under the Negotiable Instruments Act, 1881 (36 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.
Return as to allotments.
75.Return as to allotments.(1) Whenever a company having a share capital makes any allotment of its shares, the company shall, within 2[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: 3[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 ———————————————————————- 1 Subs. by Act 31 of 1988, s.11 (w.e.f. 15-6-1988). 2 Subs. by Act 31 of 1965, s. 62 and Sch., for ” one month ” (w.e.f. 15-10-1965). 3 Added by s. 11, ibid. (w.e.f. 15-10-1965). ———————————————————————– 108 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 1[(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 Court sanctioning the issue and where the maximum rate of discount exceeds ten per cent., a copy of the orders 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 2[thirty days] after the allotment, file with the Registrar the pres- cribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced to writing; and those 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 2 [thirty days] specified in
subsections (1) and (2) for compliance with the requirements of this section 3[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 ———————————————————————- 1 Subs. by Act 65 of 1960, s. 21, for cl. (c). 2 Subs. by Act 31 of 1965, s. 62 and Sch., for ” one month ” (w.e.f. 15-10-1965). 3 Subs. by s. 11, ibid., for certain words, (w.e.f. 15-10-1965). ———————————————————————- 109 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 1[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 hundred rupees for every day during which the default continues : 2[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 five 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. Commissions and Discounts
Power to pay certain commissions and prohibition of payment of allother commissions, discounts, etc. 76.Power to pay certain commissions and prohibition of payment of
all other commissions, discounts, etc. (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; ———————————————————————- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for ” one month ” (w.e.f. 15-10-1965). 2 Subs. by s. 11, ibid., for the proviso (w.e.f. 15-10-1965). ———————————————————————- 110 (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 ; 1* * * (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 2 [and] 2[(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 3[any of its moneys], either directly or indirectly, in payment of any com- mission, 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. ———————————————————————- 1 The word ” and” omitted by Act 31 of 1965, s. 12 (w.e.f. 15-10- 1965). 2 Ins. by s. 12, ibid. (w.e.f. 15-10-1965). 3 Subs. by Act 65 of 1960, s. 22, for “any of its capital moneys”. ———————————————————————- 110A
(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 pay- ment 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. 1[(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 subs-
cribe under clause (a) of sub-section (1) for any shares in, or deben- tures 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 pros- pectus 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 hundred rupees.
Restrictions on purchase by company or loans by company for purchase,of its own or its holding company’s shares. 77.Restrictions on purchase by company or loans by company for
purchase, of its own or its holding company’s shares. (1) No company limited by shares, and no company limited by guarantee and having a share capital, shall have power to buy its ———————————————————————- 1 Ins. by Act 31 of 1965, s. 12 (w.e.f. 15-10-1965). ———————————————————————- 111 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 sub- sidiary 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, managing agents, secretaries and treasurers 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 one 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. 112 Issue of Shares at Premium and Discount
Application of premiums received on issue of shares.
78.Application of premiums received on issue of shares.(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 share 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 share premium account were paid-up share capital of the company.
(2) The share 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 Vl, shall be disregarded in determining the sum to be included in the share premium account.
Power to issue shares at a discount.
79.Power to issue shares at a discount. (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 1 [Company Law Board]; ———————————————————————- 1 Subs. by Act 41 of 1974, s. 9, for “Court” (w.e.f. 1-2-1975). ———————————————————————- 113 (ii) the resolution specifies the maximum, rate of discount 1* * * at which the shares are to be issued: 2[Provided that no such resolution shall be sanctioned by the Company Law Board if the maximum rate of discount specified in the resolution exceeds ten per cent., unless that Board 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 3[Company Law Board] or within such extended time as the 3[Company Law Board] may allow.
(3) Where a company has passed a resolution authorising the issue of shares at a discount, it may apply to the 3[Company Law Board] for an order sanctioning the issue; and on any such applica- tion, the 3[Company Law Board], if, having regard to all. the circum- stances 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.
(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 com- pany, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees. 4[Issue and Redemption of Preference Shares]
Power to issue redeemable preference shares.
80.Power to issue redeemable preference shares.(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: ———————————————————————- 1 Certain words omitted by Act 41 of 1974, s. 9 (w.e.f. 1-2- 1975). 2 Ins. by s. 9, ibid. (w.e.f. 1-2-1975). 3 Subs. by s. 9, ibid.. for “Court” (w.e.f. 1-2-1975). 4 Subs. by Act 31 of 1988, s. 12 (w.e.f. 15.6.1988). ———————————————————————- 114 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 share 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 1[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 1[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 2[section 611], be deemed to be increased by the issue of shares in pursuance of this sub-section: ———————————————————————- 1 Subs. by Act 65 of 1960, s. 23, for “the capital redemption reserve fund”. 2 Subs. by s. 23, ibid., for “section 601”. ———————————————————————- 114A 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) 1[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. 2[(5A) Notwithstanding anything contained in this Act, no company limited by shares shall, after the commencement of the Companies (Amendment) Act, 1988, issue any preference share which is irredeemable or is redeemable after the expiry of a period of ten 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, ———————————————————————- 1 Subs. by Act 65 of 1960, s. 23, for “The capital redemption reserve fund”. 2 Ins. by Act 31 of of 1988, s. 13 (w.e.f 15.6.1988). ———————————————————————- 115 shall be punishable with fine which may extend to one thousand rupees. 80A. Redemption of irredeemable preference shares, etc.
4[80A.Redemption of irredeemable preference shares, etc. (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 com- mencement, or (b) which is not redeemable before the expiry of ten years from the date of issue there-on in accordance with the terms of its issue and which had not been redeemed before such com- mencement, 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 Company Law Board, on a petition made by it in this behalf and notwithstanding anything contained in this Act, issue further redeem-able 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 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 one 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
Further issue of capital.
81.Further issue of capital.(1) 2[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 3[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 exercis- able 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.
4[(1A) Notwithstanding anything contained in sub-section (1), the further shares aforesaid may be offered to any persons [whether or ———————————————————————- 1 Ins. by Act 31 of 1988, s. 14 (w.e.f. 15.6.1988). 2 Subs. by Act 65 of 1960, s. 24, for certain words. 3 Subs. by s. 24, ibid., for “new”. 4 Ins. by s. 24, ibid. ———————————————————————- 116 not those persons include the persons referred to in clause (a) of
subsection (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.
1(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: 2[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 ———————————————————————-
1 Subs. by Act 65 of 1960, s. 24, for sub-section (3). 2 Subs. by Act 53 of 1963, s. 5, for the proviso (w.e.f. 1-1- 1964). ———————————————————————- 117 (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.] ]
1[(4) Notwithstanding anything contained in the foregoing provi- sions 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 cir- cumstances, 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 conclu- sive.] ———————————————————————- 1 Ins. by Act 53 of 1963, s. 5 (w.e.f. 1-1-1964). ———————————————————————- 118 PART IV SHARE CAPITAL AND DEBENTURES Nature, Numbering and Certificate of Shares
Nature of shares. 82. Nature of shares. The shares or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company.
[Repeled] 83. Repealed by the Depositories Act, 1996 (22 of 1996) s.31 and Sch. (w.e.f. 20-9-1995).
Certificate of shares.
84.Certificate of shares.1[(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 [(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 ten thousand rupees, or with both.
(4) Notwithstanding anything contained in the articles of asso- ciation 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 certi- ficate may be renewed or a duplicate thereof may be issued, shall be such as may be prescribed.] ———————————————————————-
1 S. 84 re-numbered as sub-section (1) of that section by Act 65 of 1960, s. 25. 2 Ins. by s. 25, ibid. ———————————————————————- 118A Kinds of Share Capital
Two kinds of share capital.
85.Two kinds of share capital.(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 respects 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, 119 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.New issues of share capital to be only of two kinds.The share capital of a company limited by shares formed after the commencement of this Act, or issued after such commencement, shall be of two kinds only, namely:- (a) equity share capital; and (b) preference share capital.
Voting rights.
87.Voting rights.(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 120 (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.Prohibition of issue of shares with disproportionate rights. No company formed after the commencement of this Act, or issuing any share capital after such commencement, shall issue any shares (not being preference shares) which carry voting rights or rights in the company as to dividend, capital or otherwise which are disproportionate to the rights attaching to the holders of other shares (not being preference shares).
Termination of disproportionately excessive voting rights in existingcompanies. 89.Termination of disproportionately excessive voting rights in
existing companies.(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 of a managing agent or secretaries and treasurers, or to any variation in the terms of an agreement between the company and a managing or wholetime director thereof or its managing agent or secretaries and treasurers; (b) any resolution relating to the appointment of buying or selling agents; (c) any resolution relating to the grant of a loan or to the giving of a guarantee or any other financial assistance, to any other body corporate having any person as managing agent or secretaries and treasurers who is also either the managing agent or the secretaries and treasurers of the company or an associate of such managing agent or secretaries and treasurers.
(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 subsection (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 com- pany, and every officer of the company who is in default, shall be punishable with fine which may extend to one 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. 122 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.
Savings.
1[90.Savings. (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 (41 of 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 prefe- rence 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.Calls on shares of same class to be made on uniform basis. 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 calledup. 92.Power of company to accept unpaid share capital, although not
called up. (1) A company may, if so authorised by its articles, accept from any member the whole or a part of the amount remaining un- paid 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. ——————————————————————— 1 Subs. by Act 41 of 1974, S. 10, for section 90 (w.e.f. 1-2- 1975). ——————————————————————— 123
Payment of dividend in proportion to amount paid up. 93.Payment of dividend in proportion to amount paid up. 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.Power of limited company to alter its share capital. (1) A limited company having a share capital, may, if so authorised by its articles, alter the conditions of is 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) subdivide 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. 124 94A.
Share capital to stand increased where an order is made under section81 (4). 1[94A.Share capital to stand increased where an order is made
under section 81(4). (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 condi- tions 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 unecessary alterations in the memorandum of the company.
Notice to Registrar of consolidation of share capital conversion ofshares into stock, etc. 95.Notice to Registrar of consolidation of share capital
conversion of shares into stock, etc. (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; ——————————————————————— 1 Ins. by Act 41 of 1974, s. 11(w.e.f. 1-2-1975). ——————————————————————— 124A (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 1[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 fifty rupees for every dlay during which the default continues.
Effect of conversion of shares into stock. 96. Effect of conversion of shares into stock. 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.Notice of increase of share capital or of members. (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 2[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 com- pany, and every officer of the company who is in default, shall be ——————————————————————— 1 Subs. by Act 31 of 1965, s. 62 and Sch., for “one month” (w.e.f. 15-10 1965). 2 Subs. by s. 62 and Sch., ibid., for “fifteen” (w.e.f. 15-10- 1965). ——————————————————————— 124B punishable with fine which may extend to fifty rupees for every day during which the default continues.
Power of unlimited company to provide for reserve share capital on re-registration. 98.Power of unlimited company to provide for reserve share capital on re- registration. 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 125 event and for the purposes of the company being wound up.
Reserve liability of limited company. 99.Reserve liability of limited company.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. Reduction of Share Capital
Special resolution for reduction of share capital.
100.Special resolution for reduction of share capital. (1) Subject to confirmation by the Court, 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 off 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”.
Application to Court for cofirming order, objections by creditors, andsettlement of list of objecting creditors. 101.Application to Court for cofirming order, objections by
creditors, and settlement of list of objecting creditors. (1) Where a company has passed a resolution for reducing share capital, it may apply, by petition, to the Court for an order confirming the reduction.
(2) Where the-proposed reduction of share capital involves either the diminution of liability In respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, and in any other case if the Court so directs, the following provisions shall
have effect, subject to the provisions of sub-section (3):- (a) every creditor of the company who at the date fixed by the Court is entitled to any debt or claim which, if that 126 date were the commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the reduction ; (b) the Court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction ; (c) where a creditor entered on the list whose debt or claim is not discharged or has not determined does not consent to the reduction’, the Court may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating, as the Court may direct, the following amount:- (i)if the company admits the full amount of the debt or claim, or, though not admitting it, is willing to provide for it, then, the full amount of the debt or claim; (ii)if the company does not admit and is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not, ascertained, then, an amount fixed by the Court after the like inquiry and adjudication as if the company were being wound up by the Court.
(3) Where a proposed reduction of share capital involves either the diminution of any liability in respect of unpaid share capital or the payment to any share holder of any paid-up share capital, the Court may, if, having regard to any special circumstances of the case, it thinks proper so to do, direct that the provisions of sub-section
(2) shall not apply as regards any class or any classes of creditors.
Order confirming reduction and powers of court on making such order. 102.Order confirming reduction and powers of court on making such
order.(1) The Court, if satisfied with respect to every creditor of the company who under section 101 is entitled to object to the reduction, that either his consent to the reduction has been obtained or his debt or claim has been discharged, or has determined, or has 127 been secured, may make an order confirming the reduction on such terms and conditions as it thinks fit.
(2) Where the Court makes any such order, it may- (a) if for any special reason it thinks proper so to do, make an order directing that the company shall, during such period commencing on, or at any time after, the date of the order, as is specified in the order, add to its name as the last words thereof the words ” and reduced ” ; and (b) make an order requiring the company to publish as the Court directs the reasons for reduction or such other information in regard thereto as the Court may think expedient with a view to giving proper information to the public, and, if the Court thinks fit, the causes which led to the reduction.
(3) Where a company is ordered to add to its name the words “and reduced “, those words shall, until the expiration of the period specified in the order, be deemed to be part of the name of the company,
Registration of order and minute of reduction.
103.Registration of order and minute of reduction.(1) The Registrar- (a) on production to him of an order of the Court confirming the reduction of the share capital of a company ; and (b) on the delivery to him of a certified copy of the order and of a minute approved by the Court showing, with respect to the share capital of the company as altered by the order, (i) the amount of the share capital, (ii) the number of shares [into which it is to be divided, (iii) the amount of each share and (iv) the amount, if any, at the date of the registration deemed to be paid up on each share; shall register the order and minute.
(2) On the registration of the order and minute, and not before, the resolution for reducing share capital as confirmed by the order shall take effect.
(3) Notice of the registration shall be published in such manner as the Court may direct.
(4) The Registrar shall certify under his hand the registration of the order and minute, and his certificate shall be conclusive evidence that all the requirements of this Act with respect to 128 reduction of share capital have been complied with, and that the share capital of the company is such as is stated in the minute.
(5) The minute when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company, and shall be valid and alterable as if it had been originally contained therein.
(6) The substitution of any such minute as aforesaid for part of the memorandum of the company shall be deemed to be an alteration of the memorandum within the meaning and for the purposes of section 40.
Liability of members in respect of reduced shares..
104.Liability of members in respect of reduced shares.. (1) A member of the company, past or present, shall not be liable, in respect of any share, to any call or contribution exceeding in amount the difference, if any, between the amount paid on the share, or the reduced amount, if any, which is to be deemed to have been paid thereon, as the case may be, and the amount of the share as fixed by the minute of reduction: Provided that, if any creditor entitled in respect of any debt or claim to object to the reduction of share capital is, by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to his debt or claim, not entered on the list of creditors, and after the reduction the company is unable, within the meaning of section 434, to pay the amount of his debt or claim, then- (a) every person who was a member of the company at the date of the registration of the order for reduction and minute, shall be liable to contribute for the payment of that debt or claim an amount not exceeding the amount which he would have been liable to contribute if the company had commenced to be wound up on the day immediately before the said date ; and (b) if the company is wound up, the Court, on the application of any such creditor and proof of his ignorance as aforesaid, may, if it thinks fit, settle accordingly a list of persons so ‘liable to contribute, and make and enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories in a winding up.
(2) Nothing in this section shall affect the rights of the contributories among themselves.
Penalty for concealing name of creditor, etc. 105.Penalty for concealing name of creditor, etc. If any officer of the company- (a) knowingly conceals the name of’ any creditor entitled to object to the reduction: (b) knowingly misrepresents the nature or amount of the debt or claim of’ any creditor. or (c) abets of is privy to any such concealment or misrepresentation as aforesaid; he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both. Variation of Shareholders Rights
Alteration of rights of holders of special classes of shares. 1[106.Alteration of rights of holders of special classes of shares. Where the share capital of a company is divided into different classes of shares, the rights attached to the shares of any class may be varied with the consent in writing of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the issued shares of that class– (a) if provision with respect to such variation is contained in the memorandum or articles of the company, or (b) in the absence of any such provision in the memorandum or articles, if such variation is not prohibited by the terms of issue of the shares of that class.]
Rights of dissentient shareholders.
107.Rights of dissentient shareholders. (1) If in pursuance of any provision such as is referred to in section 106, the rights attached to any such class of shares are at any time varied, the holders of not less in the aggregate than ten per cent. of issued shares of that class, being persons who did not consent to or vote in favour of the resolution for the variation, may apply to the Court to have the variation cancelled and where any such application is made, the variation shall not have effect unless and until it is confirmed by the Court.
(2) An application under this section shall be made within twenty-one days after the date on which the consent was given or the resolution was passed,as the case may be, and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.
(3) On any such application, the Court. after hearing the applicant and any other persons who apply to the Court to be heard and appear to ——————————————————————— 1 Subs. by Act 65 of 1960, s. 26, for s. 106. ———————————————————————
the Court to be interested in the application, may, if it is satisfied, having regard to all the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation; and shall, if not so satisfied, confirm the variation.
(4) The decision of the Court on any such application shall be final.
(5) The company shall, within 1[thirty] days after the service on the company of any order made on any such application, forward a copy of the order to the Registrar; and if default is made in complying with this provision, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees. Transfer of shares and debentures
Transfer not to be registered except on production of instrument oftransfer. 108.Transfer not to be registered except on production of
instrument of transfer. (1) A company shall not register a transfer of shares in, or debentures of, the company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures: Provided that where, on an application in writing made to the company by the transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the Board of directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit: Provided further that nothing in this section shall prejudice any power of the company to register as shareholder or debenture holder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law. 2[3[(1A) Every instrument of transfer of shares shall be in such form as may be prescribed, and- (a) every such form shall, before it is signed by or on behalf of the transferor and before any entry is made therein, be presented to the prescribed authority, being a person ——————————————————————— 1 Subs. by Act 31 of 1965, s. 62 and Sch., for “fifteen” (w.e.f. 15-10-1965). 2 Ins. by s. 13, ibid. (w.e.f. 1-4-1966). 3 Subs. by Act 37 of 1966, s. 2. for sub-sections (1A), (1B) and (1C) (w.e.f. 1-4-1966). ——————————————————————— 130A already in the service of the Government, who shall stamp or otherwise endorse thereon the date on which it is so presented, and (b) every instrument of transfer in the prescribed form with the date of such presentation stamped or otherwise en- dorsed thereon shall, after it is executed by or on behalf of the transferor and the transferee and completed in all other respects, be delivered to the company,- (i)in the case of shares dealt in or quoted on a re- cognised stock exchange, at any time before the date on which the register of members is closed, in accordance with law, for the first time after the date of the presentation of the prescribed form to the prescribed authority under clause (a) or within 1[twelve months] from the date of such presentation, whichever is latter; (ii) in any other case, within two months from the date of such presentation. (1B) Notwithstanding anything contained in sub-section (1A),-an instrument of transfer of shares, executed before the commencement of section 13 of the Companies (Amendment) Act, 1965, (31 of 1965). or executed after such commencement in a form other than the prescribed form, shall be accepted by a company,- (a) in the case of shares dealt in or quoted on a recognised stock exchange, at any time not later than the expiry of six months from such commencement or the date on which the register of members is closed, in accordance with law, for the first time after such commencement, whichever is later; (b) in any other case, at any time not later than the expiry of six months from such commencement. (1C) Nothing contained in sub-sections (1A) and (1B) shall apply to- (A) any share- (i)which is held by a company in any other body corporate in the name of a director or nominee in pursuance of sub-section
(2), or as the case may be, sub-section(3), of section 49, or (ii) which is held by a corporation, owned or controlled by the Central Government or a State Government, in any other body corporate in the name of a director or nominee, or ——————————————————————— 1.Subs. by Act 31 of 1988, s.15 (w.e.f.15-6-1988). ——————————————————————— 130B (iii) in respect of which a declaration has been made to the Public Trustee under section 153B, if-
(1) the company or corporation, as the case may be, stamps or otherwise endorses, on the form of transfer in respect of such share, the date on which it decides that such share shall not be held in the name of the said director or nominee or, as the case may be, in the case of any share in respect of which any such declaration has been made to the Public Trustee, the Public Trustee stamps or otherwise endorses, on the form of transfer in respect of such share under his seal, the date on which the form is presented to him, and
(2) the instrument of transfer in such form, duly completed in all respects, is delivered to the- (a) body corporate in, whose share such company or corporation has made investment in the name of its director or nominee, or (b) company in which such share is held in trust, within two months of the date so stamped or otherwise endorsed ; or (B) any share deposited by any person with- (i) the State Bank of India, or (ii) any scheduled bank, or (iii)any banking company (other than a scheduled bank) or financial institution approved by the Central Government by notification in the Official Gazette (and any such approval may be accorded so as to be retros- pective to any date not earlier than the 1st day of April, 1966), or (iv) the Central Government or a State Government or any corporation owned or controlled by the Central Government or a State Government, by way of security for the repayment of any loan or ad- vance to, or for the performance of any obligation undertaken by, such person, if-
(1) the bank, institution, Government or corporation, as the case may be, stamps or otherwise endorses on the form of transfer of such share- (a)the date on which such share is returned by it to the depositor, or 130c (b)in the case of failure on the part of the depositor to repay the loan or advance or to perform the obligation, the date on which such share is released for sale by such bank. institution, Government or corporation, as the case may be, or (c)where the bank, institution, Government or corporation, as the case may be, intends to get such share registered in its own name, the date on which the instrument of transfer relating to such share is executed by it; and
(2)the instrument of transfer in such form, duly completed in all respects, is delivered to the company within two months from the date so stamped or endorsed. Explanation.-Where any investment by a company or a cor- poration in the name of its director or nominee referred to in clause (A) (i) or clause (A) (ii), or any declaration referred to in clause (A) (iii), or any deposit referred to in clause (B), of this sub-section is made after the expiry of the period or date mentioned in clause (a) of sub-section (1B) or after the expiry of the period mentioned in clause (b) of that sub-section, as the case may be, the form of transfer, in respect of the share which is the subject of such investment, declaration or deposit, means the prescribed form; or (C) any share which is held in any company by the Central Government or a State Government in the name of its nominee, except that every instrument of transfer which is executed on or after the 1st day of October, 1966, in respect of any such share shall be in the prescribed form.] (1D) Notwithstanding anything in sub-section (1A) or sub-section (1B) 1[or sub-section (1C)], where in the opinion of the Central Gov- ernment it is necessary so to do to avoid hardship in any case, that Government may on an application made to it in that behalf, extend the periods mentioned in those sub-sections by such further time as it may deem fit 1[whether such application is made before or after the expiry of the periods aforesaid]; and the number of extensions ——————————————————————— 1 Ins. by Act 37 of 1966, s. 2 (w.e.f. 1-4-1966). ——————————————————————– 131 granted hereunder and the period of each such extension shall be shown in the annual report laid before the Houses of Parliament under section 638.]
(2) In the case of a company having no share capital, sub-
section (1) shall apply as if the references therein to shares were references instead to the interest of the member in the company.
1[(3) Nothing contained in this section shall apply to transfer of security effected by the transferor and the transferee both of whome are entered as beneficial owners in the records of a depository.] 108A Restriction on acquisition of certain shares.
2[108A. Restriction on acquisition of certain shares.(1) Except with the previous approval of the Central Government, no individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management, shall jointly or severally acquire or agree to acquire, whether in his or its own name or in the name of any other person, any equity shares in a public company, or a private company which is a subsidiary of a public company, if the total nominal value of the equity shares intended to be so acquired exceeds, or would, together with the total nominal value of any equity shares already held in the company by such individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management, exceed twenty-five per cent. of the paid-up equity share capital of such company.
(2) Where any individual, firm.group constituent of a group, body corporate or bodies corporate under the same management (hereafter in this Act referred to as the acquirer), is prohibited, by sub-section
(1), from acquiring or agreeing to acquire except with the previous approval of the Central Government, any share of a public company or a private company which is a subsidiary of the company, no- (a) company in which not less than fifty-one per cent of the share capital is held by the Central Government; or (b) corporation (not being a company) established by or under any Central Act; or (c) financial institution, shall transfer or agree to transfer any share to such acquirer unless such acquirer has obtained the previous approval of the Central Government for the acquisition, or agreement for the acquisition, of such share. 108B Restriction on transfer of shares.
108B.Restriction on transfer of shares. (1) Every body corporate or bodies corporate under the same management, holding, whether singly or in the aggregate, ten per cent. or more of the nominal value of the subscribed equity share capital of any other company shall, before transferring one or more of such shares, give to the Central Government an intimation of its or their proposal to transfer such share, and every such intimation shall include a statement as to the particulars of the share proposed to be transferred, the name and address of the person to whom the share is proposed to be transferred, the share holding, if any, of the proposed transferee in the concerned company and such other particulars as may be prescribed.
(2) Where, on receipt of an intimation given under sub-section
(1) or otherwise, the Central Government is satisfied that as a result of such transfer, a change in the composition of the Board of directors of the company is likely to take place and that such change would be prejudicial to the interests of the company or to the public interest, it may, by order, direct that- (a) no such share shall be transferred to the proposed transferee: Provided that no such order shall preclude the body corporate or bodies corporate from intimating in accordance
with the provisions of sub-section (1), to the Central Government its or their proposal to transfer the share to any other person, or (b) where such share is held in a company engaged in any industry specified in Schedule XV, such share shall be trans- ferred to the Central Government or to such corporation owned or controlled by that Government as may be specified in the direction.
(3) Where a direction is made by the Central Government under
clause (b) of sub-section (2), the share referred to in such direction shall stand transferred to the Central Government or to the Corporation specified therein, and the Central Government or the specified corporation, as the case may be, shall pay. in cash, to the body corporate or bodies corporate from which such share stands transferred, an amount equal to the market value of such share, within
the time specified in sub-section (4). Explanation.–In this sub-section, “market value” means, in the case of a share which is quoted on any recognised stock exchange,value quoted at such stock exchange on the date immediately preceding the date on which the direction is made, and, in any other case, such value as may be mutually agreed upon between the holder of the share and the Central Government or the specified corporation, as the case may be, or in the absence of such agreement, as may be determined by the court.
(4) The market value referred to in sub-section (3) shall be given forthwith, where there is no dispute as to such value or where such value has been mutually agreed upon, but where there is a dispute as to the market value, such value as is estimated by the Central Government or the corporation, as the case may be, shall be given forthwith and the balance, if any, shall be given within thirty days from the date when the market value is determined by the court.
(5) If the Central Government does not make any direction under
sub-section (2) within sixty days from the date of receipt by it of
the intimation given under sub-section (1), the provisions contained
in sub-section (2) with regard to the transfer of such share shall not apply. 108C Restriction on the transfer of shares of foreign companies. 108C.Restriction on the transfer of shares of foreign companies. No body corporate or bodies corporate under the same management, which holds. or hold in the aggregate, ten per cent. or more of the nominal value of the equity share capital of a foreign company, having an established place of business in India, shall transfer any share in such foreign company to any citizen of India or any body corporate incorporated in India except with the previous approval of the Central Government and such previous approval shall not be refused unless the Central Government is of opinion that such transfer would be prejudicial to the public interest. 108D Power of Central Government to direct companies not to give effect tothe transfer. 108D.Power of Central Government to direct companies not to give
effect to the transfer. (1) Where the Central Government is satisfied that as a result of the transfer of any share or block of shares of a company, a change in the controlling interest of the company is likely to take place and that such change would be prejudicial to the interests of the company or to the public interest,that Government may direct the company not to give effect to the transfer of any such share or block of shares and- (a)where the transfer of such share or block of shares has already been registered, not to permit the transferee or any nominee or proxy of the transferee, to exercise any voting or other rights attaching to such share or block of shares; and (b) where the transfer of such share or block of shares has not been registered, not to permit any nominee or proxy of the transferor to exercise any voting or other rights attaching to such share or block of shares.
(2) Where any direction is given by the Central Government
under sub-section (1), the share or the block of shares referred to therein shall stand retransferred to the person from whom it was acquired, and thereupon the amount paid by the transferee for the acquisition of such share or block of shares shall be refunded to him by the person to whom such share or block of shares stands or stand retransferred.
(3)If the refund referred ‘GO in sub-section (2) is not made within the period of thirty days from the date of the direction
referred to in sub-section (1), the Central Government shall, on the application of the person entitled to get the refund, direct, by order, the refund of such amount and such order may be enforced as if it were a decree made by a civil court.
(4) The person to whom any share or block of shares stands or
stand retransferred under sub-section (2) shall, on making refund
under sub-section (2) or sub-section (3), be eligible to exercise voting or other rights attaching to such share or block of shares. 108E Time within which refusal to be communicated. 108E.Time within which refusal to be communicated. Every request made to the Central Government for according its approval to the proposal for the acquisition of any share referred to in section 108A or the transfer of any share referred to in section 108C shall be presumed to have been granted unless, within a period of sixty days from the date of receipt of such request, the Central Government communicates to the person by whom the request was made, that the approval prayed for cannot be granted. 108F Nothing in sections 108A to 108D to apply to Government companies,etc. 108F.Nothing in sections 108A to 108D to apply to Government companies, etc. Nothing contained in section 108A [except sub-section
(2) thereof] shall apply to the transfer of any share to, and nothing in section 108B or section 108C or section 108D shall apply to the transfer of any share by- (a) any company in which not less than fifty-one per cent. of the share capital is held by the Central Government; (b) any corporation (not being a company) established by or under any Central Act; (c) any financial institution. 108G Applicability of the provisions of sections 108A to 108F. 108G.Applicability of the provisions of sections 108A to 108F. The provisions of sections 108A to 108F (both inclusive) shall apply to the acquisition or transfer of shares or share capital by, or to, an individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management, who or which- (a) is, in case of acquisition of shares or share capital, the owner in relation to a dominant undertaking and there would be, as a result of such acquisition, any increase- (i)in the production, supply, distribution or control of any goods that are produced, supplied, distributed or controlled in India or any substantial part thereof by that dominant undertaking, or (ii)in the provision or control of any services that are rendered in India or any substantial part thereof by that dominant undertaking; or (b) would be, as a result of such acquisition or transfer of shares or share capital, the owner of a dominant undertaking; or (c)is, in case of ,transfer of shares or share capital, the owner in relations to a dominant undertaking. 108H Penalty for acquisition or transfer of share in contravention ofsections 108A to 108D. 108H.Construction of certain expressions used in sections 108A to 108G. The expressions “group”, “same management”, “financial institution”, “dominant undertaking” and “owner” used in sections 108A to 108G (both inclusive), shall have the meanings respectively assigned to them in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969). 3[108-I.Penalty for acquisition or transfer of share in
contravention of sections 108A to 108D. (1) Any person who acquires any share in contravention of the provisions of section 108A shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both.
(2) (a) Every body corporate which makes any transfer of shares without giving any intimation is required by section 108B, shall be punishable with fine which may extend to five thousand rupees. (b) Where any contravention of the provisions of section 108B has been made by a company, every officer of the company. who in default shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both.
(3) (a) Every body corporate which makes any transfer of shares in contravention of the provisions of section 108C, shall be punish- able with fine which may extend to five thousand rupees. (b) Where any contravention of the provisions of section 108C has been made by a company, every officer of the company who is in default shall be punishable with imprisonment for a term which may ex- tend to three years, or with fine which may extend to five thousand rupees, or with both.
(4) (a) Every person who transfers any share in contravention of any order made by the Central Government under section 108B, or gives effect to any transfer of shares made in contravention of any direction made by the Central Government under section 108D, or who exercises any voting right in respect of any share in contravention of any direction made by the Central Government under section 108D, shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine. (b) If any company gives effect to any voting or other right exercised in relation to any share acquired in contravention of the provisions of section 108B, or which gives effect to any voting right in contravention of any direction made by the Central Government under section 108D the company shall be punishable with fine which may extend to five thousand rupees, and every officer of the company who is in default shall be punishable with imprisonment for a term which may exetend to three years, or with fine which may extend to five tho- usand rupees, or with both. ——————————————————————— 1 Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995). 2 Sections 108A to 108H were ins. by Act 41 of 1974, s. 12 (w.e.f. 1-2-1975) and omitted by Act 30 of 1984, s. 52 (w.e.f. 1-8-1984) now ins. by Act 58 of 1991, s. 28 (w.e.f. 27-9-1991). 3. Ins. by Act 58 of 1991, s.28 (w.e.f. 27-9-1991). ——————————————————————— 132C.
Transfer by legal representative. 109.Transfer by legal representative. A transfer of the share or other interest in a company of a deceased member thereof made by his legal representative shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of transfer.
Application for transfer.
110.Application for transfer.(1) An application for the registration of a transfer of the shares or other interest of a member in a company may be made either by the transferor or by the transferee.
(2)Where the application is made by the transferor and relates to partly paid shares, the transfer shall not be registered, unless the company gives notice of the application to the transferee and the transferee makes no objection to the transfer within two weeks from the receipt of the notice. 132D
(3) For the purposes of sub-section (2), notice to the transferee shall be deemed to have been duly given if it is despatched by pre-paid registered post to the transferee at the address given in the instrument of transfer and shall be deemed to have been duly deli- vered at the time at which It would have been delivered in the ordinary course of post.
Power to refuse registration and appeal against refual.
1[111.Power to refuse registration and appeal against refual. (1) If a company refuses, whether in pursuance of any power of the company under its articles or otherwise, to register, the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in, or debentures of, the company, it shall, within two months from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.
(2) The transferer or transferee, or the person who gave inti- mation of the transmission by operation of law, as the case may be, may appeal to the Company Law Board against any refusal of the company to register the transfer or transmission, or against any failure on
its part within the period referred to in subsection (1), either to register the transfer or transmission or to send notice of its refusal to register the same.
(3) An appeal under sub-section (2) shall be made within two months of the receipt of the notice of such refusal or, where no notice has been sent by the company, within four months from the date on which the instrument of transfer, or the intimation of transmission, as the case may be’, was delivered to the company.
(4) If- (a) the name of any person- (i) is, without sufficient cause, entered in the register of members of a company, or (ii) after having been entered in the register, is, without sufficient cause, omitted therefrom; or (b) default is made, or unnecessary delay takes place, in entering in the register the fact of any person having become, or ceased to be, a member [including a refusal under
sub-section (1)], the person aggrieved, or any member of the company, or the company, may apply to the Company Law Board for rectification of the register.
(5) The Company Law Board, while dealing with an appeal
preferred under sub-section (2) or an application made under sub-
section (4) may, after hearing the parties, either dismiss the appeal or reject the application, or by order- (a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within ten days of the receipt of the order; or (b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved.
(6) The Company Law Board, while acting under sub-section (5), may, at its discretion make- (a) such interim orders, including any orders as to injunction or stay, as it may deem fit and just; (b) such orders as to costs as it thinks fit; and (c) incidental or consequential orders regarding payment of dividend or the allotment of bonus or rights shares.
(7) On any application under this section, the Company Law Board- (a) may decide any question relating to the title of any person who is a party to the application to have his name entered in, or omitted from, the register; (b) generally, may decide any question which it is neces- sary or expedient to decide in connection with the application for rectification.
(8) The provisions of sub-sections (4) to (7)shall apply in relation to the rectification of the register of debenture-holders as they apply in relation to the rectification of the register of members.
(9) If default is made in giving effect to the orders of the Company Law Board under this section, the company and every officer of the company who is in default shall be punishable with fine which may extend to one thousand rupees, and with a further fine which may extend to one hundred rupees for every day after the first day after which the default continues.
(10)Every appeal or application to the Company Law Board under
sub-section (2) or sub-section (4) shall be made by a petition in writing and shall be accompanied by such fee as may be prescribed.
(11) In the case of a private company which is not a subsidiary of a public company, where the right to any shares or interest of a member in, or debentures of, the company is transmitted by a sale thereof held by a court or other public authority, the provisions of
sub-sections (4) to (7) shall apply as if the company were a public company: Provided that the Company Law Board may, in lieu of an order
under sub-section (5), pass an order directing the company to register the transmission of the right unless any member or members of the company specified in the order acquire the right aforesaid within such time as may, be allowed for the purpose by the order, on payment to the purchaser of the price paid by him therefore or such other sum as the Company Law Board may determine to be a reasonable compensation for the right in all the circumstances of the case.
(12)If default is made in complying with any of 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 fifty rupees for every day during which the default continues.
(13) Nothing in this section and section 108, 109 or 110 shall prejudice any power of a private company under its articles to enforce the restrictions contained therein against the right to transfer the shares of such company.
2[(14) In this section “company” means a private company and in- cludes a private company which had become a public company by virue of section 43A of this Act.] ——————————————————————— 1. Subs. by Act 31 of 1988, s.16 (w.e.f. 31-5-1991). 2. Ins. by Act 22 of 1996, S.31 and Sch. (w.e.f. 20-9-1995). ———————————————————————
111A Rectification of register of transfer.
1[111A. Rectification of register of transfer. (1) In this section, unless the context otherwise requires, “company” means a
company other than a company referred to in sub-section (14) of section 111 of this Act.
(2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable.
(3) The Company Law Board may, on an application made by a depository, company, participant or investor or the Securities and Exchange Board of India within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of transmission was delivered to the company, as the case may, be, after such enquiry as it thinks fit, direct any company or depository to rectify register or records if the transfer of the shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986).
(4) The Company Law Board while acting under sub-section (3), may at its descretion make such interim order as to suspend the voting rights before making or completing such enquiry.
(5) The provisions of this section shall not restrict the right of a holder of shares or debentures, to transfer such shares or debentures and any person acquiring such shares or debentures shall be entitled to voting rights unless the voting rights have been suspended by an order of the Company Law Board.
(6) Notwithstanding anything contained in this section, any further transfer, during the pendency of the application with the Company Law Board, of shares or debentures shall entitle the transferee to voting rights unless the voting rights in respect of such transferee have also been suspended.
(7) The provisions of sub-sections (5), (7), (9), (10) and (12) of section 111 shall, so far as may be, apply to the proceedings before the Company Law Board under this section as they apply to the proceedings under that section]. ———————————————————————- 1. Ins. by Act 22 of 1986, s. 31 and Sch. (20-9-1995). ———————————————————————- 134
Certification of transfers.
112.Certification of transfers.(1) The certification by a company of any instrument of transfer of shares in, or debentures of, the company, shall be taken as a representation by the company to any person acting on the faith of the certification that there have been produced to the company such documents as on the face of them show a prima facie title to the shares or debentures in the transferor named in the instrument of transfer, but not as a representation that the transferor has any title to the shares or debentures.
(2) Where any person acts on the faith of an erroneous certification made by a company negligently, the company shall be under the same liability to him as if the certification had been made fraudulently.
(3) For the purposes of this section- (a) an instrument of transfer shall be deemed to be certificated if it bears the words ” certificate lodged ” or words to the like effect ; (b) the certification of an instrument of transfer shall be deemed to be made by a company, if- (i) the person issuing the certificated instrument is a person authorised to issue such instruments of transfer on the company’s behalf ; and (ii) the certification is signed by any officer or servant of the company or any other person, authorised to certificate transfers on the company’s behalf, or if a body corporate has been so authorised, by any officer or servant of that body corporate; (c) a certification shall be deemed to be signed by any person, if it purports to be authenticated by his signature unless it is shown that the signature was placed there neither by himself nor by any person authorised to use the signature for the purpose of certificating transfers on the company’s behalf. Issue of Certificate of Shares, etc.
Limitation of time for issue of certificates.
113.Limitation of time for issue of certificates. (1) 1[Every company, unless prohibited by any provision of law or of any order of any court, tribunal or other authority, shall, within three months after the allotment of any of its shares, debentures or debenture stock, and within two months after the application for the registration of the transfer of any such shares, debentures or debenture stock, deliver, in accordance with the procedure laid down in section 53, the certificates of all shares, debentures and certificates of debenture stocks allotted or transferred: Provided that the Company Law Board may, on an application being made to it in this behalf by the company, extend any of the periods within which the certificates of all debentures and debenture stocks allotted or transferred shall be delivered under this sub-section, to a further period not exceeding nine months, if it is satisfied that it is not possible for the company to deliver such certificates within the said periods.] ——————————————————————— 1. Subs. by Act 31 of 1988, s.17 (w.e.f. 15-6-1988). ——————————————————————– 134A The expression “transfer”, for the purposes of this sub-section, means a transfer duly stamped and otherwise valid, and does not include any transfer which the company is for any reason entitled to refuse to register and does not register.
(2) 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. 135
(3) If any company on which a notice-has been served requiring it to make good any default in complying with the provisions of sub-
section (1), fails to make good the default within ten days after the service of the notice, the 1[Company Law Board] may, on the application of the person entitled to have the certificates or the debentures delivered to him, make an order directing the company and any officer of the company to make good the default within such time as may be specified in the order; and any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officer of the company responsible for the default.
2[(4) Notwithstanding anything contained in sub-section (1), where the securities are dealt with in a depository, the company shall inti- mate the details of allotment of securities to depository immediately on allotment of such securities.] Share warrants
Issue and effect of share warrants to bearer.
114.Issue and effect of share warrants to bearer. (1) A public company limited by shares, if so authorised by its articles, may, with the previous approval of the Central Government, with respect to any fully paid-up shares, issue under its common seal a warrant stating that the bearer of the warrant is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of the future dividends on the shares specified in the warrant.
(2) The warrant aforesaid is in this Act referred to as a “share warrant”.
(3) A share warrant shall entitle the bearer thereof to the shares therein specified, and the shares may be transferred by delivery of the warrant.
Share warrants and entries in register of members.
115.Share warrants and entries in register of members. (1) On the issue of a share warrant, the company shall strike out of its register of members the name of the member then entered therein as holding the shares specified in the warrant as if he had ceased to be a member, and shall enter in that register the following particulars, namely:- (a) the fact of the issue of the warrant; (b) a statement of the shares specified in the warrant, distinguishing each share by its number; and (c) the date of the issue of the warrant.
(2) The bearer of a share warrant shall, subject to the articles of the company, be entitled, on surrendering the warrant for cancella- tion and paying such fee to the company as the, Board of directors may from time to time determine, to have his name entered as a member in the register of members. ——————————————————————— 1. Subs. by Act 31 of 1988, s.17 (w.e.f. 31-5-1991). 2. Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995). ——————————————————————— 136
(3) The company shall be responsible for any loss incurred by any person by reason of the company entering in its register of mem- bers the name of a bearer of a share warrant in respect of the shares therein specified, without the warrant being surrendered and cancelled.
(4) Until the warrant is surrendered, the particulars specified
in sub-section (1) shall be deemed to be the particulars required by this Act to be entered in the register of members ; and, on the surrender, the date of the surrender shall be entered in that register.
(5) Subject to the provisions of this Act, the bearer of a share warrant may, if the articles of the company so provide, be deemed to be a member of the company within the meaning of this Act, for any purposes defined in the articles.
(6) If default is made in complying with any of the requirements of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. Penalty for personation of shareholder
Penalty for personation of shareholder. 116.Penalty for personation of shareholder. If any person deceitfully personates an owner of any share or interest in a company or of any share warrant or coupon issued in pursuance of this Act, and thereby obtains or attempts to obtain any such share or interest or any such share warrant or coupon, or receives or attempts to receive any money due to any such owner, he shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine. Special Provisions as to Debentures
Debentures with voting rights not to be issued hereafter. 117.Debentures with voting rights not to be issued hereafter. No company shall, after the commencement of this Act, issue any debentures carrying voting rights at any meeting of the company whether generally or in respect of particular classes of business.
Right to obtain copies of and inspect trust deed.
118.Right to obtain copies of and inspect trust deed. (1) A copy of any trust deed for securing any issue of debentures shall be forwarded to the holder of any such debentures or any member of the company, at his request and within seven days of the making thereof, on payment- (a) in the case of a printed trust deed, of 1[such sum as may be prescribed]; and ——————————————————————— 1. Subs. by Act 31 of 1988, s.67 (w.e.f. 15-7-1988). ——————————————————————— 137 (b) in the case of a trust deed which has not been printed, of 1[such sum as may be prescribed for] every one hundred words or fractional part thereof required to be copied.
(2) If a copy is refused, or is not forwarded within the time
specified in sub-section (1), the company, and every officer of the company who is in default, shall be punishable, for each offence, with fine which may extend to fifty rupees and with a further fine which may extend to twenty rupees for every day during which the offence continues.
(3) The 2[Company Law Board] also, by order. direct that the copy required shall forthwith be sent to the person requiring it.
(4) The trust deed referred to in sub-section (1) shall also be open to inspection by any member or debenture holder of the company in the same manner, to the same extent, and on payment of the same fees, as if it were the register of members of the company.
Liability of trustees for debenture holders.
119.Liability of trustees for debenture holders. (1) Subject to the provisions of this section, any provision contained in a trust deed, for securing an issue of debentures, or in any contract with the holders of debentures secured by a trust deed, shall be void in so far as, it would have the effect of exempting a trustee thereof from. or indemnifying him against liability for breach of trust, where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust deed conferring on him, any powers, authorities or discretions.
(2) Sub-section (1) shall not invalidate- (a) any release otherwise validly given in respect of anything done or omitted to be done by a trustee before the giving of the release ; or (b) any provision enabling such a release to be given- (i)on the agreement thereto of a majority of not less than three fourths in value of the debenture holders present and voting in person or, where proxies are per- mitted, by proxy, at a meeting summoned for the purpose; and (ii)either with respect to specific acts or commissions or on the trustee dying or ceasing to act.
(3) Sub-section (1) shall not operate- (a) to invalidate any provision in force at the commencement of this Act so long as any person then entitled to the benefit of that provision or afterwards given the benefit ——————————————————————— 1. Subs. by Act 31 of 1988, s.67 (w.e.f. 15-7-1988). 2. Subs. by s.67, ibid, (w.e.f. 31-5-1991). ——————————————————————— 138
thereof under sub-section (4) remains a trustee of the deed in question; or (b) to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.
(4) While any trustee of a trust deed remains entitled to the
benefit of a provision saved by sub-section (3), the benefit of that provision may be given either- (a) to all trustees of the deed, present and future ; or (b) to any named trustees or proposed trustees thereof; by a resolution passed by a majority of not less than three-fourths in value of the debenture holders present in person or, where proxies are permitted, by proxy, at a meeting called for the purpose in accordance with the provisions of the deed or, if the deed makes no provision for calling meetings, at a meeting called for the purpose in any manner approved by the Court.
Perpetual debentures. 120.Perpetual debentures. A condition contained in any debentures or in any deed for securing any debentures, whether issued or executed before or after the commencement of this Act, shall not be invalid by reason only that thereby, the debentures are made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long.
Power to re-issue redeemed debentures in certain cases.
121.Power to re-issue redeemed debentures in certain cases. (1) Where either before or after the commencement of this Act, a company has redeemed any debentures previously issued, then,- (a) unless any provision to the contrary, whether express or implied, is contained in the articles, or in the conditions of issue, or in any contract entered into by the company; or (b) unless the company has, by passing a resolution to that effect or by some other act, manifested its intention that the debentures shall be cancelled ; the company shall have, and shall be deemed always to have had, the right to keep the debentures alive for the purposes of re-issue ; and in exercising such a right, the company shall have. and shall be deemed always to have had, power to re-issue the debentures either by re-issuing the same debentures or by issuing other debentures in their place. 139
(2) Upon such re-issue, the person entitled to the debentures shall have, and shall be deemed always to have had, the same rights and priorities as if the debentures had never been redeemed.
(3) Where with the object of keeping debentures alive for the purpose of re-issue, they have, either before or after the commence- ment of this Act, been transferred to a nominee of the company, a transfer from that nominee shall be deemed to be a re-issue for the purposes of this section.
(4) Where a company has, either before or after the commencement of this Act, deposited any of its debentures to secure advances from time to time on current account or otherwise, the debentures shall not be deemed to have been redeemed by reason only of the account of the company having ceased to be in debit whilst the debentures remained so deposited.
(5) The re-issue of a debenture or the issue of another debenture in its place under the power by this section given to, or deemed to have been possessed by, a company, whether the re-issue or issue was made before or after the commencement of this Act, shall be treated as the issue of a new debenture for the purposes of stamp duty, but it shall not be so treated for the purposes of any provision limiting the amount or number of debentures to be issued: Provided that any person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp duty or any penalty in respect thereof, unless he had notice or, but for his negligence, might have discovered, that the debenture was not duly stamped ; but in any such case the company shall be liable to pay the proper stamp duty and penalty.
(6) Nothing in this section shall prejudice- (a) the operation of any decree or order of a Court of competent jurisdiction pronounced or made before the twenty- fifth day of February, 1910, as between the parties to the proceedings in which the decree or order was made; (b) where an appeal has been preferred against any such decree or order the operation of any decree or order passed on such appeal, as between the parties to such appeal; or (c) any power to issue debentures in the place of any debentures paid off or otherwise satisfied or extinguished, 140 reserved to a company by its debentures or the securities for the same.
Specific performance of contract to subscribe for debentures. 122.Specific performance of contract to subscribe for debentures. A contract with a company to take up and pay for any debentures of the company may be enforced by a decree for specific performance.
Payments of certain debts out of assets subject to floating charge inpriority to claims under the charge. 123.Payments of certain debts out of assets subject to floating
charge in priority to claims under the charge. (1) Where either- (a) a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge; or (b) possession is taken by or on behalf of those debenture holders of any property comprised in or subject to the charge; then, if the company is not at the time in course of being wound up, the debts which in every winding up are, under the provisions of Part VII relating to preferential payments, to be paid in priority to all other debts, shall be paid forthwith out of any assets coming to the hands of the receiver or other person taking possession as aforesaid in priority to any claim for principal. or interest in respect of the debentures.
(2) In the application of the provisions aforesaid, section 530 shall be construed as if the provision for payment of accrued-holiday remuneration becoming payable on the termination of employment before or by the effect of the winding up order or resolution were a provision for payment of such remuneration becoming payable on the termination of employment before or by the effect of the appointment of the receiver or possession being taken as aforesaid.
(3) The periods of time mentioned in the said provisions of Part VII shall be reckoned from the date of appointment of the receiver or of possession being taken as aforesaid, as the case may be.
(4) Where the date referred to in sub-section (3) occurred
before the commencement of this Act, sub-sections (1) and (3) shall have effect with the substitution, for references to the said provisions of Part VII, of references to the provisions which, by
virtue of sub-section (9) of section 530, are deemed to remain in
force in the case therein mentioned, and subsection (2) shall not apply.
(5) Any payments made under this section shall be recouped, as far as may be, out of the assets of the company available for payment of general creditors.
PART V REGISTRATION OF CHARGES
“Charge” to include mortgage in this Part. 124.”Charge” to include mortgage in this Part. In this Part, the expression ” charge” includes a mortgage.
Certain charges to be void against liquidator or creditors unlessregistered. 125.Certain charges to be void against liquidator or creditors
unless registered. (1) Subject to the provisions of this Part, every charge created on or after the 1st day of April, 1914, by a company and being a charge to which this section applies shall, so far as any security on the company’s property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge, together with the instrument, if any, by which the charge is created or evidenced, or a copy thereof verified in the prescribed manner, are filed with the Registrar for registration in the manner required by this Act within 1[thirty] days after the date of its creation: 2[Provided that the Registrar may allow the particulars and instrument or copy as aforesaid to be filed within thirty days next following the expiry of the said period of thirty days on payment of such additional fee not exceeding ten times the amount of fee speci- fied in Schedule X as the Registrar may determine, if the company satisfies the Registrar that it had sufficient cause for not filing the particulars and instrument or copy within that period.]
(2) Nothing in subsection (1) shall prejudice any contract or obligation for the repayment of the money secured by the charge.
(3) When a charge becomes void under this section, the money secured thereby shall immediately become payable.
(4) This section applies to the following charges:- (a) a charge for the purpose of securing any issue of deben- tures ; (b) a charge on uncalled share capital of the company; (c) a charge on any immovable property, wherever situate, or any interest therein; (d) a charge on any book debts of the company; (e) a charge, not being a pledge, on any movable property of the company ; (f) a floating charge on the undertaking or any property of the company including stock-in-trade; (g) a charge on calls made but not paid; (h) a charge on a ship or any share in a ship; ——————————————————————— 1 Subs. by Act 31 of 1965, s. 62 and Sch., for ” twenty-one ” (w.e.f. 15-10-1965). 2. Subs. by Act 31 of 1988, s.18 (w.e.f. 15-6-1988). ——————————————————————— 142 (i) a charge on goodwill, on a patent or a licence under a patent, on a trade mark, or on a copyright or a licence under a copyright.
(5) In the case of a charge created out of India and comprising solely property situate outside India, 1 [thirty] days after the date on which the instrument creating or evidencing the charge or a copy thereof could, in due course of post and if despatched with due dili- gence, have been received in India, shall be substituted for 1[thirty] days after the date of the creation of the charge, as the time within which the particulars and instrument or copy are to be filed with the Registrar.
(6) Where a charge is created in India but comprises property outside India, the instrument creating or purporting to create the charge under this section or a copy thereof verified in the prescribed manner, may be filed for registration, notwithstanding that further proceedings may be necessary to make the charge valid or effectual according to the law of the country in which the property is situate.
(7) Where a negotiable instrument has been given to secure the payment of any book debts of a company, the deposit of the instrument for the purpose of securing an advance to the company shall not, for the purposes of this section, be treated as a charge on those book debts.
(8) The holding of debentures entitling the holder to a charge on immovable property shall not, for the purposes of this section, be deemed to be an interest in immovable property.
Date of notice of charge. 126.Date of notice of charge. Where any charge on any property of a company required to be registered under section 125 has been so registered, any person acquiring such property or any part thereof, or any share or interest therein, shall be deemed to have notice of the charge as from the date of such registration.
Registration of charges on properties acquired subject to charge. 127.Registration of charges on properties acquired subject to
charge. (1) Where a company acquires any property which is subject to a charge of any such kind as would, if it had been created by the company after the acquisition of the property, have been required to be registered under this Part, the company shall cause the prescribed particulars of the charge, together with a copy (certified in the prescribed manner to be a correct copy) of the instrument, if any, by which the charge was created or is evidenced, to be delivered to the Registrar for registration in the manner required by ——————————————————————— 1 Subs. by Act 31 of 1965. s. 62 and Sch., for ” twenty-one ” (w.e.f. 15-10-1965), ——————————————————————— 143 this Act within 1[thirty] days after the date on which the acquisition is completed: Provided that, if the property is situate, and the charge was created, outside India, 1[thirty] days after the date on which a copy of the instrument could, in due course of post and if despatched with due diligence, have been received in India shall be substituted for 1[thirty] days after the completion of the acquisition as the time within which the particulars and the copy of the instrument are to be delivered to the Registrar.
(2)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.
Particulars in case of series of debentures entitling holders paripassu. 128.Particulars in case of series of debentures entitling holders pari passu. Where a series of debentures containing, or giving by reference to any other instrument, any charge to the benefit of which the debenture holders of that series are entitled pari passu is created by a company, it shall, for the purposes of section 125, be sufficient, if there are filed with the Registrar, within 1[thirty] days after the execution of the deed containing the charge or, if there is no such deed, after the execution of any debentures of the series, the following particulars:- (a) the total amount secured by the whole series; (b) the dates of the resolutions authorising the issue of the series and the date of the covering deed, if any, by which the security is created or defined; (c) a general description of the property charged;and (d) the names of the trustees, if any, for the debenture holders; together with the deed containing the charge, or a copy of the deed verified in the prescribed manner, or if there is no such deed, one of the debentures of the series: Provided that, where more than one issue is made of debentures in the series, there shall be filed with the Registrar, for entry in the register, particulars of the date and amount of each issue; but an omission to do this shall not affect the validity of the debentures issued.
Particulars in case of commission, etc., on debentures. 129.Particulars in case of commission, etc., on debentures. Where any commission, allowance or discount has been paid or made either directly or indirectly by a company to any person in consideration of his subscribing or agreeing to subscribe, whether ——————————————————————— 1 Subs. by Act 31 of 1965, s. 62 and Sch., for “twenty-one” (w.e.f. 15-10-1965). ——————————————————————— 144 absolutely or conditionally, for any debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any such debentures, the particulars required to be filed for registration under sections 125 and 128 shall include parti- culars as to the amount or rate per cent. of the commission, discount or allowance so paid or made ; but an omission to do this shall not affect the validity of the debentures issued: Provided that the deposit of any debentures as security for any debt of the company shall not, for the purposes of this section, be treated as the issue of the debentures at a discount.
Register of charges to be kept by Registrar.
130.Register of charges to be kept by Registrar 1[(1) The Registrar shall, in respect of each company, cause to be kept a register containing the particulars of all the charges requiring registration under this Part. (1A) Every company shall forward to the Registrar for being entered in
the register kept under sub-section (1) the particulars of all the charges requiring registration under this Part in such form and manner, and after payment of, such fees as may be prescribed.
(1B) The particulars of the charges referred to in sub-section (1) shall relate to,- (a) in the case of a charge to the benefit of which the holders of a series of debentures are entitled, such particu- lars as are specified in sections 128 and 129; (b) in the case of any other charge,- (i)if the charge is a charge created by the company, the date of its creation, and if the charge was a charge existing on property acquired by the company, the date of the acquisition of the property; (ii) the amount secured by the charge; (iii)short particulars of the property charged; and (iv) the persons entitled to the charge. (1C) The pages of the register shall be consecutively numbered and the Registrar shall- (a) cause to be kept in such register in the prescribed form, the documents of charges filed in such form and manner as may be prescribed; and (b) sign or initial every page of such register.
(2) After entering the particulars of all the charges required
under sub-section (1), the Registrar shall return the instrument, if any, or the verified copy thereof, as the case may be, filed in accordance with the provisions of this Part to the person filing it].
(3) The Registrar kept in pursuance of this section shall be open to inspection by any person on payment of 1[such fee as may be prescribed ] for each inspection.
Index to register of charges. 131.Index to register of charges. The Registrar shall keep a chronological index, in the prescribed form and with the prescribed particulars, of the charges registered with him in pursuance of this Part. ——————————————————————— 1. Subs. by Act 31 of 1988, s.19 (w.e.f. 17-4-1989). ———————————————————————
