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Corporate Updates – 18-05-2015

May 18, 2015 Leave a Comment

The Companies (Amendment) Bill, 2014

The details of the amendments are as under:

1. Requirement of minimum paid- up share capital for private and public companies is proposed to be omitted. (For ease of doing business)

In terms of section 2(68) and 2(71) of the Companies Act, 2013, private companies and public companies are required to have minimum paid-up share capital of one lakh rupees and five lakh rupees respectively.

The proposed amendment omits the words “of one lakh rupees or such higher paid-up share capital” in clause 2(68) and “of five lakh rupees or such higher paid-up capital,” in Clause 2(71)(b).

2. Doing away with the requirement of filing a declaration by a company before commencement of business or exercising its borrowing powers as provided in section 11 of the Companies Act, 2013.

Section 11 of the Principal Act which deals with the requirement for filing declaration by a company before commencement of business or exercising its borrowing powers. Section 11 is proposed to be omitted.

3. The provisions with regard a company to have common seal are proposed to be made optional and consequential changes for authorisation for execution of documents (For ease of doing business)

In terms of section 9 of the Companies Act, 2013, every body corporate shall have perpetual succession and a common seal from the date of incorporation mentioned in the Certificate of Incorporation.

Provision for common seal appears in various section(s) including affixing on power of attorney [REFER SECTION 22] and on share certificate(s) [REFER SECTION 46].

Proposed amendment omits the words “and a common seal” in section 9.

In section 12 of the principal Act, in sub-section (3), for clause (b), the following clause shall be substituted, namely:—

“(b) have its name engraved in legible characters on its seal, if any;”

In section 22 (2),—

a. for the words “under its common seal”, the words “under its common seal, if any,” shall be substituted;

b. the following proviso shall be inserted, namely:—

“Provided that in case a company does not have a common seal, the authorisation under this sub-section shall be made by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary.”;

In section 22(3), the words ”and have the effect as if it were made under its common seal”, shall be omitted.

In section 46 (1), for the words “issued under the common seal of the company”, the words “issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary” shall be substituted.

In section 223, in sub-section (4), in clause (a), for the words “by the seal”, the words

“by the seal, if any,” shall be substituted.

4. Specific punishment for deposits accepted under the new Act is proposed to be prescribed. This was left out in the Act inadvertently. (To remove an omission)

Sections 73 and Section 76 of the Companies Act 2013 do not have penal provisions.

Proposed amendments inserts following section 76A after section 76:

“76A. Punishment for contravention of section 73 or section 76.—Where a company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or section 76 or rules made thereunder or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or section 76 or rules made thereunder or such further time as may be allowed by the Tribunal under section 73,—

(a) the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees; and

(b) every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both:

Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or wilfuly with the intention to deceive the company or its shareholders or depositors or creditors or tax authorities, he shall be liable for action under section 447.”

5. Public inspection of Board resolutions filed in the Registry is proposed to be prohibited. (Representations by corporate)

Section 117 (3)(g) requires the copy of resolutions passed in pursuance of sub-section (3) of section 179 to be filed with the Registrar within thirty days of the passing of such resolutions.

Section 179 (3) lists the powers which the Board is required to exercise by means of resolutions passed at meetings of the Board such as to issue securities, including debentures, whether in or outside India, to borrow monies, to invest the funds of the company, to approve financial statement and the Board’s report, to approve amalgamation, merger or reconstruction etc.

Proposed amendments provides for following amendments in section 117(3):

(i) in clause (g), the word ”and” occurring at the end shall be omitted;

(ii) after clause (g), the following proviso shall be inserted, namely:—

“Provided that no person shall be entitled under section 399 to inspect or obtain copies of such resolutions; and”

6. Provision for writing off past losses/depreciation before declaring dividend for the year is proposed to be included. This was missed in the Act but included in the Rules.

Section 123 of the Companies Act, 2013 provides for declaration of dividend.

It does not contain the provision for writing off past losses as provided under section 205 of Companies Act, 1956.

Proposed amendment inserts the following proviso after third proviso in Section 123(1):

“Provided also that no company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company for the current year.”

7. The Act provides for transferring equity shares for which unclaimed/unpaid dividend has been transferred to the IEPF. It is proposed to be rectified that such transfer of equity shares would be in case where the dividend remains unpaid or unclaimed for a continuous period of seven years.

Section 124 (6) of the Companies Act, 2013 provides that all shares in respect of which unpaid or unclaimed dividend has been transferred under sub-section (5) shall also be transferred by the company in the name of Investor Education and Protection Fund along with a statement containing such details as may be prescribed.

The following amendments are proposed in section 124(6):

1. for the words, brackets and figure “unpaid or unclaimed dividend has been transferred under sub-section (5) shall also be”, the words “dividend has not been paid or claimed for seven consecutive years or more shall be” shall be substituted;

2. after the proviso, the following explanation shall be inserted, namely:—

“Explanation. – For the removals of doubts it is hereby clarified that in case any dividend is paid or claimed for any year during the said period of seven consecutive years, the share shall not be transferred to Investor Education and Protection Fund.”

8. It is proposed to provide for prescribing the thresholds beyond which fraud shall be reported to the Central Government (below the threshold, it will be reported to the Audit Committee). Disclosures for the latter category also to be made in the Board’s Report. (Representations by auditors).

Section 143 (12) of the Companies Act, 2013 provides that if an auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government within such time and in such manner as may be prescribed. However, no quantum or threshold has been prescribed under the Companies Act, 2013 or rules made thereunder for intimation of fraud to Central Government. It is now proposed in the Act that the thresholds shall be prescribed in the rules.

As per section 143 (14), the provisions of the section shall mutatis mutandis apply to-

(a) the cost accountant in practice conducting cost audit under section 148; or

(b) the company secretary in practice conducting secretarial audit under section 204.

The following amendments are proposed in section 134 and section 143:

In section 134 of the principal Act, in sub-section (3), after clause (c), the following clause shall be inserted, namely:—

“(ca) details in respect of frauds reported by auditors under sub-section (12) of section 143 other than those which are reportable to the Central Government;”

In section 143 of the principal Act, for sub-section (12), the following sub-section shall be substituted, namely:—

“(12) Notwithstanding anything contained in this section, if an auditor of a company in the course of the performance of his duties as auditor, has reason to believe that an offence of fraud involving such amount or amounts as may be prescribed, is being or has been committed in the company by its officers or employees, the auditor shall report the matter to the Central Government within such time and in such manner as may be prescribed:

Provided that in case of a fraud involving lesser than the specified amount, the auditor shall report the matter to the audit committee constituted under section 177 or to the Board in other cases within such time and in such manner as may be prescribed:

Provided further that the companies, whose auditors have reported frauds under this sub-section to the audit committee or the Board but not reported to the Central Government, shall disclose the details about such frauds in the Board’s report in such manner as may be prescribed.”

9. Section 185 prohibits loans to Directors. The exemptions to the section are provided in the Rules. These are proposed to be included in the Act as a matter of abundant caution.

Section 185 prohibits giving loan to directors, etc. It provides that, no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person.

Rule 10 of the Companies (meetings of Board and its powers) Rules, 2014 provides exemption to the section as follows:

185.(1) Any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company is exempted from the requirements under this section; and

(2) Any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company is exempted from the requirements under this section:

Provided that such loans made under sub-rule (1) and (2) are utilised by the subsidiary company for its principle business activities.

The following amendment is proposed:

In section 185 of the principal Act, in sub-section (1), in the proviso, after clause (b) the following clauses and proviso shall be inserted, namely:—

“(c) any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company; or

(d) any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company:

Provided that the loans made under clauses (c) and (d) are utilised by the subsidiary company for its principal business activities.”

10. It is proposed to empower Audit Committee to give omnibus approvals for related party transactions on annual basis. (To align with SEBI policy and to increase ease of doing business)

As per the Clause 49 as amended vide SEBI circular CIR/CFD/POLICY CELL/7/2014 dated 15th September, 2014, Audit Committee may grant the omnibus approval to transactions with related parties subject to the fulfillment of certain conditions [refer Clause 49(VII)(D)]. However, there is no such provision under the Companies Act, 2013. Further, section 177 (4) requires the Audit Committee to approve the transactions of the company with related parties or any subsequent modification therein.

The following amendment is proposed:

In section 177 of the principal Act, in sub-section (4), in clause (iv), the following proviso shall be inserted, namely:—

“Provided that the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to such conditions as may be prescribed;”

11 It is proposed to:

a. replace ‘special resolution’ with ‘ordinary resolution’ for approval of related party transactions by non-related shareholders. (Meet problems faced by large stakeholders who are related parties) and

b. exempt related party transactions between holding companies and wholly owned subsidiaries from the requirement of approval of non-related shareholders. No resolution required to be passed at general meeting. (Representation by Corporate)

First proviso to section 188 provides that no contract or arrangement, in the case of a company having a paid-up share capital of not less than such amount, or transactions not exceeding such sums, as may be prescribed, shall be entered into except with the prior approval of the company by a special resolution. It is proposed to replace ‘special resolution’ with ‘ordinary resolution’:

The following amendment is proposed:

In section 188 of the principal Act,

(a) in sub-section (1),—

(i) for the words “special resolution”, at both the places where they occur, the word “resolution” shall be substituted;

(ii) after the third proviso, the following proviso shall be inserted, namely:—

“Provided also that the requirement of passing the resolution under first proviso shall not be applicable for transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.”;

(b) in sub-section (3), for the words “special resolution”, the word ” resolution” shall be substituted.

12. Bail restrictions to apply only for offence relating to fraud u/s 447.

This amendment relates to section 212 ‘Investigation into affairs of Company by Serious Fraud Investigation Office’.

The following amendments are proposed:

In section 212 of the principal Act, in sub-section (6), for the words, brackets and figures “the offences covered under sub-sections (5) and (6) of section 7, section 34, section 36, sub-section (1) of section 38, sub-section (5) of section 46, sub-section (7) of section 56, sub-section (10) of section 66, sub-section (5) of section 140, sub-section (4) of section 206, section 213, section 229, sub-section (1) of section 251, sub-section (3) of section 339 and section 448 which attract the punishment for fraud provided in section 447”, the words and figures “offence covered under section 447” shall be substituted.

13. Winding Up cases to be heard by 2-member Bench instead of a 3-member Bench. (Removal of an inadvertent error)

Section 419 (3) of the Companies Act, 2013 provides that the powers of the Tribunal shall be exercisable by Benches consisting of two Members out of whom one shall be a Judicial Member and the other shall be a Technical Member:

Section 419 (4), ibid, provides that the President shall, for the disposal of any case relating to rehabilitation, restructuring, reviving or winding up, of companies, constitute one or more Special Benches consisting of three or more Members, majority necessarily being of Judicial Members.

Proposed Amendment provides that in section 419 of the principal Act, in sub-section (4), the words “or winding up” shall be omitted.

Accordingly for winding up cases, section 419(3) would apply.

14. Special Courts to try only offences carrying imprisonment of two years or more. (To let magistrate try minor violations)

The amendment relates to section 436 which provides for the Offences triable by Special Courts.

436. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973,-

(a) all offences under this Act shall be triable only by the Special Court established for the area in which the registered office of the company in relation to which the offence is committed or where there are more Special Courts than one for such area, by such one of them as may be specified in this behalf by the High Court concerned.

The following amendments are proposed:

In section 435 of the principal Act, in sub-section (1),—

1. for the words “trial of offences under this Act”, the words “trial of offences punishable under this Act with imprisonment of two years or more” shall be substituted;

2. the following proviso shall be inserted, namely:—

“Provided that all other offences shall be tried, as the case may be, by a Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction to try any offence under this Act or under any previous company law.”

Amendment of section 436

In section 436 of the principal Act, in sub-section (1), in clause (a), for the words “all offences under this Act”, the words, brackets and figures “all offences specified under sub-section (1) of section 435” shall be substituted.

15. Rationalizing the procedure for laying draft notifications granting exemptions to various classes of companies.

Section 462 empowers Central Government to exempt certain class or classes of companies from complying with any of the provisions of Companies Act 2013. In order to put in place a speedier process for approval of draft notifications for providing exemptions etc. from specific provisions of the Act to a class of companies, it is proposed to rationalize the procedure for laying draft notifications granting exemptions.

The following amendment is proposed:

In section 462, for sub-section (2), the following sub-sections shall be substituted, namely:—

“(2) A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft before each House of Parliament, while it is in Session, for a total period of thirty days, and if, both Houses agree in disapproving the issue of notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses.

(3) In reckoning any such period of thirty days as is referred to in sub-section (2), no account shall be taken of any period during which the House referred to in sub-section (2) is prorogued or adjourned for more than four consecutive days.

(4) The copies of every notification issued under this section shall, as soon as may be after it has been issued, be laid before each House of Parliament”.

Filed Under: Company Law, News & Updates

Corporate Updates – 15-05-2015

May 15, 2015 Leave a Comment

NCLT / NCLAT:

The Hon’ble Supreme Court upheld the Constitutionality of NCLT and NCLAT on the ground that the same has already been upheld in the case of Union of India v. R Gandhi and has given Central government the green signal to set up and operationalise the same. It was further held that non-judicial / technical members of National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) should be persons above the rank of Additional Secretary in the service of Government of India. The decision was given by a Constitution Bench of Chief Justice HL Dattu and Justices AK Sirki, Arun Mishra, Rohinton Fali Nariman and Amitava Roy in a petition filed by Madras Bar Association (Petitioner) challenging the provisions of Chapter XXVII of the Companies Act, 2013. The Hon’ble court also said that the functioning of NCLT and NCLAT has not started so far and its high time that these Tribunals start functioning now, ans MCA shall take remedial measures as per the directions contained in the judgment at the earliest, so that the NCLT & NCLAT are adequately manned and start functioning in near future.

MCA:

The Rajya Sabha approved the Companies (Amendment) Bill, 2014 on 13th May, 2015. The proposed amendments cover provisions which include empowering Audit Committee to give omnibus approvals for related party transactions on annual basis under section 188; doing away with the declaration by companies before commencement of business; ordinary resolution for related party transactions in certain cases; enabling provisions to prescribe thresholds beyond which fraud shall be reported by the auditors to the Central Government; public inspection of Board resolutions; restrictions on bail to apply only for offence relating to fraud u/s 447; making common seal optional; omitting requirement for minimum paid-up share capital; strength of benches for hearing winding up cases; jurisdiction of special courts to try offences; setting off of past losses/depreciation before declaring dividend and exemptions for giving of loans/guarantee/security by holding companies to its subsidiaries, etc.

Filed Under: Company Law, MCA, News & Updates

Corporate Updates – 24-09-2014

September 24, 2014 Leave a Comment

Company Law Board:

For the purpose of exercising and discharging the Board’s powers and functions, the Board has made the amendments in the work distribution or the Chennai Bench. Hon’ble Shri B.S.V. Prakash Kumar, Member (Judicial) has been given additional charge of the State of Andhra Pradesh and Telegana w.e.f 08.09.2014. The matters relating to the State Of Andhra Pradesh and Telegana will be posted for hearing before him, in Court No.II of CLB, Chennai Bench on the following dates:

(a)October 2014 – 13.10.2014 to 17.10.2014

(b)November 2014 – 10.11.2014 to 14.11.2014

(c)December 2014 – 08.12.2014 to 12.12.2014

Shri B.S.V. Prakash Kumar, Member (Judicial), will not be available in Court No. II of CLB, New Delhi Bench on the above dates

MCA:

MCA has made an appeal to all Corporate(s) that to avoid last minute rush and system congestion on the MCA21 portal on account of filings under the Company Law Settlement Scheme, 2014 ending on 15.10.2014 and Annual Filings during October/November 2014, Companies are requested to file their Balance Sheet and Annual Return early without postponing it to the last days.

Filed Under: Company Law, MCA, News & Updates

Corporate Updates 3 July 2014

July 3, 2014 Leave a Comment

MCA: 

MCA has notified the rules to amend the Companies (Prospectus and Allotment of Securities) Rules, 2014, which shall come into force from the date of their publication in the Official Gazette. New proviso has been inserted in Rule 14(2)(a) stating that in case of an offer or invitation for non-convertible debentures referred to in the second proviso, made within a period of six months from the date of commencement of these rules, the special resolution referred to in the second proviso may be passed within the said period of six months from the date of commencement of these rules.” .

MCA: 

MCA has notified the much awaited Cost Audit Rules under the provisions of the Section 148 of the Companies Act, 2013, as The Companies (Cost Records and Audit) Rules, 2014. For the applicability of these rules companies are broadly categorized into four classes namely A ,B, C and D. Each such category has specified the sub-categories or the specified activities. Major Highlights are : Limits based on paid-up capital and/or turnover and networth is defined for maintenance of cost records; Compliance Certificate removed for those companies which fall under the category for maintaining Cost Records; Maintenance Cost Records and Cost Audit also applicable to Foreign Companies; Cost Audit shall not be applicable to Companies operating in Special Economic Zone and for those companies whose revenue from exports in foreign exchange exceeds seventy five percent of its total revenue. The said rules has also specified the companies which need to get their cost records audited by the Cost Auditors.

Frequently Asked Questions on the Companies Act, 2013

ICSI with a view to share the knowledge & information on the Companies Act, 2013, with its Students & Members has come out with the 59 Frequently Asked Questions on the various provisions of the Companies Act, 2013 along with their answers.

Filed Under: Company Law, MCA, News & Updates

Corporate Updates 24 May 2014

May 24, 2014 Leave a Comment

Case Law:

Conducting the meeting by way of an electronic voting and postal ballot, as purportedly mandated under the new provisions of the Companies Act 2013 is an additional facility to dispense with the requirement of holding a physical meeting of shareholders ???

Hon’ble Mumbai High Court in the matter of Approval of Scheme of Amalgamation of Wadala Commodities Limited With Godrej Industries Limited has observed that postal ballot and e-voting is an additional facility and cannot have the effect of dispensing the general meeting at all. Further, the court stated that gazette copy of many MCA rules are not available… hence in the opinion of the court they are not binding so far or at least from 1st April 2014.

FACTS OF THE CASE

1. In February this year, Godrej Industries announced that it would merge Wadala Commodities, which is in the business of bulk trading of vegetable oil, with itself.
2. The scheme of amalgamation of Wadala Commodities with Godrej was approved in the third quarter in FY 13-14, when Godrej Industries boosted top line by 16.6 per cent in the vegetable oil sector year-on-year.
3. Godrej decided to issue 1 fully paid share for every 108 shares of Wadala, thinking that the amalgamation would boost revenue and help in strengthening market share in the vegetable oil segment.
4. Company Summons for Direction, viz., whether in view of the provisions of Section 110 of the Companies Act, 2013 (“the 2013 Act”) and SEBI Circular dated 21st May 2013, a resolution for approval of a Scheme of Amalgamation can be passed by a majority of the equity shareholders casting their votes by postal ballot, which includes voting by electronic means, in complete substitution of an actual meeting. In other words, whether the 2013 Act, read with various circulars and notifications, has the effect of altogether eliminating the need for an actual meeting being convened.
5. Both parties later requested the High Court to dispense with the requirement of holding a physical meeting of shareholders, and instead let them conduct the meeting by way of an electronic voting and postal ballot, as purportedly mandated under the new provisions of the Companies Act 2013.

JUDGEMENT

1. Hon’ble Bombay high court declined the request and reiterated the importance of physical meetings in corporate democracy, and the right of shareholders to discuss and deliberate actions proposed to be undertaken by the company.
2. Bombay High Court recommended that until the issues raised by the High Court on the exclusion of physical shareholder meetings are finally settled, no company should insist upon a postal-ballot-only-meeting.
3. The High Court also held that all provisions for compulsory voting by postal ballot and by electronic voting to the exclusion of a physical meeting do not apply to court-convened shareholder meetings. At such meetings, provision must be made for shareholders to allow them to vote through postal ballots or electronic voting, in addition to the voting right at the physical meeting.
4. The High Court has directed the Additional Solicitor General, Registrar of Companies and SEBI to make further submissions before it on this issue”
5. The court has also taken steps to elevate the issue to a larger bench.
6. The order says: “…….till such time as these rules are gazette, or there is some provision made for the dispensation of official gazette notification, none of the rules in the Ministry of Corporate Affairs PDF document that are not yet gazette can be said to be in force.”

Conclusion

This order of High Court treats the doctrine of indoor management and the right of shareholders to be heard in a meeting as sacrosanct. The decision reinforces the shareholders’ ability to take an informed decision and raised questions with regards to the implementation of the Companies Act 2013, and highlighted some key gaps such as the notification of the rules. “Such matters require urgent regulatory attention.”

Filed Under: Case law, Company Law, News & Updates

Corporate Updates 17 May 2014

May 17, 2014 Leave a Comment

Case Law: Where company’s name was struck off and petitioner sued company in Trial Court and if company’s name was not restored, there would be no effective remedy available for loss caused to petitioner, can name of company be restored to register ??? 

The Hon’ble High Court of Delhi in the matter of M.A. Panjwani V/s. Registrar of Companies & others, directs restoration of company’s name as no other remedy was available to make good losses of petitioner as it appeared to the Court to be “otherwise just”. The word “just” would mean that it is fair and prudent from a commercial point of view to restore the company and that the Court has to examine the concept of “justness” not exclusively from the perspective of a creditor or a member or a debtor, but from the perspective of the society as a whole. The special facts of the present case attract this principle.

This is a petition filed by the petitioner i.e. under Section 560(6) of the Companies Act, 1956 read with Rules 9 & 92 of the Company Court Rules, 1959.

Facts about the Case

  • The petitioner was residing in the United Kingdom. He wanted to settle down in India. With this end in view, he engaged the services of respondent No.3 for searching a suitable house in Delhi. Singhania identified a property known as “Jodhpur Gardens” in village Gadaipur, Tehsil Mehrauli. The petitioner remitted money from England in favour of Respondents 3 in this regard.
  • Respondent 3, who, under some pretext or the other kept deferring the issue and giving evasive answers did not handed over the original Deeds of the property to Petitioner.
  • The petitioner made inquiries in Delhi through persons who informed him that the property was registered in the name of the company and was in the possession and personal use of Respondent 3 since January, 1980.
  • On being so informed, the petitioner filed a suit for declaration, mandatory injunction and damages in the Civil Court. The suit was taken up on 07.05.2012, where the respondent No.2 informed the trial court that the name of the company has been struck off the records by the Registrar of Companies and therefore the suit cannot proceed.
  • The present petition was then filed by the petitioner, under sub-section (6) of Section 560 of the Companies Act. The prayer in the petition was for directions to the Registrar of Companies, who is the respondent No.1, for restoring the name of respondent No.2 i.e. M/s. Alfa Impex Pvt. Ltd. (hereinafter referred to as “Company”) to the register of companies maintained by respondent No.1. on the ground that it is “just” to do so having regard to the facts narrated above.
  • Counsel appearing for the Registrar of Companies took up a preliminary objection to the effect that a petition for restoration of the name of the company can be filed only by the company, member or creditor in terms of Section 560(6) of the Act and that the petitioner does not fall under any categories.
  • As regards the petitioner argued that it was “just” that the company be restored to the register having regard to the events narrated earlier, counsel for the Registrar of Companies submitted that the word “just” appearing in sub-section (6) of Section 560 has to be given a limited or restricted meaning having regard to the context and construed ejusdem generis with the requirement that the company should be carrying on business and should be in operation, and the said word cannot be given any broader meaning.

Judgement

High Court passed decision under sub-section (6) of Section 560 of the Companies Act, 1956 :

  • The court said that the power to order restoration of the company’s name to the register of companies on the application made by the company itself or its member or creditor. Such an application can be made at any time before the expiry of 20 years from the publication of the notice for striking off the name published in the official gazette.
  • The court enumerated the two circumstances in which the company court can exercise the power. The first is when it is satisfied that the company was, at the time of the striking off of its name from the register, carrying on business or was in operation and second is when it appears to the company court that it is “otherwise just” that the name of the company be restored to the register.
  • Court found from the proceeding of the trial that the petitioner was neither a member nor a creditor of the company. Even if the petitioner cannot be considered as a “member” of the company, he was certainly a “creditor” who can file the petition quite apart from the above position, the sub-section recognises that if the Court is of opinion that it is “otherwise just” that the company be restored to the register, restoration can be ordered.
  • It was submitted on behalf of the Registrar of Companies that in striking off the name of the company, the procedure prescribed in Section 560 of the Act was followed. That may be so. Sub-section (6) of Section 560 gives power to the company court to order restoration of the name of the company if it finds that such a course was “just”. The fact that the ROC did follow the due procedure prescribed by law while striking off the name cannot, therefore, be an answer to a petition filed on the ground that it would be “just” to restore the name of the company.
  • On the facts of this case there is every reason to hold that it would be “just” to restore the name of the company to the register of companies. The Registrar of Companies was directed to do so.
  • The company petition is allowed.
Filed Under: Case law, Company Law, News & Updates

Corporate Updates 14 April 2014

April 14, 2014 Leave a Comment

Secretarial Standards: 

In terms of Section 118 (10) of the the Companies Act, 2013, every Company shall observe Secretarial Standards with respect to General and Board Meetings specified by the ICSI constituted under section 3 of the Company Secretaries Act, 1980, and approved as such by the Central Government. In light of this, the Secretarial Standards with respect to Board and General Meetings i.e. SS-1, SS-2, SS-5 and SS-7 are mandatory required to be followed. ICSI has released exposure drafts for SS-1, SS-2, SS-5 and SS-7 for comments of members. To view & download the Secretarial Standards, please Click Here.

MCA: 

Ministry of Corporate Affairs (MCA) has issued Public Notice No. MCA21/28/2014-eGov dated 11th April, 2014 informing stakeholders that the all new E-Forms will be available for upload with effect from 28th April, 2014 instead of 14th April, 2014 as notified earlier on 28th March, 2014. To view & download the copy of the Notification, click here.

Filed Under: Company Law, MCA, News & Updates

Corporate Updates 05 April 2014

April 5, 2014 Leave a Comment

Company Law: 

The Ministry of Corporate Affairs vide its circular dated 04.04.2014 notified that the financial statements, auditors report and Board report in respect of financial years that commenced earlier than 1st April, 2014 shall be governed by the relevant provisions/ Schedules/ rules of the Companies Act, 1956 and that in respect of financial years commencing on or after 1 April, 2014, the provisions of the new Act shall apply.

Reserve Bank of India: 

RBI in order to complete the Compounding Applications pending in their good office has decided to delegate further powers to the Regional Offices. Accordingly, the powers to compound the contraventions will now be vested with the Regional Offices without any limit on the amount of contravention with certain restrictions. Accordingly, applications for compounding related to the contraventions (as specified in the circular) may be submitted by the concerned entities to the respective Regional Offices under whose jurisdiction they fall. For all other contraventions, applications may continue to be submitted to CEFA, Foreign Exchange Department, 5th floor, Amar Building, Sir P.M.Road, Fort, Mumbai 400001. For detailed notification, please click here.

Filed Under: Company Law, News & Updates, RBI

Corporate Updates 04 April 2014

April 4, 2014 Leave a Comment

Company Law: 

The Principal Bench of Company Law Board, Delhi in one of the Judgment held that Where ex-director has resigned prior to appointment of provisional liquidator, he/she is not liable to compensate company-under-liquidation for non-recovery debts due to company by reason of non-furnishing of sufficient particulars/records by directors.

Income Tax: 

The income Tax has clarified that the income of a firm is to be taxed in the hands of the firm only and the same can under no circumstances be taxed in the hands of its partners. Accordingly, the entire profit credited to the partners’ accounts in the firm would be exempt from tax in the hands of such partners, even if the income chargeable to tax becomes NIL in the hands of the firm on account of any exemption or deduction as per the provisions of the Act.

Filed Under: Company Law, Income Tax, News & Updates

Corporate Updates 18 March 2014

March 18, 2014 Leave a Comment

DVAT: 

The Finance (Revenue-I) Department of Government of NCT of Delhi in exercise of the powers conferred by sub-section 3 and 4 of section 13 of the Central Sales Tax Act, 1956 makes amendment in Central Sales Tax (Delhi) Rules, 2005, thereby introduces Form 10 for Application for cancellation of Central Registration and Form 11 for amendment in Central Registration. For detailed notification please Click here.

Company Law: 

The Regional Bench of Company Law Board, Mumbai in one of the Judgment decided that once the seller has given their no objection letter for transfer of shares and no other claimant had come asking for transfer of shares in question, the Company is bound to register the said transfer in favour of the purchaser.

Filed Under: Company Law, News & Updates, VAT