The Company Act, 1956
Preamble
Act No.1 of 1956
[18th January, 1956]
An Act to consolidate and amend the
law relating to companies and certain other associations.
Comment: This is the basic law which
governs the creation, continuation, the winding up of
companies and also the relationships
between the shareholders, the company, the public and the
government. Coupled with other
statutes dealing with corporate entities, this is an extremely
important piece of legislation.
Be it enacted by Parliament in the
Sixth Year of the Republic of India as follows :--
Part I Preliminary
Part I
Preliminary
1. Short title, commencement and
extent.— (1) This Act may be called the Companies Act,
1956.
(2) It shall come into force on such
date {1st April, 1956.See Gazette of India, Extraordinary,
1956, Part II, Section 3, p.413.}
as the Central Government may, by
notification in the Official Gazette, appoint.
(3) It extends to the whole of India
except the State of Jammu and Kashmir.
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 Schedule annexed to the Indian
Companies Act, 1913 (7 of 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 partners, 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,
partner or relative is a partner; any
private company of which the firm first mentioned, or any such
member, partner, relative or
other 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, the firm first mentioned, any such member or
members, partner or partners, relative
or relatives, other firm or firms and
private company or companies;
(c) where the managing agent is a
body corporate; (i) any subsidiary or
holding company of such body corporate; the managing
agent or secretaries and treasurers,
or a director , the manger 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 form in which such director, manager, partner or
relative, is a partner; and
(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
(d) where the managing agent is a
private company or a body
corporate having not more
than fifty members; in addition to the
persons mentioned 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,
partner, or relative is a partner; any
private company of which the firm first-mentioned, or any
such member, partner, relative or
other 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, the firm first-mentioned, any such member or
members, partner or partners, relative
or relatives, other firm or firms, and
private company or companies;
(b) where the secretaries and
treasurers
are a body corporate; (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 form in which such director or manger,
partner, relative, is a partner;
and
(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
(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
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;
(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, mans the Board of directors of the
company;
(7) "body corporate" or
"corporation" includes a company incorporated outside India but does
not
include a corporation sole;
(8) "book and paper" and
"book or paper" include accounts, deeds, writings, and documents;
(9) "branch office" means
any establishment described as a branch by the company, not being an
establishment specified in an
order passed by the Central Government
in pursuance of section 8;
(10) "company" means a company
as defined in section 3;
(11) "the Court" means, with
respect t any matter relating to a company, the Court having
jurisdiction under this Act with
respect
to that matter in relation to that
company, as provided in section 10;
(12) "debentures" 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;
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 1933);
(18) "Government company"
means a Government company within the meaning of section 617;
(19) "holding company" means
a holding company within the meaning of section 4;
(20) "India" means the
territory of India excluding the State of Jammu and Kashmir;
(21) "insurance company"
means a company which carries on the business of insurance wither
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) "manger" means an
individual (not being the managing agent) who, subject to the
superintendence, control and direction
of
the Board of directors, has the
management of the whole, or substantially the whole, of the affairs
of a company and includes a
director or any other person occupying
the position of a manger, by whatever name called, and
whether under a contract of
service or not;
(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;
(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 any powers of management which
would not otherwise be exercisable by him, and includes
a director occupying the
position of managing director, by
whatever name called;
(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;
(30) "officer" includes any
director, managing agent, secretaries and treasurers, manager or
secretary; where the managing agent
or the secretaries and treasurers are
a firm, also includes any partner in the firm; and where the
managing agent or the secretaries
and treasurers are a body corporate,
also includes any director, managing agent, secretaries and
treasurers or manager of the
body corporate; 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 the
companies except sub-section
(5) of section 503, sub-section (1) of
section 549 and sub-section (3) of section 550, prescribed
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,
sub-section (1) of section 549 and
sub-section (3) of section 550, prescribed by rules made by
the Central Government;
(34) "previous companies
law" means any of the laws specified in clause (ii) of sub-section (1) of
section 3;
(35) "private company" means
a private company as defined in section 3;
(36) "prospectus" means any
prospectus, notice, circular, advertisement or other document
inviting offers from the public for
the
subscription on purchase of any shares
in, or debentures of, a body corporate;
(37) "public company" means
a public company as defined in section 3;
(38) "public holiday" means
a public holiday within the meaning of the Negotiable Instruments
Act, 1881 (26 of 1881);
Provided that no day declared by the
Central Government to be a public holiday shall be deemed
to be such a holiday, in
relation to any meeting, unless the
declaration was notified before the issue of the notice
convening such meeting;
(39) "recognised stock
exchange" means, in relation to any provision of this Act in which it
occurs,
a stock exchange whether in
or outside India, which is notified by
the Central Government in the Official Gazette as a
recognised stock exchange for the
purposes of that provision;
(40) "Registrar" means a
Registrar, or an Additional, a Joint, a Deputy or an Assistant Registrar,
having the duty of registering
companies under this Act
(41) "relative" means, with
reference to any person, any one who is related to such person in any
of the ways specified in section
6, and no others;
(42) "Schedule" means a
Schedule annexed to this Act.
(43) "Scheduled Bank" has
the same meaning as in the Reserve Bank of India Act, 1934 (2 of
1934);
(44) "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
securities and treasurers, by
whatever name called, and whether
under a contract of service or not;
(45) "secretary" means the person,
if any, who is appointed to perform the duty which may be
performed by a secretary under
this Act;
(46) "share" means share 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 may be
case 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 Seventy Schedule
to the Constitution.;
(50) "variation" shall
include abrogation; and "vary" shall include abrogate.
Section 2A
[ 35a 2A INTERPRETATION OF CERTAIN
WORDS AND EXPRESSIONS.
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. 35a ]
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 registered under any of the previous
companies laws specified below:--
(a) any Act or Acts relating to
companies in force before the Indian Companies Act, 1866 (10 of
1866) and repealed by that
Act;
(b) the Indian Companies Act, 1866
(1006 1966);
(c) the Indian Companies Act, 1882 ( 6
of 1882);
(d) the Indian Companies Act, 1913 (7
of 1913);
(e) the Registration of Transferred Companies
Ordinance, 1942 (54 of 1942); and
(f) any law corresponding to any of
the Act or the Ordinance aforesaid and in force in the merged
territories or in a Part B Sate,
or any part thereof, before the
extension thereto of the Indian Companies Act, 1913( 7 of 1913);
(iii) "private company"
means a company which, by its articles,--
(a) restricts the right to transfer
its shares, if any;
(b) limits the number of its members
to fifty not including --
(i) persons who are in the employment
of the company, and
(ii) persons who having been formerly
in the employment of the company, were members of the
company while in that
employment and have continued to be
members after the employment ceased; and
(c) prohibits any invitation to the
public to subscribe for any shares in, or debentures of, the
company;
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 officer
whereof is in Burma, Aden or Pakistan and which
immediately before the separation of
that
country from India was a company as
defined in clause (i) of sub-section (1);
(b) a company the registered office
whereof is in the State of Jammu and Kashmir and which
immediately before the 26th day of
January, 1950, was a company as
defined in clause (i) aforesaid.
Section 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
compositions of its Board of directors; or
(b) that other holds more than half in
nominal value of its equity share capital; or
(c) the first-mentioned company is a
subsidiary of any company which is that other's subsidiary.
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.If Company D is a subsidiary of Company
Commencement Company D will be
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 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
(c) that the directorship is held by
that other company itself or by a subsidiary of it.
(3) In determining whether one company
is a subsidiary of another--
(a) any shares held or power
exercisable by that other company in a fiduciary capacity shall be
treated as not held or exercisable
by it;
(b) subject to the provisions of
clauses (c) and (d), any shares held or power exercisable --
(i) by any person as a nominee for
that other company (except where that other is concerned only
in a fiduciary capacity); or
(ii) by, or by a nominee for, a
subsidiary of that other company, not being a subsidiary which is
concerned only in a fiduciary
capacity;
shall be treated as held or
exercisable by that other company;
(c) any shares held or power
exercisable by any person by virtue of the provisions of any
debentures of the first-mentioned
company or of a trust deed for
securing any issue of such debentures shall be disregarded;
(d) any shares held or power
exercisable by, or by a nominee for, that other or its subsidiary [not
being held or exercisable as
mentioned in clause (c) ] shall be
treated as not held or exercisable by that other, if the ordinary
business of that other or its
subsidiary, as the case may be,
includes the lending of money and the shares are held or the
power is exercisable as aforesaid by
way of security only for the purposes
of a transaction entered into in the ordinary course of that
business.
(4) For the purposes of this Act, a
company shall be deemed to be the holding company of
another if, but only if, that other is
its
subsidiary.
(5) In this section, the expression
"company" includes any body corporate, and the expression
"equity share capital" has
the same
meaning as in sub-section (2) of
section 85.
(6) In the case of a body corporate
which is incorporated in a country outside India, a subsidiary
or holding company of the
body corporate under the law of such
country shall be deemed to be a subsidiary or holding
company of the body corporate
within the meaning and for the purpose
of this Act also, whether the requirements of this section
are fulfilled or not.
Section 4A
PUBLIC FINANCIAL INSTITUTIONS.
(1) Each of the financial institutions
specified in this sub-section shall be regarded, for the
purposes of this Act, as a public
financial institution, namely :-
(i) The Industrial Credit and
Investment Corporation of India Limited, a company formed and
registered under the Indian Companies
Act, 1913 (7 of 1913);
(ii) The Industrial Finance
Corporation of 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).
(vi) The Infrastructure Development
Finance Company Limited, a company formed and registered
under this Act.
(2) Subject to the provisions of
sub-section (1), the Central Government may, by notification in the
Official Gazette, specify such other
institution as it may think fit to be a public financial institution;
Provided that no institution shall be
so specified unless -
(i) It has been established or
constituted by or under any Central Act, or
(ii) Not less than fifty-one per cent
of the paid-up share capital of such institution is held or
controlled by the Central Government.
Section 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 any officer of the company who is knowingly guilty of the default,
non-compliance, failure,
refusal or contravention mentioned in
that provision, or who knowingly and wilfully authorises or
permits such default,
non-compliance, failure, refusal or
contravention.
Section 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."
Section7
.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.
Section8.
Power of Central Government.to declare
the establishment not to be a branch office.— The
Central Government may, by order,
declare that in the case of any company, not being a banking
or an insurance company, any
establishment carrying on
either the same or substantially the
same activity as that carried on by the head office of the
company, or any production or
manufacture, shall not be treated as a branch office of the
company for all or any of the purposes
of this Act.
Section 9.
Act to override memorandum, articles,
etc.— Save as otherwise expressly provided in the Act--
(a) the provisions of these 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.
Section 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 sub-section (2);
and
(b) where jurisdiction has been so
conferred, the District Court in regard to matters falling within
the scope of the jurisdiction
conferred, in respect of companies
having their registered offices in the district.
(2) The Central Government may, by
notification in the Official Gazette and subject to such
restrictions, limitations and
conditions
as it thinks fit, empower any District
Court to exercise all or any of the jurisdiction conferred by
this Act upon the Court, not
being the jurisdiction conferred--
(a) in respect of companies generally,
by sections 237, 391, 394, 395 and 397 to 407, both
inclusive;
(b) in respect of companies with a
paid-up share capital of not less than one lakh of rupees, by
Part VII (sections 425 to 560)
and the other provisions of this Act
relating to the winding up of companies.
(3) For the purposes of jurisdiction
to wind up companies, the expression "registered office"
means the place which the longest
been the registered office of the
company during the six months immediately preceding the
presentation of the petition for
winding
up.
Section 10A
CONSTITUTION OF TRIBUNAL.
[Omitted by the Companies Tribunal
(Abolition) Act, 1967, (17 of 1967), section 4 and Schedule
with effect from 1-7-1967.
Section 10B
PROCEDURE OF TRIBUNAL.
[Omitted by the Companies Tribunal
(Abolition) Act, 1967, (17 of 1967), section 1 and Schedule
with effect from 1-7-1967.]
Section 10C
POWERS OF TRIBUNAL.
[Omitted by the Companies Tribunal
(Abolition) Act, 1967, (17 of 1967), section 4 and Schedule
with effect from 1-7-1967.]
Section 10D
APPEALS AGAINST DECISIONS, ETC., OF
THE TRIBUNAL.
[Omitted by the Companies Tribunal
(Abolition) Act, 1967, (17 of 1967), section 4 and Schedule
with effect from 1-7-1967.]
Part I-A Board of Company Law
administration.
Section 10E
CONSTITUTION OF BOARD OF COMPANY LAW
ADMINISTRATION.
(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.
(2) The Company Law Board shall
consist of such number of members, not exceeding [nine], as
the Central Government deems fit, to
be appointed by that Government by notification in the
Official Gazette :
Provided that the Central Government
may, by notification in the Official Gazette, continue the
appointment of the chairman or any
other member of the Company Law Board functioning as
such immediately before the
commencement of the Companies (Amendment) Act, 1988, as the
chairman or any other member of the
Company Law Board, after such commencement for such
period not exceeding three years as
may be specified in the notification.
(2A) The members of the Company Law
Board shall possess such qualifications and experience
as may be prescribed.
(3) One of the members shall be
appointed by the Central Government to be the chairman of the
Company Law Board.
(4) No act done by the Company Law
Board shall be called in question on the ground only of any
defect in the constitution of, or the
existence of any vacancy in, the Company Law Board.
(4A) [Omitted by the Companies
(Amendment) Act, 1988, section 4, w.e.f. 31-5-1991. For text of
omitted sub-section (4A), refer
Appendix I].
(4B) The Board may, by order in
writing, form one or more Benches from among its members and
authorise each such Bench to exercise
and discharge such of the Board's powers and functions
as may be specified in the order; and
every order made or act done by a Bench in exercise of
such powers or discharge of such
functions shall be deemed to be the order or act, as the case
may be, of the Board.
(4C) Every Bench referred to in
sub-section (4B) shall have powers which are vested in a Court
under the Code of Civil Procedure,
1908 (5 of 1908), while trying a suit, in respect of the following
matters, namely :-
(a) discovery and inspection of
documents or other material objects producible as evidence;
(b) enforcing the attendance of
witnesses and requiring the deposit of their expenses;
(c) compelling the production of
documents or other material objects producible as evidence and
impounding the same;
(d) examining witnesses on oath;
(e) granting adjournments;
(f) reception of evidence on
affidavits.
(4D) Every Bench shall be deemed to be
a civil court for the purposes of section 195 and
[Chapter XXVI of the Code of Criminal
Procedure, 1973 (2 of 1974)], and every proceeding
before the Bench shall be deemed to be
a judicial proceeding within the meaning of sections 193
and 228 of the Indian Penal Code, 1860
(45 of 1860), and for the purpose of section 196 of that
Code.]
[(5) Without prejudice to the
provisions of sub-sections (4C) and (4D), the Company Law Board
shall in the exercise of its powers
and the discharge of its functions under this Act or any other
law be guided by the principles of
natural justice and shall act in its discretion.
(6) Subject to the foregoing
provisions of this section, the Company Law Board shall have power
to regulate its own procedure].
Section 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.
PART II
Incorporation of Company and Matters
Incidental Thereto
Certain companies, associations and
partnerships to be registered as companies under Act
Section 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.
(2) No company, association or
partnership consisting of more than twenty persons shall be
formed for the purpose of carrying
on any other business that has for its
object the acquisition of gain by the company, association
or partnership, or by the
individual members thereof, unless it
is registered as a company under this Act, or is formed in
pursuance of some other Indian
law.
(3) This section shall not apply to a
joint family as such carrying on a business; and where a
business is carried on by two or
more joint families, in computing the
number of persons for the purposes of sub-sections (1) and
(2), minor members of such
families shall be excluded.
(4) Every member of a company,
association or partnership carrying on business in contravention
of this section shall be
personally liable for all liabilities
incurred in such business.
(5) Every person who is a member of a
company, association or partnership formed in
contravension of this section shall be
punishable with fine which may extend
to one thousand rupees.
MEMORANDUM OF ASSOCIATION
Section12.
MODE OF FORMING INCORPORATED 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 its Act
termed "a company limited by shares");
(b) a company having the liability of
its members limited by the memorandum to such amount as
the members may respectively
undertake by the memorandum to
contribute to the assets of the company in the event of its
being wound up (in this Act termed
"
a company limited by guarantee");
or
(c) a company not having any limit on
the liability of its members (in this Act termed "an unlimited
company").
Section13.
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 words of the name in the case of a private Limited company;
(b) the State in which the registered
office of the company is to be situate; and
(c) the objects of he company, and,
except in the case of trading corporations, the State or States
to whose territories the
objects extend.
(2) The memorandum of a company
limited by shares or by guarantee shall also state that the
liability of its members is limited.
(3) The memorandum of a company
limited by guarantee shall also state that each member
undertakes to contribute to the assets
of the company in the event of its
being wound up while he is a member or within one year after
he ceases to be a member, for
payment of the debts and liabilities
of the company, or of such debts and liabilities of the
company as may have been contracted
before he ceases to be a member, as
the case may be, and of the costs, charges and expenses
of winding up, and for adjustment
of the rights of the contributories
among themselves, such amount as may be required, not
exceeding a specified amount.
(4) In the case of a company having a
share capital--
(a) unless the company is an unlimited
company, the memorandum shall also state the amount of
share capital with which the
company is to be registered and the
division thereof into shares of a fixed amount;
(b) no subscriber of the memorandum
shall take less than one share; and
(c) each subscriber of the memorandum
shall write opposite to his name the number of shares he
takes.
Section 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.
Section 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.
Section 15A
SPECIAL PROVISION AS TO ALTERATION OF
MEMORANDUM CONSEQUENT ON
ALTERATION OF NAME OF STATE OF MADRAS.
Where, in the memorandum of
association of a company in existence immediately before the
commencement of the Madras State
(Alteration of Name) Act, 1968 (53 of 1968), it is stated that
Madras is the State in which the
registered office of that company is situate, then, notwithstanding
anything contained in this Act, the
said memorandum shall, as from such commencement, be
deemed to have been altered by
substitution of a reference to the State of Tamil Nadu for the
reference to the State of Madras, and
the Registrar of the State of Tamil Nadu shall make
necessary alterations in the
memorandum of association and the certificate of incorporation of the
said company.
Section 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.
Section 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 conditions contained in its
memorandum.
(3) Other provisions contained in the
memorandum, including those relating to the appointment of
a managing director or
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 constructed as including
references to the other provisions
aforesaid contained in its memorandum.
Section 17
SPECIAL RESOLUTION AND CONFIRMATION BY
COURT REQUIRED FOR ALTERATION 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, f the under taking, or of any of the undertaking, 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 Court on
petition.
(3) Before confirming the alteration,
the Court 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 Court, be affected by the alteration; and
(b) that, with respect to every
creditor who, in the opinion of the Court, is entitled to object to the
alteration, and who signifies
his objection in the manner directed
by the court, 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 Court;
Provided that the Court may, in the
case of any person or class of persons, for special reasons,
dispense with the notice required
by clause (a).
(4) Notice of the alteration shall
also be given to the Registrar and he shall be given a reasonable
opportunity to appear before
the Court and state his objections and
suggestions, if any, with respect to the confirmation of the
alteration.
(5) The Court 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 Court 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 Court may, if it thinks fit,
adjourn the proceedings in order than an arrangement may be
made to the satisfaction of the
Court for the purchase of the
interests of dissentient members; and may given such directions
and make such orders as it thinks
fit for facilitating, or carrying into
effect, any such arrangement;
Provided that no part of the capital
of the company may be expended in any such purchase.
Section 18.
ALTERATION TO BE REGISTERED WITHIN
THREE MONTHS.
(1) A certified copy of the order
confirming the alteration, together with a
printed copy of the memorandum as
altered, shall, within three months from the date of the order,
be filled by the company with
the Registrar, and he shall register
the same, and shall certify the registration under his hand.
(2) The certificate shall be
conclusive evidence that all the requirements of this Act with respect to
the alteration and the
confirmation thereof have been
complied with, and henceforth the memorandum as so altered
shall be the memorandum of the
company.
(3) Where the alteration involves a
transfer of the registered office from one State to another, a
certified copy of the order
confirming the alteration shall be
filed by the company with the Registrar of each of the States,
and the Registrar of each such
State shall register the same, and
shall certify under his hand the registration thereof; and the
Registrar of the State from which
such office is transferred shall send
to the Registrar of the other State all documents relating to
the company registered, recorded
or filed in his office.
(4) The Court may, at any time, by
order, extend the time for the filing of documents under this
section by such period as its
thinks proper.
Section 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 sub-section 18.
(2) If the registration is not
effected within three months next after the date of the order of the
Court confirming the alteration, or
within such further time as may be
allowed by the Court under sub-section (4) of section 18, such
alteration and order and all
proceedings connected therewith shall,
at the expiry of such period of three months or of such
further time, as the case may be,
become void;
Provided that the Court 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
Section 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).
Section21.
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.
Section 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
(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 subsection
(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.
Section 23.
REGISTRATION OF CHANGE OF NAME AND
EFFECT THEREOF.
(1) Where a company charges 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.
Section 24
CHANGE OF NAME 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.
Section 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, the Central
Government may, by licence, authorise
the company by a special resolution to change its name,
including or consisting of the
omission of the word "Limited" or the words "Private Limited";
and
section 23 shall apply to a change of
name under this sub-section as it applies to a change of
name under section 21.
(4) A firm may be a member of any
association or company licensed under this section, but on
the dissolution of the firm, its membership
of the association or company shall cease.
(5) A licence may be granted by the
Central Government under this section on such conditions
and subject to such regulations as it
thinks fit, and those conditions and regulations shall be
binding on the body to which the
licence is granted, and where the grant is under sub-section (1),
shall, if the Central Government so
directs, be inserted in the memorandum, or in the articles, or
partly in the one and partly in the
other.
(6) It shall not be necessary for a
body to which a licence is so granted to use the word "Limited"
or the words "Private
Limited" as any part of its name and, unless its articles otherwise
provide,
such body shall, if the Central
Government by general or special order so directs and to the
extent specified in the directions, be
exempt from such of the provisions of this Act as may be
specified therein.
(7) The licence may at any time be
revoked by the Central Government, and upon revocation,
Section 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.
Section 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.
(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).
Section 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 regulations shall, so far as
applicable, be the regulations of the
company in the same manner and to the same extent as if
they were contained in duly registered
articles.
Section 29
FORM OF ARTICLES IN THE CASE OF OTHER
COMPANIES.
The articles of association of any
company, not being a company limited by shares, shall be in
such one of the Forms in Tables C, D
and E in Schedule I as may be applicable, or in a Form as
near thereto as circumstances admit :
Provided that nothing in this section
shall be deemed to prevent a company from including any
additional matters in its articles in
so far as they are not inconsistent with the provisions contained
in the Form in any of the Tables C, D
and E, adopted by the company.
Section 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 association (who shall add his address,
description and occupation, if any,)
in the presence of at least one witness who shall attest the
signature and shall likewise add his
address, description and occupation, if any.
Section 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 :
Provided that no alteration made in
the articles under this sub-section which has the effect of
converting a public company into a
private company, shall have effect unless such alteration has
been approved by the Central
Government.
(2) Any alteration so made shall,
subject to the provisions of this Act, be as valid as if originally
contained in the articles and be
subject in like manner to alteration by special resolution.
(2A) Where any alteration such as is
referred to in the proviso to sub-section (1) has been
approved by the Central Government, a
printed copy of the articles as altered shall be filed by the
company with the Registrar within one
month of the date of receipt of the order of approval.
(3) The power of altering articles
under this section shall, in the case of any company formed and
registered under Act No. 19 of 1857
and Act No. 7 of 1860 or either of them, extend to altering
any provisions in Table B annexed to
Act 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.
Section 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 in pursuance of
this Section, the Registrar shall close the former registration of
the company, and may dispense with the
delivery to him of copies of any documents with copies
of which he was furnished on the
occasion of the original registration of the company; but, save
as aforesaid, the registration shall
take place in the same manner and shall have effect, as if it
were the first registration of the
company under this Act.
(3) The registration of an unlimited
company as a limited company under this section shall not
affect any debts, liabilities,
obligations or contracts incurred or entered into, by, to, with or on
behalf of, the company before the
registration, and those debts, liabilities, obligations and
contracts may be enforced in the
manner provided by Part IX of this Act in the case of a company
registered in pursuance of that Part.
Section 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
(c) the agreement, if any, which the
company proposes to enter into with any individual, for
appointment as its managing or
whole-time director or manager.
(2) A declaration by an advocate of
the Supreme Court or of a High Court, an attorney or a
pleader entitled to appear before a
High Court, or a secretary, or a chartered accountant, in
whole-time practice in India, who is
engaged in the formation of a company, or by a person
named in the articles as a director,
manager or secretary of the company, that all the
requirements of this Act and the rules
thereunder have been complied with in respect of
registration and matters precedent and
incidental thereto, shall be filed with the Registrar; and the
Registrar may accept such a
declaration as sufficient evidence of such compliance.
Explanation : For the purposes of this
sub-section, "chartered accountant in whole-time practice
in India" means a chartered
accountant within the meaning of clause (b) of sub-section (1) of
section 2 of the Chartered Accountants
Act, 1949 (38 of 1949), who is practicing in India and who
is not in full-time employment. 95 ]
(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.
Section 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.
(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.
Section 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.
Section 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
members, 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.
Section 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.
Section 38
EFFECTS 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 alternation is made, or in any
way increases his liability as at that
date, to contribute to the share capital of, or otherwise to pay
money to, the company :
Provided that this section shall not
apply -
(a) in any case where the member
agrees in writing either before or after a particular alteration is
made, to be bound by the alteration;
or
(b) in any case where the company is a
club or the company is any other association and the
alteration requires the member to pay
recurring or periodical subscriptions or charges at a higher
rate although he does not agree in
writing to be bound by the alteration.
Section 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) and 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 requirement 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.
Section 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, 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 memorandum, articles, resolution or
agreement, which are not in accordance
with the alteration or alterations made therein before that
time, the company, and every officer
of the company who is in default, shall be punishable with
fine which may extend to ten rupees
for each copy so issued.
Section 41
DEFINITION OF "MEMBER".
(1) The subscribers of the memorandum
of a company shall be deemed to have agreed to
become members of a company, and on
its registration, shall be entered as members in its
register of members.
(2) Every other person who agrees in
writing a become a member of a company
Section 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 holdings
company if it was a member thereof
either at the commencement of this Act or before becoming a
subsidiary of the holding company, but
except in the cases referred to in sub-section (2), the
subsidiary shall have no right to vote
at meetings of the holding company or of any class of
members thereof.
(4) subject to sub-section (2),
sub-sections (1) and (3) shall apply in relation to a nominee for a
body corporate which is a subsidiary,
as if references in the said sub-sections (1) and (3) to such
a body corporate included references
to a nominee for it.
(5) In relation to a holding company
which is either a company limited by guarantee or an
unlimited company, the reference in
this section to shares shall, whether or not the company has
a share capital, be construed as
including a reference to the interest of its members as such,
whatever the form of that interest.
Section 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 Company Law Board
99, 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 101 of the company
or any other person interested and on
such terms and conditions as seem to the Company Law
Board just and expedient, order that
the company be relieved from such consequences as
aforesaid.
Section 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
corporate, the private company shall,
-
(a) on and from the date on which the
aforesaid percentage is first held by such body or bodies
corporate, or
(b) where the aforesaid percentage has
been first so held before the commencement of the
Companies (Amendment) Act, 1960 (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 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 matter specified in clause (iii) of sub-section (1)
of section 3 and the number of its
members may be, or may at any time be reduced, below seven
:
Provided further that in computing the
aforesaid percentage, account shall not be taken of any
share in the private` company held by
a banking company if, but only if, the following conditions
are satisfied in respect of such
share, namely :-
(a) that the share -
(i) forms part of the subject-matter
of a trust.
(ii) has not been set apart for the
benefit of any body corporate, and
(iii) is held by the banking company
either as a trustee of that trust or in its own name on behalf of
a trustee of that trust; or
(b) that the share -
(i) forms part of the estate of a
deceased person,
(ii) has not been bequeathed by the
deceased person by his will to any body corporate, and
(iii) is held by the banking company
either as an executor or administrator of the deceased person
or in its own name on behalf of an
executor or administrator of the deceased person; and the
Registrar may, for the purpose of
satisfying himself that any share is held in the private company
by a banking company as aforesaid,
call for at any time from the banking company such books
and papers as he considers necessary
Explanation: For the purposes of this
sub-section, "bodies corporate" means public companies, or
private companies which had become
public companies by virtue of this section.
(1A) Without prejudice to the
provisions of sub-section (1), where the average annual turnover of
a private company, whether in
existence at the commencement of the Companies (Amendment)
Act, 1974, or incorporated thereafter,
is not, during the relevant period, less than such amount as
may be prescribed ,the private company
shall, irrespective of its paid-up share capital, become,
on and from the expiry of a period of
three months from the last day of the relevant period during
which the private company had the said
average annual turnover, a public company by virtue of
this sub-section :
Provided that even after the private
company has so become a public company, its articles of
association may include provisions
relating to the matters specified in clause (iii) of sub-section
(1) of section 3 and the number of its
members may be, or may at any time be reduced, below
seven.
(1B) Where not less than twenty-five
per cent of the paid-up share capital of a public company,
having share capital, is held by a
private company, the private company shall, -
(a) on and from the date on which the
aforesaid percentage is first held by it after the
commencement of the Companies
(Amendment) Act, 1974, or
(b) where the aforesaid percentage has
been first so held before the commencement of the
Companies (Amendment) Act, 1974 on and
from the expiry of the period of three months from the
date of such commencement, unless
within that period the aforesaid percentage is reduced
below twenty-five per cent of the
paid-up share capital of the public company, become, by virtue
of this sub-section, a public company,
and thereupon all other provisions of this section shall
apply thereto :
Provided that even after the private
company has so become a public company, its articles of
association may include provisions
relating to the matters specified in clause (iii) of sub-section
(1) of section 3 and the number of its
members may be, or may at any time be reduced, below
seven.
(1C) Where, after the commencement of
the Companies (Amendment) Act, 1988, a private
company accepts, after an invitation
is made by an advertisement, or renews, deposits from the
public, other than its members,
directors or their relatives, such private company shall, on and
from the date on which such acceptance
or renewal, as the case may be, is first made after such
commencement, become a public company
and thereupon all the provisions of this section shall
apply thereto :
Provided that even after the private
company has so become a public company, its articles of
association may include provisions
relating to the matters specified in clause (iii) of sub-section
(1) of section 3 and the number of its
members may be or may at any time, be, reduced below
seven.
(2) Within three months from the date
on which a private company becomes a public company by
virtue of this section, the company
shall inform the Registrar that it has become a public company
as aforesaid, and thereupon the
Registrar shall delete the word "Private" before the word
"Limited" in the name of the
company upon the register and shall also make the necessary
alterations in the certificate of
incorporation issued to the company and in its memorandum of
association.
(3) Sub-section (3) of section 23
shall apply to a change of name under sub-section (2) as it
applies to a change of name under
section 21.
(4) A private company which has become
a public company by virtue of this section shall
continue to be a public company until
it has, with the approval of the Central Government and in
accordance with the provisions of this
Act, again become a private company.
(5) If a company makes default in
complying with sub-section (2), the company and every officer
of the company who is in default,
shall be punishable with fine which may extend to five hundred
rupees for every day during which the
default continues.
(6) & (7) [Omitted by the
Companies (Amendment) Act, 1988, section 7, w.e.f. 15-6-1988. For
sub-sections (6) and (7) as they stood
prior to omission, refer Appendix I].
(8) Every private company having a
share capital shall, in addition to the certificate referred to in
sub-section (2) of section 161, file
with the Registrar along with the annual return a second
certificate signed by both the signatories
of the return, stating either -
(a) that since the date of the annual
general meeting with reference to which the last return was
submitted, or in the case of a first
return, since the date of the incorporation of the private
company, no body or bodies corporate
has or have held twenty-five per cent or more of its paidup
share capital, [ 108 * * * 108 ]
(b) [Omitted by the Companies
(Amendment) Act, 1988, section 7, w.e.f. 15-6-1988. For clause
(b) as it stood prior to its
(c) that the private company,
irrespective of its paid-up share capital, did not have, during the
relevant period, an average annual
turnover of such amount as is referred to in sub-section (1A)
or more,
(d) that the private company did not
accept or renew deposits from the public.
(9) Every private company, having
share capital, shall file with the Registrar along with the annual
return a certificate signed by both
the signatories of the return, stating that since the date of the
annual general meeting with reference
to which the last return was submitted, or in the case of a
first return, since the date of the
incorporation of the private company, it did not hold twenty-five
per cent or more of the paid-up share
capital of one or more public companies.
(10) Subject to the other provisions
of this Act, any reference in this section to accepting, after an
invitation is made by an
advertisement, or renewing deposists 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.
Explanation : For the purposes of this
section, -
(a) "relevant period" means
the period of three consecutive financial years, -
(i) immediately preceding the
commencement of the Companies (Amendment) Act, 1974, or
(ii) a part of which immediately
preceded such commencement and the other part of which
immediately, followed such
commencement, or
(iii) immediately following such
commencement or at any time thereafter;
(b) "turnover" of a company,
means the aggregate value of the realisation made form the sale,
supply or distribution of goods or on
account of services rendered, or both, by the company
during a financial year. 109 ]
(c) "deposit" has the same
meaning as in section 58A.
Section 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 articles in such 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 the a period of thirty
days after the said date, file with the Registrar either a
prospectus or a statement in lieu of
prospectus, as specified in sub-section (2).
(2)
(a) Every prospectus filed under
sub-section (1) shall state the matters specified in Part I of
Schedule II and set out the reports
specified in Part II of that Schedule, and the said Parts I and II
shall have effect subject to the
provisions contained in Part III of that Schedule.
(b) Every statement in lieu of
prospectus filed under sub-section (1) shall be in the form and
contain the particulars set out in
Part I of Schedule IV, and in the cases mentioned in Part II of
that Schedule, shall set out the
report specified therein, and the said Parts I and II shall have
effect subject to the provision
contained in Part III of that Schedule.
(c) Where the persons making any such
report as is referred to in clause (a) or (b) have made
therein, or have, without giving the
reasons indicated therein, any such adjustments as are
mentioned in clause 32 of Schedule II
or clause 5 of Schedule IV, as the case may be, the
prospectus or statement in lieu of
prospectus filed as aforesaid, shall have endorsed thereon or
attached thereto, a written statement
signed by those persons, setting out there adjustment 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 action 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 purpose of this section –
(a) a statement included in a
prospectus or a statement in lieu of prospectus shall be deemed to
be untrue if it is misleading in the
form and context in which it is included; and
(b) where the omission from a
prospectus or a statement in lieu of prospectus of any matter is
calculated to mislead, the prospectus
or statement in lieu of prospectus shall be deemed, in
respect of such omission, to be a
prospects or a statement in lieu of prospectus in which an
untrue statement is included.
(6) For the purpose 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.
Section 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 public company,
below seven, or in the case of private
company, below two, and the company carrier on business
for more than six months while the
number is so reduced, every person who is a member of the
company during the time that it so
carries on business after those six months and is cognizant of
the fact that it is carrying on
business with fewer than seven members or two members, as the
case may be, shall be severally liable
for the payment of the whole debts of the company
contracted during that time, and may
be severally sued therefor.
Section 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.
Section 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 the
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. Section 48
Section 48
EXECUTION OF DEEDS.
(1) A company may, by writing under
its common seal, empower any person, either generally or
in respect of any specified matters,
as its attorney, to execute deeds on its behalf in any place
either in or outside India.
(2) A deed singed 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.
Section 49
INVESTMENTS OF COMPANY TO BE HELD IN
ITS OWN NAME.
(1) Save as otherwise provided in
sub-sections (2) to (5) or any other law for 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 its in it own
name; and
(b) where any such investments are not
so held at the commencement of this Act the company
shall, within a period of one year
from such commencement, either cause them to be transferred
to, and hold them in, its own name, or
dispose of them.
(2) Where the company has a right to
appoint any person or persons, or where any nominee or
nominees of the company has or have
been appointed, as a director or directors of any other
body corporate, shares in such other
body corporate to an amount not exceeding the nominal
value of the qualification shares
which are required to be held by a director thereof, may be
registered or held by such company
jointly in the names of itself and of each such person or
nominee or in the name of each such
person or nominee .
(3) A company may hold any shares in
its subsidiary in the name or names of any nominee or
nominees of the company, if and in so
far as it is necessary so to do, to ensure that the number of
members of the subsidiary is not
reduced, where it is a public company, below seven, and where
it is a private company, below two.
(4) Sub-section (1) shall not apply to
investments made by a company whose principal business
consists of the buying and selling of
shares or securities.
(5) Nothing in this section shall be
deemed to prevent a company -
(a) from depositing with a bank, being
the bankers of the company, any shares or securities for
the collection of any dividend or
interest payable thereon; or
(aa) from depositing with, or
transferring to, or holding in the name of, the State Bank of India or a
Scheduled Bank, being the bankers of
the company, shares or securities, in order to facilitate the
transfer thereof :
Provided that if within a period of
six months from the date on which the shares or securities are
transferred by the company to, or are
first held by the company in the name of, the State Bank of
India or a Scheduled Bank as
aforesaid, no transfer of such shares or securities takes place, the
company shall, as soon as practicable
after the expiry of that period, have the shares or
securities retransferred to it from
the State Bank of India or the Scheduled Bank or, as the case
may be, again hold the shares or
securities in its own name; or
(b) from depositing with, or
transferring to, any person any shares or securities, by way of security
for the repayment of any loan advanced
to the company or the performance of any obligation
undertaken by it.
(c) from holding investments in the
name of a depository when such investments are in the form
of securities held by the company as a
beneficial owner.
(6) The certificate or letter of
allotment relating to the shares or securities in which investments
have been made by a company shall,
except in the cases referred to in sub-sections (4) and (5),
be in the custody of such company
orwith the State Bank of India or a Schedule Bank , being the
bankers of the company.
(7) Where, in pursuance of sub-section
(2), (3), (4) and (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 meetings, impose, so
that not less than two hours in each
day are allowed for inspection.
(9) If default is made in complying
with any of the requirements of sub-sections (1) to (8), the
company, and every officer of the
company who is in default, shall be punishable with fine which
may extend to five thousand rupees.
(10) If any inspection required under
sub-section (8) is refused, the Company Law Board may, by
order, direct an immediate inspection
of the register 121 . 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.
Section 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 territory, district or place may, by writing
under its common seal, authorise any
person appointed for the purpose in that territory, district or
place to affix the official seal to
any deed or other document to which the company is a party in
that territory, district or place.
(3) The authority of any agent
authorised under sub-section (2) shall, as between the company
and any person dealing with the agent,
continue during the period, if any, mentioned in the
instrument conferring the authority,
or if no period is there mentioned, until notice of the
revocation or determination of the
agent's authority has been given to the person dealing with
him.
(4) The person affixing any such
official seal shall, by writing under his hand, certify on the deed
or other document to which the seal is
affixed, the date on which and the place at which, it is
affixed.
(5) A deed or other document to which
an official seal is duly affixed shall bind the company as if
it had been sealed with the common
seal of the company.
Section 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 a certificate of posting or by
registered post, or by leaving it at
its registered office :
Provided that where the securities are
held in a depository, the records of the beneficial
ownership may be served by such
depository on the company by means of electronic mode or by
delivery of floppies or discs.
Section 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 the
certificate of posting or by
registered post, or by delivering it to, or leaving it for, him at his office.
Section 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
supplied by him to the company for the giving of notices to him.
(2) Where a document is sent by post,
-
(a) service thereof shall be deemed to
be effected by properly addressing, prepaying and posting
a letter containing the document,
provided that where a member has intimated to the company in
advance that documents should be sent
to him under a certificate of posting or by registered post
with or without acknowledgement due
and has deposited with the company a sum sufficient to
defray the expenses of doing so,
service of the document shall not be deemed to be effected
unless it is sent in the manner
intimated by the member; and
(b) such service shall be deemed to
have been effected -
(i) in the case of a notice of a
meeting, at the expiration of forty-eight hours after the letter
containing the same is posted, and
(ii) in any other case, at the time at
which the letter would be delivered in the ordinary course of
post.
(3) A document advertised in a
newspaper circulating in the neighbourhood of the registered
office of the company shall be deemed
to be duly served on the day on which the advertisement
appears, on every member of the
company who has no registered address in India and has not
supplied to the company an address
with in India for the giving of notices to him.
(4) A document may be served by the
company on the joint-holders of a share by serving it on the
joint-holder named first in the
register in respect of the share.
(5) A document may be served by the
company on the persons entitled to a share in
consequence of the death or insolvency
of a member by sending it through the post in a prepaid
letter addressed to them by name, or
by the title of representatives of the deceased, or assignees
of the insolvent, or by any like
description, at the address, if any, in India supplied for the purpose
by the persons claiming to be so
entitled, or until such an address has been so supplied, by
serving the document in any manner in
which it might have been served if the death or insolvency
hand not occurred
Section 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 manager, the secretary or other
authorised officer of the company, and
need not be under its common seal.
Section 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.
Section 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
Section 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.
Section 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.
Section 59
PENALTY AND INTERPRETATION.
(1) If any prospectus is issued in
contravention of section 57 or 58, 140 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 section 57 and 58, the
expression "expert" includes an engineer, a valuer, an accountant
and any other person whose profession
gives authority to a statement made by him.
Section 60
REGISTRATION OF PROSPECTUS.
(1) No prospectus shall be issued buy
or on behalf of a company or in relation to an intended
company unless, on or before the date
of its publication, there has been delivered to the Registrar
for registration a copy thereof signed
by every person who is named therein as a director or
proposed director of the company or by
his agent authorised in writing, and having endorsed
thereon or attached thereto -
(a) any consent to the issue of the
prospectus required by section 58 from any person as an
expert; and
(b) in the case of a prospectus issued
generally, also –
(i) a copy of every contract required
by clause 16 of Schedule II to be specified in the prospectus,
or, in the case of a contract not
reduced into writing, a memorandum giving full particulars
thereof; and
(ii) where the persons making any
report required by Part II of that Schedule have made therein,
or have, without giving the reasons,
indicated therein, any such adjustments as are mentioned in
clause 32 of that Schedule, a written
statement signed by those persons setting out the
adjustments and giving the reasons
therefor.
(2) Every prospectus to which
sub-section (1) applies shall, on the face of it, -
(a) state that a copy has been
delivered for registration as required by this section; and
(b) specify any documents required by
this section to be endorsed on or attached to the copy so
delivered, or refer to statements
included in the prospectus which specify those documents.
(3) The Registrar shall not register a
prospectus unless the requirements of section 55, 56, 57
and 58 and sub-section (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
Section 61
TERMS OF CONTRACT MENTIONED IN
PROSPECTUS OR STATEMENT IN LIEU OF
PROSPECTUS, NOT TO BE VARIED.
A company shall not, at any time, vary
the terms of a contract refereed 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.
Section 62
CIVIL LIABILITY FOR MIS-STATEMENTS 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;
(b) every person who has authorised
himself to be named and is named in the prospectus either
as a director, or as having agreed to
become a director, either immediately or after an interval of
time;
(c) every person who is a promoter of
the company; and
(d) every person who has authorised
the issue of the prospectus :
Provided that where, under section 58,
the consent of a person is required to the issue of a
prospectus and he has given that
consent, or where, under sub-section (3) of section 60, the
consent of a person named in a
prospectus is required and he has given that consent, he shall
not, by reason of having given such
consent, be liable under this sub-section as a person who
has authorised the issue of the
prospectus except in respect of an untrue statement, if any,
purporting to be made by him as an
expert.
(2) No person shall be liable under
sub-section (1), if he proves -
(a) that, having consented to become a
director of the company, he withdrew his consent before
the issue of the prospectus, and that
it was issued without his authority or consent;
(b) that the prospectus was issued
without his knowledge or consent, and that on becoming
aware of its issue, he forthwith gave
reasonable public notice that it was issued without his
knowledge or consent;
(c) that, after the issue of the
prospectus and before allotment 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 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 correct
and fair representation of the
statement, or a correct copy of, or a correct and fair extract from,
the report or valuation; and he had
reasonable ground to believe, and did up to the time of the
issue of the prospectus believe, that
the person making the statement was competent to make it
and that that person had given the
consent required by section 58 to the issue of the prospectus
and had not withdrawn that consent
before delivery of a copy of the prospectus for registration or,
to the defendant's knowledge, before
allotment thereunder; and
(iii) as regards every untrue
statement purporting to be a statement made by an official person or
contained in what purports to be a
copy of or extract from a public official document, it was a
correct and fair representation of the
statement, or a correct copy of or a correct and fair extract
from, the document :
Provided that this sub-section shall
not apply in the case of a person liable, by reason of his
having given a consent required of him
by section 58 as a person who has authorised the issue of
the prospectus in respect of an untrue
statement, purporting to be made by him as an expert.
(3) A person who, apart from this
sub-section, would under sub-section (1), be liable by reason of
his having given a consent required of
him by section 58 as a person who has authorised the
issue of a prospectus in respect of an
untrue statement purporting to be made by him as an
expert, shall not be so liable, if he
proves –
(a) that, having given his consent
under section 58 to the issue of the prospectus, he withdrew it
in writing before delivery of a copy
of the prospectus for registration;
(b) that, after delivery of a copy of
the prospectus for registration and before allotment thereunder,
he, on becoming aware of the untrue
statement, withdrew his consent in writing and gave
reasonable public notice of the
withdrawal and of the reason therefor; or
(c) that he was competent to make the
statement and that he had reasonable ground to believe,
and did up to the time of the
allotment of the shares or debentures, believe, that the statement
was true.
(4) Where -
(a) the prospectus specifies the name
of a person as a director of the company, or as having
agreed to become a director thereof,
and he has not consented to become a director, or has
withdrawn his consent before the issue
of the prospectus, and has not authorised or consented to
the issue thereof; or
(b) the consent of a person is
required under section 58 to the issue of the prospectus and he
either has not given that consent or
has withdrawn it before the issue of the prospectus;
the directors of the company excluding
those without whose knowledge or consent the
prospectus was issued, and every other
person who authorised the issue thereof, shall be liable
to indemnify the person refereed 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 of former person was, and the latter person was
not, guilty of fraudulent
misrepresentation.
(6) For the purposes of this section -
(a) the expression
"promoter" means a promoter who was a party to the preparation of the
prospectus or of the portion thereof
containing the untrue statement, but does not include any
person by reason of his acting in a
professional capacity for persons engaged in procuring the
formation of the company; and
(b) the expression "expert"
has the same meaning as in section 58.
Section 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 purpose of this section to have authorised the issue of a
prospectus by reason only of his
having given -
(a) the consent required by section 58
to the inclusion therein of a statement purporting to be
made by him as an expert, or
(b) the consent required by
sub-section (3) of section 60.
Section 64
DOCUMENT CONTAINING OFFER OF SHARES OR
DEBENTURES FOR SALE 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 enactment 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-section (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
person accepting the offer in respect of any shares or debentures
were subscribers for those shares or
debentures, but without prejudice to the liability, if any, of
the persons by whom the offer is made
in respect of mis-statements contained in the document or
otherwise in respect thereof.
(2) For the purposes of this Act, it
shall, unless the contrary is proved, be evidence that an
allotment of, or an agreement to allot,
shares or debentures was made with a view to the shares
or debentures being offered for sale
to the public if it is shown -
(a) that an offer of the shares or
debentures or of any of them for sale to the public was made
within six months after the allotment
or agreement to allot; or
(b) that at the date when the offer
was made, the whole consideration to be received by the
company in respect of the shares or
debentures had not been received by it.
(3) Section 56 as applied by this
section shall have effect as if it required a prospectus to state in
addition to the matters required by
that section to be stated in a prospectus -
(a) the net amount of the
consideration received or to be received by the company in respect of
the shares or debentures to which the
offer relates; and
(b) the place and time at which the
contract under which the said shares or debentures have
been or are to be allotted may be
inspected.
(4) Section 60 as applied by this
section shall have effect as if the persons making the offer were
persons named in a prospectus as
directors of a company.
(5) Where a person making an offer to
which this section relates is a company or a firm, it shall be
sufficient if the document referred to
in sub-section (1) is signed on behalf of the company or firm
by two directors of the company or by
not less that 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.Section 65
INTERPRETATION OF PROVISION 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 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 in
included.
(2) For the purposes of sections 61,
62 and 63 and clause (a) of sub-section (1) of this section,
the expression "included"
when used with reference to a prospectus, means included in the
prospectus itself or contained in any
report or memorandum appearing on the face thereof or by
reference incorporated therein or
issued therewith.
Section 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.
Section 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-section (3) and (4),
be construed as including a reference to offering them to
any section of the public, whether
selected as members or debentures 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 subsection
(2), as the case may be, if the offer
or invitation can properly be regarded, in all the
circumstances -
(a) as not being calculated to result,
directly or indirectly, in the shares or debentures becoming
available for subscription or purchase
by persons other than those receiving the offer or invitation;
or
(b) otherwise as being a domestic
concern of the persons making and receiving the offer or
invitation.
(4) Without prejudice to the
generality of sub-section (3), a provision in a company's articles
prohibiting invitation to the public
to subscribe for the shares or debentures shall not be taken as
prohibiting the making to members or
debenture holders of an invitation which can properly be
regarded in the manner set forth in
that sub-section.
(5) The provisions of this Act
relating to private companies shall be construed in accordance with
the provisions contained in
sub-sections (1) to (4).
Section 68
PENALTY FOR FRAUDULENTLY INDUCING
PERSONS TO INVEST MONEY 143b .
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 the fine
which may extend to ten thousand
rupees, or with both.
Section 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.
Section 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 in the
prospectus as the minimum amount, which, in the opinion
of the Board of directors, must be
raised by the issue of share capital in order to provide for the
matters specified in clause 5 of
Schedule II has been subscribed, and the sum payable on
application for the amount so stated
has been paid to and received by the company, whether in
cash or by a cheque or other
instrument which has been paid.
(2) The amount so stated in the
prospectus shall be reckoned exclusively of any amount payable
otherwise than in money, and is in
this Act referred to as "the minimum subscription".
(3) The amount payable on application
on each share shall not be less than five per cent of the
nominal amount of the share.
(4) All moneys received from
applicants for shares shall be deposited and kept deposited in a
Scheduled Bank -
(a) until the certificate to commence
business is obtained under the section, or
(b) where such certificate has already
been obtained, until the entire amount payable on
applications for shares in respect of
the minimum subscription has been received by the
company,
and where such amount has not been
received by the company within the time on the expiry of
which the moneys received from the
applicants for shares are required to be repaid without
interest under sub-section (5), all
moneys received from applicants for shares shall be returned in
accordance with the provisions of that
sub-section.
In the event of any contravention of
the provisions of this sub-section, every promoter, director or
other person who is knowingly
responsible for such contravention shall be punishable with fine
which may extend to 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 the rate of six per cent per
annum from the expiry of the one
hundred and thirtieth day :
Provided that a director shall not be
so liable if he proves that the default in the repayment of the
money was not due to any misconduct or
negligence on his part.
(6) Any condition purporting to
require or bind any applicant for shares to waive compliance the
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.
Section 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 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 day 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 reports specified therein, and
the said Parts I and II shall have
effect subject to the provisions contained in Part III of that
Schedule.
(2) Every statement in lieu of
prospectus delivered under sub-section (1), shall, where the
persons making any such report as
aforesaid have made therein, or have without giving the
reason 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.
Section 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, notwithstanding that the company is in course of
being wound up.
(3) If any director of a company
knowingly contravenes, or wilfully authorises or permits the
contravention of, any of the
provisions of section 69 or 70 with respect of allotment, he shall be
liable to compensate the company and
the allotment 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.
Section 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 the 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 provision
shall be deemed to exclude, limit or diminish any liability
that might be incurred in the case
referred to therein under the general law or this Act.
(c) The beginning of the fifth day or
such later time as is mentioned in the first paragraph of
clause (a), or the beginning of the
fifth day mentioned in the second paragraph of that clause, as
the case may be, is hereinafter in
this Act referred to as "the time of the opening of the
subscription lists".
(2) In sub-section (1), the reference
to the day on which the prospectus is first issued generally
shall be construed as referring to the
day on which it is first so issued as a newspaper
advertisement :
Provided that, if it is not so issued
as a newspaper advertisement before the fifth day after that on
which it is first so issued in any
other manner, the said reference shall be construed as referring
to the day on which it is first so
issued in any manner.
(3) The validity of an allotment shall
not be affected by any contravention of the foregoing
provisions of this section; but, in
the event of any such contravention, the company, and every
officer of the company who is in
default, shall be punishable with fine which may extend to five
thousand rupees.
(4) In the application of this section
to a prospectus offering shares or debentures for sale, subsections
(1) to (3) shall have effect with the
substitution of references to sale for references to
allotment, and with the substitution
for the reference to the company and every officer of the
company who is in default of a
reference to any person by or through whom the offer is made and
who is knowingly guilty of, or
wilfully authorises or permits, the contravention.
(5) An application for shares in, or
debentures of, a company, which is made in pursuance of a
prospectus issued generally shall not
be revocable until after the expiration of the fifth day after
the time of the opening of the
subscription lists, or the giving, before the expiry of the said fifth
day by some person responsible under
section 62 for the prospectus, of a public notice having
the effect under that section of
excluding, limiting or diminishing the responsibility of the person
giving it.
Section 73
ALLOTMENT OF SHARES AND DEBENTURES TO
BE DEALT IN ON STOCK EXCHANGE.
(1) Every company intending to offer
shares or debentures to the public for subscription by the
issue of a prospectus shall, before
such issue, make an application to one or more recognised
stock exchanges for permission for the
shares or debentures intending to be so offered to be
dealt with in the stock exchange or
each such stock exchange.
(1A)Where a prospectus, whether issued
generally or not, states that an application under subsection
(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
application in pursuance of such
prospectus shall, whenever made, be void, if the permission has
not been granted by the stock exchange
or each such stock exchange, as the case may be,
before the expiry of ten weeks from
the date of the closing of the subscription lists :
Provided that where an appeal against
the decision of any recognized stock exchange refusing
permission for the shares or
debentures to be dealt in on that stock exchange has been preferred
under section 22 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956), such allotment
shall not be void until the dismissal
of the appeal.
(2) Where the permission has not been
applied under sub-section (1), or, such permission having
been applied for, has not been granted
as aforesaid, the company shall forthwith repay without
interest all moneys received from applicants
in pursuance of the prospectus, and, if any such
money is not repaid within eight days
after the company becomes liable to repay it, the company
and every director of the company who
is an officer in default shall, on and from the expiry of the
eighth day, be jointly and severally
liable to repay that money with interest at such rate, not less
than four percent and not more than
fifteen per cent. as may be prescribed, having regard to the
length of the period of delay in
making the repayment of such money.
(2A) Where permission has been granted
by the recognised stock exchange or stock exchanges
for dealing in any shares or
debentures in such stock exchange or each such stock exchange and
the moneys received from applicants
for shares or debentures are in excess of the aggregate of
the application moneys relating to the
shares or debentures in respect of which allotments have
been made, the company shall repay the
moneys to the extent of such excess forthwith without
interest, and if such money is not
repaid within eight days, from the day the company becomes
liable to pay it, the company and
every director of the company who is an officer in default shall,
on and from the expiry of the eighth
day, be jointly and severally liable to repay that money with
interest at such rate, not less than
four per cent. and not more than fifteen per cent. as may be
prescribed having regard to the length
of the period of delay in making the repayment of such
money.
(2B) If default is made in complying
with the provisions of sub-section (2A), the company and
every officer of the company who is in
default shall be punishable with fine which may extend to
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 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 subsection
(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.
(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 exchanger or each stock
exchange specified in the prospectus; or
(b) repayment of moneys received from
applicants in pursuance of the prospectus, where shares
have not been permitted to be dealt in
on the stock exchanger or each stock exchange specified
in the prospectus, as the case may be,
or, where the company is for any other reason unable to
make the allotment of share.
(4) Any condition purporting to
require or bind any applicant for shares or debentures to waive
compliance with any of the
requirements of this section shall be void.
(5) For the purposes of this section,
it shall be deemed that permission has not been granted if
the application for permission, where
made, has not been disposed of within the time specified in
sub-section (1).
(6) This section shall have effect -
(a) in relation to any shares or
debentures agreed to be taken by a person underwriting an offer
thereof by a prospectus, as if he had
applied therefor in pursuance of the prospectus; and
(b) in relation to a prospectus
offering shares for sale, with the following modifications, namely, -
(i) references to sale shall be
substituted for references to allotment;
(ii) the persons by whom the offer is
made, and not the company, shall be liable under subsection
(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.
Section 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, or the eighth day after another
day, any intervening day which is a
public holiday under the Negotiable Instruments Act, 1881 (26
of 1881), shall be disregarded, and if
the fifth, or eighth day (as so reckoned) is itself such a
public holiday, there shall for the
said purposes be substituted the first day thereafter which is not
such a holiday.
Section 75
RETURN AS TO ALLOTMENTS.
(1) Whenever a company having a share
capital makes any allotment of its shares, the company
shall, within thirty days thereafter,
-
(a) file with the Registrar a return
of the allotments, stating the number and nominal amount of the
shares comprised in the allotment, the
names, addresses and occupations of the allottees, and
the amount, if any, paid or due and
payable on each share :
Provided that the company shall not
show in such return any shares as having been allotted for
cash if cash has not actually been
received in respect of such allotment;
(b) in the case of shares (not being
bonus shares) allotted as fully or partly paid-up otherwise
than in cash, produce for the
inspection and examination of the Registrar a contract in writing
constituting the tile of the allottee
to the allotment together with any contract of sale, or a contract
for services or other consideration in
respect of which that allotment was made, such contracts
being duly stamped, and file with the
Registrar copies verified in the prescribed manner of all
such contracts and a return stating
the number and nominal amount of shares so allotted, the
extent to which they are to be treated
as paid up, and the consideration for which they have been
allotted; and
(c) file with the Registrar -
(i) in the case of bonus shares, a
return stating the number and nominal amount of such shares
comprised in the allotment and the
names, addresses and occupations of the allottees and a
copy of the resolution authorising the
issue of such shares;
(ii) in the case of issue of shares at
a discount, a copy of the resolution passed by the company
authorising such issue together with a
copy of the order of the Court sanctioning the issue and
where the maximum rate of discount
exceeds ten per cent. a copy of the order of the Central
Government permitting the issue at the
higher percentage.
(2) Where a contract such as in
mentioned in clause (b) of sub-section (1) is not reduced to
writing, the company shall, within
thirty days after the allotment, file with the Registrar the
prescribed particulars of the contract
stamped with the same stamp duty as would have been
payable if the contract had been
reduced to writing; and 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 ofthirty
days specified in sub-sections (1) and
(2) for compliance with the requirements of this section is
or was inadequate, he may, on application
made in that behalf by the company, whether before
or after the expiry of the said
period, extend that period as he thinks fit ; and if he does so, the
provisions of sub-sections (1) and (2)
shall have effect in that particular case as if for the said
period of thirty days the extended
period allowed by the Registrar were substituted.
(4) If default is made in complying
with this section, every officer of the company who is in default
shall be punishable with fine which
may extend to five hundred rupees for every day during which
the default continues :
Provided that in case of contravention
of the proviso to clause (a) of sub-section (1), every such
officer, and every promoter of the
company who is guilty of the contravention shall be punishable
with fine which may extend to 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.
Section 76
POWER TO PAY CERTAIN COMMISSION 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;
(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; and
(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;
(v) a copy of the contract for the
payment of the commission is delivered to the Registrar at the
time of delivery of the prospectus or
the statement in lieu of prospectus for registration.
(2) Save as aforesaid and save as
provided in section 79, no company shall allot any of its shares
or debentures or apply any of its
moneys, either directly or indirectly, in payment of any
commission, discount or allowance, to
any person in consideration of -
(a) his subscribing or agreeing to
subscribe, whether absolutely or conditionally, for any shares in,
or debentures of, the company, or
(b) his procuring or agreeing to
procure subscriptions, whether absolute or conditional, for any
shares in, or debentures of, the
company.
whether the shares, debentures or
money be so allotted or applied by being added to the
purchase money of any property
acquired by the company or to the contract price of any work to
be executed for the company, or the
money be paid out of the nominal purchase money or
contract price, or otherwise.
(3) Nothing in this section shall
affect the power of any company to pay such brokerage as it has
heretofore been lawful for a company
to pay.
(4) A vendor to, promoter of, or other
person who receives payment in shares, debentures or
money from, a company shall have and
shall be deemed always to have had power to apply any
part of the shares, debentures or
money so received in payment of any commission the payment
of which, if made directly by the
company, would have been legal under this section.
(4A) For the removal of doubts it is
hereby declared that no commission shall be paid under
clause (a) of sub-section (1) to any
person on shares or debentures which are not offered to the
public for subscription :
Provided that where a person has
subscribed or agreed to subscribe under clause (a) of subsection
(1) for any shares in, or debentures
of, the company and before the issue of the
prospectus or statement in lieu
thereof any other person or persons has or have subscribed for
any or all of those shares or
debentures and that fact together with the aggregate amount of
commission payable under this section
in respect of such subscription is disclosed in such
prospectus or statement, then, the
company may pay commission, to the first-mentioned person
in respect of such subscription.
(5) If default is made in complying
with the provisions of this section, the company, and every
officer of the company who is in
default, shall be punishable with fine which may extend to five
hundred rupees.
Section 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
own shares, unless the consequent reduction of capital is
effected and sanctioned in pursuance
of sections 100 to 104 or of section 402.
(2) No public company, and no private
company which is a subsidiary of a public company, shall
give, whether directly or indirectly,
and whether by means of a loan, guarantee, the provision of
security or otherwise, any financial
assistance for the purpose of or in connection with a purchase
or subscription made or to be made by
any person of or for any shares in the company or in its
holding company :
Provided that nothing in this
sub-section shall be taken to prohibit -
(a) the lending of money by a banking
company in the ordinary course of its business; or
(b) the provision by a company, in
accordance with any scheme for the time being in force, of
money for the purchase of, or
subscription for, fully paid shares in the company or its holding
company, being a purchase or
subscription by trustees of or for shares to be held by or for the
benefit of employees of the company,
including any director holding a salaried office or
employment in the company; or
(c) the making by a company of loans,
within the limit laid down in sub-section (3), to persons
(other than directors , or managers)
bona fide in the employment of the company with a view to
enabling those persons to purchase or
subscribe for fully paid shares in the company or its
holding company to be held by
themselves by way of beneficial ownership.
(3) No loan made to any person in
pursuance of clause (c) of the foregoing proviso shall exceed
in amount his salary or wages at that
time for a period of six months.
(4) If a company acts in contravention
of sub-section (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.
Section 77A
POWER OF COMPANY TO PURCHASE ITS OWN
SECURITIES.
(1) Notwithstanding anything contained
in this Act, but subject to the provisions of sub-section (2)
of this section and section 77B, a
company may purchase its own shares or other specified
securities (hereinafter referred to as
"buy-back") out of -
(i) its free reserves; or
(ii) the securities premium account;
or
(iii) the proceeds of any shares or
other specified securities :
PROVIDED that no buy-back of any kind
of shares or other specified securities shall be made out
of the proceeds of an earlier issue of
the same kind of shares or same kind of other specified
securities.
(2) No company shall purchase its own
shares or other specified securities under sub-section (1)
unless-
(a) the buy-back is authorised by its
articles
(b) a special resolution has been
passed in general meeting of the company authorising the buyback;
(c) the buy-back is of less than
twenty-five per cent of the total paid-up capital and fee reserves of
the company :
Provided that the buy-back of equity
shares in any financial year shall not exceed twenty-five per
cent of its total paid-up equity
capital in that financial year;
(d) the ratio of the debt owed by the
company is not more than twice the capital and its free
reserves after such buy-back :
Provided that the Central Government
may prescribe a higher ratio of the debt than that specified
under this clause for class or classes
of companies.
Explanation : For the purposes of this
clause, the expression "debt" includes all amounts of
unsecured and secured debts;
(e) all the shares or other specified
securities for buy-back are fully paid-up;
(f) the buy-back of the shares or
other specified securities listed on any recognised stock
exchange is in accordance with the
regulations made by the Securities and Exchange Board of
India in this behalf; and
(g) the buy-back in respect of shares
or other specified securities other than those specified in
clause (f) is in accordance with the
guidelines as may be prescribed.
(3) The notice of the meeting at which
special resolution is proposed to be passed shall be
accompanied by an explanatory statement
stating -
(a) a full and complete disclosure of
all material facts;
(b) the necessity for the buy-back;
(c) the class of security intended to
be purchased under the buy-back;
(d) the amount to be invested under
the buy-back; and
(e) the time-limit for completion of
buy-back.
(4) Every buy-back shall be completed
within twelve months from the date of passing the special
resolution under clause (b) of
sub-section (2).
(5) The buy-back under sub-section (1)
may be -
(a) from the existing security-holders
on a proportionate basis; or
(b) from the open market; or
(c) from odd lots, that is to say,
where the lot of securities of a public company, whose shares are
listed on a recognised stock exchange,
is smaller than such marketable lot, as may be specified
by the stock exchange; or
(d) by purchasing the securities
issued to employees of the company pursuant to a scheme of
stock option or sweat equity.
(6) Where a company has passed a
special resolution under clause (b) of sub-section (2) to buyback
its own shares or other securities
under this section, it shall, before making such buy-back,
file with the Registrar and the
Securities and Exchange Board of India a declaration of solvency in
the form as may be prescribed and
verified by an affidavit to the effect that the Board has made a
full inquiry into the affairs of the
company as a result of which they have formed an opinion that it
is capable of meeting its liabilities
and will not be rendered insolvent within a period of one year of
the date of declaration adopted by the
Board, and signed by at least two directors of the
company, one of whom shall be the
managing director, if any :
PROVIDED that no declaration of
solvency shall be filed with the Securities and Exchange Board
of India by a company whose shares are
not listed on any recognised stock exchange.
(7) Where a company buys-back its own
securities, it shall extinguish and physically destroy the
securities so bought-back within seven
days of the last date of completion of buy-back.
(8) Where a company completes a
buy-back of its shares or other specified securities under this
section, it shall not make further
issue of the same kind of shares [including allotment of further
shares under clause (a) of sub-section
(1) of section 81] or other specified securities within a
period of twenty-four months except by
way of bonus issue or in the discharge of subsisting
obligations such as conversion of
warrants, stock option schemes, sweat equity or conversion of
preference shares or debentures into
equity shares.
(9) Where a company buys-back its
securities under this section, it shall maintain a register of the
securities so bought, the
consideration paid for the securities bought-back, the date of
cancellation of securities, the date
of extinguishing and physically destroying of securities and
such other particulars as may be
prescribed.
(10) A Company shall, after the
completion of the buy-back under this section, file with the
Registrar and the Securities and
Exchange Board of India, a return containing such particulars
relating to the buyback within thirty
days of such completion, as may be prescribed :
PROVIDED that no return shall be filed
with the Securities and Exchange Board of India by a
company whose shares are not listed on
any recognised stock exchange.
(11) If a company makes default in
complying with the provisions of this section or any rules
made thereunder, or any regulations
made under clause (f) of sub-section (2), the company or
any officer of the company who is in
default shall be punishable with imprisonment for a term
which may extend to two years, or with
fine which may extend to fifty thousand rupees, or with
both.
Explanation : For the purposes of this
section, -
(a) "specified securities"
includes employees' stock option or other securities as may be notified
by the Central Government from time to
time;
(b) "free reserves" shall
have the meaning assigned to it in clause (b) of Explantion to section
372A. 179b ]
Section 77AA
TRANSFER OF CERTAIN SUMS TO CAPITAL
REDEMPTION RESERVE ACCOUNT.
Where a company purchases its own
shares out of free reserves, then a sum equal to the
nominal value of the share so
purchased shall be transferred to the capital redemption reserve
account referred to in clause (d) of
the proviso to sub-section (1) of section 80 and details of such
transfer shall be disclosed in the
balance-sheet.
Section 77B
PROHIBITION FOR BUY-BACK IN CERTAIN
CIRCUMSTANCES.
(1) No company shall directly or
indirectly purchase its own shares or other specified securities -
(a) through any subsidiary company
including its own subsidiary companies; or
(b) through any investment company or
group of investment companies; or
(c) if a default, by the company, in
repayment of deposit or interest payable thereon, redemption
of debentures, or preference shares or
payment of dividend to any shareholder or repayment of
any term loan or interest payable
thereon to any financial institution or bank, is subsisting.
(2) No company shall directly or
indirectly purchase its own shares or other specified securities in
case such company has not complied
with provisions of sections 159, 207 and 211.
Section 78
APPLICATION OF PREMIUMS RECEIVED ON
ISSUE OF SECURITIES.
(1) Where a company issues securities
at a premium, whether for cash or otherwise, a sum equal
to the aggregate amount or value of
the premiums on those securities shall be transferred to an
account, to be called "the
securities premium account"; and the provisions of this Act relating to
the reduction of the securities
capital of a company shall except as provided in this section, apply
as if the securities premium account
were paid-up share capital of the company.
(2) The share premium accounts may,
notwithstanding anything in sub-section (1), be applied by
the company -
(a) in paying up unissued securities
of the company to be issued to members of the company as
fully paid bonus securities;
(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
securities or debentures of the
company; or
(d) in providing for the premium
payable on the redemption of any redeemable preference
securities or of any debentures of the
company.
(3) Where a company has, before the
commencement of this Act, issued any securities at a
premium, this section shall apply as
if the securities had been issued after the commencement of
this Act;
Provided that any part of the premiums
which has been so applied that it does not at the
commencement of this Act form an
identifiable part of the company's reserves within the meaning
of Schedule VI, shall be disregarded
in determining the sum to be included in the securities
premium account.
Section 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 meetings, and sanctioned 181
by the Company Law Board;
(ii) the resolution specifies the
maximum rate of discount at which the shares are to be issued :
Provided that no such resolution shall
be sanctioned by the 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 Company Law
Board or within such extended time as the 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 Company Law Board for
an order sanctioning the issue; and on any such
application, the Company Law Board,
if, having regard to all the circumstances of the case, it
thinks proper so to do, may make an
order sanctioning the issue on such terms and conditions as
it thinks fit.
(4) Every prospectus relating to the
issue of the shares shall contain particulars of the discount
allowed on the issue of the shares or
of so much of that discount as has not been written off at
the date of the issue of the
prospectus.
If default is made in complying with
this sub-section, the company, and every officer of the
company who is in default, shall be
punishable with fine which may extend to fifty rupees.
Section 79A
ISSUE OF SWEAT EQUITY SHARES.
(1) Notwithstanding anything contained
in section 79, a company may issue sweat equity shares
of a class of shares already issued if
the following conditions are fulfilled, namely :-
(a) the issue of sweat equity shares
is authorised by a special resolution passed by the company
in the general meeting;
(b) the resolution specifies the
number of shares, current market price, consideration, if any, and
the class or classes of directors or
employees to whom such equity shares are to be issued;
(c) not less than one year has, at the
date of the issue elapsed since the date on which the
company was entitled to commence,
business;
(d) the sweat equity shares of a
company whose equity shares are listed on a recognised stock
exchange are issued in accordance with
the regulations made by the securities and Exchange
Board of India in this behalf :
PROVIDED that in the case of a company
whose equity shares are not listed on any recognised
stock exchange, the sweat equity
shares are issued in accordance with the guidelines as may be
prescribed.
Explanation I : For the purposes of
this sub-section, the expression "a company" means company
incorporated, formed and registered
under this Act and includes its subsidiary company
incorporated in a country outside
India.
Explanation II : For the purposes of
this Act, the expression "sweat equity shares" means equity
shares issued by the company to
employees or directors at a discount or for consideration other
than cash for providing know-how or
making available rights in the nature of intellectual property
rights or value additions, by whatever
name called.
(2) All the limitations, restrictions
and provisions relating to equity shares shall be applicable to
such sweat equity shares issued under
sub-section (1).
Section 80
POWER TO ISSUE REDEEMABLE PREFERENCE
SHARES.
(1) Subject to the provisions of this
section, a company limited by shares may, if so authorized by
its articles, issue preference shares
which are, or at the option of the company are to be liable, to
be redeemed :
Provided that -
(a) no such shares shall be redeemed
except out of profits of the company which would otherwise
be available for dividend or out of
the proceeds of a fresh issue of shares made for the purposes
of the redemption;
(b) no such shares shall be redeemed
unless they are fully paid;
(c) the premium, if any, payable on
redemption shall have been provided for out of the profits of
the company or out of the company's
security premium account, before the shares are redeemed;
(d) where any such shares are redeemed
otherwise than out of the proceeds of a fresh issue,
there shall, out of profits which
would otherwise have been available for dividend, be transferred
to a reserve fund, to be called the
capital redemption reserve account, a sum equal to the
nominal amount of the shares redeemed;
and the provisions of this Act relating to the reduction of
the share capital of a company shall,
except as provided in this section, apply as if the capital
redemption reserve account were
paid-up share capital of the company.
(2) Subject to the provisions of this
section, the redemption of preference shares thereunder may
be effected on such terms and in such
manner as may be provided by the articles of the
company.
(3) The redemption of preference
shares under this section by a company shall not be taken as
reducing the amount of its authorised
share capital.
(4) Where in pursuance of this section,
a company has redeemed or is about to redeem any
preference shares, it shall have power
to issue shares up to the nominal amount of the shares
redeemed or to be redeemed as if those
shares had never been issued; and accordingly the
share capital of the company shall
not, for the purpose of calculating the fees payable under
section 611, be deemed to be increased
by the issue of shares in pursuance of this sub-section :
Provided that, where new shares are
issued before the redemption of the old shares, the new
shares shall not, so far as relates to
stamp duty, be deemed to have been issued in pursuance of
this sub-section unless the old shares
are redeemed within one month after the issue of the new
shares.
(5) The capital redemption reserve
account may, notwithstanding anything in this section, be
applied by the company, in paying up
unissued shares of the company to be issued to members
of the company as fully paid bonus
shares.
(5A) Notwithstanding anything
contained in this Act, no company limited by shares shall, after the
commencement of the Companies
(Amendment) Act, 1996, issue any preference share which is
irredeemable or is redeemable after
the expiry of a period of twenty years from the date of its
issue.
(6) If a company fails to comply with
the provisions of this section, the company, and every officer
of the company who is in default,
shall be punishable with fine which may extend to one thousand
rupees.
Section 81
FURTHER ISSUE OF CAPITAL.
(1) Where at any time after the expiry
of two years from the formation of a company or at any time
after the expiry of one year from the
allotment of shares in that company made for the first time
after its formation, whichever is
earlier, it is proposed to increase the subscribed capital of the
company by allotment of further
shares, then
(a) such further shares shall be
offered to the persons who, at the date of the offer, are holders of
the equity shares of the company, in
proportion, as nearly as circumstances admit, to the capital
paid-up on those shares at that date;
(b) the offer aforesaid shall be made
by notice specifying the number of shares offered and
limiting a time not being less than
fifteen days from the date of the offer within which the offer, if
not accepted, will be deemed to have
been declined.
(c) unless the articles of the company
otherwise provide, the offer aforesaid shall be deemed to
include a right exercisable by the
person concerned to renounce the shares offered to him or any
of them in favour of any other person;
and the notice referred to in clause (b) shall contain a
statement of this right;
(d) after the expiry of the time
specified in the notice aforesaid, or on receipt of earlier intimation
from the person to whom such notice is
given that he declines to accept the shares offered, the
Board of directors may dispose of them
in such manner as they think most beneficial to the
company.
Explanation : In this sub-section,
"equity share capital" and "equity shares" have the same
meaning as in section 85.
(1A) Notwithstanding anything contained
in sub-section (1), the further shares aforesaid may be
offered to any persons [whether or not
those persons include the persons referred to in clause (a)
of sub-section (1)] in any manner
whatsoever -
(a) if a special resolution to that
effect is passed by the company in general meeting, or
(b) where no such special resolution
is passed, if the votes cast (whether on a show of hands, or
on a poll, as the case may be) in
favour of the proposal contained in the resolution moved in that
general meeting (including the casting
vote, if any, of the chairman) by members who, being
entitled so to do, vote in person, or
where proxies are allowed, by proxy, exceed the votes, if any,
cast against the proposal by members
so entitled and voting and the Central Government is
satisfied, on an application made by
the Board of directors in this behalf, that the proposal is most
beneficial to the company.
(2) Nothing in clause (c) of
sub-section (1) shall be deemed -
(a) to extend the time within which
the offer should be accepted, or
(b) to authorise any person to
exercise the right of renunciation for a second time, on the ground
that the person in whose favour the
renunciation was first made has declined to take the shares
comprised in the renunciation.
(3) Nothing in this section shall
apply -
(a) to a private company; or
(b) to the increase of the subscribed
capital of a public company caused by the exercise of an
option attached to debentures issued
or loans raised by the company -
(i) to convert such debentures or
loans into shares in the company, or
(ii) to subscribe for shares in the
company :
Provided that the terms of issue of
such debentures or the terms of such loans include a term
providing for such option and such
term :
(a) either has been approved by the
Central Government before the issue of debentures or the
raising of the loans, or is in
conformity with the rules 197 , if any, made by that Government in this
behalf; and
(b) in the case of debentures or loans
other than debentures issued to, or loans obtained from,
the Government or any institution
specified by the Central Government in this behalf, has also
been approved by a special resolution
passed by the company in general meeting before the
issue of the debentures or the raising
of the loans.
(4) Notwithstanding anything contained
in the foregoing provisions of this section, where any
debentures have been issued to, or
loans have been obtained from, the Government by a
company, whether such debentures have
been issued or loans have been obtained before or
after the commencement of the
Companies (Amendment) Act, 1963, the Central Government
may, if in its opinion it is necessary
in the public interest so to do, by order, direct that such
debentures or loans or any part
thereof shall be converted into shares 201 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
circumstance, that is to say, the financial position of the
company, the terms of issue of the
debentures or the terms of the loans, as the case may be, the
rate of interest payable on the
debentures or the loans, the capital of the company, its loan
liabilities, its reserves, its profits
during the preceding five years and the current market price of
the shares in the company.
(6) A copy of every order proposed to
be issued by the Central Government under sub-section (4)
shall be laid in draft before each
House of Parliament while it is in session for a total period of
thirty days which may be comprised in
one session or in two or more successive sessions.
(7) If the terms and conditions of
such conversion are not acceptable to the company, the
company may, within thirty days from
the date of communication to it of such order or within such
further time as may be granted by the
Court, prefer an appeal to the Court in regard to such terms
and conditions and the decision of the
Court on such appeal and, subject only to such decision,
the order of the Central Government
under sub-section (4) shall be final and conclusive.
Section 82
NATURE OF SHARES.
Nature, numbering and certificate of
shares
The shares or debentures or other
interest of any member in a company shall be movable
property, transferable in the manner
provided by the articles of the company.
Section 83
NUMBERING OF SHARES.
Each share in a company having a share
capital shall be distinguished by its appropriate number
:
Provided that nothing in this section
shall apply to the shares held with a depository.
Section 84
CERTIFICATE OF SHARES.
(1) A certificate, under the common
seal of the company, specifying any shares held by any
member, shall be prima facie evidence
of the title of the member to such shares.
(2) A certificate, may be renewed or a
duplicate of a certificate may be issued if such certificate -
(a) is proved to have been lost or
destroyed, or
(b) having been defaced or mutilated
or torn is surrendered to the company.
(3) If a company with intent to
defraud renews a certificate or issues a duplicate thereof, the
company shall be punishable with fine
which may extend to ten thousand rupees and every
officer of the company who is in
default shall be punishable with imprisonment for a term which
may extend to six months, or with fine
which may extend to ten thousand rupees, or with both.
(4) Notwithstanding anything contained
in the articles of association of a company, the manner of
issue or renewal of a certificate or
issue of a duplicate thereof, the form of a certificate (original or
renewed) or of a duplicate thereof,
the particulars to be entered in the register of members or in
the register of renewed or duplicate
certificates, the form of such registers, the fee on payment of
which, the terms and conditions, if
any (including terms and conditions as to evidences and
indemnity and the payment of
out-of-pocket expenses incurred by a company in investigating
evidence) on which a certificate may
be renewed or a duplicate thereof may be issued, shall be
such as may be prescribed.
The ComPany Act, 1956